AutoZone Q3: Margins Under Pressure, But CEO 'Excited About Momentum' Heading Into Summer

AutoZone, Inc. AZO shares are trading slightly lower in the premarket session on Tuesday after the company reported third-quarter results.

The company reported earnings per share of $35.36, missing the analyst consensus estimate of $37.17. Quarterly sales of $4.46 billion (+5.4% year over year) outpaced the street view of $4.35 billion.

The company reported a 3.2% growth in same-store sales on strength in the domestic segment.

Also Read: AutoZone Set To Gain As Tariffs Push Car Owners To Repair Over New Purchases: Analyst

For the quarter, gross profit was $2.35 billion, higher than $2.26 billion a year ago. 

The gross margin in the quarter under review was 52.7%, a decrease of 77 basis points vs. the prior year.

The decrease in gross margin was negatively impacted by higher inventory shrink, higher commercial mix, new distribution center startup costs, and a 21-basis point ($8 million net) non-cash LIFO impact.

In the third quarter, operating expenses rose to 33.3% of sales, up from 32.2% last year. This increase, or deleverage, was mainly due to higher self-insurance costs. Additional spending to support growth initiatives also contributed to the rise.

Operating profit decreased 3.8% to $866.2 million.

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“Our international business also continued to deliver strong results, as same-store sales grew 8.1% on a constant currency basis,” said President and Chief Executive Officer Phil Daniele.

“While currency rate moves continued to pressure reported sales and earnings, we believe our international operations are positioned well as we continue to focus on opening more stores in these markets,” Daniele added. 

“We are excited about our momentum heading into the last quarter of the fiscal year, and we are well prepared for our summer selling season,” the CEO stated.

During the quarter ended May 10, AutoZone added 84 net new stores. This included 54 in the U.S., 25 in Mexico, and 5 in Brazil. The company now operates 7,516 stores across all three countries.

The company exited the quarter with cash and equivalent worth $268.625 million.

Price Action: AZO shares are trading lower by 1.06% to $3,785.80 premarket at last check Tuesday.

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