Automobile parts supplier AutoZone Inc. (NYSE: AZO) announced Thursday that it plans to hire 20,000 new employees to work in the company’s 5,836 U.S. stores. New jobs will be available at stores in all 50 states and in the company’s 10 distribution centers.
Because auto parts stores were declared to be essential businesses, the company’s stores remained open during the lockdowns related to the COVID-19 pandemic that disrupted and damaged so many other U.S. retailers. When the company reported third-quarter results in late May, U.S. store revenue was down just 1% year over year, even though sales in the second four weeks of the quarter were down “materially.” As federal stimulus checks put cash back in consumers’ hands during the final four weeks of the quarter, AutoZone sales turned “meaningfully positive.”
The financial crisis of 2008 and 2009 was something of a dress rehearsal for the far more devastating job losses due to the coronavirus outbreak. During the financial crisis of a decade ago, new car sales plunged as Americans chose to repair, rather than replace, their existing vehicles.
This time around, more owners did the work themselves rather than taking their vehicles into professional shops for service and minor repairs.
In its most recent annual report, for fiscal year 2019 ending last August, AutoZone reported approximately 86,000 employees at 5,772 U.S. stores. Even given the higher store count nearly a year later, adding 20,000 employees is a major increase.
So, is AutoZone hiring more employees because the company thinks the effects of the pandemic on retail sales of new cars will continue? That would be a good bet given that auto industry analysts are expecting full-year sales to drop by as much as 2 million new vehicle sales compared to last year.
The pandemic also might make vehicle owners more reluctant to visit a professional shop for simple things like oil changes or to put off more difficult things like replacing a worn part. After all, many Americans weren’t driving as much during the lockdowns and the number who have continued working from home remains fairly high.
In the noon hour Friday, AutoZone shares traded up about 0.8% at $1,199.90, in a 52-week range of $684.91 to $1,274.41. The price target on the stock is $1,275.87, and shares trade at a multiple of 17.4 times expected 2021 earnings.