Auto parts and accessories retailer AutoZone (NYSE:AZO) missed Wall Street’s revenue expectations in Q1 CY2025 as sales rose 2.4% year on year to $3.95 billion. Its GAAP profit of $28.29 per share was 2.4% below analysts’ consensus estimates.
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AutoZone (AZO) Q1 CY2025 Highlights:
- Revenue: $3.95 billion vs analyst estimates of $3.98 billion (2.4% year-on-year growth, 0.8% miss)
- EPS (GAAP): $28.29 vs analyst expectations of $28.98 (2.4% miss)
- Adjusted EBITDA: $844.7 million vs analyst estimates of $881.9 million (21.4% margin, 4.2% miss)
- Operating Margin: 17.9%, down from 19.3% in the same quarter last year
- Free Cash Flow Margin: 7.4%, up from 4.6% in the same quarter last year
- Locations: 7,432 at quarter end, up from 7,191 in the same quarter last year
- Same-Store Sales were flat year on year (3% in the same quarter last year)
- Market Capitalization: $58.36 billion
“I want to thank our AutoZoners for delivering solid results this quarter. We continue to be pleased with our strategy to grow our domestic DIY and Commercial sales. Domestically, both DIY and Commercial continued to perform well and sales accelerated from the previous quarter. Our international business also continued to deliver strong results and same store sales grew 9.5% on a constant currency basis. While currency rate moves pressured reported sales and earnings, our international performance remains encouraging as we continue to focus on opening more stores in these markets. We are excited about our momentum heading into the back half of the fiscal year and we are well prepared for our spring and summer selling season. As we continue to invest in our business, we remain committed to our disciplined approach of increasing earnings and cash flow, all while delivering strong shareholder value,” said Phil Daniele, President and Chief Executive Officer.
Company Overview
Aiming to be a one-stop shop for the DIY customer, AutoZone (NYSE:AZO) is an auto parts and accessories retailer that sells everything from car batteries to windshield wiper fluid to brake pads.
Auto Parts Retailer
Cars are complex machines that need maintenance and occasional repairs, and auto parts retailers cater to the professional mechanic as well as the do-it-yourself (DIY) fixer. Work on cars may entail replacing fluids, parts, or accessories, and these stores have the parts and accessories or these jobs. While e-commerce competition presents a risk, these stores have a leg up due to the combination of broad and deep selection as well as expertise provided by sales associates. Another change on the horizon could be the increasing penetration of electric vehicles.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years.
With $18.67 billion in revenue over the past 12 months, AutoZone is one of the larger companies in the consumer retail industry and benefits from a well-known brand that influences purchasing decisions. However, its scale is a double-edged sword because it’s harder to find incremental growth when you’ve penetrated most of the market. To accelerate sales, AutoZone likely needs to lean into pricing or international expansion.
As you can see below, AutoZone’s 8.7% annualized revenue growth over the last six years (we compare to 2019 to normalize for COVID-19 impacts) was mediocre, but to its credit, it opened new stores and increased sales at existing, established locations.
This quarter, AutoZone’s revenue grew by 2.4% year on year to $3.95 billion, falling short of Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 3.2% over the next 12 months, a deceleration versus the last six years. We still think its growth trajectory is satisfactory given its scale and suggests the market is baking in success for its products.
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Store Performance
Number of Stores
AutoZone sported 7,432 locations in the latest quarter. Over the last two years, it has opened new stores quickly, averaging 2.9% annual growth. This was faster than the broader consumer retail sector.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
Same-Store Sales
A company's store base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales provides a deeper understanding of this issue because it measures organic growth at brick-and-mortar shops for at least a year.
AutoZone’s demand rose over the last two years and slightly outpaced the industry. On average, the company’s same-store sales have grown by 2.3% per year. This performance suggests its rollout of new stores could be beneficial for shareholders. When a retailer has demand, more locations should help it reach more customers and boost revenue growth.
In the latest quarter, AutoZone’s year on year same-store sales were flat. This was a meaningful deceleration from its historical levels. We’ll be watching closely to see if AutoZone can reaccelerate growth.
Key Takeaways from AutoZone’s Q1 Results
We struggled to find many positives in these results as its revenue, EBITDA, and EPS missed Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 1% to $3,440 immediately following the results.
AutoZone may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.