Aging of U.S. Auto Fleet Benefits AutoZone

Despite posting flat first-quarter 2009 earnings of $131.4 million on anemic sales growth of 1.6 percent, AutoZone, a leading retailer of automotive parts and accessories, remains upbeat about its longer-term prospects, according to its 10-Q regulatory filing for the 12-weeks ended November 22:

• In the midst of a very challenging macro environment, our business displayed a great deal of resilience. The sales of new vehicles have declined significantly while scrappage rates have remained stable. This leads to an aging U.S. fleet, which historically has be en beneficial to us. On the other hand, miles driven declined for the twelfth straight month in October [down 3.6% year-to-date]. While we believe higher gas prices have contributed to these trends, we have seen a material decline in gas prices in the last few months and we are optimistic that, over time, the decline in gas prices will lead to a more normalized trend in miles driven which could eliminate one of the major challenges our industry has faced for the last couple of years.

Although it is "worth noting that while the economy continues to challenge customers' pocketbooks, spending has proved resilient," said Rhodes. Sales of select discretionary products, such as car wash and wax accessories, have slowed, but most merchandise categories (including sales floor items like wiper blades, filtration, oil, and chemicals) continue to witness year-on-year sales gains. In addition, the company has not seen wholesale shifts in sales mix to lower price point merchandise.

As Congress fiddles while the Detroit Big Three automakers burn, AutoZone's future looks brighter.