AutoZone Q4 Earnings Call Highlights

Key Points

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• AutoZone delivered strong fiscal 2026 results: Fourth-quarter sales rose 5.6% to $6.6 billion and diluted EPS increased 15.1% to $56.05. Full-year sales reached a record $20.3 billion, with 374 stores opened.

• Commercial sales remained the primary growth driver: Domestic commercial sales grew nearly 11% for the year, supported by improved inventory, delivery capabilities and Mega Hub expansion. AutoZone plans to open more than 40 Mega Hubs in fiscal 2027.

• The fiscal 2027 outlook calls for continued expansion but modest comparable-sales growth: Domestic same-store sales are expected to range from flat to low-single-digit growth, while the company plans about 400 global store openings and $1.65 billion in capital expenditures.

AutoZone (NYSE:AZO) reported fiscal 2026 fourth-quarter sales growth of 5.6% to $6.6 billion, while diluted earnings per share rose 15.1% to $56.05. The company said its results included a $96 million benefit from tariff refunds and a $15 million non-cash LIFO charge.

For the full fiscal year, sales increased 7.4% to a record $20.3 billion and earnings per share grew 5.3% to $152.55. AutoZone opened 374 stores during the year, its highest annual total, including 175 locations in the fourth quarter.

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“We continued to gain market share in a challenging macro environment,” President and Chief Executive Officer Phil Daniele said, pointing to improved customer service, store execution, inventory availability and investments in supply-chain capabilities.

Comparable Sales Improve Late in the Quarter

Total company same-store sales increased 1.5% on a constant-currency basis in the fourth quarter. Domestic comparable sales rose 1.6%, as an 8.6% increase in commercial sales offset a 0.6% decline in the do-it-yourself, or DIY, business. International comparable sales increased 1.3% on a constant-currency basis.

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Daniele said domestic sales strengthened as the quarter progressed. Domestic comparable sales averaged approximately 1.4% growth during the first three months of the 16-week period before accelerating to 2.1% in August. Retail sales were negative over the first three months before becoming essentially flat in August.

The company attributed earlier-quarter weakness partly to milder temperatures in the Southeast and South Central markets, as well as lower customer traffic. Higher oil and gasoline prices also likely pressured traffic and sales, according to management. Hot-weather product categories performed better late in the quarter as temperatures increased.

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DIY average ticket increased about 5%, supported by mid-single-digit same-SKU inflation, but traffic declines offset that gain. Chief Financial Officer Jamere Jackson said customers, particularly financially challenged DIY consumers, have shown signs of deferring purchases and trading down amid inflation. Management expects transaction trends to improve as inflation moderates.

For the first quarter of fiscal 2027, AutoZone expects same-store sales to be relatively flat, with average ticket remaining near the approximately 5% increase seen in the fourth quarter.

Commercial Business Remains a Growth Driver

Domestic commercial sales, also known as DIFM sales, totaled $1.9 billion during the quarter and represented 34% of domestic auto-parts sales. For the full year, commercial sales were just under $5.8 billion and grew nearly 11%.

AutoZone said its commercial growth has been supported by greater inventory availability at satellite locations, improved hub and Mega Hub coverage, the Duralast brand, and efforts to improve delivery speed and professional-customer service.

• Commercial programs increased by 87 net new locations during the quarter to 6,443.

• The commercial program was operating in 94% of domestic stores at year-end.

• AutoZone opened 39 Mega Hubs during fiscal 2026, ending the year with 172 Mega Hubs.

• The company expects to open more than 40 Mega Hubs in fiscal 2027 and is targeting about 300 over the next three years.

Jackson said commercial programs connected to a Mega Hub network generate 16% more annual sales than the remainder of the company’s commercial programs. Mega Hubs generally carry more than 100,000 SKUs and supply expanded assortments to surrounding stores.

International Growth Continues Despite Mexico Softness

AutoZone ended the quarter with 1,001 stores in Mexico and 167 in Brazil, for 1,168 international locations. The company opened 68 Mexican stores and 10 Brazilian stores during the quarter. Approximately 15% of AutoZone’s store base is now outside the United States.

While constant-currency international same-store sales rose 1.3%, reported international comparable sales increased 10.7% because of favorable exchange rates. The Mexican peso strengthened nearly 9% against the U.S. dollar year over year, providing a $70 million benefit to sales, a $21 million benefit to EBIT and an $0.87 benefit to quarterly earnings per share, Jackson said.

Management said Mexico has faced a softer macroeconomic environment, though sales improved during the final four weeks of the quarter. AutoZone expects international comparable sales to improve to low- to mid-single-digit constant-currency growth for fiscal 2027, with low-double-digit reported growth anticipated in the first quarter.

The company opened a relocated Monterrey distribution center that is nearly twice the size of its previous facility and broke ground on a new León, Mexico, distribution center expected to begin operating in late fiscal 2028.

Fiscal 2027 Outlook and Capital Plans

AutoZone expects domestic same-store sales in fiscal 2027 to range from flat to low-single-digit growth, driven by approximately 4% ticket growth. The company expects total domestic commercial sales to grow at a high-single-digit to low-double-digit rate and international constant-currency comparable sales to rise at a low- to mid-single-digit pace.

The retailer plans to open about 400 stores globally in fiscal 2027, compared with 374 in fiscal 2026. It expects roughly 300 openings in the U.S., about 120 in Mexico and about 20 in Brazil. AutoZone reduced its fiscal 2028 global store-opening target to about 430 from approximately 500, largely because it plans to slow expansion in Brazil and concentrate more heavily on the U.S. and Mexico.

Capital expenditures are expected to be about $1.65 billion in fiscal 2027, primarily for new stores, hubs and Mega Hubs. Daniele said newer stores are performing slightly ahead of the company’s original sales and EBIT forecasts. AutoZone estimates an average new store generates roughly $1.7 million in first-year sales, rising to approximately $2.7 million by year six, with return on invested capital exceeding 20% by the end of the sixth year.

For fiscal 2027, the company expects gross margin to be flat to up 25 basis points on a GAAP basis. It forecasts $85 million to $90 million in LIFO charges, including approximately $40 million in the first quarter. AutoZone also expects SG&A per store to rise about 3% for the year, or approximately 8% in total.

AutoZone generated approximately $1.8 billion in free cash flow during fiscal 2026 and repurchased $2 billion of its shares during the year. At year-end, $1.6 billion remained available under its repurchase authorization.

About AutoZone (NYSE:AZO)

AutoZone, Inc is a retailer and distributor of automotive replacement parts, accessories, and maintenance products. The company serves do-it-yourself customers, professional service technicians, and commercial repair businesses through its stores, distribution network, and online platform.

Its product offerings include replacement parts such as batteries, brakes, engine components, and ignition products, along with tools, fluids, filters, and other automotive accessories. AutoZone also provides services such as parts lookup, diagnostic assistance, battery testing and charging, and loaner tools for eligible repairs.

Founded in 1979 and headquartered in Memphis, Tennessee, AutoZone operates primarily in the United States, with additional locations in Mexico and Brazil.

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The article “AutoZone Q4 Earnings Call Highlights” was originally published by MarketBeat.

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