Key Takeaways:
AutoZone reported fourth-quarter diluted earnings of $56.05 a share, topping Wall Street's estimate, as a 182 basis-point jump in gross margin carried profit past a domestic same-store sales gain of just 1.6%.
"Over the last eight weeks of the quarter our sales results strengthened, and we feel we are well positioned for sales growth in fiscal 2027," Chief Executive Officer Phil Daniele said in the earnings release.
The Memphis-based retailer's net sales rose 5.6% to $6.59 billion for the 16 weeks ended Aug. 29, the company said Tuesday. Net income climbed to $931.6 million from $837.0 million a year earlier, and operating profit advanced 10.1% to $1.32 billion. Gross margin expanded to 53.3% from 51.5%, a gain the company attributed to a 145 basis-point benefit from tariff refunds and a 105 basis-point non-cash LIFO adjustment, partly offset by a heavier mix of lower-margin commercial sales.
The profit beat rested on margin rather than volume. Domestic same-store sales increased 1.6%, decelerating from 4.8% in the same quarter last year, while total company comparable sales rose 2.7%, or 1.5% excluding currency swings. International stores posted a 10.7% comparable gain, though that narrows to 1.3% in constant currency. Operating expenses rose to 33.4% of sales from 32.4%, which the company tied to spending on growth initiatives.
For the full fiscal year, net sales reached $20.3 billion, up 7.4%, with diluted EPS of $152.55 against $144.87. Annual gross margin slipped to 52.3% from 52.6% on a 61 basis-point LIFO drag. Adjusted return on invested capital fell to 35.8% from 41.3%, and the company's adjusted debt-to-EBITDAR ratio held at 2.5 times.
AutoZone opened 175 stores in the quarter — 97 in the U.S., 68 in Mexico and 10 in Brazil — lifting its total count to 8,031. Inventory rose 10.1% to $7.74 billion, and net inventory per store was negative $107,000 versus negative $131,000 a year ago. The company repurchased 223,000 shares for $697.5 million at an average price of $3,125, and ended the year with $1.6 billion remaining on its buyback authorization.
The split between the earnings beat and the comp miss leaves the read on auto-parts demand unresolved. Domestic commercial sales, the segment serving repair shops, grew 8.6% to $1.91 billion, outpacing the do-it-yourself business and suggesting professional customers are still spending even as retail traffic cools. Investors will watch whether that commercial momentum can offset softer DIY demand when AutoZone reports fiscal 2027 first-quarter results, and whether peers O'Reilly Automotive and Advance Auto Parts show the same divergence between margin gains and slowing comparable sales.
This article is for informational purposes only and does not constitute investment advice.
