AutoZone

AutoZone’s durable advantage comes from scale, local density, and operational know‑how rather than pure brand. The company operates 7,657 stores across the Americas, with a growing international footprint, and runs a dense commercial delivery network.

Its hubs and mega‑hubs expand same‑day parts availability and enable rapid hot‑shot delivery to shops, which is difficult for online‑only entrants to replicate at comparable fill rates and speed.

In FY25, 6,098 domestic stores ran commercial programs, with commercial sales topping 5.21 billion and average sales per program per week at 16.7 thousand, reinforcing the value of availability and service to DIFM customers. Intangibles like the Duralast private label and the ALLDATA software franchise augment the offer.

Primary moat threats are continued competition from O’Reilly and NAPA in commercial, e‑commerce price transparency, and long‑run EV adoption moderating category growth, though the car parc’s age and mix support relevance for many years.

Gross margin structure remains strong for a retailer at 52.6 percent for FY25, aided by private label penetration and mix, but the company is not insulated from competitive pricing or cost pressures. FY25 margin was pressured by a 55 bps non‑cash LIFO charge and higher shrink, partially offset by higher merchandise margins.

AutoZone typically balances pricing with service and availability to preserve unit economics, and commercial growth can support better vendor terms over time. Pricing power is real but not monopolistic and can be cyclical around LIFO, shrink and freight.

The aftermarket is a classic tollbooth on vehicle use. Two key long‑term drivers correlate with growth: miles driven and the number of vehicles older than seven years. The U.S. vehicle fleet keeps aging, with the average age at 12.8 years in 2025, and miles driven up about 1 percent over the latest 12 months cited by the company.

The business model mixes DIY with a rising commercial share, smoothing volatility. FY25 same‑store sales grew mid‑single digits on a constant currency basis, with International constant‑currency comps stronger.

This supports steady, mid‑single‑digit organic growth potential through cycles, with limited exposure to severe economic shocks compared to discretionary retail.

AutoZone runs with negative working capital and meaningful leverage by design, supporting high returns. At FY25 year‑end, cash was 272 million against 8.80 billion of debt and 0.40 billion of financing lease liabilities. Adjusted debt to EBITDAR was 2.5x and adjusted after‑tax ROIC was 41.3 percent.

The company continues to emphasize maintaining investment‑grade ratings. Interest expense for FY25 was 476 million; variable‑rate exposure and modest rate sensitivity are disclosed, and liquidity includes a large undrawn revolver. Overall, leverage is significant but well covered by stable cash generation and a resilient category.

Management prioritizes high‑return reinvestment in distribution and store growth, then aggressive repurchases when the balance sheet allows. FY25 operating cash flow was 3.16 billion and capex 1.37 billion to support new stores, hubs and mega‑hubs.

Share count continues to decline, with 447 thousand shares repurchased in FY25 and an additional 1.5 billion authorization in October 2025. No dividend is paid. M&A has not been required to drive growth. The long‑run record of repurchases has been exemplary, though we remain attentive to valuation to avoid buybacks at low forward returns.

AutoZone is led by seasoned, internally developed operators. Phil Daniele, a 30‑year AutoZoner with deep commercial and supply chain experience, became CEO on January 2, 2024, following long‑time CEO Bill Rhodes transitioning to Executive Chairman. CFO Jamere Jackson brings public‑company CFO experience and capital markets discipline.

Culture, process rigor and measured store growth are hallmarks. Recent organizational updates also reflect continuity in merchandising and supply chain leadership.