AutoZone(US:AZO)2026-03-20 20:36Financial Performance - Net sales increased to $4.3 billion, an 8.1% increase over the comparable prior year period, driven by a 3.3% increase in same store sales on a constant currency basis and $114.4 million from new stores[82][87] - Operating profit decreased 1.2% to $698.5 million, negatively impacted by a $59.0 million unfavorable non-cash LIFO charge[82] - Net income decreased 3.9% to $468.9 million, with diluted earnings per share decreasing 2.3% to $27.63 for the quarter[82][93] - Gross profit for the twelve weeks ended February 14, 2026, was $2.2 billion, with a gross profit margin of 52.5%, down from 53.9% in the prior year due to a 138 basis point unfavorable non-cash LIFO charge[89] - For the twenty-four weeks ended February 14, 2026, net sales increased to $8.9 billion, an 8.2% increase, driven by a 4.0% increase in same store sales on a constant currency basis[94] Expenses and Costs - Operating, selling, general and administrative expenses for the twenty-four weeks ended February 14, 2026, were $3.1 billion, or 35.0% of sales, compared to 34.6% in the prior year[97] - Net interest expense was $213.5 million for the twenty-four weeks ended February 14, 2026, with average borrowings of $8.8 billion[98] - The effective income tax rate increased to 21.2% for the twenty-four weeks ended February 14, 2026, compared to 20.9% in the prior year[99] - The adjusted after-tax return on invested capital (ROIC) for the trailing four quarters ended February 14, 2026, was 37.6%, down from 45.5% in the prior year[108] - The accounts payable to inventory ratio was 110.9% at February 14, 2026, down from 118.2% at February 15, 2025, reflecting changes in working capital management[106] Cash Flow and Investments - Net cash flows used in investing activities for the twenty-four weeks ended February 14, 2026, were $667.5 million, up from $563.4 million in the prior year period, with capital expenditures increasing to $652.0 million from $539.7 million[103] - Net cash flows used in financing activities decreased to $642.9 million from $826.4 million in the prior year, with stock repurchases totaling $741.7 million compared to $866.5 million previously[104] - The company anticipates relying on internally generated funds and available borrowing capacity for capital expenditures and stock repurchases, with potential new borrowings as needed[107] Store Expansion and Growth Strategy - The company opened 117 net new stores during the twenty-four weeks ended February 14, 2026, compared to 79 in the prior year period, indicating a strong expansion strategy[103] - The company plans to increase investments in growth initiatives, including new stores and hub expansions, compared to fiscal 2025[105] Debt and Financial Position - The adjusted debt to EBITDAR ratio was 2.5:1 as of February 14, 2026, consistent with the prior year, indicating stable debt management[110] - The fair value of the Company's debt was estimated at $9.1 billion as of February 14, 2026, an increase from $8.9 billion as of August 30, 2025, representing a rise of 2.25%[130] - A net increase of $102.4 million in commercial paper was reported as of February 14, 2026, indicating a significant change in market-sensitive instruments[129] - The Company had $851.0 million of variable rate debt outstanding as of February 14, 2026, compared to $748.6 million as of August 30, 2025, reflecting an increase of 13.7%[130] - A one percentage point increase in interest rates would negatively impact pre-tax earnings and cash flows by $8.5 million in fiscal 2026 due to variable rate debt exposure[130] - The Company had outstanding fixed rate debt of $8.1 billion as of February 14, 2026, unchanged from August 30, 2025, with a potential fair value reduction of $304.8 million if interest rates rise by one percentage point[130] Lease and Rent Expenses - Total lease cost per ASC 842 for the trailing four quarters ended February 14, 2026, was $630.737 million, compared to $614.312 million for the same period ended February 15, 2025, reflecting a year-over-year increase of 2.5%[124] - Rent expense for the trailing four quarters ended February 14, 2026, was $478.652 million, up from $459.840 million for the same period ended February 15, 2025, indicating a growth of 4.1%[124] Tax and Financial Arrangements - The effective tax rate for the trailing four quarters ended February 14, 2026, was 20.4%, slightly higher than 20.3% for the same period ended February 15, 2025[125] - The company has arrangements with third-party financial institutions to confirm invoice balances owed to suppliers, which may impact working capital depending on supplier participation[106] - The net investment in tax credit equity investments was $9.7 million for the twenty-four weeks ended February 14, 2026, down from $37.4 million in the prior year[103]