AUTOZONE Q2 FY26 earnings call AZO

Severe winter storms, particularly in the last two weeks of Q2, significantly impacted AutoZone's commercial sales, which slowed to 1% growth during those weeks compared to over 12% in the preceding ten weeks. The storms also affected DIY sales, especially in the Mid-Atlantic and South Atlantic, and caused store closures, leading to a temporary drag on overall performance. Historically, such weather events drive increased failure and maintenance needs, which AutoZone expects to benefit its spring and summer selling season.

AutoZone experienced like-for-like same SKU inflation of over 6% for DIY and over 5% for commercial in Q2, contributing to average ticket growth. The company anticipates average ticket growth to continue sequentially through Q3 and peak in Q4, driven by ongoing tariff impact^🌐s. AutoZone prices goods against weighted average cost and expects mid-single-digit like-for-like retail SKU inflation to persist, with most of its business being break/fix and maintenance, which is less elastic to price changes.

AutoZone is making substantial capital investments, nearly $1.6 billion in FY26, focused on accelerating store growth, including Hubs and Mega-Hubs, and enhancing its supply chain. The company opened 64 stores globally in Q2 and plans 350-360 for FY26, with a target of 500 annual openings by FY28. These investments are yielding strong sales productivity from new stores and are expected to drive market share gains and accelerate top-line and EBIT growth in future years.

Despite the weather-related slowdown at quarter-end, AutoZone's domestic commercial business grew 9.8% for the quarter, driven by improved satellite store inventory, Hub/Mega-Hub coverage, and enhanced speed of delivery. The company is gaining share across national, regional, and local accounts, with Mega-Hubs continuing to drive faster growth and providing expanded assortment. AutoZone remains optimistic about reaccelerating transaction growth in the back half of the fiscal year.

AutoZone continues to expand its international footprint, opening 18 new stores in Mexico and 3 in Brazil in Q2, bringing the total to 1,065 international stores. While Mexico's soft macro environment led to slower constant currency same-store sales growth of 2.5%, the company is gaining market share and remains committed to investing in these markets, expecting them to be a meaningful contributor to future sales and operating profit growth.

A significant noncash LIFO charge of $59 million in Q2 negatively impacted gross margin by 138 basis points and reduced EPS by $2.66 per share. Excluding this charge, EBIT would have grown 7.2% and EPS 7.1%. The company anticipates further LIFO charges of approximately $60 million in each of the remaining two quarters of FY26, totaling $277 million for the year, primarily due to higher costs from tariffs.