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AutoZone (AZO)Stock (Auto Parts Stores Industry, Consumer Products Industry, Retail Industry)AutoZone is the largest U.S. retailer of automotive parts and accessories to do-it-yourself (DIY) customers. Founded in 1979, the company operates over 4,000 stores, the vast majority (97%) of which are in the United States and Puerto Rico. The company targets demographic regions in which they estimate there to exist a large number of vehicles seven years and older, mostly given these cars’ propensity for repairs and maintenance. While the company seeks to open stores in high-traffic areas, AutoZone is largely a destination retailer, which generates its own traffic instead of relying on other, nearby stores’ traffic base.[1] Operating in a mature and fragmented marketplace, AutoZone’s growth has been largely dependent upon increases in store count rather than its same store sales which have been lagging over the past 5 years. In addition, Autozone has been facing pressure in a consolidating auto parts manufacturer industry (related to the woes of the Big Three automakers), which in turn decreases the company's pricing power it enjoys as the largest auto parts retailer in the U.S. Finally, in the longer term, the company may see decreased demand in auto parts due to continually rising oil prices, which could decrease the mileage driven by American and thus decrease the demand for car repairs and maintenance.
[edit] FinancialsBelow are revenue and operating profit figures, as well as store metrics for AutoZone. Top line growth has been 2.4% compounded. However, note that sales per store, and sales per square foot have declined each year. [2] [3]Despite declining store sales efficiency, the company has generated substantial and growing free cash flow ($670 million in fiscal 2007) and high returns on capital (around 22%) [4]. It has also bolstered its earnings per share via major stock repurchase programs. [edit] Trends and Risks
[edit] Competition and Market ShareThe do-it-yourself (DIY) auto-part aftermarket retailer industry is a highly competitive and generally fragmented $35 billion/year market.[7]. Companies compete on a mix of customer service, product selection, price, and location. AZO competes with other major do-it-yourself retailers, like Advance Auto Parts (AAP) , O'Reilly Automotive (ORLY) , CSK Auto (CAO), Pep Boys-Manny, Moe & Jack (PBY), and AutoNation (AN). It also competes with a highly fragmented base of small, single store mom-and-pop shops and do-it-yourself repair destinations, and indirectly with full-service mechanics and other automotive destinations that sell parts or repair vehicles.
[edit] Auto Parts DIY Segment: Operating Metrics & Market ShareBelow is a comparison of major operating metrics for the company’s DIY segment as compared to other companies' DIY breakouts:
^All sales and market share figures an estimate based on DIY business only ^^Note: PBY, ORLY, and AAP Sales figures excludes service and DIFM revenue, isolating DIY parts sales. [edit] Footnotes
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