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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended August 31, 1996

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to __________
Commission file number 1-10714
AUTOZONE, INC.

(Exact name of registrant as specified in its charter)
NEVADA 62-1482048

(State or other jurisdiction of (I.R.S. Employer Identification No.)

incorporation or organization)
123 SOUTH FRONT STREET, MEMPHIS, TENNESSEE 38103

(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (901) 495-6500
Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange

Title of each class on which registered

------------------- ---------------------
COMMON STOCK

($.01 PAR VALUE) NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:

None
Indicate by check mark whether the registrant (1) has filed all reports

required to be filed by Section 13 or 15(d) of the Securities Exchange Act of

1934 during the preceding 12 months (or for such shorter period that the

registrant was required to file such reports), and (2) has been subject to such

filing requirements for the past 90 days. Yes X No

--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405

of Regulation S-K (Section 229.405 of this chapter) is not contained herein,

and will not be contained, to the best of registrant's knowledge, in definitive

proxy or information statements incorporated by reference in Part III of this

Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the 115,337,257 shares of voting stock of the

registrant held by non-affiliates of the registrant (excluding, for this

purpose, shares held by officers, directors, or 10% stockholders) was

$2,955,517,210 based on the last sales price of the Common Stock on October 30,

1996 as reported on the New York Stock Exchange.
The number of shares of Common Stock outstanding as of October 30, 1996

was 150,298,667.
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PART I
ITEM 1 BUSINESS
INTRODUCTION
AutoZone is a leading specialty retailer of automotive parts and

accessories, primarily focusing on "Do-It-Yourself" ("D-I-Y") consumers. The

Company began operations in 1979 and at August 31, 1996, operated 1,423 stores

in 27 states, principally located in the Sunbelt and Midwest regions of the

United States. Each AutoZone store carries an extensive product line,

including new and re-manufactured automotive hard parts, such as alternators,

starters, water pumps, brake shoes and pads, carburetors, clutches and engines;

maintenance items, such as oil, antifreeze, transmission, brake and power

steering fluids, engine additives, protectants and waxes; and accessories, such

as car stereos and floor mats. The Company carries parts for domestic and

foreign cars, vans and light trucks. During fiscal year 1996, the Company

implemented a commercial sales program which provides commercial credit and

prompt delivery of parts and other products to local repair garages, dealers

and service stations. This program was offered in 1,183 of the Company's

stores at August 31, 1996. AutoZone does not perform automotive repairs or

installations.
AutoZone is dedicated to a marketing and merchandising strategy to provide

customers with superior service, value and parts selection at conveniently

located, well-designed stores. The Company has implemented this strategy

primarily with knowledgeable and motivated store personnel trained to emphasize

prompt and courteous customer service, through an everyday low price policy and

by maintaining an extensive product line with an emphasis on automotive hard

parts. AutoZone's stores are generally situated in high-visibility locations

and provide a distinctive merchandise presentation in an attractive store

environment.
At August 31, 1996, AutoZone had stores in the following 27 states:

Alabama . . . . . . 74 Louisiana . . . . 68 South Carolina . . . 41

Arizona . . . . . . 52 Michigan . . . . . 9 Tennessee . . . . . . 102

Arkansas . . . . . . 37 Mississippi . . . 58 Texas . . . . . . . . 239

Colorado . . . . . . 24 Missouri . . . . . 56 Utah . . . . . . . . 15

Florida . . . . . . 61 New Mexico . . . . 22 Virginia . . . . . . 23

Georgia . . . . . . 87 North Carolina . . 79 West Virginia . . . . 12

Illinois . . . . . . 43 Ohio . . . . . . . 138 Wisconsin . . . . . . 1

Indiana . . . . . . 66 Oklahoma . . . . . 56 Wyoming . . . . . . . 1

Kansas . . . . . . . 7 Pennsylvania . . . 10 -----

Kentucky . . . . . . 42 Total . . . . . . 1,423

=====

MARKETING AND MERCHANDISING STRATEGY
AutoZone's marketing and merchandising strategy is to provide customers

with superior service, value and parts selection at conveniently located,

well-designed stores. Key elements of this strategy are as follows:
CUSTOMER SERVICE
The Company believes that D-I-Y consumers place a significant value on

customer service. As a result, the Company emphasizes customer service as the

most important element in its marketing and merchandising strategy. The

Company attempts to promote a corporate culture which "always puts customers

first" and emphasizes knowledgeable and courteous service. To do so, the

Company employs parts personnel with technical expertise to advise customers

regarding the correct part type and application, utilizes a wide range of

training methods to educate and motivate its store personnel, and provides

store personnel with significant opportunities for promotion and incentive

compensation. Customer service is enhanced by proprietary electronic parts

catalogs which assist in the selection of parts; free testing of starters,

alternators, batteries, and sensors and actuators; and
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liberal return and warranty policies. AutoZone stores generally open at 8 a.m.

and close from 8 to 10 p.m. (with some open to midnight) Monday through

Saturday and typically open at 9 a.m. and close between 6 and 7 p.m. on Sunday.
AutoZone has a satellite system for all its stores which, among other

things, enables the Company to speed credit card and check approval processes

and locate parts at neighboring AutoZone stores. The Company has a call center

in Memphis to support the sales staff at high volume stores. Call center

personnel handle inquiries and orders, enabling store personnel to concentrate

on serving in-store customers without having to field telephone calls. In

November, 1996, the Company consolidated the operations of the Houston call

center into the Memphis call center and offered to transfer all Houston call

center employees to AutoZone stores in the Houston area. The Company

anticipates that the call center consolidation will result in ongoing savings

to the Company.
In March 1996, Alldata Corporation became a wholly-owned subsidiary of

AutoZone in a stock-for-stock merger. Alldata has developed a database system

that provides comprehensive and up-to-date automotive diagnostic, service and

repair information which it will continue to market to professional repair

shops. In addition, the Company plans to integrate certain limited information

from the Alldata database, such as technical service bulletins, recall

information and specifications, into its electronic catalog.
PRODUCT SELECTION
The Company offers a wide selection of automotive parts and other products

designed to cover a broad range of specific vehicle applications. AutoZone's

stores generally carry between 16,000 and 19,000 stock keeping units ("SKUs").

Each AutoZone store carries the same basic product line with some regional

differences based on climate, demographics and age and type of vehicle

registration. The Company's "flexogram" program enables the Company to tailor

its hard parts inventory to the makes and models of the automobiles in each

store's trade area. In addition to brand name products, the Company sells a

number of products, including batteries and engines, under the "AutoZone" name

and a selection of automotive hard parts, including starters, alternators,

water pumps, brakes, and filters, under its private label names. In addition

to products stocked in stores, the Company offers a range of products,

consisting principally of automotive hard parts, through its Express Parts

program. The Express Parts program provides air-freight delivery of lower

turnover products to AutoZone's stores.
PRICING
The Company employs an everyday low price strategy and attempts to be the

price leader in hard parts categories. Management believes that its prices

overall compare favorably to those of its competitors.
COMMERCIAL SALES PROGRAM
During fiscal year 1996, the Company implemented a commercial sales program

which provides credit and prompt delivery of parts and other products to local

repair garages, dealers and service stations. This program was offered in 1,183

of the Company's stores at August 31, 1996. Commercial customers generally pay

the same everyday low prices for parts and other products as paid by AutoZone's

D-I-Y customers. The program will be tested in nearly all stores, but the

Company anticipates that optimum operating efficiencies will be achieved after

consolidating the commercial business of certain of these stores. Ultimately,

the Company expects that the program will be in 80 to 90 percent of its stores.

Although the commercial sales program is currently unprofitable, the Company

believes that the program should enhance its future financial performance and

will result in an expansion of its customer base at a relatively modest

incremental capital investment. There can be no assurance, however, that the

commercial sales program will enhance the Company's results of operations and

financial condition in future fiscal years.
STORE DESIGN AND VISUAL MERCHANDISING
AutoZone seeks to design and build stores with a high visual impact.

AutoZone stores are designed to have an industrial "high tech" appearance by

utilizing colorful exterior signage, exposed beams, and ductwork, and brightly

lighted interiors. Merchandise in stores is attractively displayed, typically

utilizing diagonally placed
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gondolas for maintenance and accessory products as well as specialized shelving

for batteries and, in many stores, oil products. The Company employs a uniform

("planogrammed") store layout system to promote consistent merchandise

presentation in all of its stores. In-store signage and special displays are

used extensively to aid customers in locating merchandise and promoting

products.
STORE DEVELOPMENT AND EXPANSION STRATEGY
The following table sets forth the Company's store development activities

during the past five fiscal years:
FISCAL YEAR

----------------------------------------------

1992 1993 1994 1995 1996

---- ---- ---- ---- ----
Beginning Stores ................................ 598 678 783 933 1,143

New Stores ...................................... 82 107 151 210 280

Replaced Stores(1)............................... 14 20 20 29 31

Closed Stores (1)................................ (16) (22) (21) (29) (31)

--- --- --- ----- -----

Ending Stores ................................... 678 783 933 1,143 1,423

=== === === ===== =====
- ---------------------

(1) Replaced stores are either relocations or conversions of existing

smaller stores to larger formats. Closed stores include replaced stores.
The Company opened 280 net new stores in fiscal 1996, representing an

increase in total square footage from fiscal 1995 of approximately 26%, and had

70 stores under construction at fiscal year end. The Company plans to open

approximately 335 stores in fiscal 1997, representing an increase in total

store square footage of approximately 26%.
The Company believes that expansion opportunities exist both in markets

which it does not currently serve and in markets where it can achieve a larger

presence. The Company attempts to obtain high visibility sites in high

traffic locations and undertakes substantial research prior to entering new

markets. Key factors in selecting new site and market locations include

population, demographics, vehicle profile and number and strength of

competitors' stores. The Company generally seeks to open new stores within or

contiguous to existing market areas and attempts to cluster development in new

urban markets in a relatively short period of time in order to achieve

economies of scale in advertising and distribution costs. The Company may also

expand its operations through acquisitions of existing stores from third

parties. The Company regularly evaluates potential acquisition candidates, in

new as well as existing market areas.
AutoZone's net sales have grown significantly in the past several years,

increasing from $1,002 million in fiscal 1992 to $2,243 million in fiscal 1996.

The continued growth and financial performance of the Company will be

dependent, in large part, upon management's ability to open new stores on a

profitable basis in existing and new markets and also upon its ability to

continue to increase sales in existing stores. There can be no assurance the

Company will continue to be able to open and operate new stores on a timely and

profitable basis or will continue to attain increases in comparable store

sales.
STORE OPERATIONS
STORE FORMATS
Substantially all of AutoZone's stores are based on standard store formats

resulting in generally consistent appearance, merchandising and product mix.

Although the smaller store formats were generally used by the Company for its

earlier stores, the Company has increasingly used larger format stores starting

with its 8,100 square foot store introduced in 1987, its 6,600 square foot store

introduced in 1991 and its 7,700 square foot store introduced in 1993. In fiscal

1997, the 6,600 square foot and larger store formats are expected to account for

more than 85% of new and replacement stores. Total store space as of August 31,

1996 was as follows:
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