AutoZone, Inc. F4Q09 (Qtr End 08/29/09) Earnings Call Transcript

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2009-09-23 11:23:10.0

Tags: Morgan Keegan & Co., Call Transcript, AutoZone Inc., Earnings, Sales Strategy, Investment, Sales Force Management, Product Marketing, Payroll Solutions, Operational Accounting, Sales, Finance, Marketing, Seeking Alpha

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of John Lawrence - Morgan, Keegan

John Lawrence - Morgan, Keegan

On the sales side, first of all would you talk a little bit about that discretionary customer less then 20%, I know its hard with the expanded hard parts coverage over the last few quarters, but what is the normal rate or how high did that discretionary mix get at I guess when that customer was spending freely.

William Rhodes

It wasn’t terribly higher then it was. We’ve experienced pressure in that business pretty much over the last year and its down, but its not changing that mix significantly.

John Lawrence - Morgan, Keegan

So just the opportunity there when that product mix comes back.

William Rhodes

Yes, there’ll be continued opportunities there and we look forward to taking advantage of that but I’m very encouraged by what’s going on with the maintenance items in our business. Obviously there appears to be a mindset change in our customers’ behavior on how long they’re going to keep their vehicle and that they need to continue to maintain it.

And our hope is that that will continue even as the economy improves.

John Lawrence - Morgan, Keegan

And secondly, if you look at SG&A, I know you, thanks for that breakdown of sort of where you spent that money, can you give us any step of clarification there or just help, that $50 million increase there of SG&A when you ex out the extra week, what buckets would you put those on as far as people versus the hubs and then investment. Can you give us any kind of sense of the magnitude of that investment.

Bill Giles

Its difficult to break it out specifically, I think we had given some guidance before on some of the hubs but a lot of this is people related. We think we’re improving our customer service levels. We’re certainly supporting our sales growth overall by increasing our payroll levels.

Some of the hub investments do require a headcount a little bit from increasing deliveries to the satellite stores so if I had to put it to a number, I would say more then half of that is more people related then asset related.

Operator

Your next question comes from the line of Dan Wewer - Raymond James

Dan Wewer - Raymond James

You had noted that the change in merchandise mix precluded AutoZone from improving gross margin rate, do you think this change in mix is prevalent throughout the industry or is it company specific to AutoZone.

 

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