AutoZone Gets Zacks Downgrade – Analyst Blog
Source: http://www.zacks.com/stock/news/25567/AutoZone+Gets+Zacks+Downgrade+-+Analyst+BlogPosted on Tuesday, October 6th, 2009 | In Investing Lessons, Stocks to Watch
We have downgraded the recommendation on AutoZone (AZO) from Outperform to Neutral. This reflects the company’s heavy reliance on private label brands and threats from its vendor consolidation and appreciation in gas prices, which act contrary to significant growth opportunities that exist in each of its businesses such as retail, commercial and ALLDATA.
AutoZone is one of the nation’s leading specialty retailers of automotive replacement parts and accessories, operating in the Do-It-Yourself (DIY) retail, Do-It-for-Me (DIFM) commercial and other customer markets. DIY retail sales represented 84% of the company’s revenue in 2008, DIFM commercial sales represented 11% and the remaining 5% generated from other sales.
AutoZone sells the ALLDATA brand automotive diagnostic and repair software, and offers ALLDATA repair subscription, ALLDATA online and on DVD, which offers comprehensive factory-correct repair information to DIY customers.
AutoZone has a high degree of reliance (50%) on its private label brands, which could hinder its commercial business. In recent years, several of the company’s vendors have been merged. This could materially affect the prices at which the company purchases its products. Further, the appreciation in gas prices remains a threat to the company as it has a negative impact on miles driven and deferment of purchases by its customers.
Nevertheless, AutoZone is the leader in the DIY retail market in the U.S. with a 13% share. In the DIFM commercial segment, the company has a 1.3% market share, which the management believes could increase by focusing on improving marketing initiatives.
AutoZone uses its significant cash flow to open new stores every year and maintain a mid-single-digit square footage growth rate. The company is also focused on growing same-store sales by expanding private label offerings, which now account for 25% of sales.
Read the full analyst report on “AZN”
Zacks Investment Research
Last 5 posts by Zacks Market Commentaries
- Dress Barn Tops, Lifts Outlook - Analyst Blog - November 23rd, 2009
- Another Price Cut for Palm - Analyst Blog - November 23rd, 2009
- Ford Focuses on Brazil - Analyst Blog - November 23rd, 2009
- Ratings Action on Assurant - Analyst Blog - November 23rd, 2009
- Sands China Raises $2.5B in IPO - Analyst Blog - November 23rd, 2009
Analyst, Autozone, Gas Prices, Investing Lessons, leader, retail, retail market, Retail Sales, Stocks to Watch, United States, Zacks Market Commentaries
 About Zacks Market Commentaries (http://www.zacks.com/)
Zacks Market Commentaries |
No recommendations, either expressed or implied, are being made to buy, sell, hold or short any of the mentioned stocks. No legal, tax or accounting advice is expressed or implied. Always contact your attorney, CPA, or tax advisor before acting on any legal or tax issues. StraightStocks.com is not responsible for the content, products, or services of any of the advertisers on this site. StraightStocks.com receives compensation from advertisers on this blog. Services and products referred to herein are trademarks, registered trademarks, servicemarks, and/or registered servicemarks of their respective trademark or servicemark owners.