AutoZone (AZO) shares slipped after the auto parts retailer missed Wall Street’s earnings expectations for the fifth straight quarter. Still, strong sales growth, international expansion, and ongoing store openings suggest the company’s long-term strategy remains on track.
Key Points
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Earnings Miss Again: Q4 EPS came in at $48.71, below the $50.93 expected.
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Sales Hold Up: Revenue was $6.24 billion, with same-store sales up 5.1% year-over-year.
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Expansion Continues: AutoZone opened 141 new stores in Q4 and plans 325–350 new locations in FY 2026.
Why Did AutoZone Miss Earnings Again?
AutoZone’s earnings were hit by a hefty $80 million LIFO charge — an accounting adjustment tied to rising inventory costs. This shaved profits and pushed gross margins down to 51.5% from 52.5% last year.
Net income for the quarter dropped 7.2% to $837 million, while operating expenses grew as the company invested in new stores, bigger distribution hubs, and faster delivery systems.
For everyday investors, this means that AutoZone’s profitability took a short-term hit, but much of it was due to non-cash accounting charges and growth investments rather than weakening demand.
How Strong Are Sales Trends?
Despite profit pressure, AutoZone’s sales engine is humming:
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Same-store sales rose 5.1% overall, with U.S. stores up 4.8% and international stores up 7.2%.
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Sales of “hard parts” like brakes, batteries, and engine components remain strong, supported by the aging U.S. car fleet.
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Revenue for the quarter was $6.24 billion, nearly flat with expectations but up 6.9% when adjusted for last year’s extra reporting week.
This shows AutoZone is keeping — and even growing — its market share despite inflationary pressures.
Where Is AutoZone Headed Next?
AutoZone is doubling down on growth:
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Store Growth: 141 new stores opened in Q4, bringing the total to 7,657. Next year, management plans up to 350 new openings across the Americas.
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International Push: Expansion in Mexico and Brazil has been strong, and new markets in the Caribbean and Central America are being considered for FY 2026.
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Shareholder Value: AutoZone repurchased 117,000 shares in Q4 for $446.7 million, at an average price of $3,821 per share.
CEO Phil Daniele summed it up: AutoZone will “aggressively open stores” in the year ahead while keeping a disciplined focus on cash flow and shareholder returns.
What It Means for Investors
AutoZone’s Q4 was a classic “good news, bad news” quarter. The bad news: profits missed expectations again, weighed down by inventory charges and higher costs. The good news: demand is steady, sales are growing, and international expansion is gathering momentum.
Even with five consecutive EPS misses, AZO shares are up nearly 29% in 2025 — proof that investors see long-term value.
Conclusion
AutoZone’s story is one of short-term earnings pressure versus long-term growth potential. While Wall Street may be impatient with profit misses, the company’s aggressive expansion, strong sales, and continued buybacks suggest the stock could remain a winner for long-term investors.
FAQs
Q. Why did AutoZone miss earnings expectations?
A. Earnings were dragged down by an $80 million LIFO charge related to rising inventory costs and higher operating expenses tied to store expansion.
Q. Is AutoZone still growing?
A. Yes. Same-store sales rose 5.1%, and the company opened 141 new stores in Q4 alone. Management plans to add up to 350 more stores in FY 2026.
Q. How has AutoZone stock performed in 2025?
A. Despite earnings misses, shares are up about 29% year-to-date, reflecting strong investor confidence in the company’s long-term growth strategy.
Q. What are AutoZone’s international growth plans?
A. The company is expanding in Mexico and Brazil and is exploring entry into the Caribbean and Central America starting in FY 2026.
Q. Is AutoZone a good stock for long-term investors?
A. While near-term profits are pressured, the company’s strong sales, store expansion, and buybacks suggest long-term growth potential remains solid.