Business Context and Reporting Period
Company: AutoZone, Inc. (AZO)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter ended May 9, 2026 (Twelve Weeks) and Thirty-Six Weeks ended May 9, 2026.
Business Overview: Leading retailer and distributor of automotive replacement parts and accessories in the Americas, operating 7,856 stores (6,766 U.S., 933 Mexico, 157 Brazil). The company operates as a single reportable segment.
Key Financial Metrics
| Metric | 12 Weeks Ended May 9, 2026 | 36 Weeks Ended May 9, 2026 |
|---|---|---|
| Net Sales | $4.84 billion | $13.74 billion |
| Gross Profit | $2.52 billion (52.2% margin) | $7.13 billion (51.9% margin) |
| Operating Profit | $923.8 million | $2.41 billion |
| Net Income | $641.5 million | $1.64 billion |
| Diluted EPS | $38.07 | $96.69 |
| Cash from Operations (36 weeks) | $2.12 billion | |
| Capital Expenditures (36 weeks) | $997.5 million | |
| Total Debt (Long-term) | $9.02 billion | |
| Cash and Equivalents | $253.7 million |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 8.4% for the quarter and 8.3% for the year-to-date period compared to the prior year. Growth was driven by a 3.9% increase in total company same-store sales (constant currency) and $129.0 million in sales from new stores for the quarter.
- Profitability: Operating profit increased 6.6% for the quarter. However, gross margin decreased 77 basis points for the quarter and 142 basis points year-to-date, primarily due to unfavorable non-cash LIFO impacts ($36.0 million for the quarter) driven by inflation and tariffs.
- Net Income: Net income increased 5.4% for the quarter but decreased slightly ($20.1 million) for the thirty-six week period compared to the prior year.
- Debt Structure: The company repaid $400 million in Senior Notes due April 2026 and increased commercial paper borrowings by $609.4 million. Total debt remains stable at approximately $9.0 billion.
Guidance, Outlook, and Risks
- Tariff Uncertainty: Following the U.S. Supreme Court invalidation of IEEPA tariffs in February 2026, the company filed for refunds. However, new tariffs were introduced under different authority. The company has not recognized potential refunds due to uncertainty regarding timing and amounts.
- Capital Allocation: The company continues aggressive share repurchases, spending $1.3 billion in the thirty-six week period. As of May 9, 2026, $0.8 billion remained under the Board's authorization. Subsequent to the quarter end, an additional $174.0 million was spent on repurchases.
- Investment Strategy: Capital expenditures increased to $997.5 million (36 weeks) to fund growth initiatives, including new stores and hub expansions. The company expects to increase investment in fiscal 2026 compared to fiscal 2025.
- Non-GAAP Metrics: Adjusted After-Tax ROIC for the trailing four quarters was 36.3% (down from 43.5% prior year). Adjusted Debt to EBITDAR ratio remained at 2.5:1.
- Risks: Key risks include supply chain disruptions, inflation, wage pressures, foreign currency fluctuations, and the impact of geopolitical factors and trade policies.
Investor Verification Checklist
- LIFO Impact: Verify the magnitude of the non-cash LIFO charge ($36.0 million for the quarter) and its effect on reported gross margins versus underlying operational performance.
- Tariff Refunds: Monitor the status of the IEEPA tariff refund claims filed in April 2026 and the potential impact of new tariff legislation on future cost of sales.
- Share Repurchase Runway: Confirm the remaining $0.8 billion authorization balance and the pace of subsequent repurchases ($174 million post-quarter) to assess capital return sustainability.
- Debt Maturity: Review the debt schedule, noting the repayment of the April 2026 notes and the reliance on commercial paper ($1.4 billion outstanding) and the revolving credit facility for liquidity.
- Same-Store Sales: Analyze the divergence between domestic same-store sales growth (4.1%) and international growth (16.6% reported, 1.6% constant currency) to understand regional performance drivers.