Earnings Preview: Will AutoZone bounce back in Q1 after a modest FY25?

AutoZone, Inc. (NYSE: AZO) is gearing up to report first-quarter results early next week, even as sales remain under pressure from inflation-driven spending cuts and weakness in the DIY business segment. The auto parts retailer continues to expand its store network, underscoring confidence in its long-term growth strategy. Meanwhile, the company has delivered strong shareholder returns, with the stock outperforming the broader market this year.

What to Expect

AutoZone’s first-quarter FY26 earnings report is expected on Tuesday, December 9, at 6:55 am ET. Analysts following the business predict earnings per share of $32.58 and revenues of $4.64 billion for the November quarter. In the corresponding quarter of fiscal 2025, the company posted a profit of $32.52 per share on revenues of $4.28 billion. Notably, earnings missed estimates in recent quarters, while sales broadly matched expectations.

The stock started the year on a strong note and continued its uptrend, reaching an all-time high in early September. After a brief pullback, AZO rebounded in November and has since regained upward momentum. Analysts’ bullish outlook, with the consensus price target indicating double-digit growth, suggests that the stock has more room for growth in the near term.

Financials

In the final three months of FY25, sales remained unchanged year-over-year at $6.2 billion. There was a 4.5% annual growth in domestic same-store sales. During the fourth quarter, the company opened 91 new stores and closed one in the US; and opened 45 units in Mexico and 6 in Brazil. Net income dropped to $837 million in Q4 from $902.2 million last year, and earnings per share declined 5.6% to $48.71. Sales were in line with expectations, while earnings missed the Street’s view.

From AutoZone’ Q4 FY25 Earnings Call:

“Our sales growth will be driven by our continued availability to gain market share, and an expectation that like-for-like retail SKU inflation will accelerate as we move forward. For the quarter, we opened a total of 90 net domestic stores and 51 stores in our international markets. For the year, we opened 304 net new stores, the most since 1996. We remain committed to more aggressively opening satellite stores, hub stores, and megahub stores. Hub and megahub comps results continue to grow faster than the balance of the chain, and we are going to continue to aggressively deploy these assets for FY26.”

Recession Proof?

Auto parts distribution is mostly a non-discretionary business because all vehicles need to be maintained irrespective of market conditions and the owner’s financial position. That explains AutoZone’s resilient performance in the challenging retail backdrop, to a large extent. However, tariff-related cost escalation could continue weighing on the company’s margins this year. It targets additional charges of around $120 million, linked to the government’s new import policy, for the first quarter. Despite the recent slowdown, the do-it-yourself business remains a key growth driver for AutoZone, giving it an edge over other retailers in scale and market share.

The average price of AutoZone’s stock for the last 52 weeks is $3,715.74. On Monday, the stock opened lower and was trading up 1% in the afternoon. The shares have gained around 24% this year.