AZO changes
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- About
- AutoZone sells car parts. removed: It runs retail stores, added: Its stores sell to people who repair their own cars (do-it-yourself), and removed: it added: they also removed: sells added: sell parts removed: in bulk to repair shops (the commercial business). added: At August 29, 2026, AutoZone removed: does not grow mainly by opening many new stores. added: had 8,031 stores: 6,863 in the United States, 1,001 in Mexico and 167 in Brazil. It removed: grows profit per share mainly by buying added: opened a record 374 stores in fiscal 2026 and adds large hub stores that hold more parts. It also buys back its own stock every removed: year. added: year, so profit per share grows faster than profit.
- Thesis
- added: The market doubts that AutoZone removed: buys back added: can keep its past growth in profit per share. Three facts hold the price down. First, domestic same-store sales grew only 1.6% in the fourth quarter of fiscal 2026, and management expects them to be about removed: 8% added: flat in the first quarter of removed: its shares every year. This shrinking added: fiscal 2027. Second, tariff refunds and a LIFO accounting gain caused all of the fourth-quarter gross margin increase. Without these one-time items, gross margin fell. Third, the buyback now shrinks the share count removed: drives most added: more slowly. Diluted shares fell 2.2% in fiscal 2026, after falls of removed: its profit-per-share growth. The market doubts how long this pace can continue. AutoZone borrows money added: 7% to removed: fund added: 9% a year in fiscal 2022 and 2023. Buybacks were larger than free cash flow, so new debt pays for part of added: them. Debt stays at the removed: buyback. Net debt already sits above its own target range. added: company's goal of about 2.5 times EBITDAR. For the removed: discount added: gap to close, removed: store added: domestic same-store sales must removed: keep growing. Cash flow added: grow 2% or more again. Gross margin must removed: also catch up to the buyback pace, so debt does not keep rising against earnings. added: hold without one-time items. The removed: board added $1.5 billion added: new stores and hubs must add enough sales and cash flow to added: pay for their cost. The first evidence comes with the removed: buyback authorization in June 2026, a sign it still wants to keep this pace. Q4 added: first-quarter fiscal removed: 2026 results, reported September 22, 2026, showed sales up 5.6%. Gross margin rose, but a one-time tariff refund caused most of the rise, so the margin gain does not show lasting strength. The next quarterly report is added: 2027 report, expected around December 8, 2026. removed: If sales growth and added: The second-quarter report in March 2027 shows cash flow removed: both hold up added: against the buyback. The gap can close over the next removed: two to three removed: quarters, the discount can close. added: to four quarters. If removed: debt added: do-it-yourself demand stays weak and store spending keeps removed: rising faster than added: free cash removed: flow, AutoZone may need to slow added: flow flat, the removed: buyback, and the discount removed: could persist. added: can continue.
- Risks
- removed: AutoZone borrows money to fund its buyback. On the company's own measure, adjusted debt was 2.5 times EBITDAR added: Domestic same-store sales are weak. They grew only 1.6% in added: the fourth quarter of fiscal removed: 2026 added: 2026, and added: management expects about flat sales in added: the first quarter of fiscal removed: 2025. This is within its target. But buybacks are added: 2027. If they stay weak, profit per share grows slowly. Buybacks of $2.03 billion in fiscal 2026 were larger than free cash removed: flow, added: flow of $1.81 billion. AutoZone keeps adjusted debt at about 2.5 times EBITDAR, so removed: the buyback pace depends on debt removed: that grows with added: can grow only as fast as EBITDAR. removed: The buyback needs steady added: If cash removed: flow. Cash flow removed: has grown slower than added: does not grow, the buyback removed: pace added: must slow. AutoZone spends more on new stores and hubs. Capital spending was $1.50 billion in removed: recent years. added: fiscal 2026. If added: the new stores do not add enough sales, this removed: gap continues, AutoZone may need to slow added: spending lowers free cash flow and the buyback. removed: If the buyback slows, profit-per-share growth slows too. Part added: Banks fund a large part of removed: the stock's value depends on the buyback continuing added: AutoZone's payables through supplier finance programs ($5.6 billion at removed: its current pace. added: May 9, 2026). A change in these programs or a lower credit rating could require more debt.
- Balance sheet
- added: Cash: $326M Debt: $9.1B Net debt: $8.8B Interest cover: 7.9× Ratings: Moody's Baa1 (stable outlook), S&P BBB (stable outlook), Fitch BBB (stable outlook) AutoZone had a stockholders' deficit of removed: $2.5 added: $2.50 billion at August 29, 2026. The reason is that, over many years, it spent more on buybacks than it earned and kept. removed: This is a choice, not distress. The business makes steady cash, and management removed: sets added: keeps debt removed: to keep added: at a level that gives investment-grade ratings. removed: Total added: All debt removed: was $9.08 billion at that date, all added: is unsecured at the removed: parent. It was added: parent: fixed-rate senior notes plus commercial added: paper. Commercial paper removed: ($1.36 added: was $1.36 billion at May 9, 2026, at removed: 3.96%). added: 3.96%; the year-end figure comes with the 10-K. In July 2026, AutoZone added $850 million of 4.95% notes due removed: 2031. added: 2031, and $450 million of 5.05% notes became due. The company's own measure is adjusted debt: debt, plus finance leases of $417 million, plus 6 times rent. Adjusted debt of removed: $12.5 added: $12.50 billion was removed: 2.5 added: 2.48 times EBITDAR of $5.04 billion for fiscal removed: 2026, the same as added: 2026 (2.49 times a year removed: earlier. EBIT added: earlier). This is at the company's goal of removed: $3.72 billion covered interest of $473 million about removed: 7.9 added: 2.5 times. Suppliers fund a large part of the inventory: accounts payable added: of $8.60 billion were 111% of removed: inventory. added: inventory of $7.74 billion. At May 9, 2026, $5.6 billion of payables were in supplier finance programs with banks. removed: A change in these programs or in AutoZone's rating could require more debt. Liquidity comes from cash of $326 million and a added: The $2.25 billion revolving credit facility added: runs to November removed: 2028, added: 2028 and was undrawn at May 9, 2026. removed: S&P rates AutoZone BBB and Moody's rates it Baa1, both stable at the last affirmations found (March 2025 and March 2024). Buybacks of $2.0 billion in fiscal 2026 were larger than free cash flow. In removed: the 36 weeks to May 9, added: fiscal 2026, operating cash flow of removed: $2.12 added: $3.30 billion less capital spending of removed: $1.00 added: $1.50 billion gave removed: $1.12 added: free cash flow of $1.81 billion. Buybacks removed: in the same period added: of $2.03 billion were removed: $1.32 billion. Thus the buyback pace depends on added: larger, so new debt removed: growing with EBITDAR. added: paid for part of them. As of Aug 29, 2026.
- Checkpoints
- Sep 22, 2026: Q4 fiscal 2026 results: sales growth and margin. removed: Passed. added: Failed. Watch: Sales growth near or above 5% with a lasting gross margin gain passes; slower sales or a margin gain from one-time items only fails. Outcome: Net sales rose removed: 5.6% added: 5.6%, but tariff refunds and removed: EPS added: a LIFO gain caused all of removed: $56.05 beat estimates, but added: the 1.82-point gross margin gain, and domestic same-store sales grew only removed: 1.6% and tariff refunds gave most of the 182 basis point margin gain. added: 1.6%. Dec 8, 2026 (estimate): Q1 fiscal 2027 results: same-store sales and buyback pace. Pending. Watch: Domestic same-store sales growth of 2% or more with buybacks at a steady pace and adjusted debt near 2.5 times EBITDAR passes; weaker sales or leverage above about 2.6 times fails. Mar 2027 (estimate): Q2 fiscal 2027 results: cash flow against buybacks. Pending. Watch: Free cash flow that grows faster than the buyback pace passes; buybacks funded mostly by new debt fail.
- Recent events
- added: Oct 9, 2026: AutoZone said that director Claire McDonough will not stand for re-election at the 2026 annual meeting. The company said this was not because of a disagreement. Sep added: 25, 2026: Fitch affirmed AutoZone's BBB rating with a stable outlook. Fitch says it can lower the rating if leverage on its own measure goes above 3.5 times. Sep 22, 2026: AutoZone reported Q4 fiscal 2026 results removed: on this date: net added: (16 weeks to August 29, 2026). Net sales removed: of $6.6 added: grew 5.6% to $6.59 billion, removed: up 5.6%, and diluted added: a little below the about $6.7 billion analysts expected. Domestic same-store sales grew 1.6%. Diluted EPS removed: of added: was $56.05, above the removed: $54.08 analysts expected. added: consensus of about $54.5 (Zacks). Gross margin rose 1.82 percentage points, but tariff refunds (1.45 points) and a LIFO gain (1.05 points) caused all of the rise. Jul 14, 2026: AutoZone sold $850 million of 4.95% senior notes due July 2031. Jun 16, 2026: AutoZone's board approved an additional $1.5 billion for share repurchases, bringing total authorized buybacks since 1998 to $42.2 billion. removed: Jun 1, added: May 26, 2026: removed: AutoZone's most recent quarter: sales added: AutoZone reported its third quarter of fiscal 2026 (12 weeks to May 9, 2026). Sales grew removed: 8.4%. added: 8.4% to $4.84 billion. Operating profit (EBIT) grew removed: 6.6%. EBIT grew added: 6.6%, slower than sales, so the operating margin fell slightly.