- Company name
- AutoZone
- Sector
- Auto parts retail
- About
- AutoZone sells car parts. It runs retail stores, and it also sells parts in bulk to repair shops (the commercial business). AutoZone does not grow mainly by opening many new stores. It grows profit per share mainly by buying back its own stock every year.
- Thesis
- AutoZone buys back about 8% of its shares every year. This shrinking share count drives most of its profit-per-share growth. The market doubts how long this pace can continue. AutoZone borrows money to fund part of the buyback. Net debt already sits above its own target range. For the discount to close, store sales must keep growing. Cash flow must also catch up to the buyback pace, so debt does not keep rising against earnings. The board added $1.5 billion to the buyback authorization in June 2026, a sign it still wants to keep this pace. Q4 fiscal 2026 results, reported September 22, 2026, showed sales up 5.6% and expanding margins, a good sign for the buyback. The next quarterly report is expected around December 22, 2026. If sales growth and cash flow both hold up over the next two to three quarters, the discount can close. If debt keeps rising faster than cash flow, AutoZone may need to slow the buyback, and the discount could persist.
- Risks
- AutoZone borrows money to fund its buyback. Net debt is about 2.78 times EBITDA. This is above the company's own past target range.
The buyback needs steady cash flow. Cash flow has grown slower than the buyback pace in recent years. If this gap continues, AutoZone may need to slow the buyback.
If the buyback slows, profit-per-share growth slows too. Part of the stock's value depends on the buyback continuing at its current pace.
- Recent events
- 2026-09-22: AutoZone reported Q4 fiscal 2026 results on this date: net sales of $6.6 billion, up 5.6%, and diluted EPS of $56.05, above the $54.08 analysts expected.
2026-06-16: AutoZone's board approved an additional $1.5 billion for share repurchases, bringing total authorized buybacks since 1998 to $42.2 billion.
2026-06-01: AutoZone's most recent quarter: sales grew 8.4%. Operating profit (EBIT) grew 6.6%. EBIT grew slower than sales, so the operating margin fell slightly.