AutoZone, Inc. (AZO) shares slid Tuesday after the auto parts retailer turned in quarterly results that didn't quite meet Wall Street's expectations. When you're in the business of selling spark plugs and brake pads, missing estimates tends to send investors looking for the exit.
The company reported earnings of $31.04 per share against analyst expectations of $32.37. Revenue came in at $4.629 billion, up 8.2% from last year but just shy of the $4.637 billion analysts were anticipating. Not exactly a disaster, but enough to disappoint the market.
AutoZone makes its money selling auto parts and accessories to two main groups: Do-It-Yourself customers who like getting their hands dirty on weekends, and professional mechanics who fix cars for a living. The company operates through retail stores and online platforms, serving both audiences.
The Numbers Behind The Miss
Here's where things get interesting. While overall performance came up short, the details reveal a more nuanced picture. Total company same-store sales climbed 5.5% for the quarter. Domestic same-store sales increased a respectable 4.8%, but international locations absolutely crushed it with 11.2% growth. On a constant-currency basis, international same-store sales were up 3.7%.
The margin story is less cheerful. Gross margin dropped 203 basis points year-over-year to 51.0%. The company blamed a 212 basis point non-cash LIFO headwind, which was partially offset by other margin improvements. LIFO accounting strikes again, making inventory more expensive during inflationary periods.
Operating profit fell 6.8% to $784.2 million, while net income declined to $530.8 million from $564.9 million in the prior year quarter. Not the direction shareholders want to see, even if the reasons are somewhat explainable.
Inventory jumped 13.9% compared to last year, driven primarily by growth initiatives. The company is clearly stocking up to support its expansion plans.
Buying Back Shares While Expanding
Despite the margin pressure, AutoZone kept returning cash to shareholders. The company repurchased 108,000 shares during the quarter at an average price of $3,999 each, spending $431.1 million total. At quarter's end, $1.7 billion remained under the current share repurchase authorization.
The company ended the quarter with $287.64 million in cash and equivalents. Operating cash flow came in strong at $944.17 million, up 16% year-over-year. So while earnings disappointed, the business is still generating solid cash.
Expansion Mode Activated
CEO Phil Daniele made clear the company's priorities in his statement: "We were especially pleased to open 53 net new stores globally in the quarter and we plan to aggressively open stores over the remainder of the fiscal year as we continue our focus on gaining market share."
During the quarter ended November 22, 2025, AutoZone opened 39 stores in the United States, 12 in Mexico, and two in Brazil. That's aggressive expansion by any measure, and Daniele signaled more is coming.
He also noted that both domestic and international businesses performed well as the company advanced its growth initiatives. The international strength particularly stands out given the double-digit same-store sales growth.
Despite Tuesday's selloff, AutoZone stock has returned 17.64% year-to-date. Shares traded down 2.57% at $3,670.00 during premarket activity on Monday.
