Farnam Street Investments: “Unit Economics of AutoZone, Inc. (AZO) are Fascinating”

Farnam Street Investments, an investment management company, recently published its second quarter 2022 investor letter. The same can be downloaded here. In the second quarter, the fund returned -19%. Rising interest rates, inflation, and fears of recession influenced the performance of the fund. You can view the top 5 holdings of the fund to know its best picks in 2022.

In the Q2 2022 letter, Farnam Street Investments discussed AutoZone, Inc. (NYSE:AZO). Over the last 17 years, AutoZone, Inc. (NYSE:AZO) returned more than 20% annualized returns. AutoZone, Inc. (NYSE:AZO) is an automotive parts and accessories retailer and has a market capitalization of $42.174 billion. The stock of AutoZone, Inc. (NYSE:AZO) closed at $2,164.13 per share on August 4, 2022. On a monthly time frame, AutoZone, Inc. (NYSE:AZO) had a return of -0.84%, whereas its 12-month return jumped up to 32.78%.

Here is what Farnam Street Investments specifically mentioned about  AutoZone, Inc. (NYSE:AZO) in its Q2 2022 investor letter:

“The unit economics of AutoZone, Inc. (NYSE:AZO) are fascinating for a business analyst to unpack. In a world driven by macro headlines, let’s get micro and break down the evolution of the average store

In 2005, a typical store had eight employees and drove $1.55 million of revenue through its four walls every year. EBIT was $237k; imagine about $650 being sent back to the Memphis, TN headquarters every day. Shares outstanding were around 80 million, meaning there were nearly 22k publicly-traded “claim checks” per store. If you bought 22k shares, you could imagine owning your closest Autozone unit all to yourself.

Over the next seventeen years, the company outlayed $6.8 billion to build 3,094 new stores. Sounds like a lot of money, but that’s fairly modest growth: $2.1 million per new store at a pace of 3.5 openings per week…’’ (Click here to see the full text)

AutoZone, Inc. (NYSE:AZO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 38 hedge fund portfolios held AutoZone, Inc. (NYSE:AZO) at the end of the first quarter which was 45 in the previous quarter.

We discussed AutoZone, Inc. (NYSE:AZO) in another article published in April, that shared Altron Capital Management’s views on the company. In addition, please check out our hedge fund investor letters Q2 2022 page for more investor letters from hedge funds and other leading investors.

Disclosure: None. This article is originally published at Insider Monkey.