- 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%. Gross margin rose, but a one-time tariff refund caused most of the rise, so the margin gain does not show lasting strength. The next quarterly report is expected around December 8, 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. On the company's own measure, adjusted debt was 2.5 times EBITDAR in fiscal 2026 and in fiscal 2025. This is within its target. But buybacks are larger than free cash flow, so the buyback pace depends on debt that grows with EBITDAR.
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.
- Balance sheet
- AutoZone had a stockholders' deficit of $2.5 billion at August 29, 2026. The reason is that, over many years, it spent more on buybacks than it earned and kept. This is a choice, not distress. The business makes steady cash, and management sets debt to keep investment-grade ratings. Total debt was $9.08 billion at that date, all unsecured at the parent. It was fixed-rate senior notes plus commercial paper ($1.36 billion at May 9, 2026, at 3.96%). In July 2026, AutoZone added $850 million of 4.95% notes due 2031. The company's own measure is adjusted debt: debt, plus finance leases of $417 million, plus 6 times rent. Adjusted debt of $12.5 billion was 2.5 times EBITDAR of $5.04 billion for fiscal 2026, the same as a year earlier. EBIT of $3.72 billion covered interest of $473 million about 7.9 times. Suppliers fund a large part of the inventory: accounts payable were 111% of inventory. At May 9, 2026, $5.6 billion of payables were in supplier finance programs with banks. A change in these programs or in AutoZone's rating could require more debt. Liquidity comes from cash of $326 million and a $2.25 billion revolving credit facility to November 2028, undrawn at May 9, 2026. S&P rates AutoZone BBB and Moody's rates it Baa1, both stable at the last affirmations found (March 2025 and March 2024). Buybacks of $2.0 billion in fiscal 2026 were larger than free cash flow. In the 36 weeks to May 9, 2026, operating cash flow of $2.12 billion less capital spending of $1.00 billion gave $1.12 billion. Buybacks in the same period were $1.32 billion. Thus the buyback pace depends on debt growing with EBITDAR.
As of 2026-08-29.
- Checkpoints
- Sep 22, 2026: Q4 fiscal 2026 results: sales growth and margin. Passed. Watch: Sales growth near or above 5% with a lasting gross margin gain passes; slower sales or a margin gain from one-time items only fails. Outcome: Net sales rose 5.6% and EPS of $56.05 beat estimates, but domestic same-store sales grew only 1.6% and tariff refunds gave most of the 182 basis point margin gain.
Dec 8, 2026 (estimate): Q1 fiscal 2027 results: same-store sales and buyback pace. Pending. Watch: Domestic same-store sales growth of 2% or more with buybacks at a steady pace and adjusted debt near 2.5 times EBITDAR passes; weaker sales or leverage above about 2.6 times fails.
Mar 2027 (estimate): Q2 fiscal 2027 results: cash flow against buybacks. Pending. Watch: Free cash flow that grows faster than the buyback pace passes; buybacks funded mostly by new debt fail.
- 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.