Transcript: AutoZone Q4 2026 Earnings Conference Call

AutoZone (NYSE: AZO ) held its fourth-quarter earnings conference call on Tuesday. Below is the complete transcript from the call. This content is powered APIs. 1% despite a $15 million LIFO charge and a $96 million benefit from tariff refunds.

The company achieved a milestone by opening 175 new stores in the quarter, totaling 374 for the year, the most in a single fiscal year, and celebrated its 1,000th store in Mexico. 3% on a constant currency basis, with a significant boost from currency fluctuations. 6%, driven by improved inventory availability and expansion of megahubs. 5 billion capex in FY27, focusing on new store openings, supply chain improvements, and technology enhancements.

AutoZone expects to open approximately 400 new stores in FY27 and projects domestic same-store sales to be flat to up low single digits, with international comps anticipated to improve. Management expressed confidence in gaining market share and highlighted the strategic importance of megahubs, which boost sales by improving part availability and delivery speed. Full Transcript OPERATOR Good day everyone and welcome to AutoZone's 2026 fourth quarter earnings release conference call. At this time, all participants are placed on a listen-only mode.

At this time the Company would like to provide its forward-looking statement. Brian Campbell, Vice President, Treasurer and Investor Relations Before we begin, please note that today's call includes forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance.

Please refer to this morning's press release and the Company's most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission for a discussion of important risks and uncertainties that could cause actual results to differ materially from expectations. Forward-looking statements speak only as of the date made and the Company undertakes no obligation to update such statements. Today's call will also include certain non-GAAP measures. A reconciliation of GAAP to non-GAAP financial measures can be found in our press release.

, President and CEO Good morning and thank you for joining us today for AutoZone's 2026 fourth quarter conference call. With me today are Jamir Jackson, Chief Financial Officer, and Brian Campbell, Vice President, Treasurer and Investor Relations. Regarding the fourth quarter, I hope you had an opportunity to read our press release and learn about the quarter's results. If not, the press release along with slides complementing our comments today are available on our website at under the Investor Relations link.

Please click on the Quarterly Earnings Conference Call to see them. To start out this morning, I want to thank our more than 130,000 AutoZoners across the company for continuing their relentless commitment to delivering on our pledge to always put customers first. The operating theme for FY2026 was Driving the Future Together and we delivered on that theme this year as we grew our total store count, opening the most stores ever in a single year, improved on our assortment and in-stock positions, and continued to invest in systems to deliver even better customer service. Our customer service levels and execution have improved this past year and this quarter.

We continue to gain market share in a challenging macro environment. As an outline for this morning's call, first we'll discuss our domestic DIY and commercial sales results and provide color on the cadence of our sales over the 16-week quarter including traffic, ticket, and inflation trends. We will also provide an outlook and perspective on FY27 sales. Second, we will discuss our international sales results and the progress we are making on our new store buildout.

Third, we will talk about our store openings both domestically and internationally and provide perspective on store economics and the impact on return on invested capital over the next several years. Lastly, we'll conclude with an additional commentary on how we see FY27 playing out. So let me start by unpacking our Q4 results. 6%.

While we grew slower than Q3's rate, we felt we gained momentum as the quarter moved along and we liked our sales growth potential heading into the new year. 1%. Similar to prior quarters, our gross margin, operating profit, and EPS were negatively impacted by a non-cash LIFO charge of $15 million. As a reminder, during last year's Q4 we recognized an $80 million LIFO charge.

43 per share, benefit from the refunds of IEEPA tariffs. Finally, we opened 175 new stores this quarter. For the year, we opened 374 new stores versus 304 stores last year. This year's total of 374 stores is the most ever in a fiscal year.

We also hit some major milestones. We celebrated our 1,000th store in Mexico and we opened our 8,000th store in August in our home state of Tennessee. We also held our grand opening for our relocated Monterrey, Mexico distribution center which is almost two times the size of the previous distribution center. And we broke ground on our new Leon, Mexico DC which will come online in late FY28 to support our international expansion.

Let me touch on some same store sales highlights for the quarter. 6%. 6% versus last year's Q4. We saw our sales bottom in June and then begin to improve as the quarter moved along.

We exited the quarter with good momentum and we are optimistic about our sales trajectory for the new fiscal year. 7% as exchange rates positively impacted our comps by over 900 basis points. Next, let me address our total domestic same store sales results in a little more detail. 1%.

6 for the quarter and ran negative for the first three months before running essentially flat in August. We began the quarter with milder than usual temperatures across the Southeast and the South Central markets, along with lower foot traffic. The impact of higher inflation from higher oil and gas prices likely dampened our traffic and sales results for most of the quarter. At the tail end of the quarter, our results were buoyed by stronger results in our hot weather categories.

We saw mid-single-digit like-for-like same SKU inflation for the quarter which contributed to our DIY average ticket being up roughly 5% which was offset by traffic declines. For the first quarter of FY27, we expect same store sales to be relatively flat with average ticket to remain around plus 5% that we saw in Q4. Next I will touch on our domestic commercial business. As I mentioned, our commercial sales were up just under 9% for the quarter.

The first three months of the quarter averaged just over 8% while the last month was well over 9% growth. Commercial growth was impacted earlier in the quarter by below-expectations performance in our hot weather categories that rebounded in the last month of the quarter as we experienced hotter summer temperatures. Similar to DIY, we saw ticket average growth of around 5%. We would expect this trend to continue into Q1.

Our commercial business had a solid year, finishing up nearly 11% versus FY25. So in summary, our domestic business was below our expectations driven largely by the underperformance in DIY for most of the quarter. Milder temperatures earlier in the quarter certainly had an impact along with lower foot traffic. We are encouraged by the performance late in the quarter and look to maintain momentum in Q1.

Our commercial sales results continue to be driven by our improved satellite store inventory availability, significant improvements in hub and megahub coverage, the continued strength of our Duralast brand, and execution on our initiatives to improve speed of delivery and customer service for the professional. Our sales initiatives are driving growth with the smaller up-and-down-the-street customers where we have the majority of our sales but also have a tremendous market share opportunity. We see our megahub and inventory initiatives as ways to accelerate our growth with these underpenetrated up-and-down-the-street customers.

Thus far, our initiatives are delivering market share gains and gives us confidence as we move into FY27. As a reminder, in FY26 we opened up 39 megahubs and 11 net regular hubs. Now let me take a moment to discuss our international business. This past quarter we celebrated the opening of our 1,000th store in Mexico and finished the quarter with 1,001.

In Brazil, we now have 167 stores, bringing our total international store count to 1,168. 3% on a constant currency basis as we faced continued softness in the macro environment, specifically in Mexico. Importantly, we saw an uptick in sales in the last four weeks of the quarter which gives us confidence that sales may inflect upward in Q1. We are expecting same store sales to be slightly stronger on a constant currency basis as we expect to report low single-digit growth in Q1 as the economy is starting to improve.

We expect our international sales to reaccelerate as we continue to invest in customer service, inventory, new stores, and our supply chain. S. We expect this number to grow as we continue our international store buildout. We have confidence in our international markets and the returns on invested capital are strong.

We have a relatively young store base that we expect to drive strong sales and EBIT results as they continue to mature. In summary, we have continued to invest capital in driving sales growth. We also continue to invest in refining product assortments in stores and driving efficiency in our supply chain which we believe positions us well for future growth. We are committed to investing both capex and operating expense to capitalize on these opportunities.

5 billion in capex to drive our strategic growth priorities and expect to invest a similar amount in FY27. The majority of our investments are in accelerated store growth, including hubs and megahubs. These investments place more inventory closer to our customers and will continue to reduce the time it takes us to serve both our DIY and professional customers. The early performance of our accelerated store investments are better than our original forecast which will allow us to achieve our EBIT goals sooner.

We are laser-focused on generating the returns that you expect from AutoZone. 7 million. 7 million by year six. Historically, on average, new store sales grow double-digit in the second year and roughly 5% for each of the next four years.

9 million per store, we assume that return on invested capital is roughly zero in the first year. By the end of the fourth year we expect to achieve approximately 15% ROIC and by the end of the sixth year we expect ROIC of over 20% which should continue to improve well after that. Importantly, the growth in store productivity is heavily skewed to commercial sales which typically more than doubles over that six-year time horizon. The majority of this growth comes from up-and-down-the-street customers who demand availability and speedy delivery.

65 billion in capex in FY27, we are committed to managing our investment to achieve strong results in invested capital over time. While in the near term our returns on capital have been pressured as we have accelerated our store growth, we will hold our ROIC in the mid-30s area and remain committed to driving higher ROIC over time as new stores continue to mature. Now I will turn the call over to Jameer Jackson. Jameer Jackson, Chief Financial Officer Thanks, Phil, and good morning, everyone.

Our operating results remained strong for the quarter and were highlighted by solid top line revenue. 6% versus Q4 of last year. 3% on a constant currency basis. 1%.

Our results included a $96 million tariff refund and a $15 million LIFO charge this quarter. 5%. Foreign exchange rates impacted our results for the quarter. 87 a share benefit to EPS versus the prior year.

3%. Next, let me take a few moments to elaborate on the specifics in our P&L for the quarter. First, I'll give a little more color on sales and our growth initiatives, starting with our domestic commercial business. 9 billion, up just under 9% for the quarter.

Our domestic commercial sales represented 34% of our domestic auto parts sales and 29% of our total company sales. 7% versus last year. This quarter we opened 87 net new programs. We finished with 6,443 total programs and we have our commercial program in 94% of our domestic stores.

For the year we opened 345 domestic commercial programs. Megahub stores remain a key component of our current and future commercial growth. We opened 16 megahubs in the quarter, 39 for the year, and now have 172 megahub stores. We expect to open over 40 megahubs in FY27.

As a reminder, our megahubs typically carry over 100,000 SKUs and drive a tremendous sales lift inside the store box and serve as an expanded assortment source for other stores. The expansion of coverage and parts availability continues to deliver a meaningful sales lift to both our commercial and DIY business. These larger stores give our customers access to thousands of additional parts across the market. 7%, the 172 megahubs continue to drive growth at an even faster clip.

Let me provide one other piece of perspective on the importance of megahubs. There are approximately 2,000 commercial programs that are linked to a megahub network. These programs sell 16% more annually than the balance of the commercial programs in the chain. Given these dynamics, we continue to target having approximately 300 megahubs over the next three years.

Our customers are excited by our commercial offering as we deploy more stores in local markets closer to the customer while improving our service levels. On the domestic retail side of our business, our DIY comp was down 60 basis points for the quarter. From the third-party data available to us, our DIY share has remained ahead of industry growth rates, which is indicative of the overall market softness. The DIY market is experiencing a growing and aging car park and a challenging new and used car sales market, which typically provides a tailwind for our business.

However, transactions are soft as the customer experiences high inflation. In our industry and elsewhere, we see evidence of deferrals and trade down in DIY, particularly with the most financially challenged DIY customers. This is not a new phenomenon for our industry and we expect it to recover over time. Now I'll say a few words regarding our international business.

During the quarter we opened 68 new stores in Mexico to finish with 1,001 stores and 10 new stores in Brazil, ending with 167. 7% on an unadjusted basis. While sales growth has slowed over the last few quarters in Mexico due to slower economic growth in the country, we have continued to manage our P&L appropriately in this environment. We're also continuing to grow share and are well positioned when the economy improves.

We remain committed to investing in international expansion, and as we accelerate the store opening pace, we're pleased with our results versus our forecast in these markets. As we look ahead, we're bullish on international being an attractive and meaningful contributor to AutoZone's future sales, operating profit and our ROIC. Now let me spend a few minutes on the rest of the P&L and gross margins. 3%, up 182 basis points versus last year.

This quarter we had a $15 million LIFO charge versus an $80 million LIFO charge for Q4 last year. Excluding the LIFO comparison, we were up 76 basis points versus last year as we benefited $96 million from tariff reimbursements we received this past quarter.