Company Reports

We believe AutoZone’s strategy of leveraging its dominant do-it-yourself retail core to fund aggressive expansion into the commercial do-it-for-me segment has been highly effective. Its roughly 7,700 locations across the US, Mexico, and Brazil serve as both retail storefronts and localized fulfillment hubs. In our view, its network of over 150 megahubs creates a critical competitive advantage, providing industry-leading parts availability and enabling rapid delivery of hard-to-find components to satellite stores and commercial garages. This localized certainty is critical in a need-it-now industry, effectively insulating the firm from digital disintermediation.

We believe AutoZone’s strategy of leveraging its dominant do-it-yourself (DIY) retail core to fund aggressive expansion into the commercial do-it-for-me (DIFM) segment has been highly effective. Its roughly 7,700 locations across the US, Mexico, and Brazil serve as both retail storefronts and localized fulfillment hubs. In our view, its network of over 150 megahubs creates a critical competitive advantage, providing industry-leading parts availability to rapidly deliver hard-to-find components to satellite stores and commercial garages. This localized certainty is critical in a need-it-now industry, effectively insulating the firm from digital disintermediation.

AutoZone's fourth-quarter results featured a 5.6% net sales increase, with US same-store sales up 1.6%. Diluted EPS rose 15.1% to $56.05, bolstered by a $4.43 tariff refund benefit, while core gross margin fell 68 basis points to 50.8% as commercial sales mix and freight costs offset pricing gains.

We believe AutoZone’s strategy of leveraging its dominant do-it-yourself retail core to fund aggressive expansion into the commercial do-it-for-me segment has been highly effective. Its roughly 7,700 locations across the US, Mexico, and Brazil serve as both retail storefronts and localized fulfillment hubs. In our view, its network of over 150 megahubs creates a critical competitive advantage, providing industry-leading parts availability to rapidly deliver hard-to-find components to satellite stores and commercial garages. This localized certainty is critical in a need-it-now industry, effectively insulating the firm from digital disintermediation.

As new-vehicle affordability constraints push the average age of the US vehicle to a record 12.8 years, AutoZone is adeptly positioned as the largest domestic auto-parts retailer. Through 7,700 stores across the US, Mexico, and Brazil, it serves do-it-yourself customers and commercial repair shops.

AutoZone's third-quarter results featured an 8.4% increase in net sales growth, a 3.9% constant-currency same-store sales increase, and EPS of $38.07, up 7.7%. Gross margin contracted 57 basis points to 52.2%, as a 77-basis-point LIFO charge related to tariffs offset stronger merchandise margins.

AutoZone's domestic and international sales grew 3.3% and 2.5% (constant currency), respectively, in the second quarter. Gross margin contracted 137 basis points to 52.5%, driven by a 138-basis-point noncash LIFO charge related to tariffs, and overhead expenses rose 8.6% to support store expansion.

In the aftermarket auto-parts industry, wide-moat AutoZone differentiates its retail operations by offering robust customer service to its do-it-yourself (68% of fiscal 2025 US sales) and commercial customers (32%) while maintaining ample parts availability across a wide range of vehicle makes and models. Given that about 85% of AutoZone's sales are composed of failure- and maintenance-related products that tend to be time-sensitive and vital to the functioning of a vehicle (such as alternators, batteries, and spark plugs), AutoZone's customer base typically values service quality and convenience over a lower price. The retailer's staff often assists customers with the diagnosis of a vehicle, ordering the necessary part for a specific vehicle's make and model, and in some instances, even replacing and testing the functionality of parts. While online channels (like Amazon and CarParts.com) and diversified retailers (such as Walmart) may offer ostensibly lower prices, AutoZone's consistent comparable-store sales growth and healthy gross margins (north of 50%) suggest that its focus on customer service and the convenience provided by its 6,666 domestic brick-and-mortar stores (as of the end of its fiscal first quarter 2026) is a winning formula in the category.

AutoZone's domestic and international sales were up 4.8% and 3.7%, respectively, in constant currency in the fiscal 2026 first quarter. Gross margin contracted 203 basis points to 51%, driven by a 212-basis-point noncash LIFO charge related to tariffs. Overhead expense rose 10% to support growth.

In the aftermarket auto-parts industry, wide-moat AutoZone differentiates its retail operations by offering robust customer service to its do-it-yourself (68% of fiscal 2025 US sales) and commercial customers (32%) while maintaining ample parts availability across a wide range of vehicle makes and models. Given that about 85% of AutoZone's sales are composed of failure- and maintenance-related products that tend to be time-sensitive and vital to the functioning of a vehicle (such as alternators, batteries, and spark plugs), AutoZone's customer base typically values service quality and convenience over a lower price. The retailer's staff often assists customers with the diagnosis of a vehicle, ordering the necessary part for a specific vehicle's make and model, and in some instances, even replacing and testing the functionality of parts. While online channels (like Amazon and CarParts.com) and diversified retailers (such as Walmart) may offer ostensibly lower prices, AutoZone's consistent comparable-store sales growth and healthy gross margins (north of 50%) suggest that its focus on customer service and the convenience provided by its more than 6,600 domestic brick-and-mortar stores is a winning formula in the category.

On a constant-currency basis and excluding the extra week in the prior year, AutoZone's domestic and international sales were up 4.8% and 7.2%, respectively, in the fiscal fourth quarter. Still, operating margin contracted more than 150 basis points to 19.2%.

Among the aftermarket auto-parts industry, wide-moat AutoZone differentiates its retail operations by offering robust customer service to its do-it-yourself (70% of US sales) and commercial customers (30% of US sales) while maintaining ample parts availability across a wide range of vehicle makes and models. Given about 85% of AutoZone's sales are composed of failure- and maintenance-related products that tend to be time sensitive and vital to the functioning of a vehicle (such as alternators, batteries, and spark plugs), AutoZone's customer base typically values service quality and convenience over a lower price. As such, the retailer's staff often assists customers with the diagnosis of a vehicle, ordering the necessary part for a specific vehicle's make and model, and in some instances, even replacing and testing the functionality of parts. While online channels (such as Amazon and Carparts.com) and diversified retailers (such as Walmart) may offer ostensibly lower prices, we think AutoZone's consistent comparable store sales growth and healthy gross margins (north of 50%) suggest its focus on customer service and the convenience provided by its more-than 6,500 domestic brick-and-mortar stores is a winning formula in the category.

Among the aftermarket auto-parts industry, wide-moat AutoZone differentiates its retail operations by offering robust customer service to its do-it-yourself (70% of US sales) and commercial customers (30% of US sales) while maintaining ample parts availability across a wide range of vehicle makes and models. Given about 85% of AutoZone's sales are composed of failure- and maintenance-related products that tend to be time sensitive and vital to the functioning of a vehicle (such as alternators, batteries, and spark plugs), AutoZone's customer base typically values service quality and convenience over a lower price. As such, the retailer's staff often assists customers with the diagnosis of a vehicle, ordering the necessary part for a specific vehicle's make and model, and in some instances, even replacing and testing the functionality of parts. While online channels (such as Amazon and Carparts.com) and diversified retailers (such as Walmart) may offer ostensibly lower prices, we think AutoZone's consistent comparable store sales growth and healthy gross margins (north of 50%) suggest its focus on customer service and the convenience provided by its more-than 6,500 domestic brick-and-mortar stores is a winning formula in the category.

AutoZone's revenue expanded 5% in its fiscal third quarter, underpinned by a 5% uptick in domestic comparable sales. Internationally, comparable sales improved 8% when excluding foreign currency effects. Despite the positive sales momentum, earnings per share fell 4% to $35.36.

Among the aftermarket auto-parts industry, wide-moat AutoZone differentiates its retail operations by offering robust customer service to its do-it-yourself (70% of US sales) and commercial customers (30% of US sales) while maintaining ample parts availability across a wide range of vehicle makes and models. Given about 85% of AutoZone's sales are composed of failure- and maintenance-related products that tend to be time sensitive and vital to the functioning of a vehicle (such as alternators, batteries, and spark plugs), AutoZone's customer base typically values service quality and convenience over a lower price. As such, the retailer's staff often assists customers with the diagnosis of a vehicle, ordering the necessary part for a specific vehicle's make and model, and in some instances, even replacing and testing the functionality of parts. While online channels (such as Amazon and Carparts.com) and diversified retailers (such as Walmart) may offer ostensibly lower prices, we think AutoZone's consistent comparable store sales growth and healthy gross margins (north of 50%) suggest its focus on customer service and the convenience provided by its more-than 6,400 domestic brick-and-mortar stores is a winning formula in the category.

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%.

Amid a highly fragmented aftermarket auto-parts industry, wide-moat AutoZone differentiates its retail operations by offering robust customer service to its do-it-yourself (70% of US sales) and commercial customers (30% of US sales) while maintaining ample parts availability across a wide range of vehicle makes and models. Given about 85% of AutoZone's sales are composed of failure- and maintenance-related products that tend to be time sensitive and vital to the functioning of a vehicle (such as alternators, batteries, and spark plugs), AutoZone's customer base typically values service quality and convenience over a lower price. As such, the retailer's staff often assists customers with the diagnosis of a vehicle, ordering the necessary part for a specific vehicle's make and model, and in some instances, even replacing and testing the functionality of parts. While online channels (such as Amazon and Carparts.com) and diversified retailers (such as Walmart) may offer ostensibly lower prices, we think AutoZone's consistent comparable store sales growth and healthy gross margins (north of 50%) suggest its focus on customer service and the convenience provided by its more-than 6,400 domestic brick-and-mortar stores is a winning formula in the category.

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%.

Amid a highly fragmented aftermarket auto parts industry, wide-moat AutoZone differentiates its retail operations by offering robust customer service to its do-it-yourself (70% of US sales) and commercial customers (30% of US sales) while maintaining ample parts availability across a wide range of vehicle makes and models. Given about 85% of AutoZone’s sales are composed of failure and maintenance related products that tend to be time sensitive and vital to the functioning of a vehicle (such as alternators, batteries, and spark plugs), AutoZone’s customer base typically values service quality and convenience over a lower price. As such, the retailer’s staff often assists customers with the diagnosis of a vehicle, ordering the necessary part for a specific vehicle’s make and model, and in some instances, even replacing and testing the functionality of parts. While online channels (such as Amazon and Carparts.com) and diversified retailers (such as Walmart) may offer ostensibly lower prices, we think AutoZone’s consistent comparable store sales growth and healthy gross margins (north of 50%) suggests its focus on customer service and the convenience provided by its more than 6,400 domestic brick-and-mortar stores is a winning formula in the category.

We don’t plan to significantly alter our $2,550 fair value estimate on wide-moat AutoZone after digesting its fourth-quarter results that slightly underperformed our expectations. Not to our surprise, the pace of top-line growth continued to normalize following prodigious gains in the previous four years as domestic same-store sales expanded 0.2% in the quarter (versus our estimate for a 0.5% gain) and 0.4% for the full year, down from average growth of about 8% from fiscal 2020-23.