Retail Auto Parts AutoZone vs Advance Auto

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Retail Auto PartsAutoZone vs Advance Auto

• Group 1
• Darin Arnold
• Tracy Adams
• Jessica Nester
• Wesley Lucas
• Chad Toth

September 12, 2005
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Outline

• Fidali Inc. Objective
• AutoZone Overview
• Advance Auto Overview
• Company Similarities
• Business Model
• Product Lines
• Differences
• Operating
• Financing
• Investing
• Conclusions

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Fadali Inc. Objective

• Fadali Inc. Investing 500,000 In Retail Auto
  Parts
• Group 1 Was Hired By Fadali Inc. To Determine
  Better Investment
• AutoZone Or Advance Auto
• Group 1 Determined AutoZone To Be The Better
  Investment

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Reasons For Determination

• Return On Equity
• POS System And Its Impact On COGS
• Growth
• Goodwill

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AutoZone Overview

• Founded 1979
• Stock AZO Debuted NYSE 1991
• Made Fortune 500 List 1999
• 2003 Partnership With Midas To Distribute To All
  US Locations

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Advance Auto Overview

• Formed In 1929 Operated As General Merchandise
  Retailer Until 1980s During 1980s, Advance
  sharpened Focus To Automotive Parts And
  Accessories To DIY Customers.
• Stock AAP Debuted NYSE 2001
• Listed Among Fortune 500 Companies

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Company Similarities

• Customer Service Focus
• Customer Base
• Merchandise
• Quick Delivery System For Hard To Find Parts
• Location Standards / Criteria

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AutoZone Store Development For Past 5 Years
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AutoZone Stores Coverage
3578 Stores In 48 States, District Of Columbia
And Mexico As Of May 7, 2005
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Advance Auto Store Development For Past 5 Years
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Advance Auto Parts Coverage
2708 Stores In 38 States, The US Virgin Islands
And Puerto Rico As Of July 16, 2005
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Expected Store Growth

• AutoZone Intends On Opening Approximately 200 New
  Stores In Fiscal 2005
• Advance Auto Intends On Opening Approximately
  150-175 New Stores In Fiscal 2005

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Property Plant And Equipment
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EPS Growth, PE, PEG

• AutoZone
• EPS Growth 14
• PE 13.64
• PEG 0.97
• Undervalued
• Treasury Stock
• 2004 Bought 10,194 Shares - Retired 12,400
• 2003 Bought 12,266 Shares - Retired 11,000
• 2002 Bought 12,591 Shares - Retired 12,000 Shares

• Advance Auto
• EPS Growth 22
• PE 24.43
• PEG 1.11
• Overvalued
• Treasury Stock
• 2004 Bought 3,700 Shares
• 2003 Zero
• 2002 Zero

Estimated Growth Rate Referenced From
www.my.zacks.com
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Intangibles
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AutoZone Other Intangibles

• Loan A Tool Program
• AutoZone Positioning For Growth In Southwest And
  Mexico
• Title Sponsor Of The NASCAR AutoZone Elite
  Division Series
• AutoZone Sponsoring NASCAR Busch Series
• Co-Sponsor Upcoming Series On Discover Channel
  Entitled DRIVER X RACE FOR THE RIDE

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Cash Flow Coverage
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Inventory Turn
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Accounts Receivable
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Liquidity and Financial Flexibility
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Conclusions

• AutoZone Is Better Investment
• Better Positioning For Growth
• Growth In SW And Mexico
• POS System
• AutoZone Is Better At Managing Assets
• AutoZone Has Better Return On Assets
• AutoZone Undervalued

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Questions?