AutoZone 2013 Annual Report Download - page 75

13
frequent customer visits and more effective advertising. If we are unable to continue to develop successful
competitive strategies, or if our competitors develop more effective strategies, we could lose customers and our
sales and profits may decline.
We may not be able to sustain our historic rate of sales growth.
We have increased our store count in the past five fiscal years, growing from 4,240 stores at August 30, 2008, to
5,201 stores at August 31, 2013, an average store count increase per year of 5%. Additionally, we have increased
annual revenues in the past five fiscal years from $6.523 billion in fiscal 2008 to $9.148 billion in fiscal 2013, an
average increase per year of 8%. Annual revenue growth is driven by the opening of new stores and increases in
same-store sales. We open new stores only after evaluating customer buying trends and market demand/needs, all
of which could be adversely affected by continued job losses, wage cuts, small business failures and
microeconomic conditions unique to the automotive industry. Same store sales are impacted both by customer
demand levels and by the prices we are able to charge for our products, which can also be negatively impacted by
continued recessionary pressures. We cannot provide any assurance that we will continue to open stores at
historical rates or continue to achieve increases in same-store sales.
If we cannot profitably increase our market share in the commercial auto parts business, our sales growth
may be limited.
Although we are one of the largest sellers of auto parts in the commercial market, to increase commercial sales we
must compete against national and regional auto parts chains, independently owned parts stores, wholesalers and
jobbers and auto dealers. Although we believe we compete effectively on the basis of customer service,
merchandise quality, selection and availability, price, product warranty, distribution locations, and the strength of
our AutoZone brand name, trademarks and service marks, some automotive aftermarket jobbers have been in
business for substantially longer periods of time than we have, have developed long-term customer relationships
and have large available inventories. If we are unable to profitably develop new commercial customers, our sales
growth may be limited.
Significant changes in macroeconomic factors could adversely affect our financial condition and results of
operations.
Our short-term and long-term debt is rated investment grade by the major rating agencies. These investment-grade
credit ratings have historically allowed us to take advantage of lower interest rates and other favorable terms on
our short-term credit lines, in our senior debt offerings and in the commercial paper markets. To maintain our
investment-grade ratings, we are required to meet certain financial performance ratios. An increase in our debt
and/or a decline in our earnings could result in downgrades in our credit ratings. A downgrade in our credit ratings
could limit our access to public debt markets, limit the institutions willing to provide credit facilities to us, result
in more restrictive financial and other covenants in our public and private debt and would likely significantly
increase our overall borrowing costs and adversely affect our earnings.
Moreover, significant deterioration in the financial condition of large financial institutions in calendar years 2008
and 2009 resulted in a severe loss of liquidity and availability of credit in global credit markets and in more
stringent borrowing terms. During brief time intervals in the fourth quarter of calendar 2008 and the first quarter
of calendar 2009, there was limited liquidity in the commercial paper markets, resulting in an absence of
commercial paper buyers and extraordinarily high interest rates on commercial paper. We can provide no
assurance that credit market events such as those that occurred in the fourth quarter of 2008 and the first quarter of
2009 will not occur again in the foreseeable future. Conditions and events in the global credit market could have a
material adverse effect on our access to short-term debt and the terms and cost of that debt.
Macroeconomic conditions also impact both our customers and our suppliers. Job growth in the United States has
stagnated and unemployment has remained at historically high levels during the past five years. If the United
States government is unable to reach agreement on legislation addressing the United States’ current debt level and
budget deficit, many economists have predicted another economic recession. Continued recessionary conditions
could result in additional job losses and business failures, which could result in our loss of certain small business
customers and curtailment of spending by our retail customers. In addition, continued distress in global credit
markets, business failures and other recessionary conditions could have a material adverse effect on the ability of
10-K