Imagine that you are in your garage making some weekend car
repairs. The wheel cylinders are leaking ... the brake shoe
adjuster nut is rusted solid ... you're about to enter ... the
AutoZone. With more than 5,100 stores in the US and Puerto
Rico, it's the nation's #1 auto parts chain.
It also operates some 440 stores in Mexico and seven
in Brazil. AutoZone stores sell hard parts (alternators, engines,
batteries), maintenance items (oil, antifreeze), accessories (car
stereos, floor mats), and non-automotive merchandise under
brand names, as well as under private labels. AutoZone's commercial
sales program distributes parts and other products to garages,
dealerships, and other businesses.
As part of its business, AutoZone operates through one
reportable segment: Auto Parts Stores. Besides being a retailer and
distributor of auto parts and accessories, AutoZone produces,
sells, and maintains diagnostic and repair information software
used in the auto repair industry through its ALLDATA business and
sells directly to customers through its e-commerce site,
Based in Tennessee, AutoZone sells auto and light truck parts,
chemicals, and accessories through more than 5,100 AutoZone stores
in 49 US states, the District of Columbia, and Puerto Rico. Texas,
California, Florida, Ohio, and Illinois represent the company's
largest markets and together account for more than a third of
locations. The company's fast-growing subsidiary in Mexico,
AutoZone de México, operates more than 440 stores. AutoZone also
has stores in Brazil.
AutoZone has distribution centers in more than half a dozen US
states and Mexico, and has store support centers in California and
Tennessee, as well as Mexico and Brazil.
Sales and Marketing
AutoZone relies on targeted advertising and promotions to build
its brand, offer advice about the overall importance of vehicle
maintenance, and position its business as a great value. To drive
traffic to its stores, the retailer advertises on broadcast and
Internet media. It works to educate consumers about which products
they need through use of in-store signage and circulars, as well as
creative product placement and promotions.
Leveraging a consistent store format, each AutoZone store boasts
between 85% and 90% of selling space -- up to 45% of which is
dedicated to hard parts inventory. Stores are outfitted with Z-net,
AutoZone's proprietary electronic catalog that gives employees
advice and information for customers' vehicles, down to the year,
make, model, and engine type.
AutoZone has achieved extraordinary growth over the last few
years, with revenues climbing 8% from $9.5 billion in 2014 to peak
at a record-setting $10.2 billion in fiscal 2015 (ended August).
Profits also jumped 8% to $1.2 billion in 2015, another company
The historic growth for 2015 was fueled by a 4% boost in
domestic same store sales and $185 million in sales from new
stores. Improvements in domestic same store sales were driven by a
higher average transaction value, partially offset by a drop in the
number of transactions. During the past five years, AutoZone has
grown its stores network by more than 20% (from 4,627 stores in
2010 to 5,609 stores in 2015). During the same time period, annual
revenues have surged from $7.4 billion to $10.2 billion.
Cash from operations has also followed the upward trend
established by revenue and net income. In 2015, the company
reported operating cash flow of $1.5 billion, up 14%.
The company's core strategy includes expanding its stores
network. It added about 200 stores in fiscal 2015 and is focusing
on new-store development while also enhancing its existing stores
and infrastructure. Among its focus are "hub" stores, which offer a
larger product selection and deliver items to local satellite
stores. In fiscal 2015 AutoZone opened 10 hub stores, bringing the
total to about 175.
AutoZone has grown quickly through a series of acquisitions over
the past several years but now is focused on internal growth and
development. Among the factors AutoZone considers when opening new
stores is how many cars in an area are OKVs or "our kind of
vehicles," that is, cars older than seven years and no longer under
their manufacturers' warranty.
The company is growing quickly in Mexico, where cars are even
older -- and in need of more repairs -- than in the US. The auto
parts retailer also loans tools and sells merchandise and
diagnostic and repair advice online. In addition to
parts, the stores also offer diagnostic testing for
starters, alternators, and batteries. (The shops do not sell
tires or perform general auto repairs.) In fiscal 2015 AutoZone
continued expanding in the emerging market of Brazil, opening a
handful of new stores.
Mergers and Acquisitions
In 2014 the company purchased Interamerican Motor Corporation
(IMC), a large distributor of OE quality import replacement parts
in the US, for approximately $80 million, which operates 17
locations. To build its online presence, AutoZone in 2013
acquired AutoAnything, an online retailer of specialized automotive