AutoZone (NYSE:AZO) reported fiscal 2026 second-quarter sales growth of 8.1% to $4.3 billion, but earnings per share declined 2.3% to $27.63, as management pointed to a sizable non-cash LIFO charge and weather-related disruption late in the quarter. On the company’s earnings call, CEO Phil Daniele and CFO Jamere Jackson said underlying operating performance remained strong and emphasized continued investment in store growth, hub expansion, and supply chain initiatives aimed at driving market share gains.
Quarterly results and the impact of LIFO
Daniele said total sales rose 8.1% while EPS fell 2.3%, noting that gross margin, operating profit, and EPS were “negatively impacted by a non-cash $59 million LIFO charge.” Jackson added that total company EBIT declined 1.2% to $698 million. Excluding the LIFO impact, management said EBIT would have increased 7.2% and EPS would have risen 7.1% year over year.
Management also provided an outlook for LIFO charges. Jackson said year-to-date LIFO charges totaled $157 million and that the company was “planning a LIFO charge of approximately $60 million for each of the remaining two quarters” of fiscal 2026. He said the company expects about $277 million of LIFO charges this year versus $64 million last year, citing higher costs tied to tariffs that are affecting LIFO layers.
Same-store sales, weather disruption, and regional trends
AutoZone posted total same-store sales growth of 3.3% on a constant currency basis, including domestic same-store sales up 3.4%. Domestic DIY same-store sales rose 1.5%, while domestic commercial sales increased 9.8% compared with the prior year’s second quarter.
Management repeatedly highlighted the quarter’s late-winter storms as a key factor, particularly for the commercial business. Daniele said commercial sales were “below our expectations” due to winter storms during the last four-week segment of the quarter. He said that during the two weeks most affected (weeks 10 and 11), commercial sales were up “just over 1%,” while the other 10 weeks of the quarter were up “over 12%.”
On cadence, Daniele said domestic same-store sales were up 4.1% in the first four weeks, 2.7% in the second four weeks, and 3.5% in the final four-week period. DIY comp performance was up 2.3% in the first segment, down 0.5% in the middle segment, and up 2.8% in the last segment. He attributed the mid-quarter DIY softness to tougher comparisons from colder weather last year, while the late-quarter cold weather benefited DIY but hurt commercial because many shops closed for days.
Regionally, Daniele said the company underperformed its overall DIY comp in the Mid-Atlantic and South Atlantic, and that the West Coast was “a little weaker than we would have expected” due to milder weather and less snow than the year prior.
Inflation, ticket and traffic trends, and tariff commentary
Management discussed inflation’s effect on the top line and how it intersected with traffic trends. Daniele said DIY like-for-like same-SKU inflation was “up north of 6%” for the quarter, helping drive DIY average ticket growth of 5.2%, with the difference attributed to category mix. He said the company expects average ticket growth to rise sequentially through the third fiscal quarter (ending in May) and then “peak during the fourth quarter,” when AutoZone begins to lap prior-year inflation increases.
DIY traffic declined 3.6% in the quarter, with the largest decline in the middle four-week segment. Daniele said the company expects traffic to improve as ticket growth slows by late summer and suggested that both the winter and the tax refund season could provide upside to traffic later in the fiscal year.
On the commercial side, Daniele said same-SKU inflation and average ticket growth were both “north of 5%,” similar to DIY. When asked about the sustainability of same-SKU inflation, management said it expects inflation to continue through the third quarter and into most of the fourth quarter before annualizing prior-year increases. Executives cited tariffs as a driver of cost pressure, noting that not all tariff-related costs have flowed through the system. They described a “multi-pronged strategy” including vendor negotiations, diversifying sources, and raising retails in some cases.
Commercial expansion, Mega Hubs, and investment cycle
Jackson said domestic DIFM (commercial) sales were $1.2 billion, up 9.8%, representing just over 32% of domestic auto parts sales and 27% of total company sales. Average weekly sales per commercial program were $15,400, up 4.8% year over year. He said the company opened 128 net new programs during the quarter, including nearly 80 programs in existing stores, ending with 6,310 total programs and commercial programs in 94% of domestic stores.
Mega Hubs remained a focal point. Jackson said AutoZone opened five Mega Hubs in the quarter to reach 142 locations and reiterated an expectation to open about 30 Mega Hubs in fiscal 2026, with a longer-term target of roughly 300 at full build-out. He said Mega Hubs typically carry more than 100,000 SKUs and provide a sales lift within the store while serving as an expanded assortment source for nearby locations.
Asked about the “inning” of AutoZone’s investment cycle, Daniele said the company was in the “middle innings,” pointing to a plan to build toward opening 500 stores annually by fiscal 2028. Management said the store pipeline is strong and that new stores are exceeding internal models. Jackson said the investments have put pressure on SG&A, but the company is managing other expenses with discipline and expects the new store class to help accelerate growth as stores mature.
International performance, FX tailwinds, and capital allocation
International same-store sales increased 2.5% on a constant currency basis, while unadjusted international comp was 17.1% due to exchange rates. Daniele and Jackson described Mexico’s macro environment as soft, with slower economic growth weighing on results, but said the company continues to gain market share and expects sales to re-accelerate when conditions improve.
Foreign exchange provided a meaningful boost in the quarter. Jackson said the strengthening Mexican peso contributed a $74 million tailwind to sales, a $23 million tailwind to EBIT, and a $0.95 benefit to EPS versus last year’s second quarter. Looking ahead, he said that if current spot rates held for the third quarter, management would expect about a $75 million revenue benefit, $20 million EBIT benefit, and an $0.85 per share benefit to EPS.
AutoZone opened 64 stores globally in the quarter and ended with 6,709 U.S. stores, 913 in Mexico, and 152 in Brazil. Management said it is on track to open approximately 350 to 360 stores globally this fiscal year, up from 304 last fiscal year, and expects 90 to 95 net new store openings globally in the third quarter.
On cash flow and shareholder returns, Jackson said free cash flow was $15 million in the quarter versus $291 million a year ago, with the decline attributed to CapEx and payables timing. He noted that AutoZone repurchased $311 million of stock in the quarter and had $1.4 billion remaining under its authorization. Jackson said the company’s leverage ratio ended the quarter at just over 2.5x EBITDAR and described liquidity as “very strong.”
About AutoZone (NYSE:AZO)
AutoZone, Inc (NYSE: AZO) is a retailer and distributor of automotive replacement parts and accessories. Headquartered in Memphis, Tennessee, the company supplies a wide range of aftermarket components, maintenance items and accessories for passenger cars, light trucks and commercial vehicles. Its product assortment includes engine parts, electrical components, batteries, brakes, filters, fluids and interior and exterior accessories, supported by inventory management and logistics systems to serve retail customers and professional service providers.
AutoZone serves both do‑it‑yourself (DIY) consumers and commercial customers such as independent repair shops and service centers.
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