Executive Summary
AutoZone reported QQ2 2025 total sales of approximately $3.95 billion, up 2.4% year over year, driven by a 1.9% domestic same-store sales result and a 7.3% increase in Domestic Commercial sales, with International comps up 9.5% on a constant currency basis. Management highlighted a meaningful currency headwind from Mexico (FX weakened ~19%), which translated into about $91 million of revenue drag, roughly $30 million of EBIT drag and a $1.22 per share EPS drag versus the prior year. Excluding FX, EPS would have been up about 2.1% for the quarter. On the profitability front, gross margin was 53.9% (flat versus prior year) with a modest 30 basis point unfavorable LIFO impact; excluding LIFO, gross margin benefited about 36 basis points from merchandising margin improvements. Operating income totaled $706.8 million (margin 17.9%), with net income $487.9 million and diluted EPS of $28.29, down 2.1% versus a year earlier. The company generated strong cash flow, delivering $583.7 million of operating cash flow and $291.0 million of free cash flow in the quarter, while continuing to invest aggressively in growth: capital expenditures totaled $292.7 million, and AutoZone repurchased about $330 million of stock in the quarter with roughly $1.3 billion remaining under the buyback authorization. AutoZone reiterated its long-term growth framework: accelerate store growth (including Mega-Hubs), expand international footprint (now ~949 international stores), and deepen Domestic Commercial momentum through improved parts availability, faster delivery, and enhanced service. Management guided that FX headwinds may persist into the next two quarters and outlined tariff exposure and sourcing diversification as ongoing considerations. The company remains committed to investing over $1 billion in capital expenditures in FY25 to drive market share growth and supply chain efficiency. Given the balance sheet dynamics (notably elevated debt and negative equity), investors should weigh the durable cash flow, expansion upside, and operational leverage against currency, inflation, and financing risk in the near term.
Key Performance Indicators
QoQ: -15.98% | YoY:-21.49%
QoQ: -13.63% | YoY:-25.13%
QoQ: -10.64% | YoY:-22.98%
Key Insights
Revenue and growth: QQ2 2025 revenue of $3.952B, up 2.4% vs. year-ago quarter (reported). Management notes foreign exchange headwinds from Mexico with ~$91M revenue drag, ~$30M EBIT drag and ~$1.22 per share EPS drag; if FX were neutral, EPS would have been +2.1% YoY. Gross margin and profitability: Gross margin 53.9% (flat vs. prior year); 30bp unfavorable LIFO impact; excluding LIFO, gross margin up 36bp due to merchandising margin improvements. Operating income: $706.8M, margin 17.9%, down 4....
Financial Highlights
Revenue and growth: QQ2 2025 revenue of $3.952B, up 2.4% vs. year-ago quarter (reported). Management notes foreign exchange headwinds from Mexico with ~$91M revenue drag, ~$30M EBIT drag and ~$1.22 per share EPS drag; if FX were neutral, EPS would have been +2.1% YoY. Gross margin and profitability: Gross margin 53.9% (flat vs. prior year); 30bp unfavorable LIFO impact; excluding LIFO, gross margin up 36bp due to merchandising margin improvements. Operating income: $706.8M, margin 17.9%, down 4.9% YoY; constant currency decline was ~0.9%. Net income and earnings: Net income $487.9M; diluted EPS $28.29, down 2.1% YoY; FX drag reduced EPS by $1.22. Cash flow and liquidity: Operating cash flow $583.7M; free cash flow $291.0M; cash at period end $300.9M; net debt around $12.06B; leverage approximately 2.5x EBITDAR. Capital allocation: Repurchased $330M of AutoZone stock; $1.3B remaining on buyback authorization. Balance sheet: Total assets $18.12B; total liabilities $22.57B; stockholders’ equity negative at roughly -$4.46B driven by accumulated deficits and aggressive share repurchases; inventories per store $161k; regional mix shows domestic strength in DIY and Commercial, with international growth aided by a 9.5% CC comp in Mexico and Brazil. Valuation context: P/E around 30.6x; P/S ~15.1x; negative price-to-book due to negative equity; EV/EBITDAR ~85.4x.
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
operatingProfitMargin
17.9%
operatingCashFlowPerShare
$33.85
freeCashFlowPerShare
$16.88
Management Commentary
Key management insights from the QQ2 2025 earnings call:
- Strategy and growth initiatives: Management emphasized the importance of expanding market share via Mega-Hubs and increased store openings, with 111 Mega-Hubs currently and 19 more planned in the next two quarters to broaden parts availability and drive higher sales lift across both DIY and Commercial channels. Quote: We finished the second quarter with 111 Mega-Hub stores, and we expect to open at least 19 more locations over the next 2 quarters.
- FX headwinds and margin discipline: FX pressures were highlighted as a material headwind, particularly from Mexico, with a 19% depreciation in MXN against USD contributing a $91 million revenue drag, $30 million EBIT drag, and $1.22 per share drag on EPS; management noted expectations for this trend to persist into the next two quarters. Quote: From Mexico, FX rates weakened 19% versus the U.S. dollar for the quarter resulting in a $91 million headwind to sales, a $30 million headwind to EBIT and $1.22 a share drag on EPS.
- Capex and capital allocation: AutoZone reiterated a disciplined, growth-oriented capex program exceeding $1 billion for FY25 to accelerate store growth, distribution improvements, and IT investments supporting speed and service. Quote: This year we expect, again, to invest more than $1 billion in CapEx in order to drive our strategic growth priorities.
- Domestic Commercial momentum and operations: Commercial growth accelerated in Q2, with Domestic Commercial sales up 7.3% vs. last year, contributing to higher sales per program and broader wallet share; Mega-Hub strategy is central to delivering faster parts availability and higher transaction value per program. Quote: Our Domestic Commercial sales represented 31% of our Domestic auto part sales and 27% of our total company sales; Mega-Hubs averaged significantly higher sales and are growing much faster than the balance of the commercial business in Q2.
FX rates weakened 19% versus the U.S. dollar for the quarter resulting in a $91 million headwind to sales, a $30 million headwind to EBIT and $1.22 a share drag on EPS versus the prior year.
— Jamere Jackson
This year we expect, again, to invest more than $1 billion in CapEx in order to drive our strategic growth priorities.
— Philip Daniele
Forward Guidance
Outlook and assumptions for the remainder of FY25:
- FX exposure: Management indicated continued FX headwinds with potential revenue drag of up to $356 million for the full year 2025 if current spot rates persist, with an ~$18 million EBIT drag and ~$4.82 per share EPS drag under those conditions; potential variances exist if hedging or sourcing actions offset some of this impact. Management also provided additional guidance for Q3 and Q4 FX headwinds (revenue drag ~ $106M, EBIT drag ~ $34M, EPS drag ~$1.41; Q4 drag ~ $101M revenue, $37M EBIT and $1.53 EPS under spot-rate guidance). Our assessment: FX remains a meaningful risk to near-term profitability and cash flow, though the company has demonstrated margin resilience and pricing levers to offset some of the impact.
- Tariffs and sourcing: 20% tariffs on China-sourced SKUs present a medium-term margin challenge; AZO indicated potential vendor absorption, sourcing diversification, and pricing actions as mitigants and reaffirmed intent to maintain margin profile post tariffs. The absence of an explicit tariff-pass-through model introduces execution risk but management suggested a rational industry response to tariffs.
- Growth and profitability trajectory: With capex-driven capacity expansion (2 new DCs, 2 direct-import facilities, and ongoing Mega-Hub deployment), combined with stronger Commercial and international growth, management expects a favorable mix shift and continued earnings growth in the second half of FY25. The company also highlighted ongoing investments in IT and supply-chain capabilities as enablers of higher efficiency and market share gains.
- Key risk factors to monitor: macro consumer health and disposable income, currency volatility (FX), tariff developments, store redevelopment/closures in competitive markets, and the pace of international openings relative to integration costs. Investors should watch the cadence of Mega-Hub openings, the performance of Domestic Commercial programs, and the evolution of gross margins as mix shifts and tariff/FX dynamics unfold.