5th December 2006 - AutoZone 1st Quarter Sales up 4.1 Percent; EPS up 16.4 Percent

AutoZone, Inc. today reported net sales of $1.393 billion for its first fiscal quarter (12 weeks) ended November 18, 2006, up 4.1% from fiscal first quarter 2006. Same store sales, or sales for stores open at least one year, were up 0.3% for the quarter.

Net income for the quarter increased 8.3% over the same period last year to $123.9 million, while diluted earnings per share increased 16.4% to $1.73 per share from $1.48 per share reported in the year-ago quarter.

For the quarter, gross profit, as a percentage of sales, was 49.2% (versus 49.0% last year). The Company's improvement in gross margin has largely been due to the Company's ongoing category management initiatives which include continued optimization of merchandise assortment and pricing, and an increasing focus on direct importing initiatives. Additionally, operating expenses, as a percentage of sales, were 33.2% (versus 33.6% last year). A substantial portion of the favorable variance in operating expenses reflects a $2.8 million hurricane related charge taken in last year's quarter, our store reset efforts initiated in last year's first quarter, and an ongoing focus to reduce expenditures throughout the organization.

Under its share repurchase program, AutoZone repurchased 816 thousand shares of its common stock for $90.8 million during the first quarter, at an average price of $111 per share. The Company has approximately $130 million remaining under its current share repurchase authorization.

The Company's adjusted inventory per store, including supplier owned pay-on-scan inventory, as of November 18, 2006, was $503 thousand versus $495 thousand last year. Net inventory, defined as merchandise inventories less accounts payable, increased on a per store level to $60 thousand from $45 thousand last year.

"I'd like to thank our AutoZoners across the country for delivering record first quarter sales and EPS. While we're continuing to build momentum with our ongoing efforts to improve the customer shopping experience, driving measurable increases in customer service metrics, resulting sales improvements have been slower to materialize. As our financial model continues to be strong, we will maintain our disciplined approach to growing operating earnings and utilizing our capital effectively. Additionally, we believe our focus on driving our unique and powerful culture and refining our merchandise assortment during fiscal 2007 will positively impact sales for the foreseeable future," said Bill Rhodes, President and Chief Executive Officer.

During the quarter ended November 18, 2006, AutoZone opened 40 new stores and replaced 5 stores in the U.S. Additionally, the Company re-opened 1 of the remaining 4 U.S. stores closed due to hurricane-related damage in last year's first quarter. As of November 18, 2006, the Company had 3,812 stores in 48 states plus the District of Columbia and Puerto Rico in the U.S. and 100 stores in Mexico.

AutoZone is the leading retailer and distributor of automotive replacement parts and accessories in the United States. 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.

This release includes certain financial information not derived in accordance with generally accepted accounting principles ("GAAP"). These non-GAAP measures include total inventory, total inventory per store, adjusted debt, adjusted debt/EBITDAR, adjusted rent expense. 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; energy 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 26, 2006, for more information related to those risks.

Source: AutoZone Press Release