AutoZone is slowly buying itself at an impressive discount

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Alan Howell | MBJ

Autozone's corporate headquarters in Downtown Memphis

Ed Arnold

Digital producer and social engagement manager- Memphis Business Journal

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AutoZone has a reputation as an organized and thoughtful company. Its plans for slow steady and profitable growth has made it into an absolute titan of retail and perhaps the most dominant auto parts retailer in the world.

That same thoughtful and steady approach to financials has been on display in its share repurchasing program. In June 2003, AutoZone initiated a share repurchasing plan with a budget of $75.5 million. Since 2004, the company has spent an additional $11.6 billion dollars purchasing its own shares.

Flush with cash, public companies have been looking for ways to put those reserves to work. There are three basic ways public companies use large cash reserves: by investing in expansions; by purchasing other companies through mergers and acquisitions; or directly returning cash to shareholders through dividends and share repurchases.

When a company initiates a share buyback, in essence it's suggesting that it thinks its share price is too low.

Between January and May of this year, AutoZone repurchased 1.877 million shares of its common stock for $912 million at an average price of $486 per share. By October, shares of AutoZone traded at more than $560 a share

But if you look at AutoZone's share repurchasing plan over the last decade, the deal gets even sweeter. Over the life of the repurchase program, AutoZone has paid an average of $179.56 per share. Currently, shares of AutoZone are trading at $573, a return of more than 200 percent.

By any estimate, that's an impressive return, and it doesn't look at though AutoZone is done. There is still more than $860 million in the company's share repurchasing budget.