AutoZone Earnings: Margins Remain Pressured, but Strong Growth in Commercial Channel Is Encouraging

We don't plan to materially alter our $2,750 fair value estimate on wide-moat AutoZone after the firm posted mixed fiscal 2025 second-quarter results. While domestic same-store sales growth of 1.9% slightly outpaced our 1.5% forecast, profits suffered as the retailer continued to reinvest in its store base and distribution network. As such, operating margin deleveraged by 140 basis points to 17.9%, coming in well shy of our 18.8% estimate. Even though margin degradation was more pronounced than we anticipated, we think management's commitment to improve part availability and service speeds with commercial customers should support its competitive standing. As such, we see no reason to alter our long-term outlook, which calls for mid-single-digit annual top-line growth and operating margin of around 19%.