Business Context and Reporting Period
Company: AutoZone, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Twelve and twenty-four weeks ended February 14, 2026 (Fiscal Q2 2026)
Business Overview: AutoZone is a leading retailer and distributor of automotive replacement parts and accessories in the Americas, operating 7,774 stores (6,709 in the U.S., 913 in Mexico, 152 in Brazil) as of February 14, 2026. The company operates as a single reportable segment.
Key Financial Metrics
| Metric | 12 Weeks Ended Feb 14, 2026 | 24 Weeks Ended Feb 14, 2026 |
|---|---|---|
| Net Sales | $4.27 billion | $8.90 billion |
| Gross Profit | $2.24 billion | $4.60 billion |
| Gross Margin | 52.5% | 51.7% |
| Operating Profit | $698.5 million | $1.48 billion |
| Net Income | $468.9 million | $1.00 billion |
| Diluted EPS | $27.63 | $58.68 |
| Cash and Equivalents | $285.5 million (Ending Balance) | N/A |
| Operating Cash Flow (24 wks) | N/A | $1.32 billion |
| Long-Term Debt | $8.91 billion | N/A |
| Capital Expenditures (24 wks) | N/A | $652.0 million |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 8.1% year-over-year (YoY) for the quarter and 8.2% for the first half of the fiscal year. Growth was driven by a 3.3% increase in total company same-store sales (constant currency) for the quarter and $114.4 million in sales from new stores.
- Profitability Decline: Operating profit decreased 1.2% YoY for the quarter. Net income decreased 3.9% YoY for the quarter and 5.0% for the first half.
- LIFO Impact: Gross margins were negatively impacted by unfavorable non-cash LIFO charges of 138 basis points for the quarter and 176 basis points for the first half, attributed to inflation and tariffs.
- Expense Management: Operating, selling, general, and administrative (OSG&A) expenses increased as a percentage of sales (36.1% vs. 36.0% prior year quarter) due to investments in growth initiatives.
- Share Count: The company retired 0.4 million shares of treasury stock during the quarter, reducing the share count.
Outlook, Risks, and Management Commentary
- Tariff Uncertainty: On February 20, 2026, the U.S. Supreme Court invalidated tariffs under the International Emergency Economic Powers Act. The President immediately implemented new tariffs under different authority. Management is monitoring the scope, duration, and legal challenges of these new tariffs, which pose a risk to future results.
- Capital Allocation: The company continues to prioritize growth initiatives, including new store openings (117 net new stores in the first half) and hub expansions. Capital expenditures increased to $652.0 million for the first half.
- Share Repurchases: The company repurchased $741.8 million of common stock during the first half. As of February 14, 2026, $1.4 billion remained under the Board's authorization.
- Liquidity: The company maintains $2.2 billion in undrawn capacity on its Revolving Credit Agreement and $285.5 million in cash. Management believes liquidity is adequate to fund operations, debt repayments, and share repurchases.
- ERP Implementation: The company began utilizing a new enterprise resource planning (ERP) system during the quarter. While expected to enhance controls, management notes inherent risks in the implementation process.
Investor Verification Checklist
- LIFO Reserve Impact: Verify the magnitude of the LIFO charge ($59.0 million impact on operating profit for the quarter) and its sustainability given current inflation and tariff environments.
- Tariff Policy Evolution: Monitor the specific scope and duration of the new tariffs implemented post-Supreme Court ruling and their potential effect on cost of sales.
- Same-Store Sales Trends: Track the divergence between domestic same-store sales growth (3.4%) and international growth (17.1% reported, 2.5% constant currency) to assess regional performance drivers.
- Debt Maturity Profile: Review the schedule of Senior Notes maturing in 2026 ($850 million total) and the company's intent/ability to refinance them as long-term debt.
- ERP Transition Risks: Assess any potential operational disruptions or financial reporting delays associated with the new ERP system rollout.