AutoZone, Inc. (AZO) is listed on NYSE and operates in the Auto - Parts industry (Consumer Cyclical sector).
AutoZone, Inc. retails and distributes automotive replacement parts and accessories. The company offers various products for cars, sport utility vehicles, vans, and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products. Its products include A/C compressors, batteries and accessories, bearings, belts and hoses, calipers, chassis, clutches, CV axles, engines, fuel pumps, fuses, ignition and lighting products, mufflers, radiators, starters and alternators, thermostats, and water pumps, as well as tire repairs. In addition, the company offers maintenance products, such as antifreeze and windshield washer fluids; brake drums, rotors, shoes, and pads; brake and power steering fluids, and oil and fuel additives; oil and transmission fluids; oil, cabin, air, fuel, and transmission filters; oxygen sensors; paints and accessories; refrigerants and accessories; shock absorbers and struts; spark plugs and wires; and windshield wipers. Further, it provides air fresheners, cell phone accessories, drinks and snacks, floor mats and seat covers, interior and exterior accessories, mirrors, performance products, protectants and cleaners, sealants and adhesives, steering wheel covers, stereos and radios, tools, and wash and wax products, as well as towing services. Additionally, the company provides a sales program that offers commercial credit and delivery of parts and other products; sells automotive diagnostic and ...
| Rating | Analysts |
|---|---|
| Strong Buy | 1 |
| Buy | 32 |
| Hold | 12 |
| Sell | 0 |
| Strong Sell | 0 |
AutoZone, Inc. is a retailer and distributor of automotive replacement parts and accessories, serving vehicles such as cars, sport utility vehicles, vans, and light trucks. The company provides a range of products, including automotive hard parts, maintenance items, and accessories. Key offerings include A/C compressors, batteries, bearings, belts, hoses, clutches, engines, fuel pumps, ignition and lighting products, radiators, starters, alternators, and water pumps. AutoZone also supplies maintenance products like antifreeze, brake fluids, oil additives, filters, and spark plugs. Additionally, the company offers various non-automotive products, including air fresheners, cell phone accessories, floor mats, and tools. AutoZone supports its customers with a commercial sales program offering credit and delivery services. It also sells automotive diagnostic and repair software under the ALLDATA brand and offers products online through autozone.com. As of November 2021, AutoZone operated 6,066 stores in the United States, 666 in Mexico, and 53 in Brazil. Founded in 1979, the company is headquartered in Memphis, Tennessee.
Over the past three fiscal years, the company has demonstrated a consistent increase in revenue, growing at a 4.2% CAGR from $17.46 billion in 2023 to $18.94 billion in 2025. Despite this growth, profitability metrics have shown mixed results. The gross margin slightly improved by 0.7pp, reaching 52.6% in 2025, while the operating margin experienced a slight decline of 0.8pp to 19.1%. Net margin consistently decreased by 1.3pp, ending at 13.2%, indicating some pressure on bottom-line profitability. Cash generation has been a concern, with free cash flow (FCF) decreasing from $2.14 billion in 2023 to $1.79 billion in 2025, alongside a declining FCF margin from 12.3% to 9.5%. However, operating cash flow (OCF) increased consistently, reaching $3.12 billion in 2025, suggesting that earnings are backed by cash, as indicated by a cash conversion ratio (CCR) of 1.25. The company has also enhanced shareholder value through a 9.7% reduction in share count, amplifying per-share gains. Despite these efforts, the company's return on invested capital (ROIC) has consistently decreased, reaching 33.4% in 2025, while net debt increased to $12.02 billion, reflecting a more leveraged position. Liquidity remains a concern, with a current ratio below 1, indicating potential challenges in meeting short-term obligations.
Recent news for AutoZone, Inc. (AZO) centers around significant insider and institutional trading activity. On April 29, Comerica Bank sold 3,123 shares of AutoZone, while D.A. Davidson & CO. increased its holdings by 5% in the fourth quarter. Pictet Asset Management Holding SA and Cornerstone Investment Partners LLC also expanded their positions, acquiring 2,330 and 2,821 additional shares, respectively. Conversely, Cwm LLC reduced its stake by selling 1,870 shares, and B. Metzler seel. Sohn & Co. AG divested 3,804 shares. Mirae Asset Global Investments Co. Ltd. raised its holdings by 1%, while Lbp Am Sa reduced its position. These transactions reflect routine portfolio adjustments and do not necessarily indicate a shift in the company's outlook. Additionally, AutoZone completed a strategic three-year cloud migration with Google Cloud, enhancing its operational capabilities. Despite these developments, AutoZone's stock has recently experienced a decline, underperforming the broader market.
AutoZone operates in the automotive aftermarket industry, which is currently experiencing a mix of tailwinds and headwinds. The industry benefits from a growing and aging car park, which supports demand for maintenance and repair parts. However, macroeconomic factors such as inflation and tariffs are impacting costs and pricing strategies. Management highlighted that inflation is contributing to higher average ticket prices, but they expect these pressures to moderate as they lap previous increases. Weather patterns also play a significant role, with winter storms impacting sales but potentially driving future demand for parts. The competitive landscape remains intense, with AutoZone focusing on expanding its store footprint and enhancing supply chain capabilities to maintain its market position. Consistently, management views the industry's demand as strong, with opportunities for market share gains both domestically and internationally.
In Q2 2026, AutoZone reported an 8.1% increase in total sales, with a 3.4% growth in domestic same-store sales. However, earnings per share (EPS) decreased by 2.3%, largely due to a $59 million LIFO charge. Excluding this charge, EPS would have increased by 7.1%. The company's commercial sales grew by 9.8%, although this was below expectations due to severe winter weather impacting operations. In contrast, Q1 2026 saw a stronger performance with a 14.5% increase in commercial sales, driven by improved execution and parts availability. Management expressed satisfaction with the commercial segment's growth and the expansion of Mega Hub stores, which are key to future growth. Concerns were noted around the impact of weather and inflation on DIY sales, with traffic down by 3.6% in Q2. The narrative across the calls shifted from a focus on overcoming weather-related challenges to leveraging strategic initiatives for sustained growth.
AutoZone's growth strategy focuses on expanding its store network, particularly through the addition of Mega Hubs, which enhance parts availability and drive sales. The company plans to open 350 to 360 stores in FY 2026, with significant investments in supply chain improvements and technology to enhance customer service. Management claims competitive advantages in their extensive distribution network and strong brand recognition, particularly in the commercial segment. However, they acknowledge risks such as inflation, tariffs, and economic conditions in international markets like Mexico. Analysts questioned the sustainability of current growth rates and the impact of SG&A expenses on margins. While the strategy is promising, execution risks remain, particularly in managing costs and maintaining sales momentum. Long-term investors may be excited by the potential for market share gains and international expansion, but should be cautious about the impact of macroeconomic factors and execution challenges.
Comparing Q1 and Q2 2026, AutoZone largely delivered on its commitments, particularly in expanding its commercial business and opening new stores. In Q1, management set a target for commercial sales growth, which was achieved with a 14.5% increase. However, Q2 saw a slowdown to 9.8% growth due to weather impacts. The company met its store opening targets, with 64 new stores in Q2, up from 53 in Q1. Management's guidance on LIFO charges was consistent, with expected charges impacting margins as forecasted. There was no significant silence on previously emphasized topics, indicating a consistent strategic focus. Overall, while there were some challenges, particularly with weather and inflation, management's execution aligned with their stated objectives.
- Monitor the impact of expected $60 million LIFO charges in the upcoming quarters, as these will affect margins and EPS.
- Track the progress of opening 350 to 360 stores in FY 2026, including the expansion of Mega Hub locations, which are crucial for commercial sales growth.
- Evaluate the performance of domestic commercial sales, particularly if they can maintain or exceed the 9.8% growth seen in Q2 despite weather challenges.
- Assess DIY traffic trends, especially if the anticipated improvement in traffic materializes as ticket growth slows by late summer.
- Watch for any changes in SG&A growth relative to sales growth, as management aims to manage expenses in line with sales over time.