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AUTOZONE INC (AZO)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY2025 was solid operationally but reported results were pressured by foreign currency; net sales were $3.95B (+2.4% y/y), diluted EPS $28.29 (-2.1% y/y), and total company same-store sales were +2.9% on a constant currency basis vs +0.5% reported .
  • Domestic comps improved to +1.9% and Commercial grew +7.3%, helped by improved parts availability and faster delivery; international comps were +9.5% constant currency but -8.2% reported due to a ~1,900 bps FX headwind .
  • Gross margin held flat at 53.9% (higher merch margins offset last year’s 36 bps LIFO credit); SG&A deleveraged to 36.0% as AZO accelerated investments in IT, supply chain, and growth initiatives .
  • Versus S&P Global consensus, AZO modestly missed on EPS ($28.29 vs $29.20*) and revenue ($3.95B vs $3.98B*); management guided continued FX drags in Q3/Q4 and modeled a ~23.2% Q3 tax rate .
  • Near-term catalysts: accelerating Commercial momentum, 19 additional Mega-Hubs in H2, automation in new DCs, and ~100 international store openings in FY25; watch ongoing FX pressure and tariff developments .

What Went Well and What Went Wrong

What Went Well

  • Domestic same-store sales strengthened to +1.9% and Commercial grew +7.3% y/y, driven by better availability and speed of delivery; “We believe the initiatives we have in place have a long runway and will drive further improvement” — CEO Phil Daniele .
  • International delivered +9.5% comps on a constant currency basis; “our international performance remains encouraging as we continue to focus on opening more stores in these markets” — CEO Phil Daniele .
  • Merchandising actions offset Commercial mix drag; underlying gross margin healthy, with last year’s LIFO credit the main headwind; “the actions that our merchants are taking to drive merch margin improvement is more than offset[ting] that commercial mix drag” — CFO Jamere Jackson .

What Went Wrong

  • Reported sales and EPS were pressured by FX (Mexico FX -19% vs USD for the quarter), reducing revenue by ~$91M, EBIT by ~$30M, and EPS by ~$1.22 vs prior year .
  • SG&A deleveraged 134 bps y/y to 36.0% of sales as AZO invested in IT, distribution, and growth initiatives, driving operating expense growth ahead of sales .
  • DIY traffic remained soft and discretionary categories underperformed; winter volatility hurt the last week of the quarter (DIY comp down ~7% that week), creating uneven cadence across periods .

Financial Results

Headline comparison vs prior quarter and prior year, and vs estimates

MetricQ4 2024 (16 weeks)Q1 2025 (12 weeks)Q2 2025 (12 weeks)
Revenue ($USD Billions)$5.84 $4.28 $3.95
Diluted EPS ($)$48.11 (adjusted 16-wk) $32.52 $28.29
Gross Margin (%)52.5 (GAAP; 32 bps ex-LIFO improvement y/y) 53.0 53.9
SG&A (% of Sales)31.8 (adjusted 16-wk) 33.3 36.0
Estimates vs Actual (S&P Global)Q2 2025
Revenue Consensus Mean ($USD Billions)$3.98* vs Actual $3.95
EPS Consensus Mean ($)$29.20* vs Actual $28.29
# of Estimates (Revenue / EPS)23* / 21*

Values marked with * retrieved from S&P Global.

Segment and sales detail

Metric ($USD Millions unless noted)Q2 2024Q1 2025Q2 2025
Total Auto Parts Sales$3,786.3 $4,199.7 $3,874.4
Domestic Commercial Sales$980.1 $1,128.2 $1,051.8
Commercial Avg Sales/Program/Week ($000)14.1 15.9 14.7
All Other (incl. ALLDATA) Sales$72.8 $79.9 $77.6

KPIs

KPIQ2 2024Q1 2025Q2 2025
Same-Store Sales: Domestic (%)0.3 0.3 1.9
Same-Store Sales: International (%)23.9 1.0 (8.2)
SS: International Constant Currency (%)10.6 13.7 9.5
Total Company Same-Store Sales (%)3.0 0.4 0.5
Total Company SS Constant Currency (%)1.5 1.8 2.9
Stores with Commercial Programs (count)5,823 5,935 5,962
Ending Store Count (Total)7,191 7,387 7,432
AP/Inventory (%)119.8 119.5 118.2
Inventory per Store ($000)830 849 887
Net Inventory per Store ($000)(164) (166) (161)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Tax Rate (modeled, pre stock-option credits)Q3 FY2025~23.4% (as suggested on Q1 call) ~23.2% Lowered
FX Drag on Revenue / EBIT / EPSQ3 FY2025N/A~$106M / ~$34M / ~$1.41 per share New detail
FX Drag on Revenue / EBIT / EPSQ4 FY2025N/A~$101M / ~$37M / ~$1.53 per share New detail
FX Drag Full-YearFY2025Prior spot-rate full-year view ~$355M revenue / ~$120M EBIT / ~$4.90 EPS (Q1 call) ~$356M revenue / ~$118M EBIT / ~$4.82 EPS (Q2 call spot-rate view) Slightly improved EPS drag
LIFO ImpactsQ3 FY2025Q3 FY2024 had $24M credit; cumulative $19M still to reverse (Q1 call) Not expecting any LIFO impacts in Q3; $19M cumulative LIFO remains to be reversed Clarified (no Q3 LIFO)
Mega-Hub OpeningsH2 FY2025“20+ in FY25, back-half loaded” (Q4/Q1) At least 19 more locations over next 2 quarters Quantified H2 cadence
International Store OpeningsFY2025~100 stores planned ~100 stores planned; accelerating over remaining 2 quarters Maintained
CapExFY2025>$1B expected >$1B; focus on DCs, Hubs/Mega-Hubs, technology Maintained
Interest ExpenseQ2 FY2025 (prior) / Q3 FY2025~$108M for Q2 (prior guidance) Planning interest expense for Q3 near last year’s ~$104M Updated period focus

Earnings Call Themes & Trends

TopicQ4 2024 (Prev-2)Q1 2025 (Prev-1)Q2 2025 (Current)Trend
Commercial momentum & share gainsSequential improvement; 4.5% growth on 16-week basis; expanding Hubs/Mega-Hubs +3.2% Commercial; avg weekly per program flat; 111 Mega-Hubs +7.3% Commercial; availability/speed improved; 111 Mega-Hubs and +19 planned Accelerating growth and asset deployment
DIY/discretionary softnessDIY -1% in Q4; discretionary -5% y/y DIY comp -0.4%; discretionary ~17% of mix and weak DIY comp +0.1% but volatile; discretionary ~16% of mix and down; last week cold snap hurt traffic Gradual improvement but mixed
FX headwindsFX headwind quantified; guidance for FY25 Mexico FX weakened 13%; Q2 FX drag view shared Mexico FX -19%; Q3/Q4/FY EPS drags quantified Intensifying near term
Tariffs/macroPricing discipline; inflation likely to return Watching CPI/freight; rational pricing; possible tariff impacts 20% tariffs on China SKUs noted; intent to maintain margin profile via vendor absorption/diversified sourcing/pricing Preparing mitigations
Supply chain/technologyNew DCs planned; IT investments IT and DC investments underpin growth Two DCs opened (VA largest; CA long-tail), automation, improved algorithms for delivery Execution stepping up
Regional trendsBroadly consistent in Q4 Northeast/Mid-Atlantic/Rust Belt underperformed Weather volatility; Northeast/Rust Belt weaker in last week, expect improvement Weather-driven variability

Management Commentary

  • “We delivered positive 2.9% total company same-store sales, with Domestic same-store sales growth of 1.9%; and our Domestic Commercial sales grew 7.3%... International same-store sales increased 9.5% on a constant currency basis... the U.S. dollar has continued to have a negative impact on our reported sales, operating profit and EPS” — CEO Phil Daniele .
  • “From Mexico, FX rates weakened 19% versus the U.S. dollar for the quarter resulting in a $91 million headwind to sales, a $30 million headwind to EBIT and $1.22 a share drag on EPS versus the prior year” — CFO Jamere Jackson .
  • “Our gross margin was 53.9%, flat to last year... excluding LIFO from last year’s results, we had a 36 basis point improvement in gross margin, driven by continued merchandising margins” — CFO Jamere Jackson .
  • “We expect to open at least 19 more [Mega-Hub] locations over the next 2 quarters” — CFO Jamere Jackson .
  • “We’re investing more than $1 billion in CapEx in order to drive our strategic growth priorities… distribution centers that drive efficiency and reduce supply chain costs; and leveraging technology and our IT systems” — CEO Phil Daniele .

Q&A Highlights

  • SG&A investments: Management is intentionally leaning into IT and Commercial infrastructure to drive speed, productivity, and customer experience, accepting near-term deleverage to capture share .
  • FX and Mexico profitability: Team remains pleased with Mexico’s growth and profitability; distribution capability expansions are planned to support the growing store base .
  • Tariffs and margins: AZO intends to maintain margin rates post-tariffs through vendor absorption, diversified sourcing, and rational pricing discipline .
  • Supply chain automation: New Virginia (largest DC) and California DCs add direct import and long-tail capabilities; automation to be ramped and selectively extended to older facilities .
  • Weather cadence: Harsh winter cold created near-term spikes (e.g., batteries) and should lead to downstream maintenance demand (brakes/suspension) later in spring/summer .

Estimates Context

  • Q2 FY2025 vs consensus (S&P Global): EPS $28.29 vs $29.20* (miss), revenue $3.95B vs $3.98B* (miss); 21* EPS estimates and 23* revenue estimates. Values retrieved from S&P Global.
  • Implications: Modest estimate resets likely on FX drag and SG&A deleverage; underlying comp strength and Commercial momentum may temper downward revisions .

Key Takeaways for Investors

  • FX is the principal near-term headwind; at current spot rates management sees ~$106M/$34M/$1.41 EPS drag in Q3 and ~$101M/$37M/$1.53 EPS drag in Q4, with FY EPS impact of ~$4.82 at spot — sensitivity to MXN/USD remains material .
  • Commercial momentum is improving (Q2 +7.3%), supported by parts density (Hubs/Mega-Hubs) and faster delivery; 19 new Mega-Hubs in H2 should further lift both Commercial and DIY .
  • Gross margin healthy ex-LIFO; merchandising actions offset mix drag; expect no LIFO impacts in Q3 with $19M cumulative to reverse over time .
  • SG&A deleverage reflects strategic investment in IT, store payroll, DCs, and network density; watch for eventual normalization as comps improve and assets mature .
  • DIY remains mixed, with discretionary weak but maintenance/failure categories resilient; weather volatility impacted cadence yet may catalyze spring/summer maintenance demand .
  • CapEx >$1B and ~100 international openings in FY25 underpin long-term growth; Mexico/Brazil constant-currency comps remain strong .
  • Trading setup: near-term estimate risk on FX/SG&A vs positive catalysts (Commercial acceleration, asset deployment, DC automation); stock likely to respond to evidence of sustained comp momentum and visibility on FX stabilization .

Source Documents (Q2 FY2025)

  • Earnings press release with full financial tables: March 4, 2025 .
  • Form 8-K Item 2.02 and Exhibit 99.1: March 4, 2025 .
  • Earnings call transcript: March 4, 2025 .
  • Other relevant Q2 PR: Earnings release scheduling: February 3, 2025 .
  • Prior two quarters for trend analysis: Q1 FY2025 press release and 8-K (Dec 10, 2024) ; Q4 FY2024 press release and 8-K (Sept 24, 2024) .