AutoZone’s Margin Expansion and Earnings Beat Offset Softer Sales

AutoZone Earnings Put Profitability in Focus

AutoZone (AZO) moved sharply higher Tuesday after reporting fiscal fourth-quarter earnings of $56.05 per share, above analyst expectations, while net sales increased 5.6% to approximately $6.6 billion but fell short of consensus forecasts.

The auto-parts retailer also reported company-wide same-store sales growth of 1.5% on a constant-currency basis. Profitability was stronger, with gross margin rising 182 basis points to 53.3% and net income increasing to $931.6 million from $837.0 million a year earlier.

Key Points

• Fiscal fourth-quarter earnings reached $56.05 per share, exceeding analyst expectations, while revenue of about $6.6 billion fell short of forecasts.
• Gross margin expanded 182 basis points to 53.3%, helped by tariff refunds and a favorable non-cash LIFO inventory impact.
• Sales strengthened during the final eight weeks of the quarter, and management said it expects sales growth to accelerate in fiscal 2027.

Earnings Beat as Revenue and Same-Store Sales Miss Forecasts

AutoZone’s fourth-quarter results presented a mixed picture. Earnings increased from $48.71 per share a year earlier to $56.05, exceeding the analyst estimates provided in the reports.

Revenue increased 5.6% from the prior year to approximately $6.6 billion, but remained below Wall Street expectations of roughly $6.7 billion.

Same-store sales also came in below forecasts. Total company same-store sales increased 1.5% on a constant-currency basis, compared with a Wall Street forecast for 3.8% growth. Domestic same-store sales increased 1.6%.

Commercial sales provided another source of growth. Domestic commercial sales increased 8.6% to $1.91 billion, while average weekly sales per commercial program increased 2.7%.

For the full fiscal year, AutoZone generated $20.3 billion in sales, up 7.4% from the previous year.

Why Did AZO Stock Rise Despite Softer Sales?

Profitability was a major part of the earnings reaction. AutoZone’s fourth-quarter gross margin increased 182 basis points, or 1.82 percentage points, to 53.3%.

The improvement included a 145-basis-point benefit from tariff refunds and a 105-basis-point favorable non-cash impact from last-in, first-out, or LIFO, inventory accounting. Those benefits were partially offset by the company’s higher commercial sales mix and other factors.

Operating expenses moved in the opposite direction, increasing to 33.4% of sales from 32.4% a year earlier, primarily because of spending on growth initiatives. Even with those higher expenses, operating profit increased 10.1% to $1.3 billion, while net income rose to $931.6 million from $837.0 million.

The stronger earnings and margin results outweighed the revenue miss in Tuesday’s initial market reaction, with AZO shares rising following the report.

Improving Sales and Store Expansion Shape the FY27 Outlook

Management also pointed to a change in sales trends during the quarter. CEO Phil Daniele described the first eight weeks as a difficult selling environment but said sales strengthened during the final eight weeks.

The company said it feels well positioned for sales growth in fiscal 2027 and expects sales to accelerate across the U.S., Mexico and Brazil.

AutoZone continued expanding its physical network as well. It opened 175 stores during the fourth quarter, including 97 in the U.S., 68 in Mexico and 10 in Brazil. Sixteen of the U.S. openings were Mega Hubs.

For the full fiscal year, AutoZone added 374 stores, bringing its total footprint to 8,031 locations: 6,863 in the U.S., 1,001 in Mexico and 167 in Brazil.

The company also repurchased $697.5 million of stock during the fourth quarter and finished the fiscal year with $1.6 billion remaining under its existing share-repurchase authorization.

What It Means for Investors

AutoZone’s fourth-quarter report showed a clear split between sales and profitability. Revenue and comparable-store growth were weaker than Wall Street expected, while earnings, gross margin, operating profit and net income improved.

Part of the margin expansion came from tariff refunds and a favorable LIFO accounting impact, making the composition of future margins an important part of subsequent results. At the same time, operating expenses increased as AutoZone continued investing in growth initiatives and expanding its store network.

Management’s comments about improving sales during the second half of the quarter add another metric to watch in fiscal 2027. Future results can show whether that improvement carries into the new fiscal year alongside continued commercial growth and store expansion.

Conclusion

AutoZone’s fiscal fourth quarter combined an earnings beat with softer-than-expected revenue and same-store sales, but stronger profitability helped drive a positive investor reaction.

Gross margin reached 53.3%, operating profit increased 10.1% and net income rose to $931.6 million. Meanwhile, management reported stronger sales during the final eight weeks of the quarter and said it expects sales growth to accelerate in fiscal 2027.

The next phase of the AutoZone story centers on sales growth, margins and the performance of the company’s expanding store network as it enters the new fiscal year.

FAQs

Why did AutoZone stock rise after earnings?

AutoZone shares rose after fiscal fourth-quarter earnings of $56.05 per share exceeded analyst expectations. Gross margin also expanded to 53.3%, while operating profit and net income increased despite revenue and same-store sales coming in below forecasts.

What were AutoZone’s fourth-quarter sales?

AutoZone reported approximately $6.6 billion in fourth-quarter net sales, up 5.6% from the prior year but below Wall Street expectations of roughly $6.7 billion.

How much did AutoZone’s same-store sales grow?

Total company same-store sales increased 1.5% on a constant-currency basis during the fourth quarter, while domestic same-store sales increased 1.6%.

Why did AutoZone’s gross margin increase?

AutoZone’s gross margin increased 182 basis points to 53.3%. The quarter included a 145-basis-point benefit from tariff refunds and a 105-basis-point favorable non-cash LIFO inventory impact, partially offset by higher commercial mix and other factors.

How many stores does AutoZone operate?

AutoZone ended fiscal 2026 with 8,031 stores, including 6,863 in the U.S., 1,001 in Mexico and 167 in Brazil. The company opened 374 stores during the fiscal year.