AutoZone(AZO) - 2025 Q2 - Quarterly Report

Financial Performance - Net sales for the twelve weeks ended February 15, 2025, increased by $92.9 million to$ 4.0 billion, a 2.4% increase over the prior year period [82]. - Operating profit decreased by 4.9% to $706.8 million, while net income decreased by 5.3% to$ 487.9 million for the quarter [78]. - Domestic commercial sales increased by $71.6 million to$ 1.1 billion, representing a 7.3% increase over the comparable prior year [82]. - Gross profit for the twelve weeks ended February 15, 2025, was $2.1 billion, maintaining a gross margin of 53.9% [84]. - For the twenty-four weeks ended February 15, 2025, net sales increased by$ 182.2 million to $8.2 billion, a 2.3% increase over the prior year [89]. - Net income for the twenty-four weeks decreased by$ 55.6 million to $1.1 billion, with diluted earnings per share down by 1.1% to$ 60.83 [95]. - Net income for the fiscal year ended August 26, 2023, was $2,528,426, compared to$ 1,512,564 for the twenty-four weeks ended August 26, 2023, reflecting a significant increase [120]. - EBITDAR for the fiscal year ended August 26, 2023, was $4,471,048, while for the trailing four quarters ended February 10, 2024, it was$ 4,707,160, indicating strong operational performance [120]. Expenses and Costs - Operating, selling, general and administrative expenses increased to $1.4 billion, or 36.0% of sales, compared to 34.6% in the prior year [85]. - Net interest expense rose to$ 108.8 million, with average borrowings increasing to $9.1 billion [86]. - The accounts payable to inventory ratio was 118.2% as of February 15, 2025, slightly down from 119.8% in the prior year [103]. - Rent expense for the trailing four quarters ended February 15, 2025, was$ 459,840, compared to $417,864 for the previous year [121]. - Total lease cost per ASC 842 for the trailing four quarters ended February 15, 2025, was$ 614,312, up from $546,195 for the previous year [121]. Cash Flow and Capital Expenditures - As of February 15, 2025, the company held$ 300.9 million in cash and cash equivalents, with $2.2 billion in undrawn capacity on its Revolving Credit Agreement [96]. - For the twenty-four weeks ended February 15, 2025, net cash flows from operating activities were$ 1.4 billion, an increase from $1.3 billion in the prior year period [99]. - Capital expenditures for the same period were$ 539.7 million, up from $490.8 million, driven by growth initiatives including the opening of 79 net new stores compared to 51 in the prior year [100]. - Net cash flows used in financing activities increased to$ 826.4 million from $692.8 million, with stock repurchases totaling$ 866.5 million compared to $1.7 billion in the prior year [101]. Debt and Leverage - The adjusted after-tax return on invested capital (ROIC) was 45.5% for the trailing four quarters ended February 15, 2025, down from 53.5% in the prior year [107]. - The adjusted debt to EBITDAR ratio was 2.5:1 as of February 15, 2025, compared to 2.4:1 in the prior year [108]. - The company had no debt issuances during the twenty-four weeks ended February 15, 2025, compared to$ 1.0 billion in the prior year [101]. - The fair value of the company's debt was estimated at $9.0 billion as of February 15, 2025, reflecting a decrease of$ 92.1 million compared to its carrying value [126]. - The company had $602.0 million of variable rate debt outstanding as of February 15, 2025, compared to$ 580.0 million at August 31, 2024 [126]. - A one percentage point increase in interest rates would negatively impact pre-tax earnings and cash flows by $6.0 million in fiscal 2025 due to variable rate debt exposure [126]. Taxation - Effective income tax rate decreased to 18.4% from 19.6% in the prior year, influenced by a favorable valuation allowance adjustment [87]. - The effective tax rate over the trailing four quarters ended February 15, 2025, was 20.3%, slightly down from 20.5% for the previous year [121]. Future Outlook and Strategy - The company plans to increase investments in fiscal 2025, focusing on new stores and distribution centers [102]. - The Revolving Credit Agreement was amended to extend the termination date to November 15, 2028 [109]. - The company expects to rely on internally generated funds and available borrowing capacity for capital expenditures and stock repurchases [104].