Will Q4 Sales Mix and Profit Pressures Shift AutoZone’s (AZO) Aggressive Expansion Narrative?

• AutoZone reported its fourth-quarter fiscal 2025 results, posting sales of US$6.24 billion and net income of US$836.95 million, along with 141 new store openings and continued share buybacks.
• An interesting development is that higher sales were driven more by price increases linked to tariffs rather than by greater sales volume, while profitability was affected by margin pressures and a non-cash charge.
• We’ll look at how AutoZone’s earnings miss and aggressive store expansion efforts affect the company’s investment narrative going forward.

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AutoZone Investment Narrative Recap

To be a shareholder in AutoZone right now, you’d need to believe in the long-term value of its aggressive store expansion and steady buyback program, even as short-term earnings softness and margin pressure persist. The latest earnings miss is noteworthy, mostly reflecting pricing power rather than robust demand, and reinforces that margin pressures from tariffs and expansion costs are the most important short-term risk. For now, these results don't appear to materially impact the key catalyst of improved availability and commercial sales growth.

Among several recent announcements, AutoZone’s update on its ongoing share buyback program stands out. In the last quarter alone, the company repurchased 117,000 shares for US$446.2 million, supporting the case for gradually enhanced earnings per share, even as operating margins remain under pressure from higher costs.

However, investors should not overlook the continued margin risks from cost pressures and inflation, especially as…

Read the full narrative on AutoZone (it's free!)

AutoZone's narrative projects $22.5 billion revenue and $3.1 billion earnings by 2028. This requires 6.0% yearly revenue growth and a $0.5 billion earnings increase from $2.6 billion.

Uncover how AutoZone's forecasts yield a $4420 fair value, a 7% upside to its current price.

Exploring Other Perspectives

The Simply Wall St Community's fair value estimates for AutoZone range from US$3,230 to US$4,420, with four distinct perspectives. While some see upside, ongoing margin pressures from tariffs and expansion costs remain a focus that could affect future returns, take a closer look at these varied viewpoints before deciding where you stand.

Explore 4 other fair value estimates on AutoZone - why the stock might be worth as much as 7% more than the current price!

Build Your Own AutoZone Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your AutoZone research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.
• Our free AutoZone research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate AutoZone's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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