Strong Top-Line and EPS Growth
Total sales of $4.8B, up 8.4% year-over-year; diluted EPS $38.07, up 7.7% (EPS would be +12.5% excluding a $20M noncash LIFO charge vs. a $16M credit last year).
AutoZone
· AZO
May 26th, 2026
Summary
- Earnings Call Date:
- 2026-05-26
- Change Since:
- -0.40%
- Next Earnings Date:
- 2026-09-29
Earnings Call Sentiment
PositiveThe call emphasized durable top-line growth, accelerated commercial momentum, strong free cash flow and disciplined capital returns (including significant buybacks). Key operating wins include expanding and productive new stores, the Mega Hub rollout, and improving gross-margin trends excluding LIFO. Offsetting these positives are material noncash LIFO charges that meaningfully depress reported margins and EPS, softer DIY traffic (weather driven), a moderating international backdrop, and continued inflation/supply risks. On balance the company is executing on strategic growth initiatives and generating cash, but near-term reported results will be impacted by LIFO and macro/weather-related softness.
Company Guidance
The company provided clear Q4 and near‑term guidance: they expect to open ~160 stores in Q4 (365 for FY26 vs 305 last year) while investing nearly $1.6 billion in CapEx this year and a similar amount next year; plan a Q4 LIFO charge of ~$30M (bringing FY26 LIFO to ~$207M vs $64M LY) which they expect will reduce EBIT by ~$30M, pressure gross margin by ~45 bps and reduce EPS by about $1.40; if current FX rates hold Q4 would get an estimated ~$62M revenue tailwind, ~$19M to EBIT and ~$0.78 to EPS; model Q4 interest at ~$152M, an effective tax rate of ~22%, and SG&A per store/total growth roughly in line with Q3 (~3% per store); they reiterated Q3 trends to watch (DIY traffic -3.6%, same‑SKU inflation ~7% in Q3) but expect DIY average ticket to be mid‑4% in Q4, international comps to run similar to Q3, continued strong free cash generation (Q3 FCF $455M, YTD $1.1B), a leverage ratio of ~2.5x EBITDAR, inventory per store +6% (total inventory +10.8%), net inventory per store -$107k, and $586M of buybacks this quarter with ~$800M remaining.
Domestic Same-Store and Commercial Acceleration
Domestic same-store sales +4.1%; domestic DIY comp +2.2%; domestic commercial (DIFM) sales +10.4%. Commercial now represents ~34% of domestic auto parts and ~29% of total company sales; average weekly sales per commercial program $18.5K, up 4.5%; 46 net new commercial programs added, program coverage ~94% of domestic stores.
New Stores and Store Productivity
Opened 82 stores globally this quarter; finished with ~6.77K U.S. stores, 933 Mexico, 157 Brazil; on track to open ~365 stores for the full year versus 305 last year. Management reports new-store productivity is exceeding pro forma expectations.
Mega Hub Rollout Driving Incremental Growth
Opened 14 Mega Hubs in the quarter (156 total); Mega Hubs carry >100K SKUs and are driving outsized sales lift and improved parts availability. Company targets ~300 Mega Hubs at full build-out and expects to accelerate openings in FY27.
Strong Free Cash Flow and Share Repurchases
Q3 free cash flow $455M (vs. $423M prior year); YTD free cash flow $1.1B. Repurchased $586M of stock in the quarter with ~$800M remaining authorization, supporting continued capital returns.
Gross Margin Performance Excluding LIFO and Expense Leverage
Reported gross margin 52.2% (down 57 bps YoY including LIFO); excluding the unfavorable LIFO comparison, gross margin would be up ~20 bps. SG&A grew 7.6% but leveraged ~25 bps as a percentage of sales; SG&A per store up ~3%.
Foreign-Exchange Tailwind
FX benefited results in the quarter: Mexican peso strength (~13% vs. prior Q3) provided approximately $74M in sales tailwind, ~$20M to EBIT, and ~$0.83 to EPS. Management noted a potential Q4 FX benefit of ~$62M revenue, ~$19M EBIT, and ~$0.78 EPS if rates hold.
Operator
Greetings. Welcome to the AutoZone's 2 thousand 26 Q3 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, Please note this conference is being recorded. Management would like to read their forward looking statement. Before we begin, please note that today's call includes forward looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 2 thousand. Forward looking statements are not guarantees of future performance.
Please refer to this morning's press release and the company's most recent annual report on Form 10-Ks and other filings with Securities and Exchange Commission for a discussion of important risks and uncertainties that could cause actual results to differ materially from expectations. Forward looking statements speak only as of the date made, the company undertakes no obligation to update such statements. Today's call will also include certain non GAAP measures. A reconciliation of GAAP to non GAAP financial measures can be found in our press release. I would now like to turn the call over to your host, Philip Daniele, president and CEO of AutoZone. You may begin.
Philip Daniele
Good morning, and thank you for joining us today for AutoZone's 26 third quarter conference call. With me today are Jamere Jackson, Chief Financial Officer and Brian L. Campbell, Vice President, Treasurer, Investor Relations, and Tax. Regarding the third quarter, I hope yo...
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