- Sales Growth: AutoZone reported 8.1% total sales growth to $4.3B, with domestic same-store sales up 3.4% and international up 2.5% (constant currency).
- Store Expansion: Opened 64 stores globally in Q2 (18 in Mexico, 3 in Brazil), with 342 new stores in the trailing four quarters and a target of 350–360 stores in FY26.
- EPS Impact: Non-cash $59M LIFO charge reduced EPS; adjusted EPS would have grown 7.1% YoY, with $277M in LIFO charges expected for FY26.
- Margin Pressures: Gross margin fell 137 bps to 52.5% due to LIFO, but excluding the charge, it remained slightly positive YoY, with recovery expected in Q3.
- Capital Allocation: $1.6B CapEx investment for growth, including store expansion, Mega Hubs, and supply chain, alongside $1.4B remaining in buyback authorization.
Store Expansion and International Growth
The company opened 64 stores globally, finishing with 6,709 U.S. stores, 913 Mexico stores, and 152 Brazil stores. AutoZone now has 342 new stores on a trailing four-quarter basis, and is on track to open approximately 350 to 360 stores for the full year. Internationally, the company saw a 17.1% unadjusted same-store sales growth, with a 2.5% growth on a constant currency basis, and opened 18 new stores in Mexico and 3 new stores in Brazil.
Segment Performance
Domestic DIY same-store sales grew 1.5%, while domestic commercial sales grew 9.8%. The commercial business was impacted by severe weather, with a 1-1.5% hit to comp in Q2. Management expects the business to recover as tax refunds and stimulus payments boost consumer spending. The DIY business had a low point in the middle four weeks of Q2 due to a tough comp from last year's cold weather event.
Margin Pressures and Operating Expenses
Margins can re-expand, but mix pressure from a faster-growing commercial business may impact margin rates. Management targets an 18-19% operating margin range and expects to grow EBIT dollars faster than sales. Operating expenses rose 8.7% versus Q2 last year, driven by investments in growth initiatives.
Valuation and Outlook
With a P/E Ratio of 42.05 and an EV/EBITDA of 30.05, the market is pricing in high expectations for AutoZone's future growth. Analysts estimate next year's revenue growth at 7.4%. The company's commitment to investing in international expansion and its bullish outlook on its contribution to future sales and operating profit growth are positives. However, the slowdown in discretionary business due to inflationary pressures and the impact of severe weather on the commercial business are concerns.