AutoZone Earnings: Top-Line Results Remain Weak, but Stout Competitive Standing Intact

We plan to slightly raise our $2,650 fair value estimate on wide-moat AutoZone following mixed fiscal 2025 first-quarter results. While domestic same-store sales growth came in softer than our 1.5% estimate, an improvement in merchandise margin and stringent expense control helped buoy profitability, as operating margin only deleveraged 60 basis points to 19.7% (outpacing our 19.4% forecast). While lackluster demand and anemic product inflation remain near-term headwinds, we still think AutoZone’s vast scale and the continued build out of its hub-and-spoke supply chain network should bode well for its long-term competitive standing within the fragmented industry. As such, we don’t plan to materially change our long-term outlook, which calls for mid-single-digit top-line growth and an operating margin of around 19%-20%.