DOW JONES NEWSWIRES 
 

AutoZone Inc.'s (AZO) fiscal second-quarter net income rose 8.6%, handily beating Wall Street's expectations, as sales were lifted by a wave of cost-conscious customers repairing cars.

While the recession has put Detroit auto makers on life support, auto-parts companies are holding up as cash-strapped consumers patch up their old cars rather than buy new ones. As auto dealerships close, the replacement companies are expected to receive even more business.

For the quarter ended Feb. 14, the nation's largest auto-parts retailer reported net income of $115.9 million, or $2.03 a share, up from $106.7 million, or $1.67 a share, a year earlier.

Net sales rose 8.1% to $1.45 billion, while U.S. same-store sales rose 6%.

Analysts surveyed by Thomson Reuters were expecting earnings, excluding items, of $1.85 a share on revenue of $1.38 billion.

Gross margin fell to 49.7% from 49.9%, reflecting rising theft, partially offset by lower distribution costs. Operating costs as a percentage of sales, though, dropped by 0.3 percentage point amid the sales increase and lower promotion costs.

When gas prices were at record levels, even the most cost-conscious consumers were postponing all but the most necessary car repairs, pressuring parts-retailers' profits. As gas prices dropped, however, parts retailers started to see gains. Two weeks ago, AutoZone's key rival, Advance Auto Parts Inc. (AAP), reported a 30% drop in net income on an inventory write-down, but projected double-digit commercial same-store sales growth in 2009.

Shares of AutoZone closed Monday at $140.03 and were inactive premarket. The stock is up 19% the past year, including a two-thirds increase since hitting a two-year low in November.

-By Mike Barris, Dow Jones Newswires; 2019-938-5658; mike.barris@dowjones.com