AUTOZONE-INCcc.docx - AUTOZONE INC BRIEF BACKGROUND Founded...

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AUTOZONE INC. BRIEF BACKGROUND Founded in 1979 under the name of AutoShack, AutoZone founded in Forrest City, Arkansas became the leading retailer of automotive replacement parts and accessories in the United States employing over 65,000 employees on 4,800 locations. The company implemented the first electronic auto-parts catalog for the retail industry helping them establish dominance in the market. In 1991, AutoZone went public and was listed on the New York Stock Exchange (NYSE) under the ticket symbol AZO. Because of their revolutionary electronic catalog and their sophisticated inventory system, Autozone was able to develop category leading distribution capabilities, giving them the highest operating margin in the industry and strong customer service backed by the ability of its distribution network to supply stores with nearly all of the AutoZone products on the same-day basis. Focusing on return on invested capital (ROIC) as the primary way to measure value creation for the company’s capital providers. AutoZone consistently invests in opportunities that lead to top-line revenue growth which leads to increase in margins. As a way to return capital to their capital investors, AutoZone has opted to use share repurchasing program since 1998. Autozone consistent use of share repurchases has resulted in a 39% reduction in shares outstanding, reducing shareholder’s equity to negative $1.2 billion by 2011. Funded by strong operating cash flows and issuance of debt, Autozone’s share repurchasing program has allowed their invested capital to remain relatively stable, creating an attractive ROIC for the firm.
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