AutoZone cost cutting drives bigger profit, stock gains

(Reuters) - AutoZone Inc (AZO.N) posted a quarterly profit ahead of market expectations as it managed to expand margins even as the lingering aftermath of a mild winter took a toll on sales.

Shares in AutoZone, the largest U.S. auto parts retail chain, rose 5 percent to $375.40 on the New York Stock Exchange after it reported margins expanded to 51.8 percent in the quarter from 51.2 percent a year earlier.

The improved margin, due to the company cutting the cost of parts it bought, pushed up quarterly net profit 7 percent.

Bigger margins helped balance weak demand in recent months as a warmer-than-usual winter resulted in less wear and tear to cars, reducing demand for parts.

"The company did a very good job in execution in the quarter and I think that seasonal weakness due to a more benign winter will ultimately reverse and actually be a solid benefit for 2013," said Gabelli & Co analyst Brian Sponheimer.

Same-store sales rose 2 percent in the quarter ended August 25 while total sales rose 5 percent to $2.76 billion.

"As the vehicle population continues to age ... we see AutoZone's opportunity to sell to these customers only growing," CEO William Rhodes said on a conference call with analysts.

Net income rose to $323.7 million, or $8.46 per share, from $301.5 million, or $7.18 per share, a year earlier.

Analysts on average had expected earnings of $8.40 per share, excluding items, on revenue of $2.80 billion, according to Thomson Reuters I/B/E/S.

AutoZone sells to both home mechanics and commercial repair shops and competes with Advance Auto Parts Inc (AAP.N) and O'Reilly Automotive Inc (ORLY.O).

(Reporting by Sagarika Jaisinghani in Bangalore; Editing by Joyjeet Das and Saumyadeb Chakrabarty)