...AutoZone Inc. NYSE: AZO Brent Ozenbaugh bozenbau@mail.smu.edu Jennifer Pray jenniferpray@yahoo.com Meredith Price mprice@mail.smu.edu Lindsey Price lcprice1@aol.com BUY April 27, 2004 You’re About To Enter… The AutoZone Fundamental Highlights • Offers diversification in our discretionary holdings through investment in the low volatility automotive industry. • Industry characterized by consistent demand and potential market share growth. • Top line growth drivers in place to meet management goals. Valuation Highlights • Highest operating margins and EBITDA margins among comparable companies. • PEG ratio of 1.15 is well below the comparable average of 1.66. • 21.1% undervalued on a DCF basis. Exhibit 1 Financial Summary (In Millions except for per share data) Price: $83.26 Price Target: $105.53 52-Week Range: $103.53 -$73.80 Shares Outstanding: 88.71 Market Cap.: $7,386 Beta: 0.93 EPS (CFY): $5.83 EPS (NFY): $6.58 AZO v. Comparable Avg. PEG: 1.15 v. 1.66 5yr Growth in EPS: 57.4% v. 31.2% P/E Ratio (CFY): 14.72 v. 15.29 P/E Ratio (NFY): 13.21 v. 13.48 Gross Margin (LFY): 48.1% v. 33.8% EBITDA Margin: 20.8% v. 8.7% ROE: 138.5% v. 14.8% ROA: 27.9% v. 12.5% Source: Value Line, Multex Investor Company Profile____ Discretionary, Auto Parts AutoZone, Inc. (AZO) is a specialty retailer of automotive parts and accessories, with most of its sales to doit-yourself customers. As of August 30, 2003, the Company operated 3,219 domestic auto parts stores in 48 states...
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........................5 Alternative Operating Cash Flow Options.......................................................................................6 Issuing a Dividend...........................................................................................................................6 Organic Growth ..............................................................................................................................7 Growth by Acquisition.....................................................................................................................8 Debt Retirement...............................................................................................................................8 Recommendation for Autozone.......................................................................................................9 Recommendation for Mark Johnson .............................................................................................10 References......................................................................................................................................12 Executive Summary Throughout this report, a case analysis will be conducted...
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...Case #2: AutoZone Over the past five years, AutoZone’s stock price has seen a relatively steady increase. There have been some drops in the stock price during that period, but, for the most part, the stock price has been on the rise. The number of share repurchases by AutoZone during that period of time has also been consistent with the stock price as it has increased steadily. The ROIC has also mainly increased over the past five years. A share repurchase is a company buying back its own stocks from the market. It is basically a company using its cash to buy its own shares and invest in itself. By repurchasing its own shares a company is able to enhance its earnings per share by reducing the number of shares outstanding and also reduce the book value of shareholder’s equity. In AutoZone’s case, the repurchases resulted in the invested capital staying fairly constant. Combining that with the increased earnings from operating cash flows, and the ROIC was able to see an increase over that period. The share repurchase program used by AutoZone also caused the steady increase in earnings per share for the company. These numbers can be easily viewed in Exhibits 2, 3, 4, and 5 in the case study. I believe that a strong case can be made in favor of a large portion of the stock price performance being attributed to the share repurchase program that AutoZone has used. By repurchasing the shares, AutoZone has been able to steadily increase its earnings per share. This has resulted...
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...AutoZone, Inc. (AZO): Analysis Report 1 AutoZone, Inc. (AZO): Analysis Report John Becker Financial Capstone Course Professor Ian Hudson December 11, 2011 AutoZone, Inc. (AZO): Analysis Report Introduction and Background (Part 1): AutoZone is probably best known in the US for its large chain of retail stores selling replacement auto parts, auto accessories, auto tools, and related merchandise. As of February 2 2011, the firm had 4,425 retail stores in the continental US and 249 stores in Mexico (AutoZone, 2011). AZO competes primarily with O’Reilly Automotive (ORLY), Advance Auto Parts (AAP), and The Pep Boys (PBY) in the specialty retail sector. It should be noted that CarQuest, owned by General Parts, Inc., is significant private competitor (Hoovers, 2011). Thanks to a history of very aggressive growth and acquisition, AZO is the largest among these, with ORLY not far behind in terms of market capitalization. AZO’s growth has outpaced its rivals in recent years. It has met great success with its retail “DIY” outlets, with its commercial sales to local repair garages, with its private-label line of replacement parts, and with its online sales through the Autozone.com website. AutoZone’s progress to becoming the largest publicly-held replacement auto parts supplier in the US can only be described as very impressive. Joseph Hyde III opened his first store in 1979 with the name “Auto Shack.” The opening in Forrest City, AR followed Hyde’s ventures in other specialty...
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...The industry of AutoZone would consist of being a part of the automotive industry, and more defining, the automotive aftermarket industry. Being dedicated to supplying parts and services for new and used vehicles, AutoZone has built the reputation of providing replacement parts for light, medium, and heavy duty vehicles (AutoZone, 2017). In addition, AutoZone offers lubricants, interior and exterior accessories, and tools and equipment needed to make repairs. AutoZone has been considered one of the leading distributors in the aftermarket industry. Michael Porter developed the concept of five forces, which he concluded to be the determining factor for a business to be incorporated into an industry (Parnell, 2008). Therefore, AutoZone would...
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...Table of Contents Executive Summary 2 Profitability Ratios 3 Profit Margin 3 Return on Assets 3 Return on Equity 3 Asset Utilization Ratios 3 Receivables Turnover 3 Average Collection Period 3 Inventory Turnover 3 Capital Asset Turnover 3 Total Asset Turnover 3 Liquidity Ratios 4 Current Ratio 4 Quick Ratio 4 Debt Utilization Ratios 4 Debt to Total Assets 4 Times Interest Earned 4 Conclusion and Recommendations 5 Appendix I: Ratios Analysis Results 6 Executive Summary The purpose of the report is to provide Wand Inc. a recommendation from the following choices: - 1. Grant short-term credit to Lululemon Athletica Inc. 2. Grant long-term credit to Lululemon Athletica Inc. 3. Consider purchasing shares in Lululemon Athletica Inc. or buying shares in Nike On face value and looking at ratios in isolation, granting long term credit or investing in Lululemon looks like the best option for Wand Inc. However, further investigation on all the ratios and taking into account financial statement data, granting Lululemon short-term credit such as Notes Payables is the best viable risk tolerance option for Wand Inc. Lululemon’s liquidity ratios are growing year on year and are almost 3 times better than industry. The ratios positively favour short-term investors who prefer get their money back within a year. The report details an analysis of significant ratios split into four primary categories. Profitability Ratios which...
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...In the case of EEOC vs AutoZone this case was about discrimination against an employee and the right for him to wear a turban and a bracelet that had to do with his religion. The lawsuit was filed in September 2010 that said the company violated federal law because the employee was harassed and no accommodations were made for his religious beliefs. All this took place at the Everett Massachusetts Auto Zone store when the manager did not take Mr. Burroughs religious beliefs serious and began to harass him by asking if he was a terrorist and if he had joined forces with a group called Al-Qaeda then as the customers started to harassment management did nothing to stop it. It was all ledged that AutoZone terminated his employment because he asked for religious accommodations and told them he thought that he was being decimated against. According to the EEOC Title VII of the civil rights act of 1964 prohibits employers from...
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...Advance Auto Parts and AutoZone are two leaders in the automotive parts and accessories retail industry. Both companies are performing well during the downturn in the economy as car owners hold onto their vehicles for longer periods and perform their own repairs in attempt to save costs. These two companies are prime examples of companies that perform best when the economy grows weaker. While uncertainty remains on the status of the economy’s recovery, a deeper look into the financials of these companies may clarify the sustainability of their improving profits. Advance Auto Parts (AAP) is continuing to see improvements on profit margins since the beginning of the economic downturn, steadily increasing from 4.63 percent in 2008 to 5.84 percent in 2010. Also, comparable store sales are increasing as well which is another indicator that the company is generating greater profits during this period. AAP activity ratios are stable as well. There are no immediate liquidity concerns, but the balance sheet does indicate that AAP appears to be generating its financing from debt rather than equity. In fact, account payables and long-term debt steadily rose in 2010 to an atypical level, but its debt ratio still remains to be manageable. Also, AAP is actively buying back shares, which is also amplifying the increase of EPS investors have seen the past couple years. AutoZone (AZO), like AAP, is continuing to generate substantial profit margins during this time, maintaining approximately...
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...MKT/571 May 19, 2014 John Mullin Segmentation and Market Mix AutoZone is a unique company in its ability to market to a multitude of consumers. The company targets all consumers that own and operate motor driven equipment. AutoZone targets these consumers using a variety of segmentation methods. AutoZone segments its markets demographically, geographically, using psychographics, behaviorally, and using business segmentation to achieve its marketing goals. AutoZone understands that its customers will go to whichever company is willing to provide him or her with the best products at the right price. The company is willing to create the brands to entice consumers to pay more for higher quality products. AutoZone’s strategy has been to provide its customer with the best quality products at the right price. The company will only market those products it believes are the best for its customers. AutoZone markets itself to one type of consumer. When discussing AutoZone's patrons, the type of consumer refers to a large part of the population. AutoZone markets its products and services to any individual who owns and operates anything with a motor. The company markets its products to the do-it-yourselfer, the hobbyist, the backyard mechanic, the small business, and the individual that wants to purchase the product and use someone else to install it. The do-it-yourselfer market is what AutoZone is built on. This market includes the individuals that perform much of the routine...
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...14 AutoZone’s Expansion Strategic and Operational Plan AutoZone is one of the leading distributors of replacement parts and accessories for automobiles, and they currently have their sights set on global expansion. They already have stores in forty-nine states and Washington, D.C., as well as Puerto Rico, Mexico and Brazil ("Autozone Real Estate", 2004--2014). Currently they are looking to expand with in the US as well their global presence by aggressively advertising in Mexico and Puerto Rico. AutoZone wants to add more stores in more markets, that is their strategic goal, and adding a new stores in new markets are operational goals that helps achieve that strategic goal. Strategic Plan AutoZone’s strategic goal is to add more stores in more markets, to accomplish this goal they need an overarching strategic plan. When developing a strategic plan, there are several variables AutoZone needs to consider. First they need to do a SWOT analysis and decide if they even have the ability to expand. According Marketline in their most recent SWOT analysis of AutoZone, one of their strengths is “Robust financial performance supports future expansion plans” (“AutoZone, inc. SWOT analysis” 2014, para. Strengths), and “Expansion of retail stores and hub store network could provide more business opportunities” (“AutoZone, inc. SWOT analysis” 2014, para. Opportunities). Based on this analysis, it is safe to say AutoZone can expand. The next crucial step is analyzing the stakeholders...
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...Bill Rhodes, 42, is Chairman, President and Chief Executive Officer of AutoZone, Inc. Mr. Rhodes was named Chairman of AutoZone on June 6, 2007. While the economy and stock markets struggle to find their footing, some companies keep breezing along without interruption. AutoZone, Inc. is a specialty retailer of automotive parts and accessories. Its stores provide various products for use in cars, sport utility vehicles, vans, and light trucks, such as new and remanufactured automotive hard parts, maintenance items, and accessories and non-automotive products. AutoZone has topped quarterly EPS views by at least 11 cents each of the past seven quarters. It has grown quarterly profit by at least 21% over the same time span. Sales growth has not been as robust, though AutoZone has managed to log double-digit sales gains in four of the past five quarters Analysts surveyed by Thomson Reuters expect AutoZone to report earnings of $6.97 a share for its fiscal Q4, which ended in July. That would be an increase of 23% from the prior year. Sales should come in at $2.61 billion, a 7% gain. Like other chains, AutoZone has benefited from several trends. That includes the rising number of cash-strapped consumers who try to save money by working on cars themselves. As more consumers put off buying new cars, more vehicles with expired warranties are on the road. This forces consumers to either pay for repairs at commercial shops or do the work themselves. AutoZone's rivals include Advance...
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...is essential in for companies to survive and compete in the industry given the severity of identical products which makes it hard to differentiate one business’ products from hat of the competitors. The focus of this paper is on the comparative analysis of inventory turnover of AutoZone and Advance Auto Part companies. That follow a thorough research into the operations and performance of these two companies. To begin with, AutoZone is among the cost leader in the automotive industry with reputation for its excellent customer service which that company uses as a strategy of differentiation from the competitors. The company has manged to satisfy all the key success factors and as such, it has a competitive advantage over others. A close look at AutoZone’s financial behaviour and policies reveals that the company makes use of a mixed accounting strategy when preparing its financial statements thus maintains the generally accepted accounting principles (GAAP). That is because the company applies two approaches namely conservative and aggressive approaches by stating higher cost of goods sold and lower pre-tax income so as to reduce taxes as well as stating impairments respectively. Mainly, AutoZone utilizes inventory management, supplier relationships (for...
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...John Shepherd was an employee of AutoZone and his Doctor stated he should not mop the floors due an injury. With Dr. Katchen’s documentation and along with Mr. Shepherd’s request not to mop the floors AutoZone still made him mop daily. When Mr. Shepherd performed the duties it caused him more pain than he had before. The legal issue here is that Auto Zone did not comply with Dr. Katchen’s recommendation and this is against the Americans with Disability Act. They did not comply with the Doctor and did not hear Mr. Shepherds requests regarding mopping and his pain increased. The court decided that Mr. Shepherd was in the right and AutoZone broke the Americans with Disability Act in more than one way. He was awarded punitive damages, compensatory damages, and back pay....
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...2011 ANNUAL REPORT notice of annual meeting of stockholders and proxy statement Corporate Profile AutoZone is the leading retailer and a leading distributor of automotive replacement parts and accessories in the United States. The Company also operates stores in Puerto Rico and Mexico. 1 52 155 23 53 40 67 478 38 104 84 181 157 119 67 62 59 79 85 547 112 98 180 14 221 144 26 101 6 45 233 121 70 13 129 20 37 71 15 69 1 34 19 5 2 6 1 30 233 Each store carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products. Many stores also have a commercial sales program that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers, service stations, and public sector accounts. AutoZone also sells the ALLDATA brand of diagnostic and repair software through www.alldata.com. Additionally, we sell automotive hard parts, maintenance items, accessories, non-automotive products and subscriptions to ALLDATAdiy product through www.autozone.com, and our commercial customers can make purchases through www.autozonepro.com. AutoZone does not derive revenue from automotive repair or installation. 279 27 4,534 stores in 48 states in the United States, the District of Columbia and Puerto Rico 279 stores in 31 Mexican states and the Federal District. Selected...
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...most beneficial to people who want to touch up scratches to their cars and auto dealership that want to make quick repairs. The question that Terry needs to answer is how much to charge for his new touch up paint. He has decided to sell in a 4 fluid ounce tube with a brush included. It costs Terry $3.00 per tube for the first 1000. Terry knows that conventional touch up paint costs about $4.00/tube. However, his paint has much better qualities; consumers do not need to worry about matching color and his paint flows and seals better. However, when Terry asks the manager at AutoZone about his paint the manager said the consumers are very careful about what they put on their cars and many are reluctant to try new brands. The manager at Autozone said that his customers are quite price sensitive. Terry becomes confused about where he should sell the paint and what price he should charge. AutoZone seems reluctant to sell his paint and other retailers have not been very supportive. Terry talks to a specialist auto paint shop and they are willing to sell Terry’s paint but want a warranty guarantee for the paint. Terry decided to talk to an Auto dealership and they will not use any paint the General Motors does not support through its dealer network. A...
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