AutoZone Inc reported a Q2 2025 topline of USD 3.952 billion, down 6.69% year-over-year and 7.66% quarter-over-quarter, reflecting softer demand and margin pressure in a cyclical consumer environment. Gross profit of USD 2.129 billion yielded a gross margin of 0.539, while operating income reached USD 706.8 million and net income USD 487.9 million, translating to EPS of USD 29.06 (diluted USD 28.29). YoY declines were broad across revenue, gross profit, operating income, net income, and EPS, with the company continuing to experience mix effects and cost pressures in a challenging environment. Notably, AutoZone generated solid operating cash flow of USD 583.7 million and free cash flow of USD 291.0 million, enabling a substantial share repurchase program (common stock repurchased USD 326.4 million) amidst a pronounced balance sheet tilt toward leverage.
The quarter showcased AutoZoneās resilience in cash generation and its preference for returning capital to shareholders, even as headline profitability softened versus the prior year. The companyās liquidity metrics remained constrained (current ratio 0.84, quick ratio 0.13) with a sizable long-term debt position (USD 12.1 billion) and negative stockholdersā equity, underscoring elevated leverage and balance sheet risk. Management commentary, unavailable in the provided transcript dataset, is expected to address margin management, inventory discipline, and ongoing investments in core digital/offline channels. The valuation remains premium relative to peers, supported by strong brand moat, consistent FCF, and a history of efficient capital allocation, though investors should monitor debt repayment progress, working capital efficiency, and any guidance updates that could influence multiple compression.
Overall assessment: AutoZone continues to deliver substantial free cash flow and capital returns, but the QQ2 2025 results reflect margin compression and heavy leverage. The stock remains attractive to investors with a long-term cash-flow focus and a tolerance for leverage risk, provided the company can stabilize margins and deleverage over the near term.
Revenue analysis: USD 3,952,012,000 for Q2 2025, down -6.69% YoY and -7.66% QoQ.
- Gross Profit: USD 2,128,401,000; Gross margin 0.539 (53.9%).
- Operating Income: USD 706,767,000; Operating margin 0.179.
- Net Income: USD 487,923,000; Net margin 0.123.
- EPS (GAAP): USD 29.06; Diluted EPS: USD 28.29; Weighted average shares: 17,245,000.
Profitability and margins: Gross margin steady around 53.9%, indicative of a strong core product mix but offset by elevated operating expenses; Operating margin of 17.9% and net margin of 12.3% reflect ongoing leverage on SG&A and investments in growth initiatives.
Cash flow and capital allocation: Operating cash flow USD 583.7 million; Capex USD -292.7 million; Free cash flow USD 291.0 million. Net cash from financing activities negative USD -288.4 million largely due to share repurchases (USD 326.4 million) and debt activity. The company ended the period with USD 300.9 million in cash, net debt of USD 12.1 billion, and negative equity of approximately USD -4.46 billion.
Balance sheet health: Current ratio 0.842x; Quick ratio 0.131x; Cash ratio 0.0325x; Total assets USD 18.12 billion vs total liabilities USD 22.57 billion. Long-term debt USD 12.06 billion; Debt-to-capitalization roughly 1.56x; Return on assets 2.69%, ROE negative due to equity negative; Interest coverage around 6.49x.
Value and valuation context: Price-to-Sales around 15.1x, P/E around 30.6x, with negative price-to-book due to negative book value. Enterprise value multiple approx 85.4x, implying a premium to peers reflecting the brand, cash flow profile, and market position in the auto parts ecosystem.
Industry and peer context: Sector peers (as per available cross-venue ratios) show varied multiples; AutoZoneās premium reflects its leadership in the U.S. aftermarket with a powerful distribution network and proprietary data assets (ALLDATA) that can support higher retention and cross-sell; margins and leverage will be key to sustaining market expectations.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
3.95B
-6.69%
-7.66%
Gross Profit
2.13B
-6.05%
-6.16%
Operating Income
706.77M
-21.49%
-15.98%
Net Income
487.92M
-25.13%
-13.63%
EPS
29.06
-22.98%
-10.64%
Key Financial Ratios
currentRatio
0.84
grossProfitMargin
53.9%
operatingProfitMargin
17.9%
netProfitMargin
12.3%
returnOnAssets
2.69%
returnOnEquity
-10.9%
debtEquityRatio
-2.77
operatingCashFlowPerShare
$33.85
freeCashFlowPerShare
$16.88
priceToBookRatio
-13.38
priceEarningsRatio
30.56
Net Income vs. Revenue
Expense Breakdown
Management Commentary
No earnings call transcript data provided in the input. Consequently, specific management quotes and thematic highlights (strategy, operations, market conditions) cannot be extracted. If a transcript becomes available, a themes-based synthesis should cover: cost-massaging initiatives, inventory discipline, mix shift to higher-margin items, expansion plans (store or digital), FX/supply chain considerations, and guidance posture.
N/A
ā N/A
N/A
ā N/A
Forward Guidance
No formal forward guidance was included in the provided data. In the absence of explicit management targets, investors should monitor the following indicators for directional visibility: (1) margin stabilization or expansion (especially gross margin sustainability versus SG&A as supply chain costs normalize), (2) debt reduction trajectory and leverage normalization, (3) cash conversion cycle improvements (DSO/DSI/payables), (4) capital allocation policy including capex cadence and any changes to share repurchase authorization, (5) store/network expansion and online/offline channel mix. Given the current financial positionāwith negative equity and elevated long-term debtāany management commentary on deleveraging progress, alternative financing strategies, or changes to dividend policy would be critical for evaluating risk-adjusted returns. based on current data, the near-term guidance seems to hinge on margin resilience and debt management.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0HJL.L Focus
53.86%
17.90%
-10.90%
30.56%
0HCB.L
13.40%
10.40%
0.51%
91.18%
0L7F.L
35.80%
18.60%
-0.32%
-123.72%
0QR3.L
37.80%
18.90%
1.98%
18.26%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
The QQ2 2025 results show a company that continues to generate meaningful cash flow and maintain a durable margin base, but faces notable balance sheet fragility due to substantial debt and negative equity. The strong FCF and ongoing stock repurchases support a constructive near-term equity story for investors tolerant of leverage, yet the high valuation (P/S ~15x, EV/EBITDA ~85x) implies limited upside unless margin discipline and deleveraging drive returns higher. For value-oriented or risk-sensitive investors, AutoZone presents a nuanced profile: a cash-generative leader in its niche with a potential for deleverage and margin stabilization, contingent on managementās ability to optimize working capital, reduce debt, and provide clearer forward guidance. Monitoring debt reduction progress, margin stabilization, and any corporate updates on capital allocation will be critical to confirming a constructive longer-term thesis.
Key Investment Factors
Growth Potential
Growth opportunities include continued leadership in the U.S. auto parts aftermarket, potential optimization of the digital platform and total parts ecosystem (including ALLDATA brand reach), and selective international expansion (Mexico, Brazil) where previously disclosed footprint exists. Strong free cash flow generation supports capital returns and potential strategic investments in supply chain, inventory optimization, and customer experience enhancements to bolster same-store sales and cross-sell.
Profitability Risk
Key risks include high leverage and negative net equity, exposing the company to refinancing risk and interest-rate sensitivity. Liquidity is moderate given current and quick ratios below 1x, requiring ongoing cash flow discipline. Margin compression could reflect input cost volatility and competitive dynamics in the aftermarket parts segment. Dependency on macro consumer demand remains a risk in a cyclical sector, with potential pressure from economic downturns or shifts in vehicle ownership trends. Competitive intensity from peers (e.g., Genuine Parts Co, Advance Auto Parts) could pressure pricing and market share.
Financial Position
Financial position shows robust operating cash flow and free cash flow generation, enabling significant share repurchases, but is offset by a large long-term debt burden and negative stockholdersā equity. The balance sheet indicates a liquidity challenge (low current and quick ratios) but a stable cash balance (~USD 301M) with ongoing deleveraging and potential for improved working capital efficiency to enhance liquidity.
SWOT Analysis
Strengths
Leading U.S. auto parts retailer with extensive store footprint and customer reach (AutoZoneās core business).
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