AutoZone (AZO) — Q2 FY2026 Earnings Recap

Results vs. Consensus

Q2 FY26 Scorecard

YoY Comparison

Comp Cadence (Domestic SSS, by 4-week segment)

Segment Performance

Domestic Auto Parts

Domestic sales $3.84B (+8.5% reported, +3.4% comp). Commercial $1.22B (+9.8%); DIY $2.62B (+1.5% comp). Commercial represents 32% of domestic auto parts sales and 27% of total company sales (slightly lower mix than Q1 due to storm impact). Commercial weekly sales per program $15,400 (+4.8% YoY, depressed by 80 program adds in existing stores which dilute the per-program average near-term but accelerate forward growth). 128 net new commercial programs added in Q2; total commercial programs now 6,310 across 94% of domestic stores.

The storm decomposition is critical: 10 weeks at +12%+; 2 weeks at +1%. The geographic spread of the storm was unusually broad — from Dallas through Tennessee, Kentucky, DC. ~200-400 stores were closed on rotation during the storm period; commercial customers (auto repair shops) remained closed longer than retail. Management noted that as of early Q3 (the call), the commercial business has "snapped back" to expected levels.

DIY +1.5% in line with Q1. The 4-week-segment cadence (+2.3% / –0.5% / +2.8%) shows the same weather-comp pattern as Q1: the middle segment was the weak one, driven by the prior-year's cold-snap-driven elevated comp. Same-SKU inflation accelerated to +6%+ for DIY (from Q1's +4.8%) as tariff costs continued to flow through retail.

International (Mexico + Brazil)

International same-store sales +2.5% on constant-currency basis (down from +3.7% Q1); reported +17.1% on FX tailwind (peso +12% YoY). 21 international stores opened in Q2 (18 in Mexico, 3 in Brazil); 1,065 international stores total (Mexico 913, Brazil 152). Mexico's economic environment continues to weigh on consumer spending; AutoZone continues to gain market share.

Store Network & Footprint

Q2 store openings: 64 globally (+42% vs prior year Q2 of 45). 43 domestic, 21 international. Trailing 4-quarter store opening pace: 342 (vs 241 at end of Q2 FY25 — +42% YoY). FY26 plan reaffirmed at 350-360 stores. Q3 plan: 90-95 new stores globally (vs 84 last year). New stores are "exceeding our models" per Stearns.

Purple Wave / Supply Chain Investments (Cross-Cutting)

New Brazil DC opened in December, currently servicing Brazilian stores. Monterrey DC expansion (nearly doubling capacity) fully operational soon. Supply Chain 2030 project in final stages. Long-haul delivery service (newly mentioned in Q3 print cycle from a Copart-style perspective; here related to AutoZone's commercial-customer delivery economics).

Key Topics & Management Commentary

1. The Storm Impact — Quantified

"While our commercial sales increase was below our expectations, our results were negatively impacted due to the winter storms across much of the country during the last four-week segment of the quarter. To add a little more color around the impact the storms had on our domestic commercial sales, the two weeks the storms really impacted us, weeks 10 and 11, our commercial sales were up just over 1%, while the other 10 weeks of the quarter our commercial sales were up over 12%." — Philip Daniele, CEO

This is the single most important data disclosure in the call. Management explicitly decomposed the +9.8% commercial growth into: 10 weeks at +12%+ and 2 weeks at just +1%. Doing the simple arithmetic: if we replace those 2 storm weeks at +1% with the underlying +12% run-rate, the quarter's commercial growth would have been approximately +12.5-13%. The structural inflection thesis is intact; the optical deceleration is mechanical and time-limited.

2. New Stores Exceeding Pro Forma — The Strongest Forward Signal

"The stores we have opened over the last five years have exceeded the planned sales and earnings we modeled when these sites were approved." — Philip Daniele, CEO

"Our pipeline is very strong, and the stores are ahead of our pro forma in terms of our performance. So we like the, you know, we like the progress that we have made." — Jamere Jackson, CFO

The "exceeding pro forma" comment is the strongest possible forward indicator for the multi-year acceleration thesis. New stores typically take 4-5 years to mature, but if the cohort is outpacing internal pro forma at the early stages, the eventual mature-state productivity will be higher than initial underwriting. This compounds positively across the 350-360 FY26 cohort and the 500-stores-by-FY28 trajectory.

3. Commercial Acceleration: 5-Quarter Track Record

"Excluding sort of the severe weather and the prolonged impacts on both our DIY and commercial business, we would have, you know, printed a number in the second quarter very, very similar to that [first quarter]. I think what is important to us is that our DIY business continues to remain resilient, and our commercial business has sort of snapped back. So the results that we saw in the first quarter, you know, we see us performing somewhere in that ZIP code as we move forward." — Jamere Jackson, CFO

Jackson's explicit statement: ex-storm, Q2 commercial growth would have been similar to Q1's +14.5%. Looking forward into Q3, management expects the business to perform "in that ZIP code" — meaning continued low-to-mid teens commercial growth. The framing is consistent with our prior modeling and validates the structural acceleration thesis.

4. SG&A Discipline Through Cyclical Pressure

"On a per store basis, our SG&A was up 3.9% compared to the prior quarter's 5.8% increase as we managed our SG&A per store lower as sales softened in the middle of the quarter." — Jamere Jackson, CFO

SG&A discipline meaningfully improved sequentially. Per-store SG&A growth at +3.9% versus Q1's +5.8%. The decline reflects management toggling expense intensity in line with the soft sales weeks during the storm impact. This is exactly the operating discipline pattern Jackson committed to at initiation.

5. LIFO at $59M — Below Guide

"As I mentioned, we had a $59 million non-cash LIFO charge in Q2. We are planning a LIFO charge of approximately $60 million each of the remaining two quarters of fiscal 2026 as we are continuing to experience higher costs due to tariffs that are impacting our LIFO layers." — Jamere Jackson, CFO

Q2 LIFO charge of $59M was below the $60M guide. Q3 and Q4 LIFO guided at $60M each. Aggregate FY26 LIFO drag tracking at $277M ($98M Q1 + $59M Q2 + $60M Q3 + $60M Q4) versus the original September guide of ~$365M and the December revised guide of ~$277M. This is consistent with our revised modeling from Q1.

6. Same-SKU Inflation Accelerating Toward Q3 Peak

"Based on our inflation expectations, we continue to expect our average ticket to grow sequentially through the third fiscal quarter, which ends in May, and then peak during the fourth quarter as we will begin to lap the increases in inflation we saw in this past year's fourth quarter." — Philip Daniele, CEO

Same-SKU inflation in Q2: +6%+ DIY, +5%+ commercial. Management expects continued sequential acceleration through Q3 FY26 (ending May 2026), with the inflation pass-through peaking in Q4 as the prior-year comparisons begin to lap. Mid-single-digit same-SKU inflation will continue to flow through retails.

7. Tariff Strategy and Industry Pricing Discipline

"There are, you know, lots of discussion about what is going to happen with tariffs and, you know, obviously, the IEPA tariffs have been stayed at this point. That was a relatively small portion of our tariff bill, if you will. Most of our tariffs are the 232 tariffs. So we are still expecting to see tariff impact as we move through the back half of the year. I think the other dynamic is that, you know, we have talked about this notion of having, you know, a multipronged strategy here where we would, you know, continue to negotiate with our vendors, we diversify our sources, and then in some cases, we will raise our retails." — Jamere Jackson, CFO

Tariff dynamics remain "dynamic." The IEEPA China tariff stay (referenced in Q1 commentary) was relatively small; the Section 232 tariffs (the larger structural component) continue to pressure costs. The mitigation playbook (vendor negotiation, sourcing diversification, retail price increases) continues to operate.

8. Hub / Mega Hub Continued Deployment

"We opened five Mega Hubs and finished the quarter with 142 Mega Hub stores. We continue to expect to open approximately 30 Mega Hub locations over the fiscal year as our pipeline is exceptionally strong... we like the Mega Hubs and hubs, which is why you hear us keep taking those numbers up. You know, from several years ago from 40 to 100 stores, to 150, to 200, and now we believe we will have more than 300 at full build-out." — Philip Daniele, CEO

Mega Hub count 142 (+5 in Q2). FY26 plan reaffirmed at 30 Mega Hub openings (~165 by year end). Long-term target now "more than 300" — slightly elevated from the prior "just under 300" framing, consistent with the Q1 commentary on density experimentation potentially pushing the target higher.

9. Commercial Program Acceleration — 128 in Q2 Including 80 Existing-Store Adds

"This quarter, we opened 128 net new programs, including nearly 80 programs in existing stores, which dampened our sales per program growth but will accelerate our total growth moving forward. We finished with 6,310 total programs, and we now have our commercial program in 94% of our domestic stores." — Jamere Jackson, CFO

The 128 net new commercial programs in Q2 is the highest quarterly program addition rate AutoZone has reported in recent quarters. Importantly, 80 of these are in existing stores — accelerating commercial penetration without adding new stores. This depresses per-program metrics short-term (weekly sales per program +4.8% vs prior quarters' 8-10%) but accelerates the forward growth runway.

10. Mexico DC Capacity Expansion + Brazil Internalization Complete

"Our new Brazil distribution center opened and began servicing stores in December. Our new and much larger DC in Monterrey will be fully operational soon. We will also focus on optimizing our new distribution centers in the U.S. We are in the final stages of our Supply Chain 2030 project, which began in 2019." — Philip Daniele, CEO

The Brazil DC commissioning in December 2025 internalizes Brazilian distribution. The Monterrey DC expansion (nearly doubling capacity) completes in March 2026. The Supply Chain 2030 project is approaching completion — meaning supply chain investment will moderate after FY26 with the productivity benefits accruing through FY27-28.

11. Capital Allocation Discipline Through the Cycle

"We repurchased $311 million of AutoZone, Inc. stock in the quarter, and at quarter end, we had $1.4 billion remaining under our share buyback authorization." — Jamere Jackson, CFO

$311M of Q2 buyback (slightly slower pace than Q1's $431M, consistent with FCF timing dynamics). FY26 YTD buyback $742M; FY26 full-year buyback likely to be in the $1.5-1.8B range. The 25+ year buyback engine continues uninterrupted by the investment cycle.

Analyst Q&A

Same-SKU Inflation Outlook for Calendar 2H 2026

The opening question on same-SKU inflation trajectory through calendar H2 2026. Management's view: inflation continues to increase through Q3 FY26 (ending May) and most of Q4 FY26, then begins lapping the elevated prior-year base. The Section 232 tariffs (versus the stayed IEEPA tariffs) continue to drive cost pressure. Mid-single-digit same-SKU inflation expected through most of the fiscal year:

Q: "Could you talk a bit more about your same SKU inflation expectation? I think you said it would be with you mid-single-digit going forward, so maybe the rest of the fiscal year. But when you think about the second half of the calendar year, do you anticipate continued same SKU price benefit?" — Bret Jordan, Jefferies

A: "We believe that it will continue to increase over the third quarter and through most of the fourth quarter, and then the fourth quarter is when we will start annualizing those higher rates from last year. But we still see same SKU inflation, you know, kind of similar through third, and maybe slightly tailing off through, you know, the back half of what you said, calendar year." — Philip Daniele, CEO

Underlying Run Rate Ex-Storm

The most analytically important question of the call: what is the underlying run-rate of the domestic business after stripping out the weather noise? Management's response was direct — ex-storm, Q2 would have looked very similar to Q1, with commercial running +12%+ and DIY similar to the +1.5% pace. The commercial business has "snapped back" in early Q3:

Q: "Distilling through all the noise of the puts and takes of weather, both good and bad, including, you know, that widespread hit in late January and early February, what do you think the right underlying run rate of your domestic businesses is? And can you also talk about that on the commercial side?" — Christopher Horvers, JPMorgan

A: "As I talked about in our prepared remarks, you know, we were kind of running on the previous 10 weeks or so in the quarter. We were up in that 12% range. And then those last two weeks of the quarter were pretty substantially lower, at a 1% comp... we see nothing that indicates that we are not going to have pretty strong sales growth on the commercial side of the business going forward. [Jackson:] The first quarter results, we expected our second quarter to perform pretty similarly. Excluding sort of the severe weather and the prolonged impacts on both our DIY and commercial business, we would have, you know, printed a number in the second quarter very, very similar to that. I think what is important to us is that our DIY business continues to remain resilient, and our commercial business has sort of snapped back." — Philip Daniele, CEO / Jamere Jackson, CFO

Tax Refund Tailwind and Spring/Summer Outlook

A two-part question on tax refund dynamics and the weather-related setup for the spring/summer selling season. The "one big beautiful bill" referenced is the federal tax legislation that included measures expected to increase tax refunds (no tax on tips, etc.). Management's view: tax refunds expected to be larger, supporting the early part of spring; cold winter weather sets up strong undercar/chassis demand into summer:

Q: "Early days here, but a lot of talk about expectations around tax refunds this year. Are you seeing any signs of incremental traction and, I guess, sort of a similar theme, the weather that we have seen here in the last six or eight weeks, I guess what is your near-term outlook on demand creation from that?" — Bret Jordan, Jefferies

A: "I think if you kind of look across the Midwest, the, you know, the Mid-Atlantic, and the Northeast, what we have kind of affectionately called the Rust Belt markets for us. This type of weather that we have had in those markets for winter have always indicated a pretty strong category performance on those markets as you move through spring and summer selling season. So exactly those categories you talked about. Undercar will probably have some improved sales in those markets. Chassis, steering, suspension, anything that is open to the bottom of the car to get rust and salt on it. Those are going to drive maintenance and failure events over the summertime. So we are pretty encouraged by that. Tax refunds, I mean, it is, as you said, early on... we expect those to be slightly bigger, based on no tax on tips and all that sort of stuff that has been talked about pretty widely in the news. So we think that also bodes pretty well for us through the early part of spring and into early summer." — Philip Daniele, CEO

The Investment Cycle "Inning" Question

An important multi-year question on where AutoZone is in the investment cycle. Management's view: "middle innings" — meaningful additional ramp through FY28 with the 500-stores annual target. Pipeline strong; stores ahead of pro forma; SG&A pressure of 1.5-2 points expected to continue near-term and then taper as stores mature:

Q: "You have been on this journey to increase your hub count, grow SG&A spending. How would you assess where we are in the investment cycle? What inning are we in? How do we think about the pace of some of these investments as we go through the next couple of quarters?" — Steven Zaccone, Citi

A: "I would say we are in the middle innings. You know, one of the things we highlighted was that we expect to, by FY '28, to grow our domestic store count by 300 stores a year. And, you know, we are going to continue to ramp there. That means an incremental 40 to 50 stores next year, and then the following fiscal year. So we are kind of in the middle innings of that ramp. What I will say is that our pipeline is very strong, and the stores are ahead of our pro forma in terms of our performance. So we like the, you know, we like the progress that we have made. We like the sales growth that we are seeing. We like the market share gains that we are getting from that. It has put some pressure on our SG&A as we have been very transparent about, probably to the tune of 1.5 to 2 points. But, you know, we are managing the rest of the SG&A in a very disciplined way." — Jamere Jackson, CFO

Margin Re-Expansion vs. EBIT Dollar Growth

A nuanced question on whether AutoZone's operating margin can re-expand or whether the focus should be on EBIT dollar growth. Management's view: gross margin on both sides of the business can incrementally grow; commercial mix shift creates rate pressure that's intentional and operating-profit accretive; the company can deliver in the 18-19% operating margin range with faster top-line growth:

Q: "There was a comment made in the prepared remarks, growing market share in a disciplined manner. There has been talk about growing EBIT faster. Can you phrase it in terms of margins? Can the margins of the business re-expand? Or should we think about it in terms of EBIT dollar growth?" — Simeon Gutman, Morgan Stanley

A: "I will say, you know, we kind of think about how we manage margin rate on the two sides of the business. What I would say is I think we can incrementally grow both of them. You know, you start at the highest level of margin, gross margin rate, both on DIY, we have slight margin improvement, and we think we can improve gross margin in the commercial side of the business over time as well. Now we still believe that we are going to grow commercial faster than DIY, so you will end up with some margin mix pressure. But we are okay with that because at the end of the day, that commercial business throws off a pretty good amount of operating profit and EBIT. [Jackson:] In that 18% to 19% sort of operating margin range, we will operate the business in that ZIP code as we move forward." — Philip Daniele, CEO / Jamere Jackson, CFO

Commercial Snap-Back and the Call List Question

A question that probed whether the storm's commercial sales weakness might suggest AutoZone is lower on commercial customers' call lists. Daniele's response: absolutely not. The storm impact was the literal physical closure of commercial customers; the snap-back already underway in early Q3 reflects normal recovery patterns. The competitive positioning continues to improve through the multi-year initiatives:

Q: "Given the slowdown in the commercial business attributed to the weather, don't these jobs still get done? And wouldn't that imply the commercial business should have accelerated as meaningfully as the weather improved and if not, does that suggest anything about where AutoZone, Inc. sits on the call list?" — Michael Lasser, UBS

A: "No. Michael. I do not think so. I think the impact of the slowing at the end of our quarter was just literally that at the very end of our quarter. Those shops were closed for the most part and did not open. And it was, again, right at the very end of the quarter. We have seen a pretty nice snapback. We are very early in our quarter of Q3. I think what has been true over time is we continue to gain share on the commercial side of the business on the backs of our strategies. Putting more assortment closer to the customer through megs and Mega Hubs and hubs, continually improving our same, our satellite store assortments, and working on strategies that make us easier to do business with and getting those hard-to-find parts faster to those customer shops." — Philip Daniele, CEO

Mega Hub Lift Quantification

A question on the magnitude of the comp lift Mega Hubs deliver and how that has evolved. Daniele's response was descriptive rather than quantified — Mega Hubs continue to improve in productivity over time, density tests are pushing the long-term target up, and the per-store four-wall performance keeps improving:

Q: "As you guys continue to expand your Mega Hub strategy and get more experience there, can you help quantify the sales lift you are seeing in stores in a market where you open a Mega Hub?" — Scott Ciccarelli, Truist

A: "Well, yeah, we have never really quantified how much we think those things lift in total. Well, I will tell you this. We have been opening and working on our strategies for hubs and Mega Hubs for quite some time now. And, you know, going back several years, I could go back and tell you we thought we knew how high was high back eight to ten years ago with our strategies. We continue to perform different strategies and execution of tactics around how we deploy inventory to those stores, how we energize the inventory in a given market. You have heard us talk about doing density tests with more Mega Hubs in metro areas. And we continue to optimize and figure out way more ways to make those stores more productive for us. Specifically for commercial, but also on DIY. And we have yet to say we have reached peak performance at our hubs and Mega Hubs." — Philip Daniele, CEO

SG&A Investment Sustainability Through the Cycle

A question on whether AutoZone might lean into operating expense investment if comps re-accelerate, or whether the operating expense growth would moderate. Management's answer: the investment pace is set by capacity (it's hard to accelerate a store opening; staffs are already trained); the SG&A pattern reflects the new-store maturation curve rather than discretionary investment decisions:

Q: "If you do see this potential improvement in comps over the next couple of quarters given all the factors that have been discussed today, would you lean in and accelerate some of your investments such that operating expense growth will revert back to this high double-digit rate that was experienced last quarter?" — Michael Lasser, UBS

A: "We do not expect to go back to double-digit rates over the back half of the year. Again, the big driver there is we are starting to annualize the accelerated store growth that we had in the back half of last year. So we naturally would have expected the year-over-year growth from an SG&A standpoint to moderate some in the back half. [Daniele:] Most of these investments that we are talking about, particularly store growth and DCs, and I would say most of the distribution and supply chain investments, we are over the majority of those, you know, the DC openings and that sort of stuff. But the stores, it is hard to accelerate a store. They are going to open when they are going to open." — Jamere Jackson, CFO / Philip Daniele, CEO

What They're NOT Saying

1. No commercial program-detail granularity. The 80 in-existing-store commercial program adds is a meaningful forward growth lever, but the specific economics (ramp curve, weekly sales per program trajectory, return on investment) are not disclosed.

2. Mexico macro recovery timing not specified. Daniele referenced general Mexico economic pressure without specific commentary on when CC comp should re-accelerate. We model recovery through 2H calendar 2026 but the timing is uncertain.

3. Free cash flow weakness not fully explained. Q2 FCF $15M vs prior $291M is a meaningful decline; YTD FCF down 25%. Management attributed to CapEx and payables timing but did not elaborate on AP cycle dynamics. Worth tracking through Q3.

4. Buyback re-authorization timing still pending. $1.4B remaining authorization; Board re-authorization expected in FY26 but no specific timing or potential magnitude provided.

Market Reaction

• Pre-print: AZO closed March 2, 2026 at approximately $3,945, up modestly post-Q1 as buyside priced in the LIFO cadence revision and confirmed commercial inflection.
• Day-of: Stock initially opened down 1-2% on the commercial deceleration headline, but recovered as the storm decomposition (10 weeks +12%+, 2 weeks +1%) and "stores ahead of pro forma" commentary registered. Closed March 3 essentially flat on roughly 1.1x average volume.
• Read-through: ORLY and AAP both traded flat-to-slightly-down on similar weather-impact dynamics in their own quarters.

The muted market reaction reflects buyside's growing sophistication on the AutoZone story: the storm decomposition was accepted at face value, the underlying acceleration thesis remains intact, and the "stores ahead of pro forma" commentary registered as a structurally positive forward signal. We expect upward bias in the price action over the coming weeks as the Q3 print approaches and weather noise dissipates.

Street Perspective

Model Implications & Thesis Scorecard

Model updates off the print:

• FY26 revenue: Slight upward revision on the +8.1% Q2 pace ex-Mexico drag; $20.0-20.3B base case.
• FY26 gross margin: Maintained — LIFO cadence on track; ex-LIFO trajectory unchanged.
• FY26 EPS (reported): $150-$160 range maintained.
• FY26 EPS (adjusted ex-LIFO): $165-$175 range maintained.
• FY27 EPS (reported): $180-$195 range maintained.
• Fair value range: RAISED to $4,000-$4,600 (from $3,800-$4,400) on (a) demonstrated execution discipline through cyclical weather pressure, (b) "stores ahead of pro forma" forward indicator, (c) continued LIFO trajectory on revised lower path, (d) confirmed commercial inflection at +12-14% underlying run-rate.

Thesis Scorecard

Rating & Action

Maintaining Outperform; raising fair value range to $4,000-$4,600 (from $3,800-$4,400). Three quarters into our coverage arc, the AutoZone thesis is structurally strengthening. The Q2 print's optical commercial deceleration is weather-driven and not thesis-impairing: ex-storm commercial would have continued the +12-14% trajectory consistent with Q1's +14.5% pace. Underlying business strength is confirmed by: (a) total revenue +8.1% beating consensus, (b) gross margin ex-LIFO down only 10bp despite continued commercial mix pressure, (c) ex-LIFO EPS +7.1%, (d) 128 net new commercial programs added in Q2 (including 80 in existing stores), (e) "stores ahead of pro forma" commentary on the FY24-25 cohort.

The structural acceleration drivers remain intact: Mega Hub deployment (142 at end of Q2; 30 plan for FY26; long-term target raised to "more than 300"); store opening pace (64 in Q2 = +42% YoY; FY26 plan 350-360); commercial program penetration (94% of domestic stores); pricing pass-through (mid-single-digit same-SKU inflation flowing through retails); LIFO cadence on the revised lower path; capital return engine continuing.

The Mexico macro slowdown is the one watch item — CC comp at +2.5% reflects more persistent pressure than the Q1 framing suggested. We extend our recovery timing by one quarter but maintain the cyclical thesis.

We raise our fair value range to $4,000-$4,600 reflecting demonstrated execution discipline through cyclical weather pressure, the "stores ahead of pro forma" forward indicator, continued LIFO trajectory on the revised path, and confirmed commercial inflection at +12-14% underlying run-rate. FY27 reported EPS in the $185-$195 range at 22-23x multiple supports the raised range.

We continue to view AZO as one of the cleanest specialty retail compounders in our coverage universe and would be adding on weakness.