| Author | Message | ||
     Entrepreneur Kurra Bewarse Username: Entrepreneur Post Number: 3299 Registered: 05-2011 Posted From: 65.35.45.47 Rating: N/A |
AutoZone in the zone as stimulus dollars and harsh winter weather boost results (1188.71 +17.31) AutoZone (AZO +2%) is in the zone today after reporting strong upside results for Q2 (Feb) this morning. Stimulus dollars plus harsh winter weather that finally arrived in February helped to drive a surge in comps. What jumps off the screen are the robust same store comps of +15.2%. This was a noticeable acceleration from +12.3% comps in Q1, though still a good bit below the record Q4 comps of +21.8%. We were nervous about the Q2 comps given the downward cadence of comps observed during Q1: +16.5% in the first four weeks, followed by +11.4%, and ending +8.8% in the last four weeks. Thus, the quarter's +15.2% comps represented a welcome rebound. Granted, AZO was lapping a mild winter last year (cars tend to break down more during harsh winters), but this was still a great result, and it bodes well for upcoming Q1 comp results for others in this space, including AAP and ORLY. We cover a lot of earnings reports from automotive part retailers. Something we have noticed is that these companies are among the most vocal about being big beneficiaries from pandemic stimulus dollars. AZO says it saw a noticeable uptick in sales when the $600 checks started going out in January. While that amount was smaller in size than the April 2020 disbursements, AZO's business picked up nicely nevertheless, and sales remained elevated throughout the remainder of the quarter. Most of the country performed well for AZO in Q2, with the Midwest and Northeastern markets underperforming the others. The separation was likely due to the lingering effects of a mild winter last year and colder weather happening later this winter. However, winter pounded the upper US this year, and the performance gap closed. So, why is the stock not trading higher? At the risk of sounding like we're nitpicking, we think it may be that the EPS upside in Q2 was not as robust as the company's beats in recent quarters. Also, Advance Auto Parts (AAP) and O'Reilly Automotive (ORLY) both reported solid numbers last month, so perhaps this performance was priced in already. In sum, despite the tepid stock reaction, this was a good quarter for AZO. Also, a key takeaway here is that if AZO could get this big of a boost from $600 stimulus checks, imagine what $1,400 might do for comps in the coming months. Also, winter started slowly this year but packed a wallop in February with cold and snow. All of these factors point to potential for robust comps in Q1 for AAP and ORLY and in Q3 (May) for AZO. |