Shares of Autozone (AZO) dropped by 2% on Tuesday after the company reported its fourth-quarter revenue, falling short of Wall Street’s expectations. This marks the fifth consecutive quarter in which Autozone has not met revenue forecasts and posted adjusted earnings of $48.71 per share, down from $51.58 per share last year. Analysts had anticipated earnings of $50.59 per share.
The Rise in Tariffs and Sales Growth
Despite the profit decline, Autozone saw a 4.5% increase in same-store sales, attributed to price hikes resulting from tariffs. The total sales for the company reached $6.24 billion, a slight increase from $6.21 billion the previous year.
This year, a 25% tariff on imported vehicles and parts allowed the company to raise its prices. Many consumers still need car repairs, so even with higher costs, demand hasn’t completely dwindled. As new vehicle prices rise, more people are opting to keep their current cars running, which benefits retailers like Autozone.
The quarterly gross profit margin was 51.5% of sales, down 98 basis points compared to last year. This drop was mainly due to an $80 million non-cash LIFO charge, offset somewhat by improved product margins. It’s worth noting that LIFO adjustments are accounting measures that do not affect cash flow but do lower reported earnings.
Autozone’s Future Outlook
Looking ahead, the company hasn’t provided specific forecasts for 2026 but has indicated plans to grow its store network. CEO Phil Daniel expressed optimism about opening new locations to capture a larger market share.
Earlier this month, UBS analysts mentioned that Autozone is making significant investments in its stores, fleet, supply chain, workforce, and technology. While these expenditures may pressure margins in the short term, they are expected to enhance sales growth and profitability in the long run.
Should You Consider Autozone Stock?
Currently, analysts on Wall Street have a strong buy consensus for AZO stock, with 15 buy ratings issued over the last three months. The average target price for Autozone shares stands at $4,668.67, suggesting a potential 13% increase.
