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AutoZone Ramping Up International Growth

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Executives on AutoZone’s most recent earnings call were upbeat about the growth prospects for the company’s international stores.

AutoZone began publishing its international same-store sales numbers in September, along with its overall FY-2022 fourth-quarter results.

In the fourth quarter, AutoZone’s stores in Mexico and Brazil posted year-over-year same-store sales growth of nearly 15% on a constant-currency basis – compared to 1.7% for the company’s domestic stores.

In the first quarter of AutoZone’s fiscal-year 2023, which ended Nov. 18, same-store sales growth in Mexico and Brazil outpaced U.S. stores again. On a constant-currency basis, AutoZone’s international stores posted year-over-year same-store sales growth of nearly 11%, compared to 1.2% for its U.S. stores.

On AutoZone’s Dec. 5 conference call, CEO Bill Rhodes noted that “international has become a more important part of our growth story and an area where we are increasingly deploying capital.”

“We are very excited about the short- and long-term growth prospects of international,” Rhodes added. “Our expectations are we will continue to grow mature-store volumes both in DIY and DIFM and we plan to accelerate new-store openings over the next several years, ultimately getting to a minimum of 200 international new stores by 2028.”

During the first quarter, AutoZone said it opened five new stores in Mexico and four in Brazil. As of Nov. 18, the company had 6,316 stores in the United States, 745 in Mexico and 104 in Brazil, for a total store count of 7,165.

“These [international] businesses had impressive performance last quarter and should continue to grow at a robust pace for the remainder of fiscal 2024,” said Phil Daniele, who will succeed Rhodes as CEO in January. “We are leveraging many of the learnings we have in the U.S. to refine our offerings in Mexico and Brazil.”

Although AutoZone isn’t breaking out bottom-line data for its international stores, CFO Jamere Jackson provided some insight on profit margins during the question-and-answer session with analysts.

“From a margin standpoint, we’re very pleased with the progress that we’re making on margins – both gross margins and total operating margins,” Jackson said. “In our business in Mexico, which is much more mature than what we have in Brazil, we’ve been very pleased with the actions we’ve been able to take on the merchandising side of the business, and that’s given us a very healthy gross margin in that business.”

Considering “the inherent advantages” of low-cost labor, Jackson added, “it’s a very attractive operating-margin structure in Mexico, and we believe as our business in Brazil matures and scales over time that we’ll see similar advantages in Brazil.”

However, as AutoZone aggressively invests to open new stores in Brazil, Rhodes cautioned that “we’re still losing money there.” Those new stores “are causing a pretty good headwind,” Rhodes added, but such challenges are “not unanticipated.”

While Rhodes and Daniele made a point to highlight the same-store sales growth in Mexico and Brazil during the call, Daniele emphasized that “the No. 1 focus for the remainder of the year will be on growing [market] share in our domestic commercial business.”

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