AutoZone, Inc. (NYSE:AZO) Q3 2019 Earnings Conference Call Transcript

May 21, 2019 • 10:00 am ET

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AutoZone, Inc. (NYSE:AZO) Q3 2019 Earnings Conference Call Transcript

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Executive
William T. Giles

attractive capital deployment strategy.

Next, I'd like to update you on our inventory levels in total, and on a per store basis. The Company's inventory increased 8% over the same period last year, driven by new stores and increased product placement. Inventory per location was $688,000 versus $658,000 last year and $690,000 last quarter.

Net inventory defined as merchandise inventories less accounts payable, on a per location basis was a negative $58,000 versus a negative $48,000 last year and a negative $58,000 last quarter. As a result, accounts payable as a percent of gross inventory finished the quarter at a 108.5%. Finally, as Bill previously mentioned, our continued disciplined capital management approach resulted in return on invested capital for the trailing four quarters of 34.5%. We have and will continue to make investments that we believe will generate returns that significantly exceed our cost of capital.

Now, I'll turn it back to Bill Rhodes.

Executive
William C. Rhodes

Thank you, Bill. While we had a strong sales quarter, we know we have much work to do to finish this year strong. The summer months generate a large percentage of our annual sales and we'll be opening up a substantial portion of our new stores, commercial programs and mega hubs during the fourth quarter. We also have a lot of deliverables from our IT initiatives this upcoming quarter. We also have -- we remain focused on simplifying our store AutoZoners workloads to reduce clutter and unnecessary task that get in the way of making the customer experience better for both the do-it-yourself customer and the professional customer.

We believe our industry's fundamentals will remain strong as miles driven are expected to increase over the remainder of the year. This upcoming quarter, we are laser focused on executing our game plan. We are excited about our balanced model for growth around domestic retail and commercial, international, online and Pick-Up In-Store. We believe our hubs and mega hubs, Mexico, ALLDATA and digital can all grow their top lines for the remainder of 2019. To execute at a high level, we must adhere to living the pledge. We cannot and will not take our eye off of execution. Success will be achieved with an attention to detail and thoughtful execution. Services always been our most important cultural cornerstone and it will be long into the future.

Our charge remains to optimize our performance regardless of market conditions and to continue to ensure we are investing in the key initiatives that will drive our long-term performance. In the end, delivering strong EPS growth and ROIC, each and every quarter is how we measure ourselves. This formula has been extremely successful over the last 40 years and we continue to be excited about our future.

Now, we'd like to open up the call for questions.