AutoZone 2003 Annual Report Download - page 13

“The definition of insanity is doing the same thing over and over,
and expecting different results.”—Attributed to Benjamin Franklin
At AutoZone, we relentlessly establish all targets to focus
on our customers, AutoZoners and shareholders. We believe
that we need to do things differently and innovatively every
day to drive improved results. We are determined to test new
ideas in every area of our business, in order to not only meet, but
exceed the expectations of our most demanding critics…ourselves.
Fiscal 2003 proved to be another year of record performance for
our company! The hard work, innovative spirit and uncompromising
drive of AutoZoners set us apart, once again.
Sales grew to a record $5.5 billion. Operating margins
expanded from 14.5 percent to 16.8 percent. Net income
rose 20.9 percent and earnings per share increased 33.5
percent to $5.34 per share. Income growth combined with effec-
tive asset management led to a record 23.4 percent after-tax return
on invested capital. Operations generated just under $700 million in
cash flow, enabling us to open 160 new U.S. AutoZone stores and
to repurchase over 12 million shares of our stock, while maintaining
robust coverage ratios and investment-grade credit ratings.
For shareholders, our strong financial results translated to
a 23.4 percent return on invested capital in fiscal 2003 and
ranked us among the top-performing companies in our
industry and among the top-performing retailers in the
nation. We made significant strides in advancing our position in
both the retail and commercial markets. Each of our three core
businesses contributed to these results.
In our U.S. Retail Business, we achieved a record $4.6 bil-
lion in sales. Same store sales were unchanged following fiscal
2002’s incredibly strong 8 percent growth. We maintained the
larger customer base established in the prior year, while we were
able to increase our average transaction size. We now have 3,219
stores across 48 continental states.
In our emerging $670 million AZ Commercial business,
sales to professional repair shops advanced a remarkable
27 percent. Taking advantage of the national reach, extensive
inventories and efficient supply chain of our AutoZone stores,
AZ Commercial drove incremental sales, income and return on
invested capital, with minimal added capital. Sales for ALLDATA
also hit a record level in fiscal 2003, as we provided over 50,000
professional technicians with the most comprehensive automotive
diagnostic and repair software available.
In Mexico, we opened ten additional stores in fiscal 2003,
bringing our total count to 49 AutoZone stores, primarily
along the U.S. border. Each features our signature store format
and attentive customer service.
All and all, it was an outstanding year. Much was accomplished. But
in many ways, fiscal 2003 was just another milestone in our long-
term journey leveraging our strategic advantage. We have only
begun to scratch the surface of the tremendously profitable growth
potential in the vehicle solutions market. The opportunities ahead
are as compelling as ever. Nearly $60 billion* of routine automotive
maintenance goes unperformed each year. An estimated 25 million
cars** are on the road with an activated check engine light. Our
goal is to break this maintenance inertia. Capturing even a portion
of the market’s latent demand has the potential to significantly
increase our industry and market share.
Automotive trends also bode well for continued growth.
The number and age of cars on the road are increasing, as is the
number of miles being driven. SUVs, vans and light trucks, which
have dominated new car sales the past five years, are beginning to
move out of warranty cycles and into repair cycles—becoming
“our-kind-of-vehicles.” Almost half of all U.S. households are engaging
in do-it-yourself automotive maintenance and repairs.* Embedded
within each of these statistics are opportunities for us to bring in
new customers and drive future growth.
*AAIA 2003/2004 Factbook
**internal research
Dear Customers, AutoZoners and Shareholders:
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