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01/11 03:21
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals strong growth initiatives, with expansion in both domestic and international markets, supported by strategic investments in technology and new stores. Despite a slight decline in net income, free cash flow has improved, and the company maintains a stable outlook. The Q&A section highlights confidence in sustaining same-store sales and managing inflation impacts. While there are some concerns about SG&A growth and tax refund impacts, the overall sentiment is positive, driven by effective margin management and strategic growth plans.
Total Sales $4.6 billion, up 8.2% year-over-year. Growth driven by improved execution, inflation impact, and increased store openings.
Earnings Per Share (EPS) $31.04, down 4.6% year-over-year. Excluding a $98 million noncash LIFO charge, EPS would have been up 8.9%.
Gross Margin 51%, down 203 basis points year-over-year. A $98 million LIFO charge negatively impacted gross margin by 212 basis points.
Domestic Same-Store Sales Up 4.8% year-over-year. Growth attributed to improved execution and inflation-driven ticket growth.
Domestic DIY Same-Store Sales Up 1.5% year-over-year. Growth impacted by weather and regional disparities, with inflation driving a 4.8% increase in average ticket.
Domestic Commercial Sales Up 14.5% year-over-year. Growth driven by improved inventory, satellite store investments, and speed of delivery.
International Same-Store Sales Up 3.7% on a constant currency basis and 11.2% unadjusted. Growth supported by favorable foreign exchange rates and market share gains.
Net Income $531 million, down 6% year-over-year. Decline driven by the LIFO charge and increased SG&A expenses.
Free Cash Flow $630 million, up from $565 million year-over-year. Growth driven by strong cash generation and disciplined capital allocation.
Inventory Per Store Up 9.1% year-over-year. Increase driven by new stores, growth initiatives, and inflation.
New Store Openings: Opened 53 stores globally in Q1 2026, including 39 in the U.S. and 14 internationally. This is near record growth for any first quarter in the company's history.
Mega-Hub Expansion: Opened 4 new Mega-Hub stores, bringing the total to 137. Plans to open at least 30 more Mega-Hubs in FY 2026.
Distribution Centers: Investing in 2 new distribution centers in Mexico and Brazil to support international growth.
Domestic Commercial Sales: Grew 14.5% in Q1 2026, driven by improved inventory, satellite store investments, and faster delivery.
International Sales: International same-store sales grew 3.7% on a constant currency basis, with unadjusted growth of 11.2%. Mexico and Brazil store count increased to 1,044.
Gross Margin: Gross margin was 51%, down 203 basis points due to a $98 million LIFO charge. Excluding this, gross margin improved by 9 basis points.
SG&A Expenses: Increased 10.4% due to investments in growth initiatives and accelerated store openings.
CapEx Investments: Investing $1.6 billion in FY 2026, primarily for store growth, Mega-Hubs, and technology improvements.
Market Share Growth: Focused on gaining market share in domestic commercial and international markets.
Technology Investments: Investing in technology to enhance customer service and operational efficiency.
Weather-related sales impact: Sales were negatively impacted in certain regions due to less favorable weather conditions compared to the previous year, including fewer winter-related parts sales and the absence of hurricanes that had driven sales in the prior year.
Inflation impact: Inflation led to increased costs and higher average ticket prices, which could affect customer purchasing behavior, particularly in the DIY segment where traffic was down 3.4%.
LIFO charge: A noncash $98 million LIFO charge significantly impacted gross margins and earnings per share, reducing EPS by $4.39 per share.
Slower economic growth in Mexico: The softer macroeconomic environment in Mexico has slowed sales growth in the region, despite market share gains.
Increased SG&A expenses: Operating expenses grew 10.4% year-over-year, driven by investments in growth initiatives, new store openings, and higher payroll and occupancy costs, which could pressure profitability.
Supply chain and inventory challenges: Investments in inventory and supply chain improvements are ongoing, but higher costs and inflation have increased inventory per store by 9.1%, which could strain financial resources.
Foreign exchange volatility: While foreign exchange rates were favorable this quarter, future volatility could impact financial results, particularly in international markets.
Sales Growth: The company expects continued sales growth in FY '26, driven by both DIY and commercial sales trends. Domestic commercial sales are projected to grow further, supported by improved inventory, satellite store investments, and enhanced speed of delivery. International sales are expected to reaccelerate as economic conditions improve in Mexico and Brazil.
Store Expansion: AutoZone plans to open stores at an accelerated pace, targeting 350-360 new stores globally in FY '26, compared to 304 in FY '25. This includes an increase in satellite stores, Hubs, and Mega-Hubs, with at least 30 new Mega-Hub locations planned for the fiscal year.
Capital Expenditures: The company plans to invest nearly $1.6 billion in CapEx for FY '26, focusing on accelerated store growth, new distribution centers in Mexico and Brazil, and technology enhancements to improve customer service and operational efficiency.
Gross Margin and LIFO Impact: AutoZone anticipates continued benefits from merchandise margins to offset rate headwinds from accelerated commercial growth. However, LIFO charges are expected to impact gross margins, with a planned $60 million charge for each of the next three quarters.
International Growth: The company is bullish on international expansion, with plans to accelerate store openings in Mexico and Brazil. International operations are expected to contribute meaningfully to future sales and operating profit growth.
Market Trends: The aging car park and challenging new and used car sales market are expected to provide tailwinds for the DIY business. Inflation is projected to drive average ticket growth sequentially through the third fiscal quarter of FY '26.
Share Repurchase Program: We repurchased $431 million of AutoZone stock in the quarter. At quarter end, we had $1.7 billion remaining under our share buyback authorization. Our ongoing strong earnings, balance sheet, and powerful free cash generation allow us to return a significant amount of cash to our shareholders through our buyback program. We have bought back over 100% of the then outstanding shares of stock since our buyback inception in 1998, while investing in our existing assets and growing our business.
The earnings call reveals strong growth initiatives, with expansion in both domestic and international markets, supported by strategic investments in technology and new stores. Despite a slight decline in net income, free cash flow has improved, and the company maintains a stable outlook. The Q&A section highlights confidence in sustaining same-store sales and managing inflation impacts. While there are some concerns about SG&A growth and tax refund impacts, the overall sentiment is positive, driven by effective margin management and strategic growth plans.
The earnings call summary presents a generally positive outlook, with strong domestic sales growth, significant expansion plans, and effective margin management despite challenges like FX impacts. The Q&A section highlights growth opportunities in Mexico, manageable inflation impacts, and merchandise margin improvements. While management was vague on some specifics, the overall sentiment is optimistic, supported by strategic expansions and favorable market conditions. The absence of a market cap makes it hard to predict exact stock movement, but the positive sentiment suggests a likely increase.
The earnings call summary and Q&A reveal a mixed sentiment. Financial performance is impacted by foreign currency, with a negative EPS expectation. Product development and market strategy are positive due to store expansions and commercial growth. However, financial health is pressured by margin decline and increased costs. Shareholder returns remain uncertain. The Q&A highlights concerns about costs, margins, and inflation, but also shows confidence in initiatives and market share gains. The lack of clear guidance and quantification in some areas tempers overall optimism, resulting in a neutral outlook.
The earnings call summary indicates positive aspects such as plans for strategic growth through significant CapEx investments, store openings, and improved sales trends. Despite foreign currency impacts, there is an emphasis on market share growth and competitive positioning. The Q&A section highlights management's confidence in share gains and merchandise margin improvements, although some responses lacked clarity. Overall, the strategic initiatives and optimistic outlook on sales trends and market share contribute to a positive sentiment, suggesting a likely stock price increase.
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