AutoZone’s fourth quarter results were met with a negative market reaction as the company’s non-GAAP earnings per share fell short of Wall Street’s consensus despite revenue growth that aligned with expectations. Management highlighted that a significant non-cash LIFO charge negatively affected margins and earnings, while an uptick in operating expenses was attributed to accelerated investments in new stores and supply chain initiatives. CEO Philip Daniele noted that weather-related disruptions and a lack of last year’s hurricane boost also played a role in dampening some retail sales trends, particularly in the middle portion of the quarter.

Is now the time to buy AZO? Find out in our full research report (it’s free for active Edge members).

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From AutoZone’s Q4 Earnings Call

• Bret Jordan (Jefferies) asked about the timeline for new store maturation and the incremental investment required. CFO Jamere Jackson explained that new stores typically mature over four to five years and that SG&A will normalize as the store base matures.
• Christopher Horvers (JPMorgan) inquired about the slowdown in DIY (do-it-yourself) sales and whether it was due to demand or weather. CEO Philip Daniele attributed the softness mainly to unfavorable weather comparisons rather than weakened underlying demand.
• Simeon Gutman (Morgan Stanley) questioned whether the company was seeing signs of consumer trade-down due to higher prices. Daniele responded that while the lower-end consumer has faced pressure for some time, there has been little evidence of significant trade-down behavior.
• Michael Lasser (UBS) focused on whether SG&A growth would continue to outpace sales and if margin recovery depends on gross margin improvements. Jackson said that SG&A would slightly outpace sales until new stores mature, after which expenses should align with revenue growth.
• Scott Ciccarelli (Truist) asked about the lower-than-expected LIFO charge and potential impact on inflation expectations. Jackson cited both better-than-anticipated cost performance and partial tariff rollbacks as factors reducing the LIFO charge.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be watching (1) the pace at which new stores and mega hub locations ramp up and begin contributing to profitability, (2) whether inflation and tariff pressures on costs and ticket sizes begin to moderate as expected, and (3) the sustained strength of commercial sales and potential improvement in the international segment. Progress on supply chain efficiencies and margin stabilization will also be closely tracked.

AutoZone currently trades at $3,489, down from $3,767 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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