Autozone: How Long Will They Be in the Zone?

5 Pages Posted: 21 Oct 2008

See all articles by Paul Farris

Paul Farris

University of Virginia - Darden School of Business

Tom Cross

University of Virginia - Darden School of Business

Paul J. Simko

University of Virginia - Darden School of Business

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Abstract

Bad news for AutoZone: until recently the sales and store count leader in the retail auto parts category, AutoZone has been surpassed by Advance Auto Parts; Wall Street has punished AutoZone and is praising Advance Auto. Students will examine why this has happened and what AutoZone can do to compete with Advance Auto.

Excerpt

UVA-M-0730

AutoZone: How long will they be in the zone?

The New President and CEO

Bill Rhodes was named president and CEO of AutoZone on March 13, 2005; He had joined AutoZone in 1997 and during the next eight years held positions in finance, supply chain, and store operations. He was well regarded and seen as an excellent choice for CEO.

Rhodes had much to be proud of. He was now CEO of the number one auto parts retailer, with annual sales of $ 5.7 billion, 3,592 stores in 48 U.S. states, and 81 stores in Mexico (2005 annual report). AutoZone was founded in 1979 and listed on the New York Stock Exchange in 1991 under the symbol AZO. It had been in Standard & Poor's 500 since 1996 and had more stores, more sales, and better financial results than any other auto parts retailer. In the last 10 years, growth had been exceptional: total sales 15% CAGR (compound annual growth rate), EBIT (earnings before income taxes) 19% CAGR, and EPS (earnings per share) 24% CAGR. A vendor-owned inventory program had increased return on equity to 110%, far above that of any competitor.

In spite of all the good news, Rhodes had some concerns. Recent financial press coverage about AutoZone had not been favorable. In the January 2004 issue of Aftermarket Business, an auto parts trade monthly, financial investment columnist Herb Greenberg said, “AutoZone's a turtle dressed up like a hare and the costume is starting to fall off. This is now a mature company. It is no longer a growth company.” The article went on to say:

. . .

Keywords: marketing strategy

Suggested Citation

Farris, Paul and Cross, Tom and Simko, Paul, Autozone: How Long Will They Be in the Zone?. Darden Case No. UVA-M-0730. Available at SSRN: https://ssrn.com/abstract=1280626

Paul Farris (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-0524 (Phone)

HOME PAGE: http://www.darden.virginia.edu/faculty/farris.htm

Tom Cross

University of Virginia - Darden School of Business

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Paul Simko

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-1391 (Phone)

HOME PAGE: http://www.darden.virginia.edu/faculty/simko.htm

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