Autozone 1Q15 Earnings Call Notes

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Failure categories outpaced discretionary ones

“Regarding merchandise categories, our failure categories continued to do well, outpacing both maintenance and discretionary categories. This was opposite of last quarter and a little unique considering we were hoping the lower gas prices at the pump, coupled with the spring season, would lead to accelerating growth. Our belief is that the late winter storms in the first few weeks of the quarter coupled with accelerated tax refunds led to a later start to the spring maintenance season.”

Tax refunds come earlier this year

“I should say one last thing regarding the income tax refund discussion I mentioned earlier. From a report issued by the Treasury Department, the amount of refund dollars were just about identical with last year’s totals. However, it was the pronounced shift to initiating refunds two weeks earlier this year that was new. We believe this was the large reason for the start of our quarter being a little weaker and we believe our last quarter sales represented more normalized levels.”

Gas prices still a lot lower than last year

“Declining prices at the pump have benefited our customers, especially those most financially stressed (17:57). The lower end customer benefits the most from lower gas prices relative to income. This trend is encouraging, but we understand this is just one of many factors that impact our business. While gas prices have increased more recently, prices are still around $1 a gallon below last year.”

One step ahead of the next guy

“As our competition continues to innovate, we understand our ability to both maintain and gain market share will require us to have great-looking stores, higher in-stock levels, and most importantly, more knowledgeable AutoZoners to help customers than even what is available today

Miles driven has increased

“We also recognized that the impact of miles driven on cars over 10 years old, the current average is much different than on newer cars in terms of wear and tear. Miles driven increased 4.9% in January and 2.8% in February. We don’t have March or April data yet.”

Almost 9 straight years of double digit eps growth

“35th consecutive quarter of double-digit EPS growth, growing this quarter at a rate of 13.1%. ‘

Take time and be methodical when making big decisions

“this is a big decision, and we at AutoZone are pretty methodical in how we make decisions. This isn’t about next year or year after, this is about the long-term and so we want to make sure we get it right. So we’re going to take enough time to get it right.”

Weather wasn’t normal

“I would just say in those first few weeks, Matt, weather is always seasonal in the spring time. But we were – it was the third quarter here. We’re sitting with six inches of snow in Memphis, Tennessee. That’s not normal.”

Parts proliferation has created new challenges for inventory management

“this whole industry is chasing parts coverage, parts availability and the ability to say yes, because our customers need it. As parts proliferation continues, it’s become a greater and greater challenge and frankly, it’s on the forefront of one of the ways we compete against each other.’

Deal with that with a hub store

“There is a lot of diminishing returns on putting inventory into locations. Why don’t we put 50,000 SKUs into the local store? Well, because we can’t afford to. That’s why we have a hub store that will aggregate the demand of 30 stores or 40 stores. ”