AutoZone (NYSE:AZO) Q2 2026 Earnings call March 03, 2026 10:00 AM ET Company ParticipantsBret Jordan - Managing DirectorJamere Jackson - CFOPhilip Daniele - President and CEONone - Video NarratorConference Call ParticipantsChristopher Horvers - Senior AnalystMichael Lasser - Equity Research Analyst of Broadlines & Food RetailScot Ciccarelli - Managing Director and Senior Equity Research AnalystSimeon Gutman - Executive Director and Senior Equity AnalystSteven Forbes - Senior Managing Director and Equity Res ...

AutoZone (NYSE:AZO) Q2 2026 Earnings call March 03, 2026 10:00 AM ET Company ParticipantsBret Jordan - Managing DirectorJamere Jackson - CFOPhilip Daniele - President and CEONone - Video NarratorConference Call ParticipantsChristopher Horvers - Senior AnalystMichael Lasser - Equity Research Analyst of Broadlines & Food RetailScot Ciccarelli - Managing Director and Senior Equity Research AnalystSimeon Gutman - Executive Director and Senior Equity AnalystSteven Forbes - Senior Managing Director and Equity Res ...

AutoZone (NYSE:AZO) Q2 2026 Earnings call March 03, 2026 10:00 AM ET Speaker4Welcome to AutoZone's 2nd quarter 2026 earnings release conference call. At this time, all participants are on a listen-only mode and a question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. Please note this conference is being recorded. At this time, we would like to play the company's Safe Harbor statement.S ...

Financial Data and Key Metrics Changes - For Q4 2025, net sales from continuing operations were approximately $2 billion, a decline of 1% year-over-year, primarily due to store optimization activities completed in Q1 2025 [25] - Comparable sales grew by 1.1% in Q4, with positive trends noted in the last eight weeks of the quarter, indicating operational stability [25] - Adjusted gross profit from continuing operations was $873 million, representing 44.2% of net sales, with nearly 530 basis points of gross margin expansion compared to the same period last year [27] - Adjusted operating income from continuing operations was $73 million, or 3.7% of net sales, resulting in nearly 870 basis points of year-over-year operating margin expansion [28] - For the full year 2025, net sales from continuing operations declined 5% to $8.6 billion, with comparable sales growth just under 1% [29] Business Line Data and Key Metrics Changes - The pro business grew nearly 4% during Q4, while DIY experienced a low single-digit decline in comps, reflecting ongoing market trends [26] - The company expanded its assortment by 100,000 new SKUs and improved store availability to the high-90% range [6] - The average speed of delivery to pro customers improved by cutting delivery time by more than 10 minutes [7] Market Data and Key Metrics Changes - The company noted that its core consumer group has been adjusting purchasing habits in response to rising prices, impacting DIY sales [26] - The pro channel showed strong performance, indicating a positive trend in that segment [13] Company Strategy and Development Direction - The company is focused on a significant transformation aimed at enhancing parts availability and customer service, with expectations for stronger financial performance in 2026 [5] - Strategic priorities for 2026 include merchandising excellence, pricing optimization, and supply chain improvements [14][15] - The company plans to open 40-45 new stores and 10-15 market hubs in 2026, aiming to enhance market density and service levels [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver against operational and financial goals, emphasizing improved execution quality [14] - The company anticipates generating approximately $100 million in free cash flow in 2026, supported by stronger comparable sales and profitability [39] - Management acknowledged external economic factors impacting consumer spending but remains optimistic about the strategic plan's execution [12] Other Important Information - The company completed the consolidation of its distribution centers, reducing from nearly 40 to 16 DCs, which is expected to enhance service levels [7][20] - The new Advance Rewards loyalty program was launched to enhance customer engagement and drive transaction growth in the DIY channel [18][19] Q&A Session Summary Question: Why is the company's inflation lower than peers? - Management explained that SKU inflation is consistent with peers, but prior price investments impacted the current year's inflation rate [44][45] Question: What drove the decision to reduce supply chain financing? - The reduction was based on leveling payables and adjusting to new purchases, with management expressing satisfaction with the current supplier financing program [48][50] Question: What impact did store closings have on comps and margins? - The liquidation impact was about $51 million for the year, with no further closures expected, and pro comps benefited from sales transfer to new stores [55][60] Question: What drives the difference in margin progression cadence? - Management indicated that while 7% is still the target, investments in supply chain and store operations are necessary for future margin gains [62][67]

Financial Data and Key Metrics Changes - The company reported a comparable store sales increase of 5.6% in Q4 2025, bringing the full year comparable sales to 4.7%, which was at the high end of the revised guidance range of 4%-5% [4][5] - Total sales increased by 6.4% to $17.8 billion, reflecting over 50% growth in total sales volume over the last five years [5] - Operating profit for the full year was $3.5 billion, a 6.4% increase over 2024, with an operating profit margin of 19.5%, flat compared to the prior year [6][7] - Diluted earnings per share (EPS) for Q4 was $0.71, a 13% increase year-over-year, while full year EPS was $2.97, a 10% increase over 2024 [7][8] Business Line Data and Key Metrics Changes - The professional business saw a comparable store sales increase of over 10% for the second consecutive quarter, while the DIY business generated a positive comp in the low single digits [8][9] - Average ticket growth was in the mid-single digits, driven by same-SKU inflation of approximately 6% [9][10] - The company experienced modest pressure in DIY transaction counts, particularly in discretionary categories [11][12] Market Data and Key Metrics Changes - The U.S. car park has seen an increase in total miles driven of approximately 1% over the last two years, with expectations for steady growth supported by the total size of the car park [15] - The company anticipates continued growth in both professional and DIY businesses, with expectations for comparable store sales guidance for 2026 set at 3%-5% [14][16] Company Strategy and Development Direction - The company plans to prioritize new store expansion, targeting 225-235 net new store openings for 2026, an increase of approximately 25 stores over 2025 [21][22] - Continued investment in distribution capabilities is a key component of the growth strategy, with a focus on enhancing the distribution network to support store growth [30][31] - The company aims to maintain a strong competitive position by leveraging capital and operating investments to drive long-term growth and high returns [38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a stable industry environment for 2026, despite cautious consumer sentiment [15][16] - The company expects to see continued growth in average ticket values, primarily supported by anticipated same-SKU inflation [16][17] - Management acknowledged substantial cost pressures in 2025, particularly related to healthcare and self-insurance programs, but remains focused on effective business management [7][36] Other Important Information - The company generated free cash flow of $1.6 billion in 2025, with expectations for 2026 to be in the range of $1.8-$2.1 billion [41][42] - The adjusted debt to EBITDA ratio at the end of Q4 was 2.03 times, remaining below the leverage target of 2.5 times [43][44] - The company repurchased 23 million shares in 2025 at an average price of $92.26, totaling $2.1 billion [44] Q&A Session Summary Question: How long could elevated expenses, like healthcare, continue? - Management indicated that the pressure from healthcare costs has persisted longer than expected, and there is caution regarding the outlook for 2026 [47][50] Question: Is SG&A per store growth expected to moderate in the second half of 2026? - Management did not provide a specific exit rate but acknowledged that structural pieces of managing spend are in place, with a cautious approach to 2026 [48][49] Question: Can you provide insights on the Virginia distribution center and its impact? - The new distribution center in Virginia is expected to enhance service capabilities in the Mid-Atlantic region, with plans for aggressive market penetration [56][58] Question: What are the risks associated with SG&A growth this year? - Management noted that while there are pressures from self-insurance costs, they are focused on managing overall cost structure effectively [75][76]

Core Insights - O'Reilly Automotive reported revenue of $4.41 billion for the quarter ended December 2025, reflecting a year-over-year increase of 7.8% [1] - The company's EPS was $0.71, up from $0.66 in the same quarter last year, although it fell short of the consensus estimate of $0.72 by 1.28% [1] Financial Performance - Revenue exceeded the Zacks Consensus Estimate of $4.4 billion, resulting in a surprise of +0.44% [1] - Comparable store sales increased by 5.6%, surpassing the average estimate of 4.9% from eight analysts [4] - Sales to Do-It-Yourself customers totaled $2.18 billion, slightly below the estimated $2.2 billion, but still representing a year-over-year increase of 4.2% [4] - Sales to professional service provider customers reached $2.15 billion, exceeding the average estimate of $2.1 billion, with a year-over-year growth of 13.5% [4] Operational Metrics - Total square footage was reported at 51.52 million square feet, above the four-analyst average estimate of 51.31 million square feet [4] - The total number of stores remained at 6,585, matching the average estimate [4] - The company opened 47 new stores, consistent with the estimates from three analysts [4] - The ending domestic store count was 6,447, slightly above the average estimate of 6,446 [4] - Sales per weighted-average store were $0.67 million, slightly below the estimated $0.68 million [4] - The ending count of stores in Canada was 26, exceeding the two-analyst average estimate of 25 [4] - The number of stores in Mexico at the end of the period was 112, below the estimated 114 [4] Stock Performance - O'Reilly Automotive's shares returned +7.4% over the past month, outperforming the Zacks S&P 500 composite's +0.9% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market [3]

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]

Core Viewpoint - AutoZone, Inc. reported first-quarter earnings and sales that fell short of Wall Street expectations, with earnings per share at $31.04 and sales at $4.629 billion, both missing analyst estimates [1] Financial Performance - Quarterly earnings per share were $31.04, below the consensus estimate of $32.37 [1] - Quarterly sales reached $4.629 billion, reflecting an 8.2% year-over-year increase, but still fell short of the expected $4.637 billion [1] Strategic Initiatives - The company opened 53 net new stores globally during the quarter and plans to aggressively continue store openings throughout the fiscal year to gain market share, as stated by CEO Phil Daniele [2] Stock Market Reaction - Following the earnings announcement, AutoZone shares increased by 2.8%, trading at $52.99 [2] Analyst Ratings and Price Targets - BMO Capital maintained an Outperform rating, lowering the price target from $4,600 to $4,400 [3] - Guggenheim maintained a Buy rating, cutting the price target from $4,600 to $4,400 [3] - Mizuho maintained an Outperform rating, reducing the price target from $4,050 to $3,850 [3] - Barclays maintained an Overweight rating, lowering the price target from $4,510 to $4,318 [3] - DA Davidson maintained a Buy rating, reducing the price target from $4,850 to $4,500 [3] - UBS maintained a Buy rating, lowering the price target from $4,800 to $4,325 [3]

Core Viewpoint - Analysts project that AutoZone (AZO) will report quarterly earnings of $32.22 per share, reflecting a year-over-year decline of 0.9%, while revenues are expected to increase by 8.3% to $4.64 billion [1]. Earnings Projections - The consensus EPS estimate has been adjusted upward by 0.1% over the past 30 days, indicating a reassessment by analysts [1][2]. - Revisions to earnings projections are crucial for predicting investor behavior and stock price performance [2]. Revenue Estimates - Analysts estimate 'Net Sales- Auto Parts' will reach $4.61 billion, a 9.7% increase from the previous year [4]. - 'Net Sales- All Other' is projected at $85.83 million, reflecting a 7.4% year-over-year increase [4]. - 'Net Sales- Domestic Commercial sales' is expected to be $1.27 billion, marking a 12.7% rise from the prior year [4]. Store Metrics - Total square footage is estimated to be 52,372 thousand square feet, up from 49,781 thousand square feet a year ago [5]. - The total number of AutoZone stores is projected to be 7,711, compared to 7,387 in the same quarter last year [5]. - The number of domestic stores is expected to reach 6,659, an increase from 6,455 a year ago [6]. Performance Indicators - Analysts predict 'Square footage per store' will be 6.80 million, up from 6.74 million in the same quarter last year [6]. - The consensus for 'Sales per average square foot' stands at $89.16 thousand, compared to $85.00 thousand a year ago [6]. New Store Openings - The number of stores opened in Brazil is expected to be 6, up from 5 last year [7]. - In Mexico, the number of new stores is projected to reach 7, compared to 6 in the same quarter last year [7]. - Domestic store openings are estimated at 35, an increase from 23 in the same quarter last year [8]. Market Performance - Over the past month, AutoZone shares have returned +4.4%, outperforming the Zacks S&P 500 composite's +0.1% change [8].

Summary of AutoZone Conference Call Company Overview - **Company**: AutoZone - **Shares Outstanding**: 16.7 million shares trading around $3,700 - **Market Capitalization**: $64 billion - **Net Debt**: $8.5 billion - **Total Enterprise Value**: Just under $73 billion - **CFO**: Jamere Jackson - **Director of Investor Relations**: Brian Campbell - **Industry**: Automotive aftermarket retail Key Points Consumer Behavior and Market Conditions - The consumer landscape has remained stable over the past year, with high new car prices averaging over $50,000 and monthly payments exceeding $700, leading consumers to maintain their current vehicles [2][3][4] - The average age of vehicles on the road is now 12.8 years, indicating consumers are holding onto their vehicles longer [5] - Despite some volatility and uncertainty in the marketplace, the low-end consumer segment has not deteriorated further [3][4] - Unemployment rates have ticked up to approximately 4.3%, but overall consumer resilience remains strong [4] Pricing Strategy and Inflation - AutoZone operates primarily in the break-fix business, with 85% of its sales in maintenance categories, allowing for disciplined pricing strategies [9][10] - The company has successfully maintained gross profit dollars and margins despite inflationary pressures, benefiting from the inelastic nature of its core products [11] - Inflation is expected to continue impacting pricing, with retail prices rising significantly across the industry [35] Regional Performance - Regional performance varies, with weather conditions affecting sales, particularly in the Rust Belt [12][14] - The company anticipates a good winter, which typically drives higher sales due to increased vehicle failures [15] Growth Initiatives - AutoZone is focusing on expanding its commercial business, which now constitutes about one-third of its U.S. sales mix, up from 19-20% five years ago [17] - The company is investing in inventory and building mega hubs, which carry close to 100,000 SKUs, to improve service levels and market share [18][19] - Expansion in Mexico is a key growth area, with plans to double the number of stores in the next decade [20][21] Sourcing and Supply Chain - AutoZone is diversifying its sourcing capabilities, reducing reliance on China from 85-90% to around 60% [23][24] - The company is working with suppliers to mitigate tariff impacts and maintain margin structures [24] Online Competition and Consumer Behavior - While online competition is growing, many consumers still prefer in-store visits for trustworthy advice and installation services [26][27] - AutoZone is enhancing its online presence and assortment to adapt to changing consumer behaviors [28] Tax Refunds and Economic Factors - Tax refund season is crucial for sales, with expectations of larger refunds potentially boosting business [43] - Weather conditions during tax refund season can significantly impact consumer spending [44] Conclusion - AutoZone remains well-positioned in the automotive aftermarket industry, leveraging its strong market presence, disciplined pricing strategies, and growth initiatives to navigate current economic challenges and consumer behaviors [1][19][20]