Autozone FY 3Q16 Earnings Call Notes

AutoZone’s (AZO) CEO Bill Rhodes on Q3 2016 Results

On the surface it looks like sales started strong and moderated but it really was actually consistent

” Our same-store weekly sales performance was quite volatile during the quarter. We started the quarter very strong, but recall that last year’s third quarter started very weak due to a shift in tax refund timing. Additionally, we had a few weeks of poor sales when the weather was materially colder and wetter than last year. On the surface, it appears that the quarter started strong and then moderated. But when you assess it on a two-year basis, sales trends were generally consistent throughout the quarter.”

Performance in weather hit areas worse than other markets

“On a regional basis, our performance in the Midwestern, Mid-Atlantic and Northeastern states were substantially below other markets, especially in late March, all the way through the end of the quarter, where temperatures were much cooler and it was much wetter than usual.”

Miles driven is biggest tailwind

“The biggest sales tailwind at the moment, in our opinion, remains the increased miles driven across the country. While volatility with weather has been the greatest headwind, increasing miles driven leads to more failure and maintenance related demand and benefits both our DIY and DIFM businesses. But unusually cool weather leads to limited sales.”

They are calling for a hot summer and if that comes it should help

“To your question about should you straight-line the two year comp, our premise at this point in time, as you know we don’t give guidance. But we think the weather was a pretty significant headwind in this quarter. They are calling for a hot summer. We haven’t seen it yet. It’s starting to heat up around here a little bit, and hopefully it does in the Northeast. But we think if that comes to fruition we could have a pretty strong fourth quarter.”

Bill Giles

Gas prices increased during the quarter

” during the quarter nationally unleaded gas prices started out at $1.72 a gallon and ended the quarter at $2.22 a gallon, a $0.50 increase. Last year gas prices increased $0.42 per gallon during the third quarter, starting at $2.27 and ending at $2.69 a gallon.”

Miles driven increased in Jan and Feb

“current average, is much different than on newer cars in terms of wear and tear. Miles driven increased in both January and February. We don’t have March or April data yet. The other statistic we highlight is the number of seven-year and older vehicles on the road, which continues to trend in our industry‚Äôs favor.”