AutoZone net up 61 pct as aging cars need work

MEMPHIS, Tenn., May 21 Reuters reported that AutoZone Inc., the largest U.S. auto parts retailer, on Tuesday said its quarterly earnings rose 61 percent, sharply exceeding expectations, fueled by an increase in older cars on the road needing new parts.

AutoZone, which sells automotive and light truck parts and accessories through more than 3,000 stores in the United States and Mexico, said net income in the fiscal third quarter ended May 4 rose to $102.3 million, or 96 cents a share, from $63.5 million, or 56 cents a share, in the same period a year ago.

Analysts' consensus estimate was 78 cents a share, in a range of 70 cents to 83 cents, according to a Thomson First Call survey.

Memphis, Tennessee-based AutoZone said sales rose 11 percent to $1.23 billion in the quarter, excluding sales from its TruckPro subsidiary that was sold in December. Sales at stores open at least one year grew 9.5 percent.

Sales to professional mechanics, which account for about 10 percent of AutoZone's business, were up 18 percent.

Helping to drive sales growth is the rising number of aging vehicles on the road, particularly light trucks and sports utility vehicles, which tend to be more customized and whose drivers often do their own repair work, said Steve Odland, AutoZone's chairman and chief executive.

The company says $60 billion worth of vehicle maintenance goes undone each year.

Drivers are also putting more miles on their cars each year, increasing maintenance demands, Odland said.

AutoZone's marketing campaign, featuring radio ads reminding owners to service their vehicles, was a key factor in boosting sales, he said.

"It's really this marketing and merchandising campaign that we're doing that is distinguishing us and driving our sales," Odland said in an interview.

AutoZone also decreased expenses in the quarter by negotiating lower costs from its suppliers and reducing distribution and administrative costs, the CEO said.

During the quarter, AutoZone opened 19 stores, replaced two stores and closed four stores in the United States. It also opened four new stores in Mexico.

AutoZone's board also authorized a $300 million increase in the company's share repurchase program in the quarter, raising its total authorization to $2 billion.

Shares of AutoZone ended down $2.90, or 3.84 percent, at $72.70 Tuesday on the New York Stock Exchange. The stock has more than doubled in the past year.