22nd May 2007 - AutoZone 3rd Quarter Sales Increase 4.0 Percent; EPS Increases 15.0 Percent

AutoZone, Inc. today reported net sales of $1.474 billion for its third quarter (12 weeks) ended May 5, 2007, an increase of 4.0% from fiscal third quarter 2006. Domestic same store sales, or sales for stores open at least one year, increased 0.4% for the quarter.

Net income for the quarter increased 5.0% over the same period last year to $151.6 million, while diluted earnings per share increased 15.0% to $2.17 per share from $1.89 per share reported in the year-ago quarter.

For the quarter, gross profit, as a percentage of sales, was 49.9% (versus 49.7% last year). The improvement in gross margin was largely due to the Company's ongoing category management initiatives and a focus on driving supply chain efficiencies. Additionally, operating expenses, as a percentage of sales, were 31.9% (versus 31.8% last year). The increase in operating expenses, as a percentage of sales, reflected higher occupancy costs versus last year.

Under its share repurchase program, AutoZone repurchased 1.9 million shares of its common stock for $244.8 million during the third quarter, at an average price of $128 per share. For the fiscal year to date, the Company has repurchased 3.8 million shares of its common stock for $464.5 million, at an average price of $123 per share.

The Company's adjusted inventory per store, which includes supplier owned pay-on-scan inventory, as of May 5, 2007, was $504 thousand versus $495 thousand last year. Net inventory, defined as merchandise inventories less accounts payable, decreased on a per store level to $73 thousand from $82 thousand last year.

"We continue to be pleased with our earnings performance, and are encouraged with the progress we are making on our major initiatives. While we experienced disappointing sales in the first half of April, we were pleased to deliver 15.0% growth in earnings per share for the quarter. As we enter our busiest selling season, we feel we are well positioned based on the progress we have made with our sales initiatives including improving merchandise assortment and implementation of Z-net, our updated electronic parts catalog. As our operating model continues to be strong, we will maintain our disciplined approach to growing operating earnings and utilizing our capital effectively," said Bill Rhodes, President and Chief Executive Officer.

During the quarter ended May 5, 2007, AutoZone opened 33 new stores and replaced five stores in the U.S. Additionally, the Company re-opened one of the remaining two U.S. stores closed due to hurricane-related damage in last year's first quarter. As of May 5, 2007, the Company had 3,881 stores in 48 states plus the District of Columbia and Puerto Rico in the U.S. and 110 stores in Mexico.

AutoZone is the leading retailer and a leading 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.

Forward Statements

This release includes certain financial information not derived in accordance with generally accepted accounting principles ("GAAP"). These non-GAAP measures include adjusted inventory, adjusted inventory per store, adjusted debt, adjusted debt/EBITDAR, and 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 targets 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. The Company believes this is important information for the 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