# AutoZone, Inc. (AZO): Fiscal 2026 Narrative

AutoZone's fiscal year is 52 or 53 weeks and ends on the last Saturday in August. Fiscal 2026 ran 52 weeks and ended August 29, 2026; fiscal 2025 also ran 52 weeks (ended August 30, 2025), and fiscal 2024 ran 53 weeks. The first three quarters are 12 weeks each and the fourth quarter is 16 weeks (17 in a 53-week year), so the fourth quarter carries a disproportionate share of the year: 32.4% of fiscal 2026 net sales and 36.2% of net income.

## Business

*From the fiscal 2026 Form 10-K, accession 0001104659-26-118791.*

AutoZone sells automotive replacement parts and accessories to do-it-yourself (DIY) retail customers and to professional repair shops ("commercial" customers) across the Americas. At August 29, 2026 it operated 8,031 stores: 6,863 in the United States, 1,001 in Mexico and 167 in Brazil. Each store stocks new and remanufactured hard parts, maintenance items, accessories and non-automotive products for cars, SUVs, vans and light trucks. Its revenue comes from selling that merchandise; it earns no revenue from repair or installation services. It also sells online through autozone.com and, for commercial customers, autozonepro.com, and it sells ALLDATA diagnostic, repair, collision and shop-management software to repair shops.

Net sales were $20.34 billion in fiscal 2026. By product grouping:

- **Failure** parts (batteries, starters and alternators, calipers, water pumps, radiators and similar): $9.95 billion.
- **Maintenance** items (oil and fluids, filters, brake pads and rotors, wipers, spark plugs and similar): $7.42 billion.
- **Accessories and other** (floor mats, tools, cleaners, drinks and snacks and similar): $2.97 billion.

Failure and maintenance categories together made up about 85% of sales. Sales in the United States were $17.61 billion and sales outside it $2.72 billion. One class of similar products accounted for about 14% of revenue, and one vendor supplied about 14% of purchases. Since the fourth quarter of fiscal 2025, AutoZone has reported a single operating and reportable segment ("Auto Parts"). The chief executive reviews consolidated net income, along with compensation, rent, depreciation, advertising and other expense lines, to allocate resources.

**Commercial.** At year end, 6,443 domestic stores and the vast majority of Mexican and Brazilian stores ran a commercial program offering prompt delivery and trade credit to repair garages, dealers, service stations and fleets. Domestic commercial sales grew 10.6% in fiscal 2026 and made up 33.1% of domestic sales. The company calls this market highly fragmented and supports it with dedicated sales teams, the AutoZone Pro ordering app and the ProVantage loyalty program.

**Store network and supply chain.** Most stores carry 20,000 to 25,000 SKUs. Hub stores carry 40,000 to 50,000 and mega hubs 80,000 to 110,000, and these give nearby stores same-day access to a wider hard-parts range. At year end there were 417 domestic and 74 international hub stores. Within the domestic hubs were 172 mega hubs, 39 more than a year earlier, and there were another 11 mega hubs in Mexico. The company opened 374 net new stores in fiscal 2026 (304 in fiscal 2025) and relocated 10. Of the 8,031 stores, 4,542 are leased and 3,489 owned, with 54.7 million square feet of selling space. Thirteen U.S. distribution centers, two in Mexico and one in Brazil (about 9.2 million square feet) restock the stores up to several times a week, depending on store sales volume. The company's main store support center is in Memphis, Tennessee, with others in Monterrey and Chihuahua (Mexico), Sao Paulo (Brazil) and Gurugram (India). Sourcing offices are in Shanghai and Istanbul.

**How it competes.** AutoZone aims to be the value leader. It sells good/better/best assortments built around exclusive in-house brands: Duralast and its family of brands, Econocraft, ProElite, ShopPro, SureBilt, TotalPro, TruGrade and Valucraft. It also offers free services, including the Loan-A-Tool program, check-engine-light readings through AutoZone Fix Finder, and battery, starter and alternator testing. Its proprietary Z-net electronic catalog looks up parts by vehicle. Competitors range from national, regional and local parts chains to independents, online sellers and marketplaces, wholesale distributors, jobbers, dealers and mass merchants.

**Demand drivers and seasonality.** Management ties long-run demand to miles driven and to the number of vehicles seven years old or older, which are usually out of warranty. U.S. miles driven rose 0.8% in the twelve months to July 2026. The average light vehicle on U.S. roads is 12.9 years old, and vehicles seven years or older make up about 44% of the U.S. fleet. Sales peak from February through September and are lowest in December and January. Extreme heat or cold lifts sales by causing parts failures, while mild or rainy weather softens them.

**People and capital return.** AutoZone had about 132,000 employees ("AutoZoners") at year end, about 21,000 of them outside the U.S., and has no U.S. collective bargaining agreements. It pays no dividend and returns cash through a share repurchase program that has run since 1998. Through August 29, 2026 the program had bought back 156.2 million shares for $40.5 billion, against total Board authorizations of $42.2 billion.

## Risk factors

*From the fiscal 2026 Form 10-K, accession 0001104659-26-118791 (Item 1A). The Q3 fiscal 2026 Form 10-Q (accession 0001104659-26-073525) reported no material changes to the prior year's risk factors.*

These are the risks the company describes in the most detail:

- **Tariffs and trade policy.** In February 2026 the U.S. Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act (IEEPA). The President responded with an executive order imposing tariffs under Section 122 of the Trade Act of 1974 for 150 days, effective February 24, 2026. The company says further trade action is unclear. Because it imports directly and indirectly from many countries, new tariffs could materially raise its costs and disrupt its supply chains. AutoZone directly imported about 12% of its fiscal 2026 purchases, and many domestic vendors import products or components. The company says tariff-driven inflation is the main reason its LIFO reserve rose (see MD&A).
- **Demand for parts.** Demand depends on things the company does not control: the age of the fleet, miles driven (affected by fuel prices, ride sharing and weather), the economy, weather, longer-lasting parts, and the quality and warranty length of new vehicles. The company also names wider electric-vehicle adoption, which can mean fewer parts failures. It also names original manufacturers or regulators restricting access to telematics, diagnostic tools and repair information, which could push owners to dealers.
- **Competition.** Rivals may have more money, better sourcing, bigger stores, deeper relationships or better use of data analytics and AI. Online and multi-channel sellers often run at lower cost and offer faster or free delivery. AutoZone's service-heavy model gives it a higher cost structure than some competitors, which puts pressure on margins.
- **Sustaining growth.** Revenue grew from $14.6 billion in fiscal 2021 to $20.3 billion in fiscal 2026, about 7% a year, and the store count from 6,767 to 8,031, about 3% a year. The company warns that this pace may not continue, and that new, remodeled and expanded stores may not open on plan or run profitably. Growing commercial share means competing with long-established distributors that have large inventories and experienced sales forces.
- **Labor.** Workforce costs are the largest operating expense. Hourly roles have high turnover, wages face inflationary pressure, and changes to overtime and minimum-wage rules could raise costs. The company also flags rising union activity in U.S. retail and recent NLRB decisions that make organizing easier. It says unionization could challenge its culture and operating model.
- **Vendors and product quality.** AutoZone depends on vendors for quality merchandise at competitive prices and payment terms, and on their compliance with product-safety law. Actual or perceived safety problems could bring recalls, litigation and reputational harm. A significant vendor in financial or operating trouble could leave stores short of product.
- **Supply chain and distribution.** Damage to distribution centers, driver shortages, fleet costs and congestion at ports and rail could cut inventory availability. The company is building several new distribution centers and running technology projects. If these fall short, it could be left with too much or too little inventory and need further investment.
- **International operations.** Mexico and Brazil call for different merchandising for local vehicle fleets and customer habits. They also bring tariff, tax, anti-corruption and intellectual-property risks. Results there are translated into U.S. dollars, so exchange-rate moves, chiefly in the Mexican peso, flow through reported results.
- **Business interruptions.** War, terrorism, civil unrest, severe weather, public health crises and failures of utilities, banking or other critical infrastructure could disrupt stores, distribution centers and transport.
- **Brand and reputation.** Sales depend partly on the AutoZone and private-label brands. Negative publicity, true or not and fast-spreading on social media, could erode trust. So could the company's positions on social, political or environmental issues, or a failure to meet ethical, labor or environmental standards.
- **Technology, cybersecurity and AI.** Key processes run on in-house and third-party systems, some of them older legacy systems being replaced or moved to the cloud. The company says it has had no material breach, but unauthorized parties have in the past gained access and taken data. It also flags generative and agentic AI as both a competitive risk and a source of more sophisticated attacks. A growing body of U.S. state data-privacy laws adds to compliance costs.
- **Self-insurance.** AutoZone self-insures up to set limits for workers' compensation, employee medical, general and product liability, property and vehicle claims. Reserves were $308.5 million at year end. More claims, or higher claim severity or healthcare costs, could push costs above reserves.
- **Credit ratings and supplier finance.** The company keeps its investment-grade ratings by holding to target financial ratios. A downgrade would raise borrowing costs, limit market access, and could make banks less willing to take part in the supplier-finance programs that support its high payables-to-inventory ratio. At year end, $5.5 billion of supplier obligations confirmed under these programs sat in accounts payable, plus $285.8 million in other long-term liabilities.
- **Law, regulation and climate.** The company is exposed to new laws, changes in enforcement and tax legislation across employment, environmental, privacy, trade and consumer-protection rules. It also faces climate-related rules, such as fuel-economy, emissions and vehicle-incentive rules that could reduce miles driven or demand. Physical climate risks include drought and wildfire in California.
- **Corporate-responsibility goals.** The company may miss its greenhouse-gas and other corporate-responsibility goals, or fail to meet stakeholders' expectations, which could affect public perception, employee morale and support from customers and stockholders.
- **Litigation.** The company faces lawsuits and investigations in the ordinary course of business, covering wage and hour, employment, product liability, privacy and cybersecurity, environmental, intellectual-property and regulatory matters. The 10-K says it does not expect these to be material, alone or together.
- **Macroeconomic conditions.** Large U.S. government deficits, inflation, interest rates, exchange rates, energy prices, geopolitical conflict, tariffs and a possible prolonged government shutdown could hurt sales growth, margins and overhead.

## Management's discussion: fiscal 2026

*From the fiscal 2026 Form 10-K, accession 0001104659-26-118791 (Item 7 and the financial statements), unless noted.*

**Results.** Fiscal 2026 net sales rose 7.4% to $20.34 billion from $18.94 billion. Growth came mainly from a 3.3% domestic same-store sales increase and $534.3 million of sales from new domestic and international stores. Domestic commercial sales rose $550.1 million, or 10.6%. Same-store sales were:

| Same-store sales, fiscal year (52-week basis) | 2026 | 2025 |
|---|---|---|
| Domestic | 3.3% | 3.2% |
| International, as reported | 13.5% | (3.2%) |
| International, constant currency | 2.2% | 9.3% |
| Total company, as reported | 4.5% | 2.4% |
| Total company, constant currency | 3.2% | 3.9% |

The international business looks much stronger in dollars than in local currency. Exchange rates added $254.4 million to net sales and $73.9 million to operating profit, while constant-currency international comparable sales grew 2.2%.

**Margins: LIFO and tariff refunds.** Gross profit was $10.64 billion, or 52.3% of sales, down 29 basis points from 52.6%. The company attributes the decline to its non-cash LIFO charge, which cost 61 basis points: $192.0 million in fiscal 2026 against $64.0 million in fiscal 2025. U.S. inventory is valued on LIFO. The company says purchase-cost inflation, mainly from tariffs, raised its LIFO credit reserve to $275.0 million from $83.0 million, and increases in that reserve are charged to cost of sales. Working against this were IEEPA tariff refunds. After the February 20, 2026 Supreme Court ruling, AutoZone filed for refunds on April 20, 2026. During the year it received $127.6 million, substantially all it had claimed. Of that, $96.0 million reduced cost of sales (refunds on goods already sold) and $31.6 million reduced inventory, to flow through cost of sales as that inventory is sold. The fourth-quarter earnings release puts the full-year refund benefit at 48 basis points of gross margin.

Operating, selling, general and administrative expenses rose to $6.92 billion, or 34.0% of sales, from 33.6%. Management attributes the increase mainly to investment in growth initiatives. Operating profit rose 3.1% to $3.72 billion. The executive summary puts the net LIFO drag on the operating-profit comparison at $128.0 million, against the $96.0 million refund benefit and the $73.9 million currency benefit.

**Below the operating line.** Net interest expense was $472.6 million, compared with $475.8 million. Average borrowings were $8.9 billion, compared with $9.0 billion, at a weighted average rate of 4.53%, compared with 4.48%. The effective tax rate rose to 20.9% from 20.3%, partly because stock-option exercises produced a smaller tax benefit: $30.7 million, compared with $58.2 million. Net income rose 3.0% to $2.57 billion. Diluted EPS rose 5.3% to $152.55 from $144.87, helped by fewer shares: weighted diluted shares fell to 16.87 million from 17.25 million.

**Cash flow and investment.** Operating cash flow was $3.25 billion, compared with $3.12 billion. Management credits higher net income and favorable changes in receivables and inventory. Capital expenditures rose to $1.43 billion from $1.33 billion, driven by new stores and hub and mega hub expansion. Net investment in tax-credit equity funds fell to $24.0 million from $111.8 million. Inventory rose to $7.74 billion from $7.03 billion, or $963 thousand per store compared with $918 thousand. Payables covered 111.1% of inventory, compared with 114.2% a year earlier. Inventory turnover was 1.3 times, compared with 1.4 times.

**Capital allocation and balance sheet.** AutoZone bought back 579 thousand shares for $2.03 billion, including excise tax, compared with $1.53 billion in fiscal 2025. The buybacks were funded mainly by operating cash flow. On June 16, 2026 the Board added $1.5 billion of authorization, which left $1.6 billion available at year end. The company's non-GAAP "cash flow before share repurchases and changes in debt" was $1.8 billion, about the same as in each of the two prior years.

Debt ended the year at $9.08 billion, compared with $8.80 billion. In fiscal 2026 the company repaid its $400 million 3.125% notes (April 21, 2026) and its $450 million 5.050% notes (July 15, 2026). It issued $850 million of 4.950% senior notes due July 2031 on July 14, 2026 and increased commercial paper by a net $276.4 million, to $1.025 billion outstanding. All debt is unsecured. Maturities in the coming year total $1.63 billion: the $600 million 3.750% notes due June 2027 plus the commercial paper. Both are classified as long-term because the company can refinance them through its $2.25 billion revolving credit facility, which runs to November 15, 2028. The facility had no borrowings and $2.2 billion available at year end. The interest-coverage covenant requires at least 2.5:1, and the ratio was 5.2:1. Year-end cash was $326.1 million, of which $113.6 million was held outside the U.S. The stockholders' deficit narrowed to $2.50 billion from $3.41 billion.

Under the company's non-GAAP measures, adjusted debt to EBITDAR held at 2.5 times, the level AutoZone targets to keep its investment-grade ratings. Adjusted after-tax return on invested capital (ROIC) fell to 35.8% from 41.3%. In the company's reconciliation, invested capital grew to $9.33 billion from $7.87 billion while adjusted after-tax return grew to $3.34 billion from $3.25 billion.

**Market risk.** Variable-rate debt was $1.0 billion at year end, compared with $748.6 million. The main currency exposure is the Mexican peso: net assets in the Mexican subsidiaries were $1.3 billion. A hypothetical 10% adverse move in the exchange rate would reduce their value by about $116.6 million. The company says it generally does not hedge these net investments.

**Outlook.** Management expects to "slightly increase" investment in fiscal 2027 compared with fiscal 2026, directed mainly at new stores and expanded hub and mega hub stores.

## Current quarter: fourth quarter of fiscal 2026 (16 weeks ended August 29, 2026)

*From the fourth-quarter earnings release furnished on Form 8-K, accession 0001171843-26-006159 (Exhibit 99.1, September 22, 2026), and the fiscal 2026 Form 10-K, accession 0001104659-26-118791. The 10-K does not present the fourth quarter as a separate period.*

The release compares the 16-week quarter with the 16-week fourth quarter of fiscal 2025. Net sales rose 5.6% to $6.59 billion from $6.24 billion. Same-store sales grew more slowly than earlier in the year:

| Same-store sales | Q4 FY2026 (16 wks) | Q4 FY2025 (16 wks) |
|---|---|---|
| Domestic | 1.6% | 4.8% |
| International, as reported | 10.7% | 2.1% |
| International, constant currency | 1.3% | 7.2% |
| Total company, as reported | 2.7% | 4.5% |
| Total company, constant currency | 1.5% | 5.1% |

Domestic commercial sales were $1.91 billion, up 8.6%, and average sales per commercial program per week rose 2.7% to $18.7 thousand. Chief Executive Phil Daniele described "a difficult selling environment the first eight weeks of our quarter," after which sales "strengthened" over the last eight weeks.

Gross margin was 53.3%, up 182 basis points. The release credits 145 basis points to tariff refunds and 105 basis points to the net non-cash LIFO impact, partly offset by a higher commercial mix. No IEEPA refunds had been recognized as of May 9, 2026, the end of the third quarter (Q3 Form 10-Q), which places the $96.0 million cost-of-sales benefit in the fourth quarter. Operating expenses rose to 33.4% of sales from 32.4%, which the release attributes mainly to growth initiatives. Operating profit rose 10.1% to $1.32 billion. Net income was $931.6 million, compared with $837.0 million, and diluted EPS was $56.05, compared with $48.71.

The company opened 175 stores in the quarter: 97 in the U.S., 68 in Mexico and 10 in Brazil, including 16 new U.S. mega hubs. It repurchased 223 thousand shares at an average of $3,125 per share, a total of $697.5 million. Inventory was up 10.1% from a year earlier. Net inventory (inventory less payables) was negative $107 thousand per store, compared with negative $131 thousand a year earlier.

Daniele said the company expects "sales in each of the three countries in which we operate to accelerate in the new fiscal year." He also said it continued to gain share.

**Release and 10-K figures that differ.** The release's income-statement totals for the full year match the audited 10-K. Its cash-flow lines do not. The release reports 52-week "cash flow from operations" of $3.30 billion and "capital spending" of $1.50 billion, while the audited cash flow statement in the 10-K shows net cash from operating activities of $3.25 billion and capital expenditures of $1.43 billion. For fiscal 2025 the release shows $3.16 billion and $1.37 billion, against $3.12 billion and $1.33 billion in the 10-K. For the 16-week quarter the release reports cash flow from operations of $1.18 billion and capital spending of $498.8 million. The 10-K full-year amounts less the 36-week amounts in the Q3 10-Q give $1.13 billion and $436.1 million. Both sets are shown here, labelled by source.

### Third quarter of fiscal 2026 (12 weeks ended May 9, 2026)

*From the Q3 fiscal 2026 Form 10-Q, accession 0001104659-26-073525, and the third-quarter earnings release furnished on Form 8-K, accession 0001171843-26-003674 (Exhibit 99.1, May 26, 2026).*

Net sales rose 8.4% to $4.84 billion. Constant-currency total same-store sales grew 3.9%, and new stores added $129.0 million. Domestic same-store sales rose 4.1%. International same-store sales were up 16.6% as reported but 1.6% in constant currency. Domestic commercial sales rose 10.4% to $1.4 billion. Gross margin fell to 52.2% from 52.7%, including a 77 basis point net non-cash LIFO charge. Operating expenses fell to 33.1% of sales from 33.3%, which the company attributes to strong sales growth. Operating profit rose 6.6% to $923.8 million, despite a $36.0 million net unfavorable LIFO impact. Net income rose 5.4% to $641.5 million and diluted EPS 7.7% to $38.07. The effective tax rate was 21.1%, compared with 19.4%, mainly because stock-option exercises produced a smaller tax benefit.

For the first 36 weeks, sales rose 8.3% to $13.74 billion. Gross margin fell to 51.9% from 53.2% on a 142 basis point LIFO charge, and net income fell $20.1 million to $1.64 billion. Diluted EPS edged up 0.5% to $96.69 as the share count fell. In the release, Daniele said international sales in constant currency "continued to be challenged" and were below plan, while domestic DIY and commercial sales both grew. At that point the company expected to open about 355 to 365 stores for the year. It opened 374.

## Subsequent events

*From the fiscal 2026 Form 10-K, accession 0001104659-26-118791 (Note K and Item 7), and Forms 8-K as noted.*

These are the events disclosed after the August 29, 2026 year end:

- **Share repurchases.** From August 30 through October 19, 2026, AutoZone repurchased 106,862 shares for $310.6 million. This left $1.3 billion of repurchase authorization (10-K, Note K). Shares outstanding were 16,094,341 at October 19, 2026.
- **Director departure.** On October 6, 2026, director Claire R. McDonough told the Board she will not stand for re-election at the 2026 Annual Meeting of Stockholders, because she has taken an executive role elsewhere whose calendar conflicts with AutoZone board meetings. The company said her decision was not due to any disagreement (Form 8-K, accession 0001171843-26-006565). The 10-K cover gives the annual meeting date as December 16, 2026.
- **CFO resignation.** On October 20, 2026, Chief Financial Officer Jamere Jackson gave notice that he is resigning effective November 25, 2026. The company's October 26 press release says he will become Chief Financial Officer of FedEx Corporation. The company said his departure is unrelated to its financial or operating results or to any disagreement over accounting or reporting. AutoZone has begun an external search for a successor. From the effective date until one is named, Vice President and Controller J. Scott Murphy will serve as principal financial officer as well as principal accounting officer (Form 8-K and Exhibit 99.1, accession 0001171843-26-006805). The release quotes Daniele as saying the company is "on track for a solid fiscal 2027."

The 10-K discloses no acquisitions, divestitures or new borrowings after year end, and goodwill was unchanged at $302.6 million across the year. The third-quarter 10-Q's subsequent-events disclosure, covering the period after May 9, 2026, consists of repurchases of 53.9 thousand shares for $174.0 million through June 5, 2026.