EPS of $51.88 increased by 58.1% from previous year
Gross margin of 52.5%
Net income of 902.21M
"reaccelerate our new hub and mega-hub openings; effectively and efficiently open our new distribution centers and optimize our direct import facility; ramp-up our domestic and international store growth; and most importantly, reaccelerate our domestic commercial sales growth and continue to gain market share on DIY." - Phil Daniele
AutoZone Inc (AZO) QQ4 2024 Earnings Analysis: 9% Q4 Revenue Growth, FX Headwinds, and Strategic Hub Expansion Set to Accelerate Domestic Commercial and International Growth
Executive Summary
AutoZone reported a solid QQ4 2024, with total sales of $6.205B and diluted EPS of $51.58, up 9% and 11% respectively on the quarter. On a 16-week basis, the quarter implied a 2.6% year-over-year increase in sales, with domestic DIY roughly flat and domestic DIFM up 10.9%, while international comps rose about 9.9% in constant currency. The quarter benefited from a favorable 53rd week in the fiscal year, but foreign exchange headwinds reduced reported international sales and EPS. Full-year 2024 results showed sales of $18.5B and EPS of $149.55, up 5.9% and 13%, respectively. AutoZone generated strong cash flow, delivering $723M of free cash flow in Q4 and $1.9B for the year, and repurchased $711M of stock in the quarter, with roughly $2.2B remaining under the current buyback authorization.
Key Performance Indicators
Revenue
6.21B
QoQ: 46.51% | YoY:48.09%
Gross Profit
3.26B
52.50% margin
QoQ: 43.80% | YoY:47.15%
Operating Income
1.30B
QoQ: 44.05% | YoY:52.80%
Net Income
902.21M
QoQ: 38.43% | YoY:52.02%
EPS
52.98
QoQ: 40.42% | YoY:58.10%
Revenue Trend
Margin Analysis
Key Insights
Total revenue (Q4): $6.205B, up 9% year over year; FY24 revenue: $18.5B, up 5.9% YoY. On 16-week bases, Q4 comps were up 2.6% vs. last year (per management).
Gross margin: 52.5% in Q4, down 21 bps versus prior year due to LIFO; excluding LIFO, gross margin up 32 bps driven by merchandising margin strength.
Operating income (EBIT): Q4 $1.296B, up 6.1% YoY; FY24 EBIT just under $3.8B, up 9.1% YoY.
Net income and EPS: Q4 net income $902.2M; diluted EPS $51.58 for the quarter (YoY EPS up ~11%). FY24 net income $2.7B; diluted EPS $149.55, up 13%.
SG&A and Opex: SG&A up 10.4% in Q4; SG&A as a % of sales deleveraged 37 bps; investment in IT and payroll to support growth initiatives.
Financial Highlights
Summary of key QQ4 2024 metrics and year-over-year/quarter-over-quarter trends:
- Total revenue (Q4): $6.205B, up 9% year over year; FY24 revenue: $18.5B, up 5.9% YoY. On 16-week bases, Q4 comps were up 2.6% vs. last year (per management).
- Gross margin: 52.5% in Q4, down 21 bps versus prior year due to LIFO; excluding LIFO, gross margin up 32 bps driven by merchandising margin strength.
- Operating income (EBIT): Q4 $1.296B, up 6.1% YoY; FY24 EBIT just under $3.8B, up 9.1% YoY.
- Net income and EPS: Q4 net income $902.2M; diluted EPS $51.58 for the quarter (YoY EPS up ~11%). FY24 net income $2.7B; diluted EPS $149.55, up 13%.
- SG&A and Opex: SG&A up 10.4% in Q4; SG&A as a % of sales deleveraged 37 bps; investment in IT and payroll to support growth initiatives.
- Cash flow and balance sheet: Free cash flow (FCF) of $723M in Q4; FY24 FCF of $1.9B; cash at period end $298.2M; total debt around $12.37B; net debt around $12.07B; leverage/EBITDAR at 2.5x.
- Capital allocation: AutoZone repurchased $711M of stock in Q4; 16-year buyback program history with >$3.2B buybacks in FY24? (management note indicates $37B since inception; specifics vary by report).
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
6.21B
48.09%
46.51%
Gross Profit
3.26B
47.15%
43.80%
Operating Income
1.30B
52.80%
44.05%
Net Income
902.21M
52.02%
38.43%
EPS
52.98
58.10%
40.42%
Key Financial Ratios
currentRatio
0.84
grossProfitMargin
52.5%
operatingProfitMargin
20.9%
netProfitMargin
14.5%
returnOnAssets
5.25%
returnOnEquity
-19%
debtEquityRatio
-2.6
operatingCashFlowPerShare
$62.85
freeCashFlowPerShare
$42.48
priceToBookRatio
-11.41
priceEarningsRatio
15.01
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management takeaways from the QQ4 2024 conference call, organized by theme:
- Strategy and growth trajectory
- Phil Daniele emphasized a deliberate growth path: reaccelerating hub and mega-hub openings, accelerating distribution-center build-out, ramping both domestic and international store growth, and increasing domestic commercial market share while continuing DIY leadership. He described the plan as a marathon, not a sprint, with a focus on flawless execution and Wow! Customer Service.
- Quote: “reaccelerate our new hub and mega-hub openings; effectively and efficiently open our new distribution centers and optimize our direct import facility; ramp-up our domestic and international store growth; as well as reaccelerate our domestic commercial sales growth and continue to gain market share on DIY.”
- FX headwinds and international implications
- Jamere Jackson highlighted a material foreign-exchange drag in QQ4: a 500 bps FX headwind on international sales resulting in a $32M revenue drag, $8M EBIT drag, and approximately $0.32 per share EPS impact versus the prior year. He also quantified forward FX guidance: if spot rates hold constant, Q1 FY25 could see about a $55M revenue drag, $16M EBIT drag, and a $0.63 per share EPS drag; full-year 2025 FX could imply about a $265M revenue drag, $90M EBIT drag, and $3.64 EPS drag.
- Margin dynamics and pricing discipline
- Management stressed disciplined pricing and margin expansion through merchandising improvements, with particular attention to the impact of inflation on ticket averages. They noted that discretionary DIY categories pressured DIY comps, but the company continues to gain DIY market share and expects inflation to re-accelerate modestly in FY25.
- Operational execution and hub strategy
- Discussion of the hub/mega-hub expansion pipeline (presently ~70 mega-hubs in construction with a plan for well over 200 mega-hubs) and the synergy with commercial growth through faster delivery and improved coverage. They also highlighted international expansion momentum (Mexico and Brazil) with 921 international stores and a target of 200 international openings per year by 2028.
- Financial discipline and capital allocation
- The company underscored its strong cash generation, ongoing buybacks, and disciplined SG&A management even as it invests in IT and payroll to support growth initiatives.
reaccelerate our new hub and mega-hub openings; effectively and efficiently open our new distribution centers and optimize our direct import facility; ramp-up our domestic and international store growth; and most importantly, reaccelerate our domestic commercial sales growth and continue to gain market share on DIY.
— Phil Daniele
If yesterday's spot rates held constant for Q1 FY '25, then we expect an approximate $55 million drag on revenue, a $16 million drag on EBIT, and a $0.63 a share drag on EPS.
— Jamere Jackson
Forward Guidance
Management guidance and assessment for FY25 and beyond:
- Near-term trajectory: Q1 FY25 comps expected to modestly improve vs. the prior quarter, with better performance anticipated in Q2 and Q3. The cadence reflects continued macro pressure on DIY discretionary categories but with improving commercial execution and hub-enabled capacity.
- Growth investments: AutoZone intends to accelerate hub and mega-hub openings (targeting well north of 200 mega-hubs total; greater than 20 mega-hubs in FY25) and to accelerate international openings (aiming for ~200 international openings per year by 2028). These investments are expected to drive faster comp growth in both DIY and DIFM, particularly as inventory availability and delivery speed improve.
- FX and LIFO considerations: The company guides a meaningful FX headwind for FY25 (if rates stay at current levels) and notes a LIFO-related dynamic that could influence margins and earnings cadence. Investors should monitor FX movements, as a shift in spot rates could have sizable quarterly earnings impact (Q1: ~$0.63 EPS drag; full-year $3.64 EPS drag under constant spot rates scenarios).
- Inflation and pricing: The company expects SKU inflation to be in the low-single-digits in FY25, and pricing remains disciplined with limited near-term price increases, suggesting margin expansion will rely more on merchandising margins and operating efficiency rather than aggressive price hikes.
- Key monitorables for investors: trajectory of DIY vs. DIFM growth as hub strategy scales; international same-store sales and store openings; LIFO reversals and their timing; FX exposure management; SG&A discipline in the face of growth investments; and the pace of hub/mega-hub integration into operating margins.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
AZO Focus
52.50%
20.90%
-19.00%
15.01%
AAP
17.40%
-41.10%
-19.10%
-1.59%
TSCO
35.20%
8.44%
10.40%
30.79%
GPC
35.90%
3.28%
3.07%
30.46%
FIVE
40.50%
17.70%
10.40%
6.88%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
AutoZone's QQ4 2024 results affirm a durable, long-term growth thesis centered on expanding the hub/mega-hub network, accelerating international penetration, and enhancing commercial share. The company delivered strong cash flow, disciplined capital allocation (notably buybacks), and a clear plan to scale its hub infrastructure to drive faster comp growth. However, the near-term earnings cadence faces FX headwinds and LIFO-related margin dynamics, and management cautions that 2025 could reflect continued currency translation effects and modest gross-margin headwinds if inflation accelerates. The long-run algorithm remains intact: expanding gross margins via merchandising gains, controlled SG&A, and sustained free cash flow generation feeding a shareholder-friendly capital allocation strategy. Given AZO’s margin superiority relative to peers and its proven ability to convert growth investments into higher earnings power, the stock offers attractive upside should the international and domestic commercial initiatives materialize as planned and FX/headwinds normalize over time.
Valuation considerations: AZO trades at roughly mid-teens on earnings (P/E around 15x implied by current data), with a price-to-sales multiple of about 8.7x and an enterprise value multiple around 45x, reflecting highly leveraged balance sheet under a negative equity scenario. The company’s negative book value and high leverage are notable contrasts against peers such as TSCO, GPC, and DKS, which exhibit more traditional capitalization profiles. Investors should weigh AZO’s strong cash generation and growth plan against the near-term FX sensitivity and balance-sheet dynamics. Key catalysts include the hub/mega-hub rollout cadence, international store openings relative to FX stabilization, and potential margin gains from merchandising improvements.
Key Investment Factors
Growth Potential
Long-term growth driven by a balanced mix of domestic commercial expansion and rapid international scale-up. Hub/mega-hub deployment improves inventory availability, reduces delivery times, and elevates DIFM sales. International footprint (Mexico and Brazil) and ALLDATA synergy provide meaningful traffic and margin upside. Management targets well over 200 mega-hubs (70+ currently in the pipeline) with ongoing capex in distribution and IT to support growth.
Profitability Risk
FX volatility remains a material near-term risk given the large international footprint and a reported 500 bps drag in QQ4; potential headwinds from macro consumer softness, particularly in discretionary DIY categories; LIFO accounting dynamics and possible reversals; elevated leverage given high debt and negative equity could amplify sensitivity to earnings volatility; competition and pricing discipline in a consolidating auto-parts market.
Financial Position
Strong cash generation with FY24 free cash flow of $1.9B and Q4 FCF of $723M. Liquidity is robust, with cash of ~$298M and leverage at 2.5x EBITDAR. However, total debt (~$12.37B) and negative stockholders’ equity (~$-4.75B) reflect a capital structure that relies heavily on borrowings and buybacks. Stock repurchase activity remained meaningful (Q4 buybacks of ~$711M), illustrating a disciplined capital allocation approach that prioritizes shareholder value while funding growth initiatives.
SWOT Analysis
Strengths
Market leadership in DIY/diff-merchant auto parts with a broad footprint and scale economics