To stay out of the no-driving zone, DIY car repairers with auto
problems often enter the AutoZone. With more than 5,190 stores in
the US and Puerto Rico, AutoZone is the nation's #1 auto parts
chain. It also has more than 450 stores in Mexico and eight
stores in Brazil. The company also operates 24 Interamerican Motor
Corporation (parts distribution) branches in the US. 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 5,190 AutoZone stores
in 50 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 450 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 in 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 40% 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.
Advertising expense for the company was $98.3 million in fiscal
2016 (ended August) and $98.0 million in fiscal 2015.
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 $10.6 billion in fiscal 2016.
In fiscal 2016, net revenues increased by 4% compared to fiscal
2015, driven primarily by a US same store sales increase of 2.4%
and net sales of $177 million from new domestic AutoZone
In fiscal 2016 net income increased by 7% to $1.24 billion due to
the increase in net revenues and a marginal decrease in interest
Interest expense decreased by 2% to $147.7 million as the result of
a decline in borrowing rates, partially offset by higher borrowing
Net cash provided by the company was $1.6 billion, up $52.2 million
on fiscal 2015.
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 "Mega Hub" stores, which
offer a larger product selection and deliver items to local
satellite stores. Continuing its store expansion strategy, AutoZone
is rolling out a plan for both more frequent weekly deliveries from
its distribution centers to stores and more Mega Hub openings. The
company is trying to increase multiple deliveries per week to
another 1,000 US-based stores and also plans to open additional
Mega Hubs. It plans to have a majority of 5,000 domestic stores on
multiple distribution center deliveries and to have a total of 25
Mega Hub stores in operation over the next few years.
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.