Market Analysis by covering: AutoZone Inc, O'Reilly Automotive Inc. Read 's Market Analysis on Investing.com ...

Key Takeaways AutoZone posted $4.6B in Q1 fiscal 2026 revenues, up 8.2% YoY, marking 36 straight years of record sales.AZO is expanding mega hubs, targeting 200 locations and 350-360 new stores in fiscal 2026 to boost reach.Rising capex, high leverage and expected LIFO charges may pressure margins and earnings in upcoming quarters.AutoZone, Inc. (AZO) is one of the leading specialty retailers and distributors of automotive replacement parts and accessories in the United States. It is set to gain from streng ...

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If I told you there is a stock that quadrupled its stock over the last decade (14.87% CAGR), you might think it’s a company that grew at least in the mid-teens. Let me add some more color toAs an investor I focus on small and midcap names with asymmetric upsides. In the beginning of my professional career I was handed the Industrials and chemicals sector on the sell side. More recently I worked as the Manager of Finance & Technology at a Canadian charity in Vancouver, British Columbia. So there's a lot of d ...

Financial Performance - Net sales for the twelve weeks ended November 22, 2025, increased by $349.0 million to $4.6 billion, representing an 8.2% growth compared to the prior year period [84]. - Domestic commercial sales rose by $163.7 million to $1.3 billion, marking a 14.5% increase over the comparable prior year period [84]. - Gross profit for the twelve weeks ended November 22, 2025, was $2.4 billion, with a gross margin of 51.0%, down from 53.0% in the prior year period [86]. - Operating profit decreased by 6.8% to $784.2 million, negatively impacted by a non-cash LIFO effect of $98.0 million [80]. - Net income for the twelve weeks ended November 22, 2025, decreased by 6.0% to $530.8 million, with diluted earnings per share down 4.6% to $31.04 [90]. - Net income for the trailing four quarters ended November 22, 2025, was $2.5 billion, compared to $2.6 billion for the prior year [106]. - EBITDAR for the trailing four quarters ended November 22, 2025, was $4.8 billion, reflecting the company's operational performance [108]. Capital Expenditures and Investments - Capital expenditures for the twelve weeks ended November 22, 2025, were $314.2 million, up from $247.0 million in the prior year period, driven by growth initiatives [93]. - The company plans to increase investments in growth initiatives, including new stores and hub expansions, during fiscal 2026 compared to fiscal 2025 [95]. - The company anticipates relying primarily on internally generated funds and available borrowing capacity for capital expenditures and stock repurchases [97]. Tax and Debt Management - The effective income tax rate for the twelve weeks ended November 22, 2025, was 21.7%, down from 23.0% in the prior year period [89]. - The effective tax rate over the trailing four quarters ended November 22, 2025, was 20.0%, compared to 20.5% for the prior year [111]. - The adjusted debt to EBITDAR ratio as of November 22, 2025, was 2.5:1, consistent with the previous year [100]. - The company plans to maintain its investment grade credit ratings by targeting a ratio of adjusted debt to EBITDAR [100]. - A net decrease of $179.1 million in commercial paper was reported as of November 22, 2025 [116]. - The company expects to obtain financing based on current credit ratings and favorable experiences in the debt markets [97]. Debt Valuation and Interest Rate Impact - The fair value of the Company's debt was estimated at $8.7 billion as of November 22, 2025, and $8.9 billion as of August 30, 2025 [117]. - The fair value of debt exceeds the carrying value by $91.6 million at November 22, 2025, and $94.4 million at August 30, 2025 [117]. - The Company had $569.5 million and $748.6 million of variable rate debt outstanding at November 22, 2025, and August 30, 2025, respectively [117]. - A one percentage point increase in interest rates would negatively impact pre-tax earnings and cash flows by $5.7 million in fiscal 2026 for variable rate debt [117]. - The Company had outstanding fixed rate debt of $8.1 billion, net of unamortized debt issuance costs of $46.4 million at November 22, 2025 [117]. - A one percentage point increase in interest rates would reduce the fair value of fixed rate debt by $443.3 million at November 22, 2025 [117]. Store Expansion - The company opened 53 net new stores during the twelve weeks ended November 22, 2025, compared to 34 in the prior year period [93].

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Financial Data and Key Metrics Changes - The LIFO effect for Q1 was just under $100 million, and for Q2, it is expected to be around $60 million due to higher incoming costs and tariffs [12][13][14] Business Line Data and Key Metrics Changes - The company has been diversifying its sourcing strategies across multiple countries and categories to mitigate tariff impacts and control costs [14] Market Data and Key Metrics Changes - The company opened 89 stores in Mexico and 7 or 8 in Brazil last year, indicating a strong international expansion strategy [15][16] Company Strategy and Development Direction - The long-term strategy includes opening around 300 stores domestically and 200 stores internationally by 2028, aiming for a total of approximately 500 stores globally [16] Management's Comments on Operating Environment and Future Outlook - Management emphasized the importance of providing excellent customer service and maintaining a sustainable supply chain to meet customer needs [14][17] Other Important Information - The company successfully re-elected all 11 directors and ratified the appointment of Ernst & Young LLP as the independent auditor for fiscal year 2026 [10] Q&A Session Summary Question: What is the LIFO effect due to the tariffs, and are there any changes in the supply chain? - The LIFO effect is primarily caused by higher incoming costs, with charges for Q1 at just under $100 million and expected to be around $60 million for Q2 due to tariffs [12][13] - The company has been working on diversifying its sourcing strategies since the first tariffs in 2016 and 2017 to mitigate risks and control costs [14] Question: What is the strategy for international expansion, especially in Mexico? - The company plans to continue its expansion strategy in Mexico and Brazil, having opened 89 stores in Mexico last year and aiming for a total of 500 stores globally by 2028 [15][16]

Financial Data and Key Metrics Changes - The LIFO effect for Q1 was just under $100 million, and for Q2, it is expected to be around $60 million due to higher incoming costs and tariffs [12][13][14] Business Line Data and Key Metrics Changes - The company has been diversifying its sourcing strategies across multiple countries and categories to mitigate tariff impacts and control costs [14] Market Data and Key Metrics Changes - The company opened 89 stores in Mexico and 7 or 8 in Brazil last year, indicating a strong international expansion strategy [15][16] Company Strategy and Development Direction - The long-term strategy includes opening around 300 stores domestically and 200 stores internationally by 2028, aiming for a total of approximately 500 stores globally [16] Management's Comments on Operating Environment and Future Outlook - Management emphasized the importance of providing exceptional customer service and expressed confidence in the company's mission moving forward [17] Other Important Information - The company successfully re-elected all 11 directors and ratified the appointment of Ernst & Young LLP as the independent auditor for fiscal year 2026 [10] Q&A Session Summary Question: What is the LIFO effect due to the tariffs, and are there any changes in the supply chain? - The LIFO effect is primarily caused by higher incoming costs, with charges expected to continue due to tariffs [12][13] - The company has been working on diversifying its sourcing strategies since 2016 to mitigate risks and control costs [14] Question: What is the strategy for international expansion, especially in Mexico? - The company plans to continue its expansion in Mexico and Brazil, with a goal of opening around 500 stores globally by 2028 [15][16]

Financial Data and Key Metrics Changes - The LIFO effect for Q1 was just under $100 million, and for Q2, it is expected to be around $60 million due to higher incoming costs and tariffs [12][13] Business Line Data and Key Metrics Changes - The company opened 89 stores in Mexico and 7 or 8 in Brazil last year, indicating a strong focus on international expansion [13] Market Data and Key Metrics Changes - The company is diversifying its sourcing strategies across multiple countries and categories to mitigate tariff impacts and ensure a sustainable supply chain [13] Company Strategy and Development Direction - The long-term strategy includes opening around 300 stores domestically and 200 stores internationally by 2028, aiming for a total of approximately 500 stores globally [13] Management's Comments on Operating Environment and Future Outlook - Management emphasized the importance of providing excellent customer service and maintaining a strong commitment to their mission [15] Other Important Information - The appointment of Ernst & Young LLP as the company's Independent Registered Public Accounting Firm for fiscal year 2026 was ratified [10] Q&A Session All Questions and Answers Question: What is the LIFO effect due to the tariffs, and are there any changes in the supply chain? - The LIFO effect is caused by incoming costs being higher than current inventory, with charges for Q1 just under $100 million and expected to be around $60 million for Q2 due to higher tariffs [12] - The company has been working on changing supply chain strategies since the first tariffs in 2016 and 2017, focusing on diversifying sourcing and having multiple suppliers to control costs [13] Question: What is the strategy for international expansion in Mexico? - The company plans to continue its strategy in Mexico and Brazil, having opened 89 stores in Mexico last year and aiming for a total of 500 stores globally by 2028 [13]

Core Viewpoint - AutoZone, while not in the spotlight of current technological trends, demonstrates strong long-term performance and growth potential, making it a noteworthy investment opportunity [1]. Financial Performance - AutoZone's stock has underperformed compared to the S&P 500 over the past one and three years, with increases of 3% and 39% respectively, while the S&P 500 has seen double-digit returns [3]. - The stock has declined 21% from its all-time high of $4,354.54 reached in September, following disappointing financial results for Q1 of fiscal 2026, which ended on November 22 [4]. - Same-store sales increased by 5.5% year-over-year, and the company opened 53 net new stores during this period [4]. - Gross margin was negatively impacted by inflationary pressures on inventory, leading to a 6.8% decrease in operating income compared to Q1 2025 [5]. - Over the last five years, AutoZone's shares have increased by 201%, significantly outperforming the S&P 500, which would have doubled an initial investment [5]. Market Position and Growth Strategy - AutoZone's current market capitalization is $57 billion, with a stock price of $3,445.71 and a price-to-earnings ratio of 23, indicating potential attractiveness for investors [6][10]. - The company has shown consistent revenue growth, with a compound annual growth rate of 6.4% from fiscal 2015 to fiscal 2025, without any down years [8]. - Management plans to aggressively open new locations, indicating ongoing expansion opportunities [8]. Business Model and Profitability - AutoZone operates in the aftermarket auto parts sector, which maintains steady demand regardless of economic conditions, reducing investment risk [9]. - The company reported $2.5 billion in net income and $1.8 billion in free cash flow for fiscal 2025, showcasing strong profitability [9]. - AutoZone has effectively reduced its diluted outstanding share count by 13% over the past three years through stock buybacks [9].