25th May 2006 - AutoZone 3rd Quarter Sales Up 5.9 Percent; Same Store Sales Up 2.1 Percent

AutoZone, Inc. today reported sales of $1.417 billion for its third quarter (12 weeks) ended May 6, 2006, up 5.9% from fiscal third quarter 2005. Same store sales, or sales for stores open at least one year, were up 2.1% for the quarter.

Net income for the quarter decreased 2.3% over the same period last year to $144.4 million, while diluted earnings per share increased 1.4% to $1.89 per share from $1.86 per share reported in the year-ago quarter.

Under its share repurchase program, AutoZone repurchased 2.3 million shares of its common stock for $228.3 million during the third quarter, at an average price of $98 per share. Since 1998 cumulative share repurchases have totaled $4.3 billion, or 89.5 million shares at an average price of $49 per share.

For the quarter, gross profit, as a percentage of sales, was 49.7% (versus 50.3% last year). The reduction in comparable gross margin was primarily due to a higher penetration of commodity and maintenance items versus last year, which typically have lower margins. Additionally, operating expenses, as a percentage of sales, were 31.8% (versus 30.9% last year). A portion of the increase in operating expenses this year reflected $4.2 million in share-based expenses resulting from the adoption of the Financial Accounting Standards Board ("FASB") Statement No. 123(R), "Share-Based Payments." Adjusting for this non-comparable expense item, operating expenses were 31.5% (versus 30.9% last year) or 61 basis points over last year. The increase in comparable operating expenses reflected both the Company's ongoing initiatives to improve the customer shopping experience, such as additional training and extended hours of operation, and higher occupancy costs versus last year.

Excluding this quarter's share-based charges, adjusted net income decreased 0.5%, while adjusted diluted earnings per share of $1.92 were up 3.3% versus the year-ago quarter.

The Company's total per store inventory level, including supplier owned pay-on-scan inventory, as of May 6, 2006, was $495 thousand versus $497 thousand last year. Net inventory, defined as merchandise inventories less accounts payable, increased on a per store level to $82 thousand from $59 thousand last year.

"We are pleased with the progress we are making on the major initiatives launched at the beginning of the year. These initiatives, which focus on improving the customer shopping experience, have resulted in improved sales and measurable increases in customer service metrics. I would like to thank all of our AutoZoners for their commitment to deliver exceptional service to our customers," said Bill Rhodes, President and Chief Executive Officer. "We will continue our disciplined approach to growing operating earnings over the long-term while effectively deploying capital."

During the quarter ended May 6, 2006, AutoZone opened 42 new stores and replaced 4 stores in the U.S. while additionally opening 4 new stores in Mexico. Additionally, the Company re-opened 2 U.S. stores closed due to hurricane-related damage. As of May 6, 2006, the Company had 3,699 domestic stores and 92 stores in Mexico.

AutoZone is the nation's leading retailer of automotive parts and accessories. 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, and service stations. AutoZone also sells the ALLDATA brand diagnostic and repair software. On the web, AutoZone sells diagnostic and repair information, and auto and light truck parts through www.autozone.com. AutoZone does not derive revenue from automotive repair or installation.

Forward Statements

This release includes certain financial information not derived in accordance with generally accepted accounting principles ("GAAP"). These non-GAAP measures include adjusted debt, adjusted debt/EBITDAR, adjusted rent expense, adjusted operating expense, adjusted operating profit, adjusted income before taxes, adjusted income taxes, adjusted net income, adjusted basic earnings per share, and adjusted diluted earnings per share. The Company believes that the presentation of these non-GAAP measures provides information that is useful to investors as it indicates more clearly the Company's comparative year-to-year operating results, but this information should not be considered a substitute for any measures derived in accordance with GAAP. Management manages the Company's debt levels to a ratio of adjusted debt to EBITDAR and manages cash flows available for share repurchase by monitoring cash flows before share repurchases, as shown on the attached tables. This is important information for the Company's management of its debt levels and share repurchases. We have included a reconciliation of this information to the most comparable GAAP measures in the accompanying reconciliation tables.

Certain statements contained in this press release are forward-looking statements. Forward-looking statements typically use words such as "believe," "anticipate," "should," "intend," "plan," "will," "expect," "estimate," "project," "positioned," "strategy," and similar expressions. These are based on assumptions and assessments made by our management in light of experience and perception of historical trends, current conditions, expected future developments and other factors that we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including without limitation: competition; product demand; the economy; the ability to hire and retain qualified employees; consumer debt levels; inflation; weather; raw material costs of our suppliers; gasoline prices; war and the prospect of war, including terrorist activity; availability of consumer transportation; construction delays; access to available and feasible financing; and changes in laws or regulations. Forward-looking statements are not guarantees of future performance and actual results; developments and business decisions may differ from those contemplated by such forward-looking statements, and such events could materially and adversely affect our business. Forward-looking statements speak only as of the date made. Except as required by applicable law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Actual results may materially differ from anticipated results. Please refer to the Risk Factors section of AutoZone's Form 10-K for the fiscal year ended August 27, 2005, for more information related to those risks.

Source: AutoZone Press Release