Auto parts and accessories retailer AutoZone (NYSE: AZO) reported Q2 CY2025 results topping the market’s revenue expectations, with sales up 5.4% year on year to $4.46 billion. Its GAAP profit of $35.36 per share was 4.5% below analysts’ consensus estimates.
Is now the time to buy AutoZone? Find out by accessing our full research report, it’s free.
AutoZone (AZO) Q2 CY2025 Highlights:
- Revenue: $4.46 billion vs analyst estimates of $4.41 billion (5.4% year-on-year growth, 1.1% beat)
- EPS (GAAP): $35.36 vs analyst expectations of $37.01 (4.5% miss)
- "While our gross margins were pressured this quarter, we believe we will drive improvement as our new distribution centers ramp up and we continue to drive higher merchandise margins."
- Operating Margin: 19.4%, down from 21.3% in the same quarter last year
- Free Cash Flow Margin: 25%, up from 10.3% in the same quarter last year
- Locations: 7,516 at quarter end, up from 7,236 in the same quarter last year
- Same-Store Sales rose 3.2% year on year (1.9% in the same quarter last year)
- Market Capitalization: $64.01 billion
Company Overview
Aiming to be a one-stop shop for the DIY customer, AutoZone (NYSE: AZO) is an auto parts and accessories retailer that sells everything from car batteries to windshield wiper fluid to brake pads.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.
With $18.9 billion in revenue over the past 12 months, AutoZone is one of the larger companies in the consumer retail industry and benefits from a well-known brand that influences purchasing decisions. However, its scale is a double-edged sword because it’s harder to find incremental growth when you’ve penetrated most of the market. For AutoZone to boost its sales, it likely needs to adjust its prices or lean into foreign markets.
As you can see below, AutoZone’s sales grew at a mediocre 8.7% compounded annual growth rate over the last six years (we compare to 2019 to normalize for COVID-19 impacts), but to its credit, it opened new stores and increased sales at existing, established locations.
This quarter, AutoZone reported year-on-year revenue growth of 5.4%, and its $4.46 billion of revenue exceeded Wall Street’s estimates by 1.1%.
Looking ahead, sell-side analysts expect revenue to grow 3.4% over the next 12 months, a deceleration versus the last six years. We still think its growth trajectory is satisfactory given its scale and implies the market sees success for its products.
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Store Performance
Number of Stores
A retailer’s store count influences how much it can sell and how quickly revenue can grow.
AutoZone operated 7,516 locations in the latest quarter. It has opened new stores quickly over the last two years, averaging 3% annual growth, faster than the broader consumer retail sector.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
Same-Store Sales
The change in a company's store base only tells one side of the story. The other is the performance of its existing locations and e-commerce sales, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales gives us insight into this topic because it measures organic growth for a retailer's e-commerce platform and brick-and-mortar shops that have existed for at least a year.
AutoZone’s demand rose over the last two years and slightly outpaced the industry. On average, the company’s same-store sales have grown by 2.2% per year. This performance suggests its rollout of new stores could be beneficial for shareholders. When a retailer has demand, more locations should help it reach more customers and boost revenue growth.
In the latest quarter, AutoZone’s same-store sales rose 3.2% year on year. This growth was an acceleration from its historical levels, which is always an encouraging sign.
Key Takeaways from AutoZone’s Q2 Results
It was good to see AutoZone narrowly top analysts’ revenue expectations this quarter. On the other hand, its gross margin miss, leading to an EPS shortfall compared to Wall Street's estimates. However, management stated "we will drive improvement [in gross margins] as our new distribution centers ramp up and we continue to drive higher merchandise margins". Overall, this quarter was mixed, with the market seemingly forgiving the gross margin miss due to the commentary about future improvement. The stock traded up 1.8% to $3,900 immediately following the results.
So do we think AutoZone is an attractive buy at the current price? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
