AutoZone Earnings: Profit Falls as Tariffs Pressure Margins
AutoZone earnings saw fiscal 1Q26 sales rise 8.2% to $4.63 billion but EPS fell after margin compression, prompting traders to reassess positioning.
KEY TAKEAWAYS
- Net sales rose 8.2% to $4.63 billion while diluted EPS fell to $31.04.
- Gross margin narrowed 203 bps to 51.0%, driven mainly by a 212 bps non-cash LIFO impact.
- Secondary reports said tariffs added cost pressure, further squeezing margins.
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AutoZone, Inc. (NYSE: AZO) reported fiscal first-quarter 2026 earnings for the 12 weeks ended November 22, 2025, with net sales rising 8.2% to $4.63 billion. However, net income declined 6.0% to $530.8 million, and diluted earnings per share (EPS) fell to $31.04, the company said in a December 9 press release.
Quarterly Results and Margin Pressure
Total-company same-store sales increased 5.5%, driven by a 4.8% rise in domestic stores and an 11.2% gain internationally. International growth helped lift revenue alongside stronger U.S. commercial sales.
Despite higher sales, operating profit fell 6.8% to $784.2 million as operating, selling, general, and administrative expenses rose to 34.0% of sales. The company reported gross margin at 51.0%, down 203 basis points, primarily due to a 212 basis point non-cash last-in, first-out (LIFO) inventory accounting impact. Secondary reports noted that tariffs added cost pressures, further squeezing margins despite revenue growth.
Operations and Capital Allocation
AutoZone repurchased $431.1 million of stock during the quarter, leaving about $1.7 billion available under its authorization. Since fiscal 1998, the company has repurchased approximately $38.9 billion in shares. Cash flow from operations totaled $944.2 million, while capital spending reached $314.2 million. Adjusted debt to earnings before interest, taxes, depreciation, amortization, and rent (EBITDAR) remained steady at 2.5 times over the trailing four quarters.
The company ended the quarter with 7,710 stores, adding 53 net new locations, including 6,666 domestic stores, 895 in Mexico, and 149 in Brazil. This expansion, combined with substantial buybacks, reflects AutoZone’s dual focus on network growth and shareholder returns amid margin pressures.
AutoZone’s results show a balance between rising sales and international expansion against near-term margin challenges from accounting effects and tariff-related costs, while maintaining heavy capital returns and measured store growth.
