Online sales grew 2.7% in the fiscal second quarter for automotive parts retailer AutoZone Inc., a slowdown from the year-ago period’s 9.2% increase, as online competition grew stiffer, company officials said on an earnings call Tuesday.
Despite the slowdown in AutoZone’s e-commerce business sales, CEO Bill Rhodes told analysts he is optimistic the online sales will grow in the third quarter as auto owners drive more miles, taking advantage of relatively low gasoline prices, and today’s drivers keeping their cars longer, thus requiring greater maintenance. The average car on the road is 11.6 years old, he said.
Asked by an analyst whether competition from Amazon.com and RockAuto LLC (No. 168 in the Internet Retailer 2015 Top 500 Guide) had hurt the online business, Rhodes said the retailer faces greater competitive pressure that “probably slowed growth a bit.”
Online sales for the second quarter ended Feb. 13 for AutoZone, (No. 107), totaling $86.2 million versus the year-ago period’s $83.9 million, include all sales from AutoZone.com, AllData.com, which sells diagnostic and related repair work software, and AutoAnything.com, an online auto parts retailer acquired in 2012.
Rhodes said the retailer is also planning a new initiative that will seek to understand a customer’s preferences and purchase history regardless of how they do business with AutoZone, whether it’s through the company’s website, store, call center or mobile device.
“As customers have become more tech- and mobile-savvy, we have to have a sales proposition that meets their needs from anywhere,” Rhodes said.
Separately, AutoZone is adding workers to its stores and expanding the frequency of deliveries from distribution centers to stores as part of a program to have whatever the customer wants. The program, called “Yes, we’ve got it,” is active at 1,300 domestic AutoZone stores and will reach 2,000 of the retailer’s more than 5,000 stores by fiscal year-end, Rhodes said. AutoZone also plans to open a new distribution center this calendar year to fulfill growth at the company’s eight stores in Mexico, and open five more “mega hubs”—the retailer’s name for larger stores that serve commercial customers such as repair shops—by the end of the fiscal year.
For the fiscal second quarter ended Feb. 13, Autozone reported:
- Net sales increased 5.3% to $2.26 billion from 2.14 billion in the year-ago period.
- Commercial sales grew 8.0% to $402 million from $372.2 million last year.
- Net income increased 8.0% to $228.6 million from the year ago period’s $212 million.
- Domestic same-store sales increased 3.6%, unchanged from the year-ago quarter.
For the first six months of the fiscal year, Autozone reported:
- Net sales grew 5.2% to $4.6 billion from $4.4 billion in the year-ago period.
- Net income increased 8.0% to $486.7 million from $450.0 million.
- Commercial sales increased 9.0% to $835.3 million from $766.3 million.
- Domestic same-store sales increased 3.6%.