AutoZone(AZO) - 2026 Q1 - Quarterly Report

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].