- EPS Adjusted Growth Diluted EPS fell 4.6% to $31.04, but would have increased 8.9% excluding a $98M LIFO charge.
- Store Expansion Opened 53 stores (39 domestic, 14 international) and plans 65–70 global openings in 2026.
- Commercial Segment Growth Domestic commercial sales surged 14.5%, outpacing DIY’s 1.5% growth.
- Gross Margin Resilience Gross margin dipped 203 bps to 51% YoY, but improved 9 bps excluding LIFO charges.
- Free Cash Flow & Buybacks Free cash flow rose to $630M YoY, with $431M in Q1 stock repurchases under $1.7B remaining authorization.
Segment Performance
Domestic commercial sales grew 14.5%, while DIY sales grew 1.5%. The DIY business saw a slowdown in Q1, attributed to weather and a tough comparison to last year's hurricane and cold snap. The company does not see significant trade-down or elasticity to higher prices, with the lower-end consumer under pressure but stable, and the higher-end consumer holding up.
Store Expansion and Capital Allocation
The company opened 53 stores globally, including 39 net domestic stores and 14 international stores. For FY '26, the company expects to continue to open stores in an accelerated pace, investing nearly $1.6 billion in CapEx. The company repurchased $431 million of AutoZone stock in Q1 and has $1.7 billion remaining under its share buyback authorization.
Guidance and Outlook
AutoZone expects operating margins of 19% or higher, driven by growth in the commercial business and merch margin improvements. The company has lowered its expectation for LIFO headwinds, with a 25% reduction in the expected headwind for the next three quarters. The company is seeing benefits from its merch margin playbook, including alternate sources, new brands, and house brands.
Valuation
With a P/E Ratio of 22.92 and an EV/EBITDA of 16.31, the stock appears to be fairly valued. The company's ROE is negative due to a negative book value, but its ROIC is a healthy 27.94%. The Free Cash Flow Yield is 3.27%, indicating a decent return for shareholders.
Management's Confidence
Jamere Jackson noted that the international business showed accelerated growth, with opportunities to gain market share in all international markets, driven by a growing DIY and commercial business. He expects sales to accelerate as economic conditions improve, and the company remains excited about growth prospects, with a solid business model, and will focus on flawless execution to optimize shareholder value.