AutoZone, Inc.

(New York Stock Exchange)
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Slightly Bullish +20

Is AutoZone Stock A Real Bargain?

Company update Customer growth Earnings report AI-generated analysis

πŸ“‰ AutoZone stock has lost 17.5% over the past year while trading at a P/E of 19.8x, significantly below the S&P 500 median of 22.8x.

πŸ› οΈ Domestic commercial sales grew nearly 11% in fiscal 2026 to $5.8 billion, driven by improved parts availability and Mega Hub coverage.

πŸ“‰ DIY same-store sales declined 0.6% in Q4 fiscal 2026 as customers defer purchases and trade down to cheaper alternatives.

πŸ’° Free cash flow increased to $1.82 billion in fiscal 2026, up from $1.79 billion the previous year.

πŸ“‰ Operating margins have shrunk two years running, falling to 18.3% in fiscal 2026 from 20.5% in fiscal 2024.

πŸ—οΈ AutoZone plans approximately $1.65 billion in capital spending for fiscal 2027 to open roughly 400 new stores.

⚠️ New store openings pressure returns on capital, with management expecting a return of about 15% by the end of a store's fourth year.

πŸ“… CFO Jamere Jackson is leaving AutoZone on November 25, 2026, to become FedEx's finance chief.

πŸ” The upcoming fiscal Q1 2027 report in December 2026 will provide the next reading on domestic commercial sales growth and operating profit margins.

Bullish Signals
  • Domestic commercial sales grew almost 11% in fiscal 2026 to just under $5.8 billion, driven by better parts availability and expanded Mega Hub coverage.
  • Free cash flow edged up to $1.82 billion from $1.79 billion in the prior year despite margin compression.
  • New store openings are slightly ahead of expected sales and operating profit contributions according to management.
  • Operating margins rose to 20.0% in Q4 fiscal 2026, excluding a one-time $96 million tariff refund.
Risk Factors
  • Operating margins have shrunk two years running, dropping to 18.3% in fiscal 2026 from 20.5% in fiscal 2024.
  • DIY same-store sales fell 0.6% in Q4 fiscal 2026 as customers defer purchases and trade down.
  • Accelerated store growth to 374 new locations in fiscal 2026 has pressured returns on capital, with new stores earning roughly nothing in their first year.
  • Underlying operating profit growth of 4.4% was slower than the 5.6% rise in sales due to a non-cash inventory charge.
Full Analysis
AutoZone (AZO) stock trades at a P/E ratio of 19.8x, down from the S&P 500 median of 22.8x, following a 17.5% share price decline over the past year while the broader market gained 13.3%. The company reported revenue growth of 7.4% in fiscal 2026 compared to 2.4% the prior year, with free cash flow increasing to $1.82 billion from $1.79 billion. However, operating margins have contracted over two years, dropping to 18.3% in fiscal 2026 from 20.5% in fiscal 2024, as the retailer accelerates its store expansion strategy. The divergence in customer behavior is a central theme for AutoZone's performance. Sales to professional repair shops grew nearly 11% in fiscal 2026 to approximately $5.8 billion, driven by better parts availability and expanded Mega Hub coverage. Conversely, do-it-yourself (DIY) same-store sales fell 0.6% in the fourth quarter of fiscal 2026 as customers defer purchases and trade down. This shift forces the company to rely on commercial growth to offset stagnation in its consumer segment. AutoZone is currently executing a significant capital allocation push, planning approximately $1.65 billion in spending for fiscal 2027 to open roughly 400 new stores. Management acknowledges that returns on capital are pressured during this build-out phase, with new stores expected to earn little return in their first year before reaching target metrics by years four and six. The company's profitability is also sensitive to non-cash inventory charges, which masked a slower underlying profit growth of 4.4% compared to sales growth in the most recent quarter. Investors are betting on AutoZone's ability to restore margins as new stores mature while maintaining strong commercial sales growth. The upcoming fiscal Q1 2027 report in December 2026 will be critical for assessing domestic commercial sales velocity and operating profit margins, particularly following the departure of CFO Jamere Jackson on November 25, 2026, who is moving to become FedEx's finance chief.