AutoZone (AZO, Financial) is showing resilience amid a tariff-induced market selloff, despite reporting mixed 2Q25 results. The company missed EPS expectations for the third consecutive quarter and reported same-store sales growth of +0.5%, slightly below analyst estimates.

The primary reason for the EPS and same-store sales shortfall is greater-than-expected foreign exchange headwinds, not operational issues. With 813 stores in Mexico and 136 in Brazil, AutoZone is significantly impacted by currency fluctuations, particularly the stronger U.S. dollar against the Mexican Peso and Brazilian Real.

• On a constant currency basis, AutoZone's performance is more favorable. Total same-store sales increased by +2.9%, with international comps at +9.5% compared to (8.2)% on a reported basis. Despite FX challenges, AZO plans to expand internationally, aiming to open 100 new stores in FY25 after adding 13 in Mexico and 4 in Brazil in Q2.
• The domestic commercial business, which provides parts and services to repair shops, is thriving. This segment grew by 7.3% in Q2, driven by an aging U.S. vehicle fleet and cautious consumers opting to repair rather than purchase new vehicles.
• The domestic DIY business has been a weak spot due to discretionary product categories like accessories and tools. However, it is improving, with comps moving from -0.4% in Q4 to +0.3% last quarter, and +0.5% in Q2.

In summary, while FX headwinds impacted AutoZone's headline figures, the underlying results are solid. The company is experiencing robust growth in its international and domestic commercial segments, and the DIY business is gradually improving. However, tariffs may pose challenges for AutoZone's performance this year.