Former Chrysler CEO Bob Nardelli on rolling back EPA regulations on the auto industry and the potential impact of the coronavirus on earnings.
AutoZone stock fell more than 2% in early trading as the auto parts retailer suffered an unexpected sales slump in the second quarter led by the mild winter weather.
Continue Reading Below
The company reported net sales of $2.51 billion in the three months to Feb. 15, a 2.6% increase on the previous year but lower than the FactSet consensus of $2.57 billion. Same store sales fell 0.8%, well below analysts’ estimates of a 2.8% rise.
Weather tends to be a big driver of auto parts sales as colder temperatures increase the need for replacement parts as well as items such as windshield wipers and antifreeze.
An electric Chevy Bolt charges after a heavy snowfall. (iStock)
CEO Bill Rhodes said the sales performance didn’t meet the company’s expectations, citing the mild winter.
“We had particularly challenging sales in specific weather-sensitive categories and geographies, indicating to us that the mild winter was a considerable headwind to our and our industry’s performance,” Rhodes said.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
Nomura Instinet analyst Michael Baker said the company was more impacted by the weather than others due to its DIY exposure, which is about 80% of the business.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| AZO | AUTOZONE | 1,020.90 | -25.98 | -2.48% |
| ORLY | O’REILLY AUTOMOTIVE INC. | 366.28 | -12.11 | -3.20% |
| AAP | ADVANCE AUTO PARTS | 129.86 | -3.13 | -2.35% |
Despite the sales slump, net income rose 1.6% to $299.3 million — $12.39 per share — beating estimates of $11.75 per share, helped by a lower tax rate.
Rhodes said the company was optimistic heading into the “seasonally strong” second half of the year.
IS IT BETTER TO BUY OR LEASE A CAR?
The stock hit all-time highs of $1,274 in December last year and has now beat earnings per share estimates in 11 consecutive quarters as it has increased store footprint and fought off competition from e-commerce companies such as Amazon As of Monday’s close, the stock was trading at $1,046.89.
In January, JPMorgan downgraded rival Advance Auto Parts, citing the warm winter.
CLICK HERE TO READ MORE ON FOX BUSINESS
Looking ahead. Credit Suisse analysts were confident AutoZone’s weak sales were largely down because of the weather and expected a re-acceleration in the second half of its fiscal year, which begins in September, maintaining an outperform rating on the stock.
They said margins and earnings per share were solid, and placed a target price of $1,350 on the shares. The sales miss was substantial, making for a disappointing quarter. However, provided the weather was to blame, AutoZone and the stock remains well placed for growth.
