AutoZone Earnings Rise 30%, Beat Estimates

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AutoZone Inc. (AZO), the largest U.S. auto parts retailer, on Wednesday said quarterly earnings rose 30 percent as sales rebounded and the chain took a one-time tax benefit, beating analysts' consensus estimates.

AutoZone, whose shares rose about 1 percent, said business strengthened considerably in its fiscal second quarter after gasoline prices declined from peaks. U.S. stores open at least a year had posted sales declines for the previous two quarters.

"The earnings were particularly impressive because, for the first time in years, AutoZone produced strong earnings without a decline in share count," said Cid Wilson, director of research for Monarch Research.

"It was good to see that they were able to improve momentum on sales, given that the last two quarters had negative comp (sales)," Wilson said.

Net income for the quarter rose to $119.5 million, or $1.48 per share, in its fiscal second quarter ended Feb. 12, from $91.7 million, or $1.04 per share, a year earlier.

Excluding the one-time tax benefit and some expenses for closing a distribution center, the Memphis, Tennessee-based company earned $1.29 per share. Analysts on average were expecting $1.19, according to Reuters Estimates.

Sales rose 3.9 percent to $1.2 billion from a year earlier, said AutoZone, which has more than 3,500 stores. Sales at domestic stores open at least one year were unchanged.

AutoZone said it is reviewing its accounting for leases and leasehold improvements and expects to take a one-time charge of $15 million to $25 million net of tax for the second quarter. The charge is not reflected in the results released on Wednesday.

The chain blamed high gasoline prices for soft sales in the last six months of calendar 2004, saying its customers were forced to choose between filling their fuel tanks or performing preventive maintenance.

Other parts retailers also blamed cool summer weather and hurricanes for hurting results in the middle of 2004, though most noted a rebound later in the year.

Advance Auto Parts Inc. (AAP) and O'Reilly Automotive (ORLY) in February reported stronger-than-expected quarterly earnings and most analysts expect pent-up demand for parts to support sales across the sector.

AutoZone's quarterly same-store sales were flat, while Advance Auto and O'Reilly saw sharp increases, but analysts did not expect AutoZone's comparable sales to match its rivals, Wilson said.

The retail chain has more than 3,400 stores in the United States, with the rest in Mexico, but plans to expand into Puerto Rico in 2005 with 10 stores by fall. It expects to open about 200 stores overall in fiscal 2005.

AutoZone shares were up $1.09 at $98.42 Wednesday on the New York Stock Exchange (search).