AutoZone Leans Into Commercial Customers As Consumers Head Back To Work

A surge in sales to commercial customers combined with falling COVID-related costs drove the nation’s largest auto parts retailer’s results higher, as AutoZone on Tuesday (May 25) reported a 29 percent increase in its domestic same-store sales.

For the three months ended May 8, the Memphis-based owner of 6,600 retail locations in the U.S., Mexico and Brazil said accelerated growth in its commercial business plus a $75 million decline in pandemic related expenses like emergency time off for its 60,000 employees led to an 84 percent increase in adjusted earnings per share.

“While our DIY business was again very strong this quarter, our Commercial business’ 44 percent sales growth stood out as exceptional,” AutoZone Chairman and CEO Bill Rhodes said, noting the company’s plan to strengthen its competitive position in this large, fragmented market.

“We intend to accelerate our company’s historical commercial growth rate as we increase our penetration in this market,” Rhodes said, referring to the array of parts and products it delivers to repair garages, dealers, service stations and public sector accounts.

In total, AutoZone reported $3.7 billion in total revenue for the quarter, marking a $900 million increase from a year ago.

No Letting Up

AutoZone’s growing embrace of commercial customers comes at an interesting time for the industry, with homebound individual consumers driving more as they return to work and get out of the house again — leaving less free time for DIY auto repairs and presumably greater reliance on professional garages to provide services.

At the same time, the auto parts category has become a battleground for mega-retailers Walmart and Amazon who have aggressively moved to grow their sales at both in-store locations and online.

To that point, AutoZone currently operates dual digital platforms for consumers and professionals but the company did not break down specific eCommerce sales metrics for its fiscal third quarter.

“While we understand sales trends will slow, we must work diligently during this [fiscal] fourth quarter to maintain the share gains we have achieved,” Rhodes said. “As always, we cannot take anything for granted, but we remain excited about the ongoing sales opportunities in front of us.”

Shares of AutoZone have risen about 22 percent so far this year leaving the retailer with a market value of more than $32 billion. In addition to its 6,000 U.S. stores which account for 90 percent of its locations, AutoZone also has more than 650 stores in Mexico and about 50 locations in Brazil.