Autozone Inc Q4 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Bret Jordan - Jefferies LLC - Analyst : Hey. Good morning, guys. Jamere Jackson - Autozone Inc - Executive Vice President, Chief Financial Officer and Store Development, Customer Satisfaction Good morning.

Question: Bret Jordan - Jefferies LLC - Analyst : You're calling out inflation, I think, at least 3% in the fiscal first quarter. It's sounding from some of the WDs like they're seeing a fair amount more price than that. Is that your supply chain allowing you to sort of get the market at a lower cost and use price as a share gain? Or are you really expecting more than 3% sort of tied to same SKU tariff tailwinds?

Question: Bret Jordan - Jefferies LLC - Analyst : And then interesting, you commented that discretionary is up for the first time in a bit. Is there anything either internally that you're doing to drive that or are you saying sort of green shoots as far as that consumer base?

Question: Bret Jordan - Jefferies LLC - Analyst : Great. Thank you. Appreciate it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 23, 2025 / 2:00PM, AZO.N - Q4 2025 Autozone Inc Earnings Call

Question: Michael Lasser - UBS AG - Analyst : Good morning. Thank you so much for taking my question. Can you provide a sense of how the arc of the LIFO charges will look from here? You indicated to expect $120 million in the first quarter. Is it reasonable for us to simply annualize that number getting to around $520 million or so for the full year? Or would you expect that to peak and then fade off? And how will your margins look as that cycle fades, meaning do you get all of the margin headwind back on the other side of this cycle? Jamere Jackson - Autozone Inc - Executive Vice President, Chief Financial Officer and Store Development, Customer Satisfaction Yeah. Thanks, Michael, for the question. So for the first quarter, we're expecting the number to be in the $120 million Zip Code if you will. And we expect pressure, quite frankly, for the subsequent quarters Q2, Q3, Q4. I would say over those three quarters, right now, our modeling is probably in the $80 million to $85 million-ish a quarter range. It's a pretty dynamic environment obviously because it's associated with tariffs. But based on the visibility that we see right now, it could be in the $80 million to $85 million a quarter going out, Q2, Q3, Q4. As always, we'll be pretty transparent about what we see there and share the next quarter's outlook. What I'll say in total about that is, as you've seen in the past, as we have booked these LIFO charges and as we sort of anniversary those and they become part of the base as we see product cost deflation over time, which we have, then we would expect to see these gains potentially rolling back through the P&L. And over time, we'll get back to these reversing out and being gas through the P&L. The timing of which right now is a little bit uncertain, but that's what you can expect in the future. And then the last thing I'll say about LIFO is it is a little bit of a bellwether, if you will, for what we expect to see coming on inflation. And as Phil talked about a little bit earlier, I mean, we see at least 3% inflation. But what I'll tell you is that based on what we're seeing from tariffs and the costs associated with tariffs, the playbook that we have which is negotiating with our vendors to absorb a portion of the costs to raise retails where necessary and make sure and doing all of this that we're taking care of the customer. I mean, that playbook is still active and we're going to be pretty disciplined about what we do, but our goal over time is to maintain our gross margins and our gross margin rate.

Question: Michael Lasser - UBS AG - Analyst : Thank you very much and good luck.

Question: Greg Melich - Evercore Inc - Analyst : Hey. Thanks. Maybe I'd love to follow-up on that last question and then my follow-up would be on price elasticity. On SG&A growth, particularly, what sort of comp now do you expect, given the growth plans to be necessary to leverage SG&A if we think about the next couple of years? Jamere Jackson - Autozone Inc - Executive Vice President, Chief Financial Officer and Store Development, Customer Satisfaction Yeah, I mean, one of the things that we -- we've said is that we will manage the SG&A line in line with sales growth. So if we're expecting to invest this kind of SG&A going forward, particularly with new stores, then we obviously would expect an acceleration in the comp. I won't be date certain or very specific about what that comp looks like. But what you can anticipate for us is if we're expecting to grow at SG&A in this Zip Code, then you can see us have a little bit faster growth on the comp line. And again, we'll be transparent about what we see in the market going forward. But we like the growth prospects that we have. We're growing share both in DIY and in commercial. Our Mexico business is doing very, very well against a tougher macro backdrop. But we have a lot of confidence in this growth plan, hence, we're going to continue to accelerate store growth in the future.

Question: Greg Melich - Evercore Inc - Analyst : That's great. Congrats and good luck.

Question: Christopher Horvers - JPMorgan Chase & Co - Analyst : Thanks, guys. Good morning. So I want to make a longer-term questionnaire. Can you talk about the growth opportunity in Mexico, about 900-ish stores? How big is your market share? How big is the market? There's about 37,000 auto parts stores in the United States. Is that a comparable number? And do you think over time that you could perhaps double your store base from here? Thank you.

Question: Christopher Horvers - JPMorgan Chase & Co - Analyst : Got it. And then two quick margin follow-up questions. First on LIFO, is the LIFO numbers that you put out to me predicated on that assume 3% inflation and the balance of the year. And then on SG&A, SG&A per store growth in '26, given the timing of openings, do you expect that to be weighted to the back half of the year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 23, 2025 / 2:00PM, AZO.N - Q4 2025 Autozone Inc Earnings Call

Question: Christopher Horvers - JPMorgan Chase & Co - Analyst : And then on SG&A per store? Jamere Jackson - Autozone Inc - Executive Vice President, Chief Financial Officer and Store Development, Customer Satisfaction Yeah. From an SG&A per storage standpoint in the back half, I mean, we think we're going to be somewhere in this mid-single-digit growth for the entire fiscal year. Probably accelerates a little bit in the back half because our store count will accelerate in the back half of the year. It'll be a little bit more level loaded than it was in this in this past year, but still a little bit more skewed to the back half of the year. So as you're sort of building your models, call it mid-single-digits for the year and maybe have a little bit of acceleration in the back half and you should be in the right Zip Code.

Question: Christopher Horvers - JPMorgan Chase & Co - Analyst : Got it. Thanks so much.

Question: Steven Zaccone - Citibank Cameroon SA - Analyst : Hey. Good morning. Thanks very much for taking my question. I wanted to follow-up on the pricing elasticity question. It sounds like things have gone well thus far. But as you think about same sheer inflation stepping up over the next couple of quarters, do you have concerns that there could be some more price elasticity in the category? How does that factor into your same source sales outlook? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 23, 2025 / 2:00PM, AZO.N - Q4 2025 Autozone Inc Earnings Call

Question: Steven Zaccone - Citibank Cameroon SA - Analyst : Okay. Thanks. And then the follow-up I had was just on gross margin. Merchandise margin has been strong last couple of quarters. Sounds like that's going to continue in the first quarter. Can you just elaborate a little bit more what's driving that? And can it continue through the balance of fiscal '26? Jamere Jackson - Autozone Inc - Executive Vice President, Chief Financial Officer and Store Development, Customer Satisfaction Yeah, I think, again, our teams in merchandizing have done a fantastic job of finding opportunities for us to drive gross margin improvement. It's a playbook that we've run for a really long time. It's a combination of finding cost opportunities with our vendor community. It's innovation in those categories that enable us to go do that. And it's an opportunity for us to sweeten the mix a little bit, and we've sweetened that mix in some instances by moving more volume into, our Duralast brand. So team's have done a very good job of doing that over time. Again, it's a playbook that we run. We run it with intensity inside the company, and we count on that to help us grow our business, and that's really important for us as we think about sort of margin expansion in the future. Obviously, our commercial business is a little bit lower gross margin. Although we like the operating margins associated with that, we think that the work that we've done on the merchandizing side, particularly with merch margins, has the ability to basically mute that pressure that we see on gross margins. So you get an opportunity to have a faster-growing business with commercial that doesn't create a dramatic drag on your gross margins as you move forward.

Question: Brian Nagel - Oppenheimer & Co Inc - Analyst : Hi. Good morning. Thanks for taking my question. So first question, I know it's going to be a bit of a follow-up, but just on the topic of tariffs and trade policy. So as we look at these fiscal Q4 results, how should we think about what the impacts tariffs had there? I mean, is there a way you can say it was -- where incremental tariffs a driver of sales? Did you see some sort of say impacts on the margin here in the quarter? Jamere Jackson - Autozone Inc - Executive Vice President, Chief Financial Officer and Store Development, Customer Satisfaction Yeah, I would say the best way to think about it is, you've seen our ticket growth basically accelerate in both DIY and commercial. And a portion of that ticket growth is very clearly driven by the cost increases that we're seeing associated with tariffs. Now while we've been running the playbook, as I mentioned before, of having very healthy negotiations with our vendors by, moving sources in some cases. The reality is that some of that inflation is finding its way into the product costs and finding its way into same SKU inflation. And the entire industry has moved retail prices up accordingly. So there's a very direct impact associated with tariffs. And the fact that you're starting to see more pronounced same SKU inflation, and as a result, retailers across the industry are going up. As we move forward and we continue to see that and to have probably fewer opportunities to mitigate that, you'll continue to see same SKU inflation tick up and likely see retails moving up accordingly. And again, back to the previous question on it, this is largely a break-fix business where the lion's share of our businesses and failure and maintenance related categories. So we believe that we -- the industry will continue to be rational in terms of how we price, and we don't expect a notable drop off in terms of units.

Question: Brian Nagel - Oppenheimer & Co Inc - Analyst : No, that's very helpful. And then so as a follow-up to that, if we look at the cadence of sales through the fiscal fourth quarter, I mean, recognizing, as you pointed out, there's some noise with the timing of, I guess, the July 4 holiday. But both your DIY and your commercial commercial side sales growth strengthen. So how much -- is there a way to think about how much of that is this what we're talking about here, the tariffs rolling through? I know the weather improved for you, but then, I guess the final piece would be actual better underlying demand. So I mean, the question I'm asking is how we, how should we think about that improving trend in sales growth through the quarter with all this going on?

Question: Brian Nagel - Oppenheimer & Co Inc - Analyst : I appreciate all the color. Thank you.

Question: David Bellinger - Mizuho Securities USA - Analyst : Hey. Good morning, everyone. Thanks for the questions. Maybe for Phil, just with all the pricing going into the category and this is inflation on top of inflation, even pre-tariff inflation, how concerned are you that we could see another deferral cycle show up maybe sometime in 2026? Is that something you're watching for or just being a bit more mindful of only increasing prices about that 3% as opposed to something more?

Question: David Bellinger - Mizuho Securities USA - Analyst : Appreciate that. And then just a follow-up question on Mexico and the comments on the long-term growth opportunity there. Should we see the MegaHub model at some point roll out to Mexico and sort of replenish the stores more frequently? Does that -- how should we think about the build of that geography and what other features or capabilities these stores can get over time? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 23, 2025 / 2:00PM, AZO.N - Q4 2025 Autozone Inc Earnings Call

Question: David Bellinger - Mizuho Securities USA - Analyst : Very good. Thank you.

Question: Steven Forbes - Guggenheim Securities LLC - Analyst : Good morning, Phil, Jamere, Brian. It -- for Phil or Jamere, just revisiting the path of 500 stores by 2028, I guess sort of a two-part question. One, as we think about the 200 international stores, can you break that down by country? And then how does the year one expense rate differ between a new US store versus international store? Like, is there anything we should note as we dramatically increase the number of international stores to the mix? Jamere Jackson - Autozone Inc - Executive Vice President, Chief Financial Officer and Store Development, Customer Satisfaction Yeah. So in terms of the split, obviously we will have a significant more significantly more of those international stores will be in Mexico versus Brazil. One, because we see the market opportunity in Mexico. We have scale there today. And to Phil's point, there are opportunities for us to improve strategically there to really grow our business. And so, to the extent that we're going to put those strategies in place in Mexico, we would expect most of that international mix to skew towards Mexico versus Brazil over time. I think in terms of the cost profile, on a relative basis, it's very similar to what we see in the US. Obviously, the absolute cost per is different in the international markets versus the US, but the cost drag in the early years is very similar to what we see in the US. The stores typically take somewhere between four and five years to mature. We see a drag in the early years. But as those stores mature and the same store sales continues to grow, then those stores become very profitable for us as we move forward.

Question: Steven Forbes - Guggenheim Securities LLC - Analyst : Thank you.