The Auto Channel-Aftermarket Business Magazine

AutoZone meets with shareholder group to ponder stock value
A GROUP OF SHAREHOLDERS with a nearly 15 percent stake in AutoZone Inc. said recently it held talks with the automotive parts retailer about its recent performance and ways to enhance shareholder value.
Following those discussions, AutoZone, based in Memphis, Tenn., voted at a Sept. 17 board meeting to expand the board to ten members from nine and nominated Edward Lampert to the board, a Securities and Exchange Commission filing said.
Lampert is founder and chairman of Connecticut-based ESL Investments, which, along with various affiliates, holds 14.62 percent, or 21,761,400 AutoZone common shares.
The group, whose members include ESL Partners LP, Acres Partners LP and Marion Partners LP, said that through Lampert, it plans to continue talks with AutoZone management and board on a number of issues.
The group said in the SEC filing that in August, it notified AutoZone and federal antitrust officials of a "good faith intention" to acquire more than 15 percent of the company's shares.
An AutoZone official declined to comment on the SEC filing as we went to deadline.
That notification under the federal Hart-Scott-Rodino antitrust law of 1976 designated the 15 percent acquisition threshold, the shareholders said.
Federal authorities granted early termination of the waiting period under the law, which in effect allows them to acquire up to 24.9 percent of the outstanding shares without further notification under the law, said the filing.
Depending of such factors like AutoZone's current and anticipated future stock price, and financial condition, the group said it may acquire more shares, or sell all or part of its shares.
AutoZone's board recently approved the repurchase of up to $200 million of its common stock.
This was in addition to the $400 million already approved.

Hurricane Floyd may pinch profits at Discount Auto Parts
DESTRUCTION FROM September's hurricane Floyd may pinch the profits of Florida's largest auto parts retailer.
Commenting on the recent hurricane activity in the southeastern U.S. Discount Auto Parts President Bill Perkins stated, "We were fortunate to have had only minimal physical damage to certain store locations, and, as always, our Team responded admirably. However, because of the mandatory evacuations in many of our operating areas we had approximately 265 stores closed for at least some period during hurricane Floyd. As a result, sales and earnings may be impacted slightly for the second quarter of fiscal 2000."
Hurricane Floyd packed winds of 155 mph at its peak and produced extensive flooding from storm surges and downpours. The hurricane brought the largest evacuation in U.S. history from Florida's East Coast northward and plowed into the North Carolina coast. At press time, damage estimates were unavailable.
Discount operates in the Southeastern states of Florida, Georgia, Mississippi, Alabama, Louisiana and South Carolina. The company ended its first quarter of fiscal year 2000 with a total sales increase of 16.7 percent, reaching a record $143.6 million, as compared to $123 million a year earlier.
Comparable store sales increased 1 percent for the first quarter, which ended Aug. 31. The balance of the increase was attributable to new stores that have opened since the beginning of fiscal 1999.
During the first quarter of fiscal 2000, Discount added 22 mini-depot stores. As the second quarter began the company had 580 stores in operation consisting of 28 depot stores and 552 mini-depot stores. For fiscal 2000, Discount expects to add a total of approximately 80 to 90 stores.
Comparable store sales results include sales from Discount's commercial delivery program.
Gross profit for the first quarter increased 18.4 percent to $58.4 million as compared to $49.3 million for the first quarter of fiscal 1999. As a percentage of sales, gross profit was 40.7 percent for the first quarter of fiscal 2000 as compared to 40.1 percent for the first quarter of fiscal 1999.
Selling, general and administrative expenses increased as a percentage of sales from 28.5 percent in the first quarter of fiscal 1999 to 30.4 percent in the first quarter of fiscal 2000. The increase is primarily due to expenses incurred related to the implementation and expansion of the company's commercial delivery program and somewhat lower do-it-yourself comparable store sales.
Operating income and the resulting margins for both the first quarter of fiscal 2000 and the first quarter of fiscal 1999 were negatively impacted by the implementation and expansion of Discount's commercial delivery program. Income from operations for the first quarter of fiscal 2000 was $14.7 million as compared to $14.3 million for the first quarter of fiscal 1999. Operating margins for the first quarter of fiscal 2000 were 10.3 percent, compared to 11.6 percent for the first quarter of fiscal 1999.
Excluding the impact of the commercial delivery program, operating margins were approximately 11.4 percent for the first quarter of fiscal 2000 versus approximately 12.2 percent for the first quarter of fiscal 1999.

Advance Auto set to establish in-store television network
ADVANCE AUTO PARTS, the nation's second-largest automotive aftermarket retailer, has signed a contract with Convergent Media Systems to integrate and support the Advance Auto Parts proprietary, in-store TV network.
Convergent integrates satellite-based business television networks and interactive distance learning systems for training, education and communications.
The Advance Auto Parts satellite-based digital video network will deliver video programming directly to customers via strategically placed in-store TV monitors in 1,700 Advance Auto Parts retail locations throughout the U.S. The network will broadcast customized features from CNN, NASCAR, ESPN and The Nashville Network. Advertising messages are expected to reach in excess of 200 million Advance customers in 2000, the network's first full year of operation.
"The success of similar in-store networks at Blockbuster Video stores and Planet Hollywood restaurants was the inspiration for the Advance Auto Parts Network," said Chad Tilley, executive vice president and general manager, Advance Auto Parts. "Test marketing revealed that customers stayed longer in stores with televisions, resulting in higher average sales."
Convergent will install compressed digital video systems and three to six monitors at each retail store, as well as an on-premise uplink and encoder at the company's headquarters in Roanoke, Va. Network installation will be accomplished by Convergent's team of 400 field service representatives, who are located throughout the United States and backed by proprietary tracking and reporting systems.
Convergent also will provide transmission, encryption, help desk, maintenance, space segment and project management services. State-of-the-art Network and Engineering Control Centers, staffed by customer service and technical support teams, are the hub for many of these activities.
"When Advance Auto Parts contacted us about implementing their in-store video network, it was clear our companies were a good match," said Convergent Vice President Greg Browning. "The expertise Convergent has honed over the last 18 years is exactly what Advance Auto Parts needed for its unique network. Not only do we get to do what we do best, but we get to work with a client we hold in very high esteem."

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