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Commercial Appeal, The (Memphis, TN) (KRT) via NewsEdge Corporation :

Feb. 27–While auto parts retailers are coping with poor sales growth lately as money-pinched consumers rein in spending, AutoZone posted rising profits in the second quarter and beat analysts’ expectations.

The Memphis-based auto parts retailer recorded a 3.6 percent profit gain for the period ended Feb. 9.

That plus the 0.7 percentage point addition to gross profit margin sales minus their cost — helped drive the stock price up more than 6 percent.

“We experienced some deceleration in sales trends from the first fiscal quarter, however, we remain optimistic in our outlook for the future,” said Bill Rhodes, chairman, president and chief executive officer.

For the quarter, the nation’s largest auto-parts retailer reported net income of $106.7 million, or $1.67 a share, up from $103 million, or $1.45 a share, a year earlier.

Revenue climbed 3 percent to $1.34 billion.

The mean estimates of analysts polled by Thomson Financial were for earnings of $1.62 a share on $1.35 billion in revenue.

With the effect of its stock buyback program — reducing the number of shares on the market to 63.7 million shares from 71.2 — earnings per share jumped 15.7 percent.

Rhodes said the company will continue with “our disciplined approach to growing operating earnings and utilizing our capital effectively.”

It is that discipline that allowed AutoZone to boost profit margins, a closely watched number, while sales in stores open a year or more fell 0.3 percent during the quarter, said John Lawrence, analyst for Morgan Keegan & Co. in Memphis.

“Sales were soft, but they continue to make traction on the commercial (professional mechanics) side of the business,” Lawrence said.

Tight inventory and cost controls helped, along with ramped-up sales of private-label parts and direct imports, which are just starting to become a factor for the company, he said.

“It continues to show how well they manage the business,” Lawrence said.

“The company is positioned well for the second half, which is their most profitable period.”

Cid Wilson, director of research at Kevin Dann & Partners of New York, said in a research note that AutoZone’s results show the company “may be doing a better job of weathering the economic storm than its competitors.”

<<Commercial Appeal, The (Memphis, TN) (KRT) — 02/28/08>>