AutoZone Inc.

The stable outlook reflects our expectation that solid industry drivers and good execution will contribute to steady operating performance and EBITDA growth in the low-single-digit percent area. We expect AutoZone will maintain its existing financial policy and issue debt as capacity becomes available, resulting in adjusted debt-to-EBITDA remaining around 3x and funds from operations (FFO) to debt around 22%. We could lower the rating if AutoZone adopts a more aggressive financial policy, resulting in adjusted leverage of 3.5x or higher, and FFO to debt of less than 20%. We could raise our rating on AutoZone if the company pursues a more conservative financial policy, resulting in adjusted debt to EBITDA being sustained at less than 2.8x and FFO to debt

...We see several factors in place that should enable AutoZone to build on its leading market share. We expect the aftermarket auto parts industry backdrop to remain generally favorable over the next 12 to 24 months as modest economic growth, low unemployment, and rising wages support healthy consumer spending. We expect AutoZone to maintain its leading position in the do-it-yourself (DIY) segment and build on its recent momentum in the do-it-for-me (DIFM) segment to expand its share of the professional segment....

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