Detailed Narrative
Sales acceleration led by commercial
Total sales grew +8.4% to $4.8B, the strongest increase in over three years and an acceleration from the first half. Domestic same-store sales were +4.1%, with domestic commercial (DIFM) up +10.4% to $1.4B and DIY up +2.2%. Commercial now represents just under 34% of domestic auto parts sales and 29% of total company sales. Both national accounts and up-and-down-the-street customers grew double digits, and management stressed AutoZone is still under-penetrated at roughly 5% commercial market share.
Intra-quarter cadence and weather softness
Domestic comps ran +5.0% in the first four weeks, +4.5% in the second, and +2.9% in the final four-week segment, with the last two weeks decelerating to +1.3%. Management attributed the slowdown to unseasonably cool, wet weather that suppressed heat-related categories such as air conditioning, starting and charging, affecting both DIY and commercial. They expressed confidence that a normal-to-hotter summer would restore category demand and pointed to a strong prior winter as a positive setup.
Mega-Hub and store-growth strategy
AutoZone opened 82 stores globally (ending at 7,856), including 14 Mega-Hubs to reach 156, and is on track for ~365 openings in FY26 versus 305 last year. Mega-Hubs carry over 100,000 SKUs and are driving outsized sales lift; the pipeline holds 100+ locations toward a ~300 target (possibly higher), with at least 40 planned in FY27. Management said newer Mega-Hubs come 'out of the gate much hotter' thanks to a stronger commercial base and more direct-to-customer utilization, and that new stores are exceeding pro forma on both DIY and commercial.
Margins, LIFO and cost discipline
Gross margin was 52.2%, down 57 bps, hurt by a $20M non-cash LIFO charge (77 bps); excluding LIFO, gross margin rose 20 bps as ~42 bps of underlying improvement offset ~22 bps of commercial mix drag, aided by positive merchandise margins, improving shrink and supply-chain productivity. SG&A leveraged 25 bps on +7.6% growth (+3% per store). LIFO charges are running far above prior year — $177M YTD, ~$207M expected for FY26 versus $64M — as higher costs pressure LIFO layers.
Inflation, tariffs and DIY deferral
Like-for-like same-SKU inflation ran just north of +7% for both DIY and commercial, with DIY ticket +5.6% (the gap versus inflation reflecting product mix) and commercial ticket ~+6%. Management expects ticket to moderate to the mid-4% range in Q4 as the prior-year tariff-inflation ramp laps. DIY traffic fell -3.6% (a second straight mid-3% decline), which management tied to consumer deferral; they see room for transaction improvement as the initial deferral cycle laps and share gains continue.
International and capital allocation
International same-store sales grew +1.6% constant currency (+16.6% unadjusted, with a 1,490 bps FX tailwind) across 1,090 stores (933 Mexico, 157 Brazil), pressured by a soft Mexican macro; management expects a similar Q4 and a reacceleration when economies improve, citing strong returns on capital. The company invested nearly $1.6B in CapEx (similar planned for FY27), repurchased $586M of stock with $800M remaining on authorization, generated $455M of free cash flow ($1.1B YTD), and finished at 2.5x EBITDAR leverage.