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AutoZone, Inc.

AutoZone, Inc.

123 South Front Street
Memphis, Tennessee 38103-3607
U.S.A.
Telephone: (901) 495-6500
Fax: (901) 495-8300
Web site: http://www.autozone.com

Public Company
Incorporated:
1979 as Auto Shack
Sales: $4.12 billion (1999)
Employees: 38,500
Stock Exchanges: New York
Ticker Symbol: AZO
NAIC: 44131 Automotive Parts and Accessories Stores

The leading U.S. specialty retailer of automobile parts in the late 1990s, Memphis, Tennessee-based AutoZone, Inc., sells auto parts, maintenance items, and automotive accessories through more than 2,700 stores in 39 U.S. states and in Mexico. The retail chain offers both private-label products, including Duralast and Deutsch, and brand names. Geared primarily toward the do-it-yourself market, AutoZone also serves professional auto repair shops. AutoZone stores do not sell tires or provide repair service, but they do offer diagnostic testing for batteries, starters, and alternators. AutoZone sells heavy-duty truck parts through its subsidiary TruckPro L.P. and offers automotive diagnostic and repair software through ALLDATA Corp.

Rapid Development during the Early Years: Late 1970s-Early 1980s

Joseph R. Hyde III began working in his familys business, Malone & Hyde, Inc., immediately after graduating from college in 1968 at the age of 22. The company, a wholesale grocery business, had been founded by his grandfather in 1907. The younger Hyde expanded the family business considerably. He began with drug stores, founding Super D Drugs at age 26, and then moved on to sporting goods stores, supermarkets, and, finally, automobile parts stores.

Hydes entry into the retail auto parts market came on July 4, 1979, when he opened his first store, named Auto Shack, in Forrest City, Arkansas. The company had 25 people on its payroll at the time. To support further expansion, Hyde opened a 12,000-square-foot warehouse in Memphis, and by the end of the first year seven more stores in Arkansas and Tennessee had made their debut.

The idea behind Auto Shack was straightforward. The company aimed to provide a wide selection of auto parts at a low price to do-it-yourselferswhat it referred to as the DIY market. In addition to these customers, the company identified a pool of potential buyers as shade tree mechanics, that is, those who worked on other peoples cars in their spare time as a source of extra income, and buy-it-yourselfers, those who lacked the expertise to do the work themselves but who bought parts and then hired others to install them.

To serve these customers, Auto Shack sought to establish quality and expert advice from employees as a hallmark of its business plan. In addition, the company tried to locate its stores in neighborhoods where people who worked on their cars lived and to keep its stores open at hours when its customers were not otherwise occupied at work. This initially meant that many Auto Shack stores stayed open all night. Auto Shack stores were clean and bright, and the company emphasized friendly, helpful service. Company chairman Hyde himself, garbed in a company uniform with a name tag, spent a quarter of his time visiting Auto Shack stores to keep an eye on operations and to encourage employees to do their best.

In its second year of operation Auto Shack added 23 more stores, branching out into five nearby states: Alabama, Kentucky, Missouri, Mississippi, and Texas. By this time the company had started to hit its stride, and on average it would go on to open a new store every week for its first ten years in business. Before opening a new outlet, Auto Shacks research analysts spent time looking at appropriate sites. The companys intended customer base was lower- or middle-income males between the ages of 18 and 49. The companys ideal customer was a male who, both as a hobby and an economic necessity, spent a lot of time working on his car to keep it running much longer than ordinarily expected. Auto Shack estimated that the ever-rising cost of a new car, both in absolute dollars and as a percentage of the average familys income, was a strong incentive for a large portion of the population to enter the market for replacement auto parts.

In addition, Auto Shack took note of the business practices of other successful retailing establishments in the South, including Wal-Mart Stores, Inc., on whose corporate board Hyde sat for seven years. By selling a high volume of goods in a large number of stores serviced by central distribution centers, Auto Shack was able to keep its costs and prices low, providing the chain with a tremendous competitive advantage over smaller operations. In addition, the bright, modern, clean store interiors were a welcome contrast to the dark, grimy aura projected by some other parts outlets and by auto junkyards.

By 1981 Auto Shack had opened 45 stores, and by the following year the number was up to 74, all within its core market area. By 1982 Auto Shacks Memphis warehouse had expanded to 96,000 square feet, growth made necessary by the increasing number of Auto Shack outlets. In 1983 Auto Shack again expanded in numbers of stores, growing to 139 outlets, and in geographical scope, adding outlets in Georgia, Arizona, Illinois, and Louisiana. By the following year the number of Auto Shacks had reached 200, and openings in Florida and South Carolina pushed the companys tally of states to 13. In addition, two more distribution centers were opened to serve the increasingly far-flung Auto Shack operations. Facilities in San Antonio, Texas, and Phoenix, Arizona, raised the companys total warehouse space to 320,000 square feet.

In 1984 the leaders of Auto Shacks corporate parent, Malone & Hyde, decided that the companys stock was undervalued. To get the most value out of their properties, Hyde and his fellow executives decided to take the properties private in a leveraged buyout. To do this, they enlisted the help of the investment banking firm Kohlberg Kravis Roberts & Company (KKR), which engineered the withdrawal of Malone & Hyde from the stock market. KKR was compensated with large blocks of Auto Shack stock, in effect becoming the owner of the company.

Aggressive Growth through the Mid-1980s

Despite its new corporate status, Auto Shack continued to grow at a dramatic rate. In 1985 the company opened an additional 68 stores and moved into North Carolina. Along with its standard format, Auto Shack also inaugurated an Express Parts Service that rushed auto parts to customers who called in over a toll-free service line. In this way the company was able to offer services to parts of the country that were not yet served by an Auto Shack store.

Auto Shack took another step toward upgrading customer service in 1986 when it instituted a lifetime warranty on 42,000 separate parts it sold. The companys decision on which products to offer was closely tied to its research into what customers wanted. For some types of goods, Auto Shack stocked a wide variety of nationally known brands. Motor oil fell into this category, as surveys indicated that Auto Shack customers had a strong preference for private-label oils, being more concerned about the perception of guaranteed quality than the lowest price.

For many other goods, however, research indicated that customers simply wanted the cheapest price possible. In general, this criteria applied to more expensive car parts, where brand names were little known. Auto Shack developed its own sources for such products, eliminating the middleman and the additional costs of a distributor. In this way the company was able to offer less expensive products to its customers. On this level Auto Shack was structured like a vertically integrated business, although it had not taken on the complications of a manufacturing operation. The companys supply lines were directed by product managers, who visited factories and worked closely with suppliers to ensure quality control on various parts. The companys high volume of sales made it possible for specialized efforts like this to be efficient. In addition, Auto Shacks advertising department participated in the effort to define and upgrade products and then attempted to win new customers for them.

By 1986, as New Mexico was added, such practices had allowed Auto Shack to expand to 339 stores in 15 states. A new warehouse was also opened in Greenville, South Carolina. The companys telemarketing operation, Express Parts Service, logged its one millionth call, and an additional service, an Electronic Catalogue, was brought on-line on October 1, 1986, at the companys Bellevue store in Memphis. This database, installed throughout the companys stores, eventually grew to contain more than four million entries on parts for more than 15,000 vehicles.

Diversification and Continued Expansion in the Late 1980s and Early 1990s

In 1987 Hyde divested himself of all parts of his family business, Malone & Hyde, except Auto Shack, the fastest growing unit. For the first time Auto Shack stood alone, apart from its corporate parent. As a symbol of its new identity and to give the companys stores a more upscale image, the name was changed to AutoZone. The company announced that the new name would apply to all 390 stores.

Company Perspectives:

We rely on innovation as our fuel for growth and let others run on imitation. We make sure the objects in our rear-view mirror arent closer than they appear because we keep moving faster. Whats more, because were constantly fine-tuning the business, were squeezing more horsepower out of the same fuel-efficient engine. Were experts on getting more for less. We have to be, because when the rubber hits the road, a customer with grease up to his elbows will tell you he doesn t care about anything but the right part at the right price, right now. Yes, there are other places he could go for that. But he comes to AutoZone because we give him all of that plus a level of service that helps make that tough job a little easier. So when we say were set on customer service, were not just yanking your timing chain. Its the foundation of our culture, and its ours alone. Its what drives us.

The process of conversion began in the following year. An outlet was opened under the new name in Enid, Oklahoma, marking the companys entry into yet another state. Overall, AutoZone had 470 stores in 16 states by the end of 1988, and it served a total of 47.7 million customers in that year alone. In June 1988 the company unveiled its own line of auto products, developed by its product managers, under the trade name ADuralast. The number of AutoZone customers for these and other products rose to more than 51 million by 1989, the year of the companys tenth anniversary, and sales topped $500 million. By this time AutoZone had become the third largest American auto parts retailer. To continue to build growth, the company advertised aggressively on television, on radio (airing ads in Spanish and Navajo, as well as in English), and in newspapers.

As a symbolic gesture in 1989, AutoZone opened its 500th outlet, a store in Hobbs, New Mexico, on July 4, the date on which it had opened its first store ten years earlier. By the end of the year 14 more stores had been added, and all of the facilities were known by the companys new name. Under this name AutoZone diversified its outlets to include regular stores and superstores. The first of the larger outlets was opened in Memphis. Whereas the usual AutoZone store filled about 5,400 square feet and cost $200,000 to construct, the larger version cost about $70,000 more and stocked 5,000 additional items. More than 50 superstores had been opened by the middle of 1989, with the largest, located in New Halls Ferry, St. Louis, Missouri, boasting a 17,368-square-foot selling floor.

By 1990 AutoZone had expanded into two additional states, opening stores in Utah and Indiana, for a total of 539 outlets. The company also broke ground for a distribution center in Lafayette, Louisiana, to serve its expanded geographical operations and introduced another line of its specially manufactured items, Deutsch filters. In addition, AutoZone opened its first 8,100-square-foot prototype store in Santa Fe, New Mexico.

In April 1991 AutoZone ended its tenure as a privately held company when shares were offered for sale on the New York Stock Exchange. The 3.2 million shares offered produced a large paper profit for the companys primary owner, Kohlberg Kravis Roberts & Company. Under the structure of the stock offering, KKR retained its ownership stake in AutoZone, as investment partnerships run by KKR retained 68 percent of the company. AutoZone managers kept 16 percent of the company, and former managers retained another six percent, leaving ten percent for the public at large. With the ten percent of stock offered, AutoZone reduced its bank and mortgage debt and also invested in general company operations.

In the five months following AutoZones stock offering, the price of the companys shares rose dramatically, fueled by enthusiasm for the companys rapid growth and financial prospects. In September 1992 KKR announced that it would sell an additional 2.3 million shares of AutoZone to the public in an effort to increase the companys financial liquidity and reduce the swings in the price of its stock.

While AutoZones financial fate was being determined on Wall Street, the companys operations and expansion continued apace. Its fifth distribution center, in Lafayette, Louisiana, was opened in 1991, as were an additional 53 stores, including the first outlets in Colorado. Also in 1991, AutoZone introduced an electronic Store Management System that allowed prices to be bar-coded and scanned at checkout counters, thus speeding up customer transactions. In addition, the system allowed electronic credit card and check approval. It refined inventory control and automated in-store accounting procedures.

In December 1991 AutoZone held its first shareholders meeting, at which the company was able to announce that gross revenues had increased more than 20 percent in the previous year to reach $818 million. Net income had risen to $44 million, an increase of 89 percent.

Relying on demographics indicating that the Midwest contained a large pool of blue-collar workers who repaired their own cars both as a hobby and to save money, AutoZone began to plot its expansion into this area of the country. In 1992 the company upped its number of stores to 678 and made its first move into Wisconsin. Company sales topped $1 billion for the first time, allowing the company to continue its string of store openings without going into debt. More openings were made in another Midwest state, Michigan, in 1993. To distribute products to its new customers, the company opened distribution centers in Illinois and Tennessee.

Mid- to Late 1990s: Growth through Acquisitions and New Store Openings

As AutoZone continued its rapid and aggressive expansion, its revenues continued to rise as well. Total revenues increased from $535.8 million in 1989 to $1.216 billion in 1993, and they showed no signs of slowing down. To better serve customers, AutoZone in 1994 installed Flexogram, a satellite-based system designed to customize store inventory according to local demands and to facilitate communications between store locations. The company, which opened an average of 250 new retail stores a year, including its 1,000th store in 1995, did not slow its blistering pace in the 1990s.

Key Dates:

1979:
Joseph R. Hyde III opens Auto Shack, a retail automobile parts store, in Arkansas.
1987:
Auto Shack changes its name to AutoZone.
1989:
On its tenth anniversary AutoZone opens its 500th store.
1991:
AutoZone becomes a publicly traded company.
1995:
The 1,000th AutoZone store opens.
1999:
AutoZone expands into Mexico.

Although AutoZone was quickly emerging as the industrys retail leader, the market was becoming increasingly competitive, and the company believed that restricting itself to selling only auto parts would limit its potential. It was for this reason that AutoZone began to aggressively explore new businesses and opportunities, especially through acquisitions. In 1996 AutoZone expanded its consumer target to include commercial customers, such as professional automotive technicians and service stations. The company introduced a commercial program that provided credit and delivery to mechanics and technicians. Also in 1996 AutoZone purchased ALLDATA Corp., a software company that developed automotive diagnostic and repair software.

In 1997 AutoZone opened its 1,500th store, and Hyde, who had seen AutoZone grow from a single small store in Arkansas to a national retail chain, stepped down as CEO. He was replaced by then COO Johnston Adams. Shareholder KKR sold its 13 percent share in the company in 1998, and by 1999 Hyde had divested the majority of his interest in AutoZone, although he continued to serve on the board of directors.

AutoZone made several important acquisitions in fiscal year 1998, which ended August 29, 1998. In February the company bought Auto Palace, a retailer with 112 stores in six states in the northeastern United States. The purchase allowed AutoZone to move easily into a new market, and within a year all Auto Palace shops had been converted to AutoZone stores. In May the company purchased TruckPro L.P., an independent U.S. distributor of heavy-duty truck parts that had 43 stores in 14 states. The acquisition provided AutoZone with a doorway into the truck parts business, a fragmented industry with no clear leader and thus similar to the auto parts industry when AutoZone had first begun. The company planned to strengthen TruckPros business and make it the industry leader. At the end of June, AutoZone made a third acquisition, Chief Auto Parts Inc., with 560 outlets in five states. The acquisition significantly expanded AutoZones presence in the critical California market by increasing the number of AutoZone stores in that state to about 400, up from one store the previous year.

Although AutoZone was busily involved with acquisitions, the company still managed to open 275 new AutoZone stores during fiscal 1998. At the commencement of fiscal 1999, in October, AutoZone made yet another acquisition by purchasing 100 Express stores from The Pep BoysManny, Moe & Jack. In December 1998 the company opened its first international store, in Nuevo Laredo, Mexico, across the border from Texas. By the end of fiscal 1999 the company had opened five additional stores in Mexico and had remodeled and reopened 96 of the 100 Express stores as AutoZones. In addition, the company had also completed converting Chief Auto Parts stores into AutoZones, opened 167 new AutoZone stores, and opened three new TruckPro stores.

AutoZone was in strong shape as it celebrated its 20th anniversary. Sales in fiscal 1999 reached $4.12 billion, a 27 percent increase over 1998. The company planned to continue building its heavy-duty truck parts business and its commercial account division until AutoZone was the leader of both categories. The company also intended to continue seeking out new opportunities, particularly in international markets. Research by AutoZone pointed to international demand, and the company believed that international markets could support AutoZone stores comparable in number to those in the United States. In addition, to serve smaller U.S. communities that did not warrant full-size AutoZone stores, the company created a small-store prototype and planned to bring the total number of AutoZone outlets in the nation to more than 5,000.

Principal Subsidiaries

TruckPro L.P.; ALLDATA Corp.

Principal Competitors

Genuine Parts Company; The Pep BoysManny, Moe & Jack; Wal-Mart Stores, Inc.; Advance Holding Company; CAR-QUEST Corp.

Further Reading

Box, Terry, With Texas Store Conversions Done, Auto Parts Giant Shifts Focus, Dallas Morning News, May 18, 1999, p. D1.

Halverson, Richard, The Preeminent Purveyor of Parts, Discount Store News, December 14, 1998.

Henry, John, AutoZone to Acquire TruckPro, Arkansas Business, March 9, 1998, p. 10.

Neumeier, Shelley, AutoZone, Fortune, December 2, 1991.

Obermark, Jerome, Autozone Ends 99 with Sales Up 27%, Memphis Commercial Appeal, September 30, 1999, p. C1.

Peltz, James F., Overhauling Auto Parts Sales, Los Angeles Times, May 20, 1998, p. D1.

Tune-In Newsletters, Memphis: AutoZone, Inc., 198992.

Elizabeth Rourke

updated by Mariko Fujinaka

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AutoZone, Inc.

AutoZone, Inc.

3030 Poplar Avenue
P.O. Box 2198
Memphis, Tennessee 38101-9842
U.S.A.
(901) 325-4600
Fax: (901) 325-5122

Sales: $1.2 billion
Employees: 15,000
Founded: 1979 as Auto Shack
Stock Exchanges: New York
SICs: 5531 Automobile & Home Supply Stores

AutoZone is a chain of 783 auto parts stores that stretches across 23 states. Dedicated to serving the needs of the amateur mechanic, the company expanded remarkably quickly after its inauguration in Arkansas by an experienced retailer. With a premium on customer service as a touchstone of its corporate philosophy, AutoZone has become a major player in the automotive aftermarket in little more than a decade.

AutoZone was founded in 1979 by Joseph R. Hyde III as a division of Malone & Hyde, Inc., a wholesale food business founded by Hydes grandfather in 1907. Joseph Hyde III had entered the family business at the age of 22 immediately after his graduation from college. His contribution was to develop a line of specialty retail chains. He began with drug stores, founding Super D Drugs at age 26, and then moved on to sporting goods stores, supermarkets, and finally, auto parts stores.

Hydes first entry into this market came on July 4, 1979, when he opened his premier store in Forrest City, Arkansas. He named the outlet Auto Shack. The company had 25 people on its payroll at that time. To support further expansion, Hyde opened a 12,000-square-foot warehouse in Memphis, and by the end of the first year, seven more stores in Arkansas and Tennessee had made their debut.

The idea behind Auto Shack was straightforward. The company aimed to provide a wide selection of auto parts at a low price to Do-It-Yourselferswhat it referred to as the DIY market. In addition to these customers, the company identified a pool of potential buyers as Shade-Tree Mechanics, people who worked on other peoples cars in their spare time as a source of extra income, and Buy-It-Yourselfers, customers who bought parts and then hired others to install them, lacking the expertise to do so themselves.

To serve these customers, Auto Shack sought to establish quality and expert advice from employees as a hallmark of its business plan. In addition, the company sought to locate its stores in the neighborhoods where people who worked on their cars lived and to keep its stores open at hours when its customers were not otherwise occupied at work. Initially, this meant that many Auto Shack stores stayed open all night. Auto Shack stores were clean and bright, and the company emphasized friendly, helpful service. Company chairman Hyde himself spent one-quarter of his time visiting Auto Shack stores, garbed in a company uniform with name tag, to keep an eye on operations and to encourage employees to do their best.

In its second year of operation, Auto Shack added 23 more stores, branching out into five more states: Alabama, Kentucky, Missouri, Mississippi, and Texas. By this time, the company had started to hit its stride; it would go on to open a new store, on average, once a week, every week, for its first ten years in business. Before opening a new outlet, Auto Shacks research analysts spent thousands of hours looking at appropriate sites. The companys intended customer base was lower or middle-income men between the ages of 18 and 49. The companys ideal customer was a man who, both as a hobby and an economic necessity, spent a lot of time working on his car to keep it running much longer than ordinarily expected. Auto Shack estimated that the ever-rising cost of a new car, both in raw dollars and as a percentage of the average familys income, was a strong incentive for a large portion of the population to enter the market for replacement auto parts.

In addition, Auto Shack took note of the business practices of other successful retailing establishments of the South such as Wal-Mart, on whose corporate board Hyde sat for seven years. By selling a large volume of goods in a high number of stores serviced by central distribution centers, Auto Shack was able to keep its costs and prices low, providing the chain with a tremendous competitive advantage over smaller operations. In addition, the bright, modern, clean store interiors were a stark contrast with the dark, grimy aura some auto junk yards and other used car parts outlets projected.

By 1981 Auto Shack had opened 45 stores, and by the following year the tally was up to 74 stores, all within its core southern markets. By 1982 Auto Shacks Memphis warehouse had expanded to 96,000 feet, growth made necessary by the increasing number of Auto Shack outlets.

In 1983 Auto Shack expanded its size, maintaining 139 stores, and its geographical scope, adding outlets in Georgia, Arizona, Illinois, and Louisiana. By the following year, the number of Auto Shacks reached 200, and openings in Florida and South Carolina pushed the companys tally of states to 13. In addition, two more distribution centers were opened to serve the increasingly far-flung Auto Shack operations. Facilities in San Antonio and Phoenix brought the companys total warehouse space to 320,000 square feet.

In 1984 the leaders of Auto Shacks corporate parent, Malone & Hyde, decided that the companys stock was undervalued in the stock market. To milk the most value out of their properties, Hyde and his fellow executives decided to take the properties private in a leveraged buy-out. To do this, they enlisted the help of the investment banking firm Kohlberg Kravis Roberts & Company, (known as KKR), which engineered the withdrawal of Malone & Hyde from the stock market. KKR was compensated with large blocks of Auto Shack stock. In effect, KKR became the owner of Auto Shack at this time.

Despite its new corporate status, Auto Shack continued to grow at a dramatic rate. In 1985 the company opened an additional 68 stores, moving into North Carolina. Along with its standard format stores, Auto Shack also inaugurated an Express Parts Service that rushed auto parts to customers who called in over a toll-free phone service line. In this way, the company was able to offer services to parts of the country that were not yet served by an Auto Shack store.

Auto Shack took another step toward upgrading customer service in 1986, when it instituted a life-time warranty on 42,000 separate parts that it offered. The companys philosophy on what products to offer was closely tied to its research into what customers desired. For some types of goods, Auto Shack stocked a wide variety of nationally known brands. Motor oil fell into this category. Surveys indicated that Auto Shack customers had a strong preference for private label oils, being more concerned about the perception of guaranteed quality than the lowest price.

For many other goods, however, research indicated that customers simply wanted the cheapest price possible. In general, this criteria applied to more expensive car parts, where brand names were little known. Auto Shack developed its own sources for these products, eliminating the middleman and the additional costs that a distributor brought. In this way, the company was able to offer a less expensive product to its customers. On this level, Auto Shack was structured like a vertically integrated business, although it had not taken on the complications of a manufacturing operation. The companys supply lines were directed by product managers, who visited factories and worked closely with suppliers to insure quality control on various parts. The companys high volume of sales made it possible for specialized efforts such as this to be efficient. In addition, Auto Shacks advertising department participated in the efforts to define and upgrade products, and then attempted to win new customers for them.

By 1986 these practices had allowed Auto Shack to expand to 339 stores in 15 states, as New Mexico was added. A new warehouse was also opened in Greenville, South Carolina. The companys telemarketing operation, Express Parts, logged its one millionth call, and an additional service, an Electronic Catalogue, was brought on line on October 1, 1986, at the companys Bellevue store in Memphis, Tennessee. This database, installed throughout all the companys stores, eventually grew to contain more than four million entries on parts for over 15,000 vehicles.

In 1987 Hyde divested himself of all parts of his family business, Malone & Hyde, except Auto Shack, the fastest-growing unit. For the first time, Auto Shack stood alone, apart from its corporate parent. As a symbol of its new identity, and to give the companys stores a slightly more upscale image than the word shack implied, Auto Shacks name was changed to AutoZone. The company announced that this new moniker would apply to all 390 stores.

This process of conversion began in the following year. An outlet was opened under the new name in Enid, Oklahoma, marking the companys entry into yet another state. Overall, AutoZone had 470 stores in 16 states by the end of 1988, and served a total of 47.7 million customers in that year alone. In June 1988 the company unveiled its own line of auto products, developed by its product managers, under the trade name Duralast.

The number of AutoZone customers for these and other products rose to more than 51 million by 1989, the year of the companys tenth anniversary. AutoZone sales topped $500 million. By this time, AutoZone had become the third-largest American auto parts retailer. To continue to build this growth, the company advertised aggressively on television, on radio (airing ads in Spanish and Navajo, as well as English), and in newspapers.

In a symbolic gesture, AutoZone opened its 500th outlet, a store in Hobbs, New Mexico, on July 4, the precise date it had opened its first store ten years earlier. By the end of the year, 14 more stores had been added and all of the store facilities were known by the companys updated name.

Under this name, AutoZone diversified its outlets to include regular stores and Superstores. The first of these larger outlets was opened in Memphis, Tennessee. The usual AutoZone store filled about 5,400 feet and cost $200,000 to construct, while the larger version cost about $70,000 more, and stocked about 5,000 more items. More than 50 Superstores had been opened by the middle of 1989. The largest of these, located in New Halls Ferry, St. Louis, Missouri, boasted a 17,368-square-foot selling floor.

By 1990 AutoZone had expanded into two additional states, opening stores in Utah and Indiana, for a total of 539 outlets. The company also broke ground for a distribution center in Lafayette, Louisiana, to serve its expanded geographical operations, and introduced another line of its specially manufactured items, Deutsch filters. In addition, AutoZone opened its first 8,100-square-foot prototype store, in Santa Fe, New Mexico.

In April 1991 AutoZone ended its tenure as a privately held company when it re-entered the public market, as shares were offered for sale on the New York Stock Exchange. The 3.2 million shares offered produced a large paper profit for the companys primary owner, Kohlberg Kravis Roberts & Company. Under the structure of the stock offering, KKR retained its ownership stake in AutoZone, as investment partnerships run by KKR retained 68 percent of the company after the public offering. AutoZone managers kept 16 percent of the company, and former managers retained another six percent, leaving ten percent for the public at large. With the ten percent of stock offered, AutoZone reduced bank and mortgage debt, and also invested in general company operations.

In the five months following AutoZones stock offering, the price of the companys shares rose dramatically, fueled by enthusiasm for the companys rapid growth and financial prospects. In September 1992 KKR announced that it would sell an additional 2.3 million shares of AutoZone to the public in an effort to increase the companys financial liquidity and reduce the swings in the prices of its stock.

While AutoZones financial fate was being determined on Wall Street, the companys operations and expansion continued apace. Its fifth distribution center, in Lafayette, Louisiana, was opened in 1991, as were an additional 53 stores, including the first outlets in Colorado.

Also in 1991, AutoZone introduced an electronic Store Management System that allowed prices to be bar-coded and scanned at check-out counters, thus speeding up customer transactions. In addition, the system allowed electronic credit card and check approval. It refined inventory control, and automated in-store accounting procedures.

In December 1991 AutoZone held its first shareholders meeting, at which the company was able to announce that gross revenues had increased more than 20 percent in the previous year, to reach $818 million. Net income rose to $44 million, an increase of 89 percent.

Relying on demographics, which indicated that the Midwest contained a large pool of blue-collar workers who worked on their cars both as a hobby and to save money, AutoZone began to plot its expansion into this new area of the country. In 1992 the company upped its number of stores to 678, and made its first move into Wisconsin. Company sales topped $1 billion for the first time, allowing the company to continue its string of store openings without going into debt. More openings were made in another Midwest state, Michigan, in 1993. To distribute products to its new customers, the company opened a warehouse center in Danville, Illinois, its seventh such facility.

In 1993 the companys growth potential seemed virtually limitless. With stores spread across the southern United States, reaching up into the Midwest, the company serves a core group of customers by continued adherence to a proven merchandising formula. With more than a decade of spectacular growth behind it, AutoZone shows no signs of breaking down in the near future.

Further Reading

AutoZone, Inc. Annual Reports, Memphis, TN: AutoZone, Inc., 19911993.

AutoZone, Inc. Tune-In newsletters, Memphis, TN: AutoZone, Inc., 19891992.

Neumeier, Shelley, AutoZone, Fortune, December 2, 1991.

Elizabeth Rourke

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"AutoZone, Inc." International Directory of Company Histories. 1994. Encyclopedia.com. 1 Jul. 2016 <http://www.encyclopedia.com>.

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"AutoZone, Inc." International Directory of Company Histories. 1994. Retrieved July 01, 2016 from Encyclopedia.com: http://www.encyclopedia.com/doc/1G2-2841300023.html

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