Final Reflection of AutoZone jonathan hassler

Overview and Recent Events

  • Since its inception in 1979, originally as Auto Shack, AutoZone has climbed the ranks to become one of the largest aftermarket auto parts retailers in North America.
  • Has the largest amount of sales in comparison to Advance Auto Parts and O'Reilly.
  • With the recent acquirement of International Motor Corporation, AutoZone is also been able to offer a vast array of import replacement parts for those with foreign vehicles.

Liabilities

  • The biggest thing to note about AutoZone is the overwhelming amount of debt that they have accumulated.
  • While daunting at first glance, when examining leverage ratios, while very high (and negative), AutoZone has been able to increase their Times Interest Earned ratio.
  • Working capital is also getting closer to zero (negative $450.7 million).
  • As a side note, this could be troublesome in the long-run if the economy were to go south.

Treasury Stock Buyback Program

  • In addition to the increase in debt, AutoZone is continuing to buyback substantial amounts of its own stock, causing stockholders' equity to decrease.
  • This is contributing to their increasing EPS, $41.52 in 2016. and stock price currently being offered at $694.

Profit Ratio Comparison

  • Gross, operating, and net profit margins have been increasing and stable.
  • Nearly identical to O'reilly's ratios and nearly triple Advance Auto Parts' net profit margin.

Concerns with Activity Ratios

  • From 2014 to 2016 every activity ratio has deceased indicating a lack of efficiency in AutoZone's assets.
  • Even though AutoZone's sales have been increasing, the amount of assets they have reported seems to be growing at a faster rate.
  • Most notably their AR turnover (47 times down to 36) and the Average Collection Period (7.7 days to 9.9 days)

Area of Concern Moving Forward

  • Though not addressed in their 10-k, but in their SWOT analysis and multiple reviews from employees on websites, is how employees feel and are compensated for working at AutoZone.
  • Multiple testimonies of having meager growth opportunity in the company, the pay is barely being enough to live off of, and the consistency in work hours is anything but that.
  • Payroll is a contributor to cost of sales, which has been decreasing as a percentage of net sales over several periods.
  • Workers who feel unsatisfied in their jobs could reflect poorly on AutoZone as a brand in the future if it is not addressed soon.

Where To Go From Here?

  • Expand more on an international scale?
  • This would be limited until AutoZone can rein in their debt obligations.
  • Will they ever get back to a stockholders' balance?
  • How will they respond to employee morale (or lack thereof)?

References

AutoZone. (2016). Form 10-K 2016. Retrieved from SEC EDGAR website https://www.sec.gov/Archives/edgar/data/866787/000119312516745160/d253831d10k.htm

Investor Information. (2004). Retrieved April 11, 2017, from http://phx.corporate- ir.net/phoenix.zhtml?c=76792&p=irol-faq

SWOT Analysis. (n.d.). Retrieved March 22, 2017, from http://autozoneanalytics.weebly.com/swot-analysis.html

Credits:

Created with images by Dean Hochman - "auto zone" • ccPixs.com - "3D Shackled Debt" • pasa47 - "AutoZone"

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