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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

AutoZone Inc., economic profit calculation

US$ in thousands

12 months ended:	Aug 26, 2023	Aug 27, 2022	Aug 28, 2021	Aug 29, 2020	Aug 31, 2019	Aug 25, 2018
Net operating profit after taxes (NOPAT)¹	2,804,292)	3,175,174)	2,391,436)	2,065,020)	1,873,709)	1,350,649)
Cost of capital²	11.89%	12.14%	11.93%	11.19%	11.40%	10.87%
Invested capital³	6,986,333)	6,383,299)	6,599,731)	7,636,912)	5,730,767)	5,277,396)

Economic profit⁴	1,973,893)	2,400,027)	1,604,095)	1,210,425)	1,220,410)	776,936)

Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,804,292 – 11.89% × 6,986,333 = 1,973,893

The financial performance from 2018 to 2023 reflects a period of significant growth in value creation, characterized by a substantial increase in economic profit and a general expansion of operating profitability, despite some volatility in the capital base.

Net Operating Profit After Taxes (NOPAT): A consistent upward trend in NOPAT was observed from 2018 to 2022, with values rising from 1,350,649 thousand to a peak of 3,175,174 thousand. This represents a significant expansion in operational efficiency and profitability over five years. A contraction occurred in 2023, where NOPAT declined to 2,804,292 thousand, although the figure remained well above the baseline established in 2018.
Cost of Capital: The cost of capital remained relatively stable throughout the analyzed period, fluctuating within a narrow corridor between 10.87% and 12.14%. The peak cost of capital was reached in 2022 at 12.14%, followed by a slight reduction to 11.89% in 2023. This stability suggests a consistent risk profile and a steady cost of funding over the six-year duration.
Invested Capital: Invested capital exhibited a non-linear pattern, peaking in 2020 at 7,636,912 thousand. Following this peak, a downward trend was observed through 2022, with capital decreasing to 6,383,299 thousand, indicating a period of capital optimization or divestment. In 2023, invested capital rose again to 6,986,333 thousand, suggesting a renewal of investment in the business base.
Economic Profit and Value Creation: Economic profit demonstrated strong growth, increasing from 776,936 thousand in 2018 to a peak of 2,400,027 thousand in 2022. The peak in 2022 was the result of a synergistic effect: the highest recorded NOPAT coincided with a reduction in invested capital, maximizing the spread over the cost of capital. The decline to 1,973,893 thousand in 2023 is attributable to the simultaneous decrease in NOPAT and the increase in the invested capital base, which together reduced the overall economic value added.

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AutoZone Inc., NOPAT calculation

US$ in thousands

12 months ended:	Aug 26, 2023	Aug 27, 2022	Aug 28, 2021	Aug 29, 2020	Aug 31, 2019	Aug 25, 2018
Net income	2,528,426)	2,429,604)	2,170,314)	1,732,972)	1,617,221)	1,337,536)
Deferred income tax expense (benefit)¹	(25,707)	185,594)	(34,432)	51,077)	35,051)	(124,261)
Increase (decrease) in allowance for credit losses²	(1,800)	(1,900)	1,400)	1,500)	2,400)	200)
Increase (decrease) in LIFO reserve³	(44,000)	320,300)	21,700)	47,900)	47,500)	(37,500)
Increase (decrease) in accrued sales and warranty returns⁴	7,659)	3,278)	62)	(1,954)	14,285)	505)
Increase (decrease) in equity equivalents⁵	(63,848)	507,272)	(11,270)	98,523)	99,236)	(161,056)
Interest expense, less capitalized interest	318,426)	197,686)	200,754)	206,854)	192,200)	180,163)
Interest expense, operating lease liability⁶	123,798)	110,005)	98,708)	94,299)	14,283)	60,581)
Adjusted interest expense, less capitalized interest	442,224)	307,691)	299,462)	301,153)	206,483)	240,744)
Tax benefit of interest expense, less capitalized interest⁷	(92,867)	(64,615)	(62,887)	(63,242)	(43,361)	(62,353)
Adjusted interest expense, less capitalized interest, after taxes⁸	349,357)	243,076)	236,575)	237,911)	163,122)	178,391)
(Gain) loss on marketable securities	(152)	—)	123)	137)	(34)	(62)
Interest income	(12,054)	(6,048)	(5,417)	(5,689)	(7,396)	(5,636)
Investment income, before taxes	(12,206)	(6,048)	(5,294)	(5,552)	(7,430)	(5,698)
Tax expense (benefit) of investment income⁹	2,563)	1,270)	1,112)	1,166)	1,560)	1,476)
Investment income, after taxes¹⁰	(9,643)	(4,778)	(4,182)	(4,386)	(5,870)	(4,222)
Net operating profit after taxes (NOPAT)	2,804,292)	3,175,174)	2,391,436)	2,065,020)	1,873,709)	1,350,649)

Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for credit losses.

³ Addition of increase (decrease) in LIFO reserve. See details »

⁴ Addition of increase (decrease) in accrued sales and warranty returns.

⁵ Addition of increase (decrease) in equity equivalents to net income.

⁶ 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 3,174,302 × 3.90% = 123,798

⁷ 2023 Calculation
Tax benefit of interest expense, less capitalized interest = Adjusted interest expense, less capitalized interest × Statutory income tax rate
= 442,224 × 21.00% = 92,867

⁸ Addition of after taxes interest expense to net income.

⁹ 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 12,206 × 21.00% = 2,563

¹⁰ Elimination of after taxes investment income.

Net Income Trend: Net income has exhibited consistent growth over the six-year period under review. Starting at approximately $1.34 billion in 2018, it increased to about $1.62 billion in 2019 and continued to rise steadily each year. The upward trajectory continued through 2020 and 2021, reaching around $2.17 billion. In 2022, net income rose further to nearly $2.43 billion and reached approximately $2.53 billion in 2023. This indicates robust profitability with a consistent positive trend, though the growth rate appears to moderate slightly in the last year.
Net Operating Profit After Taxes (NOPAT) Trend: NOPAT also demonstrated an overall upward trend but with some variation in growth momentum toward the end of the period. In 2018, it stood at about $1.35 billion, growing significantly to around $1.87 billion in 2019. It continued to increase, reaching $2.07 billion in 2020 and $2.39 billion in 2021. The peak was observed in 2022 with approximately $3.18 billion, marking the highest value in the dataset. However, in 2023, NOPAT decreased to about $2.80 billion, indicating a decline after several years of growth.
Comparative Insights: Both net income and NOPAT revealed general growth patterns from 2018 to 2022, reflecting improving operational efficiency and profitability. The divergence in 2023, where net income continued to increase but NOPAT declined, may suggest variations in operating performance metrics, tax impacts, or extraordinary items affecting operational profit. The decline in NOPAT, despite rising net income, could warrant further analysis of underlying factors to assess operational challenges or changes in cost structures.

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AutoZone Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	Aug 26, 2023	Aug 27, 2022	Aug 28, 2021	Aug 29, 2020	Aug 31, 2019	Aug 25, 2018
Income tax expense	639,188)	649,487)	578,876)	483,542)	414,112)	298,793)
Less: Deferred income tax expense (benefit)	(25,707)	185,594)	(34,432)	51,077)	35,051)	(124,261)
Add: Tax savings from interest expense, less capitalized interest	92,867)	64,615)	62,887)	63,242)	43,361)	62,353)
Less: Tax imposed on investment income	2,563)	1,270)	1,112)	1,166)	1,560)	1,476)
Cash operating taxes	755,199)	527,238)	675,083)	494,541)	420,862)	483,931)

Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).

Income Tax Expense: The income tax expense has shown a consistent upward trend over the six-year period. Starting at approximately 299 million US dollars in 2018, it increased steadily each year, reaching about 649 million in 2022. There was a slight decrease in 2023, with the expense falling marginally to around 639 million dollars. This general increase suggests rising taxable income or changes in tax rates or policies affecting the company.
Cash Operating Taxes: Cash operating taxes exhibited a more volatile pattern compared to income tax expense. Beginning at roughly 484 million dollars in 2018, there was a decline in 2019 to approximately 421 million. This was followed by a rebound in 2020 to nearly 495 million and a significant jump in 2021 to about 675 million dollars. The subsequent year, 2022, saw a reduction to around 527 million, but in 2023, cash operating taxes increased sharply to approximately 755 million dollars, the highest in the observed timeframe. These fluctuations may indicate changes in operational profitability, timing of tax payments, or adjustments in tax planning strategies.

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AutoZone Inc., invested capital calculation (financing approach)

US$ in thousands

	Aug 26, 2023	Aug 27, 2022	Aug 28, 2021	Aug 29, 2020	Aug 31, 2019	Aug 25, 2018
Current portion of finance lease liabilities	86,916)	92,877)	89,932)	67,498)	56,246)	52,290)
Long-term debt	7,668,549)	6,122,092)	5,269,820)	5,513,371)	5,206,344)	5,005,930)
Finance lease liabilities, less current portion	200,702)	217,428)	186,122)	155,855)	123,659)	102,013)
Operating lease liability¹	3,174,302)	3,081,380)	2,869,410)	2,725,406)	2,131,812)	1,852,615)
Total reported debt & leases	11,130,469)	9,513,777)	8,415,284)	8,462,130)	7,518,061)	7,012,848)
Stockholders’ deficit	(4,349,894)	(3,538,913)	(1,797,536)	(877,977)	(1,713,851)	(1,520,355)
Net deferred tax (assets) liabilities²	450,276)	481,836)	296,082)	326,343)	285,119)	250,584)
Allowance for credit losses³	7,700)	9,500)	11,400)	10,000)	8,500)	6,100)
LIFO reserve⁴	(59,000)	(15,000)	(335,300)	(357,000)	(404,900)	(452,400)
Accrued sales and warranty returns⁵	43,355)	35,696)	32,418)	32,356)	34,310)	20,025)
Equity equivalents⁶	442,331)	512,032)	4,600)	11,699)	(76,971)	(175,691)
Accumulated other comprehensive (income) loss, net of tax⁷	190,836)	300,536)	307,986)	354,252)	269,322)	235,805)
Adjusted stockholders’ deficit	(3,716,727)	(2,726,345)	(1,484,950)	(512,026)	(1,521,500)	(1,460,241)
Construction in progress⁸	(305,896)	(291,588)	(216,685)	(165,953)	(126,868)	(140,535)
Marketable debt securities⁹	(121,513)	(112,545)	(113,918)	(147,239)	(138,926)	(134,676)
Invested capital	6,986,333)	6,383,299)	6,599,731)	7,636,912)	5,730,767)	5,277,396)

Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of LIFO reserve. See details »

⁵ Addition of accrued sales and warranty returns.

⁶ Addition of equity equivalents to stockholders’ deficit.

⁷ Removal of accumulated other comprehensive income.

⁸ Subtraction of construction in progress.

⁹ Subtraction of marketable debt securities.

Total Reported Debt & Leases: The total reported debt and leases exhibit a generally upward trend over the six-year period. Starting at approximately $7.0 billion in fiscal year 2018, the amount increased steadily year over year, reaching about $11.1 billion in fiscal year 2023. There is a noticeable acceleration in the increase from 2021 to 2023, suggesting enhanced leverage or increased reliance on debt and lease obligations.
Stockholders’ Deficit: The stockholders’ deficit shows a fluctuating but overall deepening negative position during the timeframe. Initially, the deficit increased from roughly -$1.52 billion in 2018 to nearly -$1.71 billion in 2019, then improved to around -$0.88 billion in 2020, indicating some recovery. However, from 2020 onwards, the deficit worsened significantly, reaching approximately -$4.35 billion by 2023. This trend reflects a substantial erosion of equity, which may signal challenges in profitability or asset valuation.
Invested Capital: Invested capital increased considerably from 2018 to 2020, rising from about $5.3 billion to $7.6 billion, indicating growing investment or capital expenditures during this period. However, in 2021 and 2022, invested capital declined to around $6.6 billion and $6.4 billion respectively, before slightly rebounding to about $7.0 billion in 2023. This pattern suggests a period of reduced capital investment or asset base contraction followed by a modest recovery.

Overall, the financial data indicates increasing leverage alongside a deteriorating equity position, with invested capital showing volatility. The rise in debt and leases coupled with a deepening stockholders’ deficit points to increasing financial risk, while fluctuations in invested capital reveal shifts in the company’s capital deployment strategy over the years.

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AutoZone Inc., cost of capital calculations

Aug 26, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	42,732,687)	42,732,687)	÷	53,456,507)	=	0.80	0.80	×	14.05%	=	11.23%
Long-term debt and finance lease liabilities³	7,549,518)	7,549,518)	÷	53,456,507)	=	0.14	0.14	×	4.21% × (1 – 21.00%)	=	0.47%
Operating lease liability⁴	3,174,302)	3,174,302)	÷	53,456,507)	=	0.06	0.06	×	3.90% × (1 – 21.00%)	=	0.18%
Total:	53,456,507)					1.00					11.89%

Based on: 10-K (reporting date: 2023-08-26).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Aug 27, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	45,698,163)	45,698,163)	÷	55,029,148)	=	0.83	0.83	×	14.05%	=	11.67%
Long-term debt and finance lease liabilities³	6,249,605)	6,249,605)	÷	55,029,148)	=	0.11	0.11	×	3.52% × (1 – 21.00%)	=	0.32%
Operating lease liability⁴	3,081,380)	3,081,380)	÷	55,029,148)	=	0.06	0.06	×	3.57% × (1 – 21.00%)	=	0.16%
Total:	55,029,148)					1.00					12.14%

Based on: 10-K (reporting date: 2022-08-27).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Aug 28, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	38,184,546)	38,184,546)	÷	47,012,910)	=	0.81	0.81	×	14.05%	=	11.41%
Long-term debt and finance lease liabilities³	5,958,954)	5,958,954)	÷	47,012,910)	=	0.13	0.13	×	3.50% × (1 – 21.00%)	=	0.35%
Operating lease liability⁴	2,869,410)	2,869,410)	÷	47,012,910)	=	0.06	0.06	×	3.44% × (1 – 21.00%)	=	0.17%
Total:	47,012,910)					1.00					11.93%

Based on: 10-K (reporting date: 2021-08-28).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Aug 29, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	26,698,238)	26,698,238)	÷	35,727,897)	=	0.75	0.75	×	14.05%	=	10.50%
Long-term debt and finance lease liabilities³	6,304,253)	6,304,253)	÷	35,727,897)	=	0.18	0.18	×	3.45% × (1 – 21.00%)	=	0.48%
Operating lease liability⁴	2,725,406)	2,725,406)	÷	35,727,897)	=	0.08	0.08	×	3.46% × (1 – 21.00%)	=	0.21%
Total:	35,727,897)					1.00					11.19%

Based on: 10-K (reporting date: 2020-08-29).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Aug 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	27,396,140)	27,396,140)	÷	35,126,857)	=	0.78	0.78	×	14.05%	=	10.96%
Long-term debt and finance lease liabilities³	5,598,905)	5,598,905)	÷	35,126,857)	=	0.16	0.16	×	3.24% × (1 – 21.00%)	=	0.41%
Operating lease liability⁴	2,131,812)	2,131,812)	÷	35,126,857)	=	0.06	0.06	×	0.67% × (1 – 21.00%)	=	0.03%
Total:	35,126,857)					1.00					11.40%

Based on: 10-K (reporting date: 2019-08-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Aug 25, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	18,612,832)	18,612,832)	÷	25,568,150)	=	0.73	0.73	×	14.05%	=	10.23%
Long-term debt and finance lease liabilities³	5,102,703)	5,102,703)	÷	25,568,150)	=	0.20	0.20	×	3.15% × (1 – 25.90%)	=	0.47%
Operating lease liability⁴	1,852,615)	1,852,615)	÷	25,568,150)	=	0.07	0.07	×	3.27% × (1 – 25.90%)	=	0.18%
Total:	25,568,150)					1.00					10.87%

Based on: 10-K (reporting date: 2018-08-25).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

AutoZone Inc., economic spread ratio calculation, comparison to benchmarks

	Aug 26, 2023	Aug 27, 2022	Aug 28, 2021	Aug 29, 2020	Aug 31, 2019	Aug 25, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	1,973,893)	2,400,027)	1,604,095)	1,210,425)	1,220,410)	776,936)
Invested capital²	6,986,333)	6,383,299)	6,599,731)	7,636,912)	5,730,767)	5,277,396)
Performance Ratio
Economic spread ratio³	28.25%	37.60%	24.31%	15.85%	21.30%	14.72%
Benchmarks
Economic Spread Ratio, Competitors⁴
Amazon.com Inc.	-10.81%	-21.75%	-1.99%	—	—	—
Home Depot Inc.	16.92%	21.36%	12.21%	—	—	—
Lowe’s Cos. Inc.	13.65%	21.62%	9.17%	—	—	—
TJX Cos. Inc.	4.24%	4.26%	-12.59%	—	—	—

Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 1,973,893 ÷ 6,986,333 = 28.25%

⁴ Click competitor name to see calculations.

The financial performance from 2018 to 2023 exhibits a general upward trajectory in value creation, characterized by substantial growth in economic profit and fluctuating efficiency in capital utilization.

Economic Profit Trends: Economic profit demonstrated a strong growth pattern for the majority of the period, increasing from 776,936 thousand US dollars in 2018 to a peak of 2,400,027 thousand US dollars in 2022. While a contraction occurred in 2023, with the figure descending to 1,973,893 thousand US dollars, the overall trajectory remains positive relative to the 2018 baseline.
Invested Capital Dynamics: Invested capital followed a non-linear path, reaching a maximum of 7,636,912 thousand US dollars in 2020. This peak was followed by two years of decline, with capital falling to 6,383,299 thousand US dollars by 2022, before rising again to 6,986,333 thousand US dollars in 2023.
Economic Spread Ratio Analysis: The economic spread ratio showed significant volatility, reflecting the shifting relationship between profitability and the capital base. A notable decline to 15.85% in 2020 coincided with the period of highest invested capital, indicating a temporary dilution of capital efficiency. Conversely, the ratio reached a peak of 37.60% in 2022, driven by the simultaneous occurrence of peak economic profit and a reduced capital base. The period concluded with a moderation of the ratio to 28.25% in 2023.

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AutoZone Inc., economic profit margin calculation, comparison to benchmarks

	Aug 26, 2023	Aug 27, 2022	Aug 28, 2021	Aug 29, 2020	Aug 31, 2019	Aug 25, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	1,973,893)	2,400,027)	1,604,095)	1,210,425)	1,220,410)	776,936)
Net sales	17,457,209)	16,252,230)	14,629,585)	12,631,967)	11,863,743)	11,221,077)
Performance Ratio
Economic profit margin²	11.31%	14.77%	10.96%	9.58%	10.29%	6.92%
Benchmarks
Economic Profit Margin, Competitors³
Amazon.com Inc.	-6.09%	-11.35%	-0.85%	—	—	—
Home Depot Inc.	5.94%	6.79%	4.59%	—	—	—
Lowe’s Cos. Inc.	3.48%	5.88%	2.90%	—	—	—
TJX Cos. Inc.	1.73%	1.73%	-8.77%	—	—	—

Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).

¹ Economic profit. See details »

² 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × 1,973,893 ÷ 17,457,209 = 11.31%

³ Click competitor name to see calculations.

An analysis of the economic profit and net sales indicates a period of sustained revenue growth accompanied by fluctuating levels of value creation efficiency over the six-year period ending August 2023.

Net Sales Trajectory: A consistent upward trend in net sales is observed, with figures rising from US$ 11.22 billion in 2018 to US$ 17.46 billion in 2023. This represents a steady expansion of the top line throughout the entire duration of the analyzed period.
Economic Profit Trends: Economic profit demonstrated significant growth from 2018 to 2022, increasing from US$ 776.9 million to a peak of US$ 2.40 billion. However, a reversal is noted in 2023, where economic profit declined to US$ 1.97 billion, marking a contraction in absolute value creation despite the continued increase in net sales.
Economic Profit Margin Volatility: The economic profit margin expanded from 6.92% in 2018 to a peak of 14.77% in 2022, suggesting a period of increasing operational efficiency and superior returns relative to the cost of capital. This trend shifted in 2023, with the margin compressing to 11.31%. The divergence between rising net sales and falling economic profit in the final year indicates a reduction in the efficiency of value generation per dollar of revenue.

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AutoZone Inc. (NYSE:AZO)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin