• Total Sales Growth: 2.4% increase to $4 billion.
• Earnings Per Share (EPS): Decreased 2.1% to $28.29.
• Same-Store Sales: Total company up 2.9%; Domestic up 1.9%; International up 9.5% on a constant currency basis.
• Domestic Commercial Sales Growth: Increased 7.3%.
• International Sales Impact: 1,900 basis points currency headwind, resulting in an unadjusted negative 8.2% International comp.
• Gross Margin: 53.9%, flat compared to last year.
• Operating Expenses: Increased 6.4%, with SG&A deleveraging 134 basis points.
• Net Income: $488 million, down 5.3% from last year.
• Free Cash Flow: $291 million, up from $179 million last year.
• Store Openings: 28 net new domestic stores; 17 new international stores, totaling 949 international locations.
• Share Repurchase: $330 million of stock repurchased, with $1.3 billion remaining under authorization.

• Warning! GuruFocus has detected 5 Warning Sign with BLMIF.

Release Date: March 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• AutoZone Inc (NYSE:AZO) reported a 2.4% increase in total sales for the quarter, with Domestic same-store sales growing by 1.9%.
• International same-store sales increased by 9.5% on a constant currency basis, indicating strong performance outside the US.
• The company's Domestic Commercial sales grew by 7.3%, showing significant improvement from the previous quarter.
• AutoZone Inc (NYSE:AZO) opened 28 net domestic stores and 17 new international stores, demonstrating continued expansion.
• The company is investing over $1 billion in CapEx to drive strategic growth priorities, including store growth and supply chain improvements.

Negative Points

• Earnings per share decreased by 2.1% for the quarter, impacted by foreign exchange headwinds.
• The company faced a significant currency headwind, with a $91 million impact on sales and a $1.22 per share drag on EPS.
• Operating expenses increased by 6.4%, leading to a 134 basis point deleverage in SG&A as a percentage of sales.
• The Domestic DIY business showed only a marginal improvement with a 0.1% comp increase, indicating challenges in this segment.
• The company anticipates continued pressure on discretionary sales until economic conditions improve for consumers.

Q & A Highlights

Q: In the press release, you talked about operating expense deleverage with investment to support growth. Was there anything beyond the accelerating store growth or Hub openings that was investing? Is it technology? Or could you talk about the SG&A spend in the quarter? A: Yes. We've been investing in IT, which is enabling growth in both DIY and Commercial. These investments are helping with speed, productivity, and customer experience. The combination of investments in our commercial business and IT will give us a competitive advantage and enable future sales growth. - Jamere Jackson, Chief Financial Officer

Q: As you build the store base in Mexico, is there a tipping point where you start getting better leverage of the distribution expense and the investment being in the market where profitability accelerates? A: We are pleased with the growth in Mexico, both in new store growth and same-store sales. We are investing in distribution center capability to get parts to the market faster and support the growing store base. We are pleased with the profitability and growth prospects there. - Jamere Jackson, Chief Financial Officer

Q: The 1.9% domestic comp on a constant currency basis is the strongest comp in the business I've seen over the past several quarters. Is this driven more by strategic initiatives, weather, or industry improvement? A: It's a combination of factors. The weather was better than in recent years, and we've improved execution in both DIY and Commercial. We've invested in growth opportunities like Hubs and Mega-Hubs, and we have significant fulfillment strategies on the Commercial side. We have good momentum going into the second half of the year. - Philip Daniele, President, CEO, Director

Q: How can we expect freight costs and inflation concerns to impact gross margins in '25? Could this be offset by strength in merch margins? A: We will see some gross margin drag due to the accelerating Commercial business. However, our merchants are driving merch margin improvement, offsetting the commercial mix drag. We had a $24 million LIFO benefit last year that won't repeat, but our underlying gross margins are healthy. - Jamere Jackson, Chief Financial Officer

Q: How should we think about the potential impact of tariffs this time, given the China tariffs had a long list of exclusions last time? A: It's still an unknown, especially regarding exclusions. We've worked to diversify sourcing and negotiate with vendors. Our merchants are doing a great job of maintaining our margin structure, and we believe the industry will behave rationally with pricing. - Philip Daniele, President, CEO, Director

For the complete transcript of the earnings call, please refer to the full earnings call transcript.