AutoZone (AZO)

Auto parts and accessories retailer AutoZone (NYSE:AZO) missed Wall Street’s revenue expectations in Q1 CY2026, but sales rose 8.1% year on year to $4.27 billion. Its GAAP profit of $27.63 per share was 1.2% above analysts’ consensus estimates.

Company Overview

Aiming to be a one-stop shop for the DIY customer, AutoZone (NYSE:AZO) is an auto parts and accessories retailer that sells everything from car batteries to windshield wiper fluid to brake pads.

Cars are complex machines that need maintenance and occasional repairs, and auto parts retailers cater to the professional mechanic as well as the do-it-yourself (DIY) fixer. Work on cars may entail replacing fluids, parts, or accessories, and these stores have the parts and accessories or these jobs. While e-commerce competition presents a risk, these stores have a leg up due to the combination of broad and deep selection as well as expertise provided by sales associates. Another change on the horizon could be the increasing penetration of electric vehicles.

Competitors offering auto parts and accessories include Advance Auto Parts (NYSE:AAP), O’Reilly Automotive (NASDAQ:ORLY), Genuine Parts (NYSE:GPC), and private company Pep Boys.

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $19.61 billion in revenue over the past 12 months, AutoZone is one of the larger companies in the consumer retail industry and benefits from a well-known brand that influences purchasing decisions. However, its scale is a double-edged sword because there are only a finite number of places to build new stores, making it harder to find incremental growth. To accelerate sales, AutoZone likely needs to optimize its pricing or lean into international expansion.

As you can see below, AutoZone grew its sales at a tepid 5.1% compounded annual growth rate over the last three years, but to its credit, it opened new stores and increased sales at existing, established locations.

This quarter, AutoZone’s revenue grew by 8.1% year on year to $4.27 billion, missing Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 8.1% over the next 12 months, an acceleration versus the last three years. This projection is particularly noteworthy for a company of its scale and indicates its newer products will spur better top-line performance.

Number of Stores

AutoZone sported 7,774 locations in the latest quarter. Over the last two years, it has opened new stores quickly, averaging 3.6% annual growth. This was faster than the broader consumer retail sector.

When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.

Same-Store Sales

A company's store base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales provides a deeper understanding of this issue because it measures organic growth at brick-and-mortar shops for at least a year.

AutoZone’s demand rose over the last two years and slightly outpaced the industry. On average, the company’s same-store sales have grown by 2.5% per year. This performance suggests its rollout of new stores could be beneficial for shareholders. When a retailer has demand, more locations should help it reach more customers and boost revenue growth.

In the latest quarter, AutoZone’s same-store sales rose 3.3% year on year. This performance was more or less in line with its historical levels.

AutoZone has best-in-class unit economics for a retailer, enabling it to invest in areas such as marketing and talent. As you can see below, it averaged an elite 52% gross margin over the last two years. That means AutoZone only paid its suppliers $47.97 for every $100 in revenue.

In Q1, AutoZone produced a 52.5% gross profit margin , marking a 1.4 percentage point decrease from 53.9% in the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting it strives to keep prices low for customers and has stable input costs (such as labor and freight expenses to transport goods).

Operating margin is an important measure of profitability for retailers as it accounts for all expenses necessary to run a store, including wages, inventory, rent, advertising, and other administrative costs.

AutoZone has been a well-oiled machine over the last two years. It demonstrated elite profitability for a consumer retail business, boasting an average operating margin of 19.2%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, AutoZone’s operating margin decreased by 2.4 percentage points over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, AutoZone generated an operating margin profit margin of 16.3%, down 1.5 percentage points year on year. Since AutoZone’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, and administrative overhead increased.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

AutoZone’s unimpressive 5.5% annual EPS growth over the last three years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

In Q1, AutoZone reported EPS of $27.63, down from $28.29 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 1.2%. Over the next 12 months, Wall Street expects AutoZone’s full-year EPS of $142.74 to grow 12.3%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

AutoZone has shown robust cash profitability, driven by its attractive business model that enables it to reinvest or return capital to investors. The company’s free cash flow margin averaged 9.5% over the last two years, quite impressive for a consumer retail business.

Taking a step back, we can see that AutoZone’s margin dropped by 2.9 percentage points over the last year. This decrease came from the higher costs associated with opening more stores.

AutoZone broke even from a free cash flow perspective in Q1. The company’s cash profitability regressed as it was 7 percentage points lower than in the same quarter last year, which isn’t ideal considering its longer-term trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

AutoZone’s five-year average ROIC was 42.6%, placing it among the best consumer retail companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

AutoZone reported $285.5 million of cash and $12.08 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $4.19 billion of EBITDA over the last 12 months, we view AutoZone’s 2.8× net-debt-to-EBITDA ratio as safe. We also see its $258.4 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see AutoZone narrowly top analysts’ EBITDA expectations this quarter. On the other hand, its revenue slightly missed. Overall, this was a weaker quarter. The stock traded down 7.1% to $3,605 immediately after reporting.

Updated: March 3, 2026 at 7:04 AM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own AutoZone, you should also grasp the company’s longer-term business quality and valuation.

AutoZone is a high-quality business worth owning. Although its revenue growth was a little slower over the last three years, its growth over the next 12 months is expected to be higher. And while its mediocre EPS growth over the last three years shows it’s failed to produce meaningful profits for shareholders, its impressive operating margins show it has a highly efficient business model. In addition, AutoZone’s stellar ROIC suggests it has been a well-run company historically.

AutoZone’s P/E ratio based on the next 12 months is 24.2x. Scanning the consumer retail space today, AutoZone’s fundamentals really stand out, and we like it at this price.

Wall Street analysts have a consensus one-year price target of $4,206 on the company (compared to the current share price of $3,605), implying they see 16.7% upside in buying AutoZone in the short term.