AutoZone(AZO) - 2023 Q4 - Annual Report

Store Expansion and Revenue Growth - The company has increased its store count from 6,202 stores in August 2018 to 7,140 stores in August 2023, representing a compounded annual growth rate of 3%[71] - Annual revenues grew from $11.2 billion in fiscal 2018 to$17.5 billion in fiscal 2023, with a compounded annual growth rate of 9%[71] - Future success depends on the ability to open new stores and remodel existing ones to meet customer needs[85] - The company operated 6,300 stores in the U.S., 740 in Mexico, and 100 in Brazil at the end of fiscal 2023, maintaining a strong retail presence[253] Labor and Employment Challenges - The workforce consists of approximately 119,000 employees, and labor costs represent the largest operating expense[74] - The company faces challenges in hiring and retaining qualified employees due to competitive labor market conditions[75] Supply Chain and Inventory Management - Significant investments in the supply chain are planned to improve product availability and meet long-term store expansion goals[87] - Disruptions in the supply chain could adversely impact inventory availability and customer loyalty[83] Market Competition - The company's sales growth may be limited if it cannot profitably increase its market share in the commercial auto parts business[72] - The company must effectively compete against various market participants to increase its commercial market share[73] Cybersecurity and IT Risks - The company relies heavily on information technology systems for key business processes, which are vulnerable to various risks including cyber-attacks and system failures[97] - Significant investments are required to upgrade legacy systems and migrate applications to the cloud, which may lead to operational challenges and increased costs[98] - The company has not experienced a material breach to date, but unauthorized access attempts have occurred, indicating ongoing security vulnerabilities[104] - The cost to remediate cyber incidents could be substantial, potentially leading to significant liability and reputational harm[105] - The regulatory environment regarding data privacy is becoming increasingly complex, which may require significant resources to comply and could adversely impact operations[106] Financial Performance - Net income for the year ended August 26, 2023, was $2,528,426, an increase from$2,429,604 in the previous year, representing a growth of 4.1%[245] - Total revenue for the year was $17,457,209, compared to$16,252,230 in the prior year, reflecting a year-over-year increase of 7.4%[243] - Operating profit for the year was $3,473,986, up from$3,270,729, indicating a growth of 6.2%[243] - Comprehensive income for the year reached $2,638,126, compared to$2,437,054 in the previous year, marking an increase of 8.2%[245] - Total assets as of August 26, 2023, amounted to $15,985,878, up from$15,275,043, showing a growth of 4.6%[247] Debt and Interest Rates - The fair value of the company's debt was estimated at $7.3 billion as of August 26, 2023, compared to$5.9 billion as of August 27, 2022, reflecting a decrease in fair value of $406.6 million[219] - The company had$1.2 billion in variable rate debt outstanding as of August 26, 2023, an increase from $603.4 million as of August 27, 2022[219] - Fixed rate debt amounted to$6.5 billion, net of unamortized debt issuance costs of $41.1 million, as of August 26, 2023, up from$5.5 billion with unamortized costs of $31.3 million as of August 27, 2022[220] - A one percentage point increase in interest rates would reduce the fair value of fixed rate debt by approximately$264.7 million as of August 26, 2023[220] - The Company had a consolidated interest coverage ratio of 6.3:1 as of August 26, 2023, significantly above the required minimum of 2.5:1[339] Cash Flow and Capital Expenditures - Cash provided by operating activities decreased to $2,940,788 from$3,211,135, reflecting a decline of 8.4% year-over-year[248] - Capital expenditures increased to $796,657, up from$672,391, representing a rise of 18.5%[248] - The company reported a net cash used in investing activities of $876,178, compared to$648,099 in the previous year, indicating a 35.2% increase[248] - The company reported a net cash used in financing activities of $2,060,082, a decrease from$3,470,497 in the previous year, indicating a 40.6% reduction[248] Tax and Regulatory Matters - The company's effective tax rate for the year ended August 26, 2023, was 20.2%, down from 21.1% in the previous year[315] - The company had net operating loss carryforwards totaling approximately $314.6 million as of August 26, 2023, compared to$241.2 million on August 27, 2022[319] - The company reported deferred tax assets of $917.0 million as of August 26, 2023, an increase from$867.1 million on August 27, 2022[318] Shareholder Returns and Stock Activity - The Company has $1.8 billion remaining under the Board's authorization to repurchase its common stock, with a total repurchase activity amounting to$3.72 billion for the year ended August 26, 2023[351] - The Company retired 2.1 million shares of treasury stock during fiscal year 2023, increasing Retained deficit by $4.2 billion[353] Lease Obligations - Total lease assets as of August 26, 2023, amounted to$3,417,344 thousand, an increase from $3,323,259 thousand as of August 27, 2022, reflecting a growth of approximately 2.83$3,461,920 thousand, up from $3,391,685 thousand as of August 27, 2022, indicating an increase of about 2.06$437,762 thousand, an increase from $401,000 thousand for the year ended August 27, 2022, representing a growth of approximately 9.1%[357]