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NEW YORK — Automotive parts retailer AutoZone Inc. on Wednesday said its fiscal third-quarter profit climbed 9.5 percent, helped by an increase in replacement-part sales as consumers held onto their cars longer.
AutoZone and other parts retailers have benefited from the slowdown in the economy as strapped consumers hold back on buying new cars, opting instead to keep and repair their existing vehicles. New vehicle sales are down 37 percent for the first four months of the year, according to Autodata Corp.
"While the current economic environment, combined with the reduction in fuel prices compared to last year, has clearly been beneficial to our industry's performance, we are very pleased with our organization's ability to capitalize on these favorable trends," Chief Executive Bill Rhodes said in a statement.
The Memphis company said it earned $173.7 million, or $3.13 per share, for the 12 weeks ended May 9, up from $158.6 million, or $2.49 per share, a year ago. Sales rose 9 percent to $1.66 billion from $1.52 billion a year earlier.
Analysts surveyed by Thomson Reuters expected a profit of $2.89 per share on $1.61 billion in sales.
Although the results beat Wall Street estimates, shares fell in midday trading. Analysts said investors may have been expecting even better results given strong first-quarter earnings reports from some competitors.
"The underlying operating performance out of AutoZone was very strong," Credit Suisse analyst Gary Balter said in a research report, "although we note that market expectations already embedded significant earnings outperformance."
Balter raised his price target on AutoZone following its earnings report to $179 from $175 and reiterated his "Outperform" rating on its stock.
Shares fell $7.80, or 4.8 percent, to close at $155.04 Wednesday. They have traded between $84.66 and $169.99 in the past 52 weeks.
The company said same-store sales, or sales open at stores at least a year, rose more than 7 percent during the quarter. The metric is important among retailers because it measures performance at existing, rather than newly opened, stores.
Rhodes said in a conference call with analysts that the company has become "mindful" of creeping gas prices. Higher gas prices discourage driving and reduce discretionary spending, which impacts the company's sales. So-called discretionary auto parts account for about a quarter of the company's revenue.
Rhodes also said the company continued to monitor the "cash-for-clunkers" legislation that is making its way through Congress. The legislation would give car buyers a government voucher up to $4,500 when they trade in older, less fuel-efficient vehicles. Some analysts say the bill's passage could hurt auto parts retailers because it would encourage car owners to give up their older vehicles instead of repair them.
Rhodes said he would prefer legislation that gives vouchers to consumers for vehicle repairs or parts. Either way, he said that the bill's passage would not have a substantial impact on AutoZone's business.
"We are working with both of our aftermarket industry associations to ensure our industry's voice is heard on this issue," he said.
Auto parts retailers have been posting a string of strong improved earnings reports in recent weeks. Last week, Roanoke, Va.-based Advance Auto Parts posted a 14 percent increase in its first-quarter profit, beating Wall Street estimates. O'Reilly Automotive reported stronger first-quarter earnings last month as well.
AutoZone's inventory rose 6 percent compared with the year-ago quarter. The company said it opened 32 new stores in the U.S. and 10 in Mexico during the quarter.
"We believe opening stores during this more difficult economic time to be beneficial," Chief Financial Officer Bill Giles said.
