Auto zone Auto Parts Retailer Harvard Case Solution & Analysis

Auto zone Auto Parts Retailer Case Solution


In the retail industry, Auto Zone was one of the leading companies. In 1979, the company opened its first store under the name of Auto Shack in Forrest City, Arkansas. In the retail industry, the company implemented the first electronic auto-parts catalog. The company changed its name to Auto Zone in 1987. After their rapid growth in 1991, Auto Zone went to the public for the initial offering, and after that, it listed on the New York Stock Exchange under the symbol of ADO.

The company had become the leading retailer of automotive replacement parts and accessories in the United States, in 2012. The company employed approximately 65,000 employees and the company located 4,813 stores in every state of the United States including Puerto Rico, and Mexico. Moreover, the company also distributed auto-parts to the commercial shops. The company sales came from its online channel. Since the company established, Auto Zone had to focus to expand their operation to every state in the United States, so in such case, the company had invested heavily in expanding its retail footprint through both organic and inorganic growth.

The company had also developed the system (hub-and-feeder) that kept the individual stores low as well as reduced the possibility of stocks out. The expansion of its retail footprint had grown steadily. Auto Zone's success was based on its supply chain channel; the company had to develop the distribution capabilities that resulted in the highest operating margin for the retail industry. The company primarily focused on its after-tax return on invested capital (RICO) so that the company primary was to measure value creation for the company’s capital providers.

The company invested in opportunities that lead to the top-line revenue growth and increase the margin for the Company. They focused on results in the aggressively managed working capital at the store level through the efficient use of its inventories as well as attractive terms of supplies. The company had returned capital to its equity investors through its share repurchases, starting in 1998.

On the other hand, Auto Zone Company changing its strategy for the use of its cash flow. Johnson needed to access the impact of the change in the company’s stock price. Auto Zone decided to distribute some of its operating cash flows to shareholders or some combination of both.

The company’s growth in recent years had been substantial as were the returns on investment. Furthermore, it was not apparent if future growth would necessarily continue to create value.

Auto zone Auto Parts Retailer Case Solution

The Effect of the News of Repurchase:

The news of the repurchase of the shares is not like that the company is about paying the cash dividend to the shareholders. The repurchase of the shares forms the shareholder entirely different from the cash dividend paying by the Company. The paying of the cash dividend is that the Company is paying the profit to the shareholders in respect of the taken investment from the shareholders. The share repurchasing is the process in which the Company deals with the shareholder to purchase their issued share from the shareholders which had Company issues to raise the investment and pay the amount as the cost of the expense of the share.

The new of the repurchase of the shares will generate the impact on the price value of the stock to decrease level.............

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