With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

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Industries included in the sector are automotive retail, general merchandisers, internet retail, and specialty retail.

Fortune Sector Leaders: Retailing

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The 200 companies on this list are transforming industries from the inside out.

The 26th edition of the list shows how much esteem Big Tech giants command among other business leaders.

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The 25th Fortune World’s Most Admired Companies list suggests that tech giants’ peers respect them as much as ever.

The 300 companies on this list are transforming industries from the inside out.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

This year’s Fortune 500 marks the 68th running of the list.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-238-Autozone

Founded in 1979, the retailer of aftermarket automotive parts and accessories operates more than 6,400 stores across the U.S., Mexico, and Brazil.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-268-AutoZone

AutoZone is an automotive parts retailer with thousands of stores in the U.S, Mexico, and Brazil.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

This year's Fortune 500 marks the 62nd running of the list.

Business insiders have spoken: Asked which companies they most admire, more than 4,100 executives, directors, and analysts chose these top 50 All-Stars.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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AutoZone, founded in 1979, is a leading retailer and distributor of automotive replacement parts, accessories, and maintenance items in the U.S., Mexico, and Brazil. With thousands of locations nationwide, AutoZone serves both do-it-yourself customers and professional mechanics. The company’s other offerings include battery-testing services, loaner tools, and check-engine-light diagnostics.

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AutoZone (AZO): Company Profile, Stock Price, News, Rankings

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AutoZone

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Welcome to AutoZone's 2nd Quarter 2026 Earnings Release Conference Call. At this time, all participants are on a listen-only mode and a question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. At this time, we would like to play the company's Safe Harbor statement.

Before we begin, please note that today's call includes forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance. Please refer to this morning's press release and the company's most recent annual report on Form 10-K and other filings with the Securities and Exchange Commission for a discussion of important risks and uncertainties that could cause actual results to differ materially from expectations. Forward-looking statements speak only as of the date made, and the company undertakes no obligation to update such statements. Today's call will also include certain non-GAAP measures. A reconciliation of GAAP to non-GAAP financial measures can be found in our press release.

Thank you. With that, I would like to turn the conference over to your host, Mr. Phil Daniele. Sir, the floor is yours.

Thank you. Good morning, thank you for joining us today for AutoZone's 2026 second quarter conference call. With me today are Jamere Jackson, Chief Financial Officer, and Brian Campbell, Vice President, Treasurer, Investor Relations, and Tax. Regarding the second quarter, I hope you had an opportunity to read our press release and learn about the quarter's results. If not, the press release, along with slides complementing our comments today, are available on our website, www.autozone.com, under the Investor Relations link. Please click on Quarterly Earnings Conference Calls to see them.

To start out this morning, I wanna thank every AutoZoner across the company for their commitment to delivering on the first line of our pledge. AutoZoners always put customers first. Our results would not be possible without us always asking what the customer needs and how we can meet those needs more efficiently day in and day out.

It is our AutoZoners across the stores, supply chain, and our store support centers who deliver on this commitment every day. Their efforts allowed us to deliver sales growth of +8.1% this past quarter. To start this morning, we will address both our sales results and provide an update on our growth initiatives. We will also discuss our domestic and international results and break our sales results down between traffic and ticket growth to address what inflation has meant to both our ticket growth and our sales growth. We will also share regional disparities where they exist, and finally, our outlook and how we expect the year to unfold as we enter our spring and summer selling season.

For the second quarter, our total sales grew +8.1%, and similar to the first quarter's sales growth, while earnings per share decreased 2.3%. Similarly to our experience in the first quarter, our gross margin, operating profit, and EPS were negatively impacted by a non-cash $59 million LIFO charge, which had a material impact on our margins and EPS. Excluding this LIFO charge, our EPS would have been up 7.1% versus last year's Q2. We also delivered a positive 3.3 total same-store sales on a constant currency basis, with domestic same-store sales growth of +3.4%. Our domestic DIY same-store sales grew +1.5%, while our domestic commercial sales grew +9.8% versus last year's Q2. I'll pause here to reiterate what we said during our last conference call.

Q2 is always our most difficult to forecast due to the less predictable winter weather patterns, and this quarter was no exception. While our commercial sales increase was below our expectations, our results were negatively impacted due to the winter storms across much of the country during the last four weeks segment of the quarter. To add a little more color around the impact the storms had on our domestic commercial sales, the two weeks the storms really impacted us, weeks 10 and 11, our commercial sales were up just over 1%, while the other 10 weeks of the quarter, our commercial sales were up over 12%. International same-store sales were up 2.5% on a constant currency basis, and our unadjusted international comp was 17.1% as exchange rates positively impacted our comps by nearly 15 points.

Jamere will provide more color for you on our foreign currency impact on foreign currency impact on our financial results for both this quarter and the upcoming third quarter later on this call. We opened 64 stores globally this past quarter versus 45 in last year's second quarter to finish with 6,709 U.S. stores, 913 Mexico stores, and 152 Brazil stores. We've now opened 342 new stores on a trailing four-quarter basis versus 241 new stores on a trailing four-quarter basis at the end of Q2 last fiscal year. We're now on track to open approximately 350-360 stores for the full year versus the 304 stores we opened globally last fiscal year.

We continue to be very pleased with the sales productivity we're generating out of our new stores as their sales results are exceeding our models. Let me address our sales results in a little more detail. Coming into the quarter, we were optimistic that our domestic store execution would drive sales growth for both retail and commercial. More specifically, we felt we had the momentum we have gained over the last several quarters with our domestic commercial sales would continue throughout the quarter. The severe weather experienced across the country significantly impacted our commercial customers, many of whom closed their businesses for several days. Despite this, on a two-year basis, our growth is right in line with last quarter's two-year growth rate.

While the winter weather was a short-term drag on sales, I want to stress that we are very excited about our growth initiatives, and they are delivering as we would expect. Historically, these types of winter weather patterns have had a positive impact on our summer selling season. As a reminder, extreme weather events drive failure and maintenance events for our customers. Additionally, our domestic retail comp was solid at +1.5%, in line with last quarter's 1.5%. The second quarter is always the most volatile quarter as the impacts of weather and the timing of tax refunds can have an impact on our short-term results. With that said, we are executing as well as we have in many years.

I'm very excited with what we are seeing in terms of market share gains, and we expect to continue to gain share for the remainder of our fiscal year 2026. Next, I'll discuss the quarter's sales cadence. Regarding the +3.4% domestic same-store sales, the cadence was +4.1% in our first four weeks, +2.7% in the second four weeks, and +3.5 over the last four-week period in the quarter. Last year, we experienced much colder weather in the middle four-week segment of the quarter, while this year, the cold weather came in the last four weeks. As a result, the DIY comparisons were tougher in the middle four-week segment.

Regarding our +1.5% DIY comp for the quarter, we experienced a +2.3% in the first four-week segment, a -0.5% DIY comp in the second segment, and a +2.8% comp during the third segment. Our merchandise categories performed as we would have expected, but the precipitation, especially the ice that large parts of the country experienced in late January and into early February, slowed our business trends. As a reminder, cold weather with ice and snow lead to higher failure rates that stretch into the summer months. Regionally, we underperformed the company's overall DIY comp in the Mid-Atlantic and the South Atlantic areas. Also, the West Coast was a little weaker than we would have expected due to milder weather but much less snow than the year before.

With regard to inflation's impact on DIY sales, we saw like-for-like same SKU inflation up north of 6% for the quarter, which contributed to our DIY average ticket being up 5.2%. The difference between the like-for-like inflation and ticket growth is attributable to category mix. Based on our inflation expectations, we continue to expect our average ticket to grow sequentially through the third fiscal quarter, which ends in May, and then peak during the fourth quarter, where we'll begin to lap the increases in inflation we saw in this past year's fourth quarter. I'll remind you that we price our goods against our weighted average cost, and we continue to expect those weighted average costs to grow due to the impact from tariffs.

We also saw DIY traffic count down 3.6, as traffic in the middle four-week segment was down more than the other eight weeks. As a reminder, our traffic decline was similar in the last quarter's decline. Again, this quarter's difficulty in the middle four-week segment was due to the difficult comparisons with cold weather we experienced last year. I do want to stress here that we expect traffic to improve as ticket growth begins to slow by late summer. We also feel the cold winter and potentially the size of the tax refund season could create upside for us with traffic over the remainder of the fiscal year. Now I will touch on our domestic commercial business. As I mentioned, our commercial sales were up 9.8% for the quarter. The first four weeks grew +10.1%.

The second four-week segment grew +12.5%. The third four-week segment grew 7.3%. As with DIY, our commercial sales were impacted somewhat during the middle four-week segment due to the weather comparisons we had last year. We clearly underperformed our expectations the last four weeks of the quarter as the impact from ice and snow accumulation negatively impacted our commercial customers at the end of the quarter, as we have already discussed. It was just more pronounced on the commercial side of the business. Our commercial sales results continue to be driven by our improved satellite store inventory availability, significant improvements in Hub and Mega Hub coverage, the continued strength of our Duralast brand, and high levels of execution on our initiatives to improve speed of delivery and customer service. We continue to see improvements in delivery times.

These initiatives are delivering share gains and give us confidence as we move further into FY 2026. Both the year-over-year inflation on a like-for-like, same SKU basis for the commercial business and our average commercial ticket growth were similar to DIY, north of 5% for same SKU inflation and north of 5% per ticket. The weather in the last four weeks of the quarter slowed transaction trends to a slight negative growth over those last four weeks, and that is understandable to us.

We continue to be optimistic about re-accelerating transaction growth over the back half of our fiscal year as we remain focused on both growing our customer base and growing share of wallet and sales per customer. Our future sales growth will be driven by share gains and an expectation that like-for-like retail SKU inflation will remain in the mid-single-digit range as we move forward.

Let me take a moment to discuss our international business. Across Mexico and Brazil, we now have 1,065 international stores. I mentioned, our same-store sales grew +2.5% on a constant currency basis behind a continued soft macro environment in Mexico. We are continuing to gain market share, the economy continues to experience slower economic growth. Mexico's economy improves, we expect our sales to re-accelerate and as we continue to invest in stores and distribution centers. We have almost 14% of our total store base outside of the U.S., and we expect this number to grow as we continue our international store build-out. We have continued to invest capital in driving traffic and sales growth.

While there will always be tailwinds and headwinds in any quarter's results, what has been consistent is our focus on driving sustainable long-term results. We continue to invest in improving product assortments in our stores and improving efficiency in our supply chain, which positions us well for the future. We are investing both CapEx and operating expense to capitalize on these opportunities. This year, we are investing nearly $1.6 billion in CapEx to drive our strategic growth priorities, and we expect to invest a similar amount next year. The majority of these investments will be in accelerated store growth, including Hubs and Mega Hubs, placing more inventory closer to our customers. We will continue to invest in our supply chain. Our new Brazil distribution center opened and began servicing stores in Mexico. Or I'm sorry, in December.

Our new and much larger DC in Monterrey, Mexico, will be fully operational soon. We will also focus on optimizing our new distribution centers in the U.S. We are in the final stages of our Supply Chain 2030 project, which began in 2019, all while continuing to invest in technology to improve customer service and our AutoZoners' ability to deliver on our promise of wow customer service. This is the right time to invest in our business, and we believe industry demand will continue to be strong, and we continue to manage our investments with an expectation to achieve strong returns on invested capital. We will monitor returns carefully to make sure that we are achieving on or exceeding our expectations. Now I will turn the call over to Jamere Jackson.

Thanks, Phil. Good morning, everyone. Our operating results remained strong for the quarter and were highlighted by solid top-line revenue. Total sales were $4.3 billion and were up 8.1% versus Q2 of last year. Our domestic same-store sales grew 3.4%, and our international comp was up 2.5% on a constant currency basis. Total company EBIT was down 1.2%, and our EPS was down 2.3%. As Phil stated earlier, excluding our non-cash $59 million LIFO charge, EBIT would have grown 7.2% and EPS would have been up 7.1%. Foreign exchange rates positively impacted our results for the quarter.

For Mexico, the peso strengthened versus last year's Q2 just over 12% versus the U.S. dollar, resulting in a $74 million tailwind to sales, a $23 million tailwind to EBIT, and a $0.95 a share benefit to EPS versus the prior year. We continue to be proud of our results as the efforts of our AutoZoners in our stores and distribution centers have enabled us to continue to grow our business. Let me take a few moments to elaborate on the specifics in our P&L for Q2. First, I'll start with a little more color on sales and our growth initiatives, starting with our domestic commercial business for the quarter. Our domestic DIFM sales were $1.2 billion, up 9.8%.

Our domestic commercial sales represented just over 32% of our domestic auto parts sales and 27% of our total company sales. Our average weekly sales per program were $15,400, up 4.8% versus last year. This quarter, we opened 128 net new programs, including nearly 80 programs in existing stores, which dampened our sales per program growth but will accelerate our total growth moving forward. We finished with 6,310 total programs, and we now have our commercial program in 94% of our domestic stores. Our commercial acceleration initiatives continue to deliver strong results as we grow share by winning new business and increasing our share of wallet with existing customers.

We're building our business with national, regional, and local accounts, and we plan to aggressively pursue growing our share of wallet with existing customers while also adding new customers. Mega Hub stores remain a key component of our current and future commercial growth. We opened five Mega Hubs and finished the quarter with 142 Mega Hub stores. We continue to expect to open approximately 30 Mega Hub locations over the fiscal year as our pipeline is exceptionally strong. As a reminder, our Mega Hubs typically carry over 100,000 SKUs and drive a tremendous sales lift inside the store box, as well as serve as an expanded assortment source for other stores. The expansion of coverage and parts availability continues to deliver a meaningful sales lift to both our commercial and DIY business.

These larger stores give our customers access to thousands of additional parts across the market. While I mentioned a moment ago that our average commercial weekly sales per program grew 4.8%, the 142 Mega Hubs continue to drive growth at an even faster clip. We continue to target having approximately 300 Mega Hubs at full build-out. Our customers are excited by our commercial offering as we deploy more parts in local markets closer to the customer while improving our service levels. On the domestic retail side of our business, our DIY comp was up 1.5% for the quarter. Our DIY share has remained strong behind our growth initiatives, and we're well-positioned for future growth.

Importantly, the market is experiencing a growing and aging car park and a challenging new and used car sales market for our customers, which continues to provide a tailwind for our business. These dynamics, ticket growth initiatives, and macro car park tailwinds, we believe, will continue to drive a resilient DIY business environment for the remainder of FY 2026. Now I'll say a few words regarding our international business. We continue to be pleased with the progress we're making in our international markets. During the quarter, we opened 18 new stores in Mexico to finish with 913 stores and three new stores in Brazil, ending with 152. Our same-store sales grew 2.5% on a constant currency basis and 17.1% on an unadjusted basis.

While sales growth has slowed over the last few quarters in Mexico due to slower economic growth in the country, we have continued to grow share and we're well-positioned when the economy improves. We remain committed to investing in international expansion, we're pleased with our results in these markets as we accelerate the store opening pace. As we look ahead, we're bullish on international being an attractive and meaningful contributor to AutoZone's future sales and operating profit growth. Let me spend a few minutes on the rest of the P&L and gross margins. For the quarter, our gross margin was 52.5%, down 137 basis points versus last year. This quarter, we had a $59 million LIFO charge, 138 basis points unfavorable LIFO comparison to last year.

Excluding the LIFO comparison, we were slightly positive year-over-year on a gross margin basis, which met our expectations as we offset a significant rate headwind from the mix shift to a faster-growing commercial business. We continue to anticipate benefits from merchandise margins next quarter as well that should help offset the rate headwind from accelerated commercial growth. As I mentioned, we had a $59 million non-cash LIFO charge in Q2 and a year-to-date total of $157 million. We're planning a LIFO charge of approximately $60 million for each of the remaining two quarters of fiscal 2026, as we're continuing to experience higher costs due to tariffs that are impacting our LIFO layers. The $277 million in LIFO charges that we expect this year compare to $64 million last year. Moving on to operating expenses.

Our expenses were up 8.7% versus Q2 last year, as SG&A as a percentage of sales deleveraged 18 basis points, driven by investments to support our growth initiatives. On a per store basis, our SG&A was up 3.9% compared to last quarter's 5.8% increase as we managed our SG&A per store lower as sales softened in the middle of the quarter. We expect to continue to increase our new store opening pace through the end of fiscal 2028 when we reach a total of 500 stores open annually. For Q3, we expect to open 90-95 stores globally versus 84 last year. For the full year, we expect to open 350-360 stores versus 304 net new stores opened in FY 2025.

We've been purposefully investing in SG&A in order to capitalize on opportunities to grow our business now and in the near future. These investments will also pay dividends in customer experience, speed of delivery, and productivity, all of which will help us grow market share. We remain committed to being disciplined with our SG&A growth, and as the accelerated new stores mature, we will manage ex-expenses in line with sales growth over time. Moving to the rest of the P&L, EBIT for the quarter was $698 million, down 1.2% versus the prior year. As I previously mentioned, a non-cash LIFO charge reduced our EBIT by $59 million. Adjusting for the unfavorable LIFO comparison, our EBIT would have been up 7.2% versus the prior year.

Interest expense for the quarter was $107 million, down 1.5% from a year ago as our debt outstanding at the end of the quarter was approximately $8.9 billion versus $9.1 billion a year ago. We're planning interest in the $112 million range for the third quarter of FY 2026 versus $111 million last year. For the quarter, our tax rate was 20.7%, up from last year's second quarter of 18.4%. This quarter's tax rate benefited 213 basis points from stock options exercised, while last year it benefited 239 basis points. For the third quarter of FY 2026, we suggest investors model us at approximately 22.9%. Moving to net income and EPS.

Net income for the quarter was $469 million, down 3.9% versus last year. Our diluted share count of 17 million was 1.6% lower than last year's second quarter. The combination of lower net income and lower share count drove earnings per share for the quarter to $27.63, down 2.3% versus last year's Q2. As a reminder, LIFO drove our EPS down $2.66 a share. Let me talk about our free cash flow. For the second quarter, we generated $15 million in free cash flow versus $291 million in Q2 last year. Year to date, we've generated $645 million in free cash flow versus $856 million last year.

The lower free cash generated is due to CapEx and payables timing. Going forward, we expect to continue being an incredibly strong cash flow generator, and we remain committed to returning meaningful amounts of cash to our shareholders. Regarding our balance sheet, our liquidity position remains very strong and our leverage ratio finished at just over 2.5x EBITDAR. Our inventory per store was up 8.1% versus Q2 last year.

While total inventory increased 13.1% over the same period last year, driven by new stores, additional inventory investment to support our growth initiatives and inflation. Net inventory, defined as merchandise inventories less accounts payable on a per store basis, was a negative $105,000 versus a negative $161,000 last year and negative $145,000 last quarter. As a result, accounts payable as a % of inventory finished the quarter at 110.9% versus last year's Q2 of 118.2%.

Lastly, I'll spend a moment on capital allocation and our share repurchase program. We repurchased $311 million of AutoZone stock in the quarter, and at quarter end we had $1.4 billion remaining under our share buyback authorization. Our ongoing strong earnings balance sheet and powerful free cash generation allows us to return a significant amount of cash to our shareholders through our buyback program. We've bought back over 100% of the then outstanding shares of stock since our buyback inception in 1998, while investing in our existing assets and growing our business. We remain committed to this disciplined capital allocation approach that will enable us to invest in the business and return meaningful amounts of cash to shareholders.

To wrap up, we remain committed to driving long-term shareholder value by investing in our growth initiatives, driving robust earnings and cash, and returning excess cash to our shareholders. Our strategy continues to work as we remain focused on gaining market share and improving our competitive positioning in a disciplined way. As we look forward to the back half of our FY 2026, we're bullish on our growth prospects behind a resilient DIY business, a solid international business, and a domestic commercial business that is growing share in a meaningful way. We continue to have tremendous confidence in our ability to drive significant and ongoing value for our shareholders. Before handing the call back to Phil, I wanna remind you that we report revenue comps on a constant currency basis to reflect our operating performance.

We generally don't take on transactional risks, so our results primarily reflect the translation impact for reporting purposes. As mentioned earlier in the quarter, foreign currency resulted in a tailwind to revenue and EPS. If current spot rates held for Q3, then we expect an approximate $75 million benefit to revenue, a $20 million benefit to EBIT and an $0.85 a share benefit to EPS. Lastly, in Q3, we expect LIFO to reduce EBIT by approximately $60 million, impact our gross margin rate by approximately 125 basis points and our EPS by approximately $2.75 a share. Now I'll turn it back to Phil.

Thank you, Jamere. To wrap up this morning, I want to stress that we are on track for delivering on our objectives for the remainder of fiscal 2026. While we have much more to accomplish this fiscal year, we remain committed to flawless execution and appropriately spending our capital to drive growth and efficiency. We feel we are well-positioned to grow both our domestic DIY sales and domestic commercial sales. We also feel that our international same store sales on a constant currency basis will improve, but we remain cautious as the Mexico consumer remains under pressure. We also expect to manage our gross margin effectively while growing our operating expenses in line with our accelerated store opening assumptions.

Finally, I want to reiterate that we are putting our capital to work where it will have the biggest impact on sales, our stores, our distribution centers, and investing in technology to build a differentiated and superior customer experience. We will make sure that the capital we deploy produces strong returns. The stores we have opened over the last five years have exceeded the planned sales and earnings we modeled when these sites were approved.

The focus areas for FY 2026 will remain growing share in our domestic DIY and commercial business and accelerating international top line growth. We do understand that we cannot take things for granted. We must remain laser-focused on customer service, execution, and gaining share in every market in which we operate. We are excited about what we can accomplish over the remainder of the year, and our AutoZoners are motivated to deliver on those commitments.

We believe AutoZone's best days are ahead of us. We would like to open the call for questions.

Thank you. At this time, we will be conducting our question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue, and you may press star two if you would like to remove your question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. We do ask that you try limit your questions two in interest of time. One moment please. Thank you. Our first question today is coming from Bret Jordan with Jefferies. Your line is live.

Could you talk a bit more about your same SKU inflation expectation? I think you said it would be with you mid-single digits going forward, so maybe the rest of the fiscal year. When you think about the second half of the calendar year, do you anticipate continued, same SKU price benefit?

We believe that it'll continue to increase over the third quarter and through most of the fourth quarter. In the fourth quarter is when we will start annualizing those higher rates from last year. We still see same SKU inflation, you know, kind of similar through third and maybe slightly tailing off through, you know, the back half of what you said calendar year, which would be most of our fiscal year, which ends in, you know, late August, as you know.

A couple drivers there, Bret, is, you know, lots of discussion about what's going to happen with tariffs and, you know, obviously the IEEPA tariffs have been stayed at this point. That was a relatively small portion of our tariff bill, if you will. Most of our tariffs are the Section 232 tariffs. We're still expecting to see tariff impact as we move through the back half of the year. I think the other dynamic is that, you know, we've talked about this notion of having a multipronged strategy here where we would continue to negotiate with our vendors, we diversify our sources, and then in some cases, we'll raise our retails.

All of the costs that we've seen so far from tariffs have not made its way through the system, which is why, as Phil mentioned, you know, we're expecting tickets to continue to be elevated through the third and the fourth quarters. I just wanted to give a little bit of color on why that expectation is where it is.

Okay, great. I guess early days here, but a lot of talk about expectations around tax refunds this year. You seeing any signs of incremental traction and I guess sort of a similar theme, the weather that we've seen here in the last six or eight weeks, you know, I guess, what's your near-term outlook on demand creation from that would sort of seem like undercar, some of the seasonal categories might see some benefit?

Yeah, I think if you kind of look across the Midwest, the, you know, the Mid-Atlantic and the Northeast, what we kind of affectionately call the Rust Belt markets for us, this type of weather that we've had in those markets for winter have always indicated a pretty strong category performance in those markets as you move through summer, you know, spring and summer selling season. Exactly those categories you talk about. Undercar will probably have some improved sales in those markets, chassis, steering, suspension, anything that is open to the bottom of the car to get rust and salt on it, those are gonna drive maintenance and failure events over the summertime. We're pretty encouraged by that.

Tax refunds, I mean, it is, as you said, early on, that tax season is just now beginning. You know, as has been stated in the news, we expect those to be slightly bigger, based on no tax on tips and all that sort of stuff that's been talked about pretty widely in the news. We think that also bodes pretty well for us through the early part of spring and into early summer.

Thank you. Our next question is coming from Christopher Horvers with J.P. Morgan. Your line is live.

Thanks. Good morning, guys. Wanted to follow up a bit on Bret Jordan's question. First, distilling through all the noise of the puts and takes of weather, both good and bad, including, you know, that widespread hit in late January and early February, what do you think the right underlying run rate of your domestic business is? Can you also talk about that on the commercial side? I think, you know, people are pretty attuned to the deceleration below 10% on a total DIFM basis.

Yeah. You know, as I talked about in our prepared remarks, you know, we were kind of running on the, on the previous 10 weeks or so in the quarter. We were up in that 12% range, then those last two weeks of the quarter were pretty substantially lower at a 1% comp. You know, the quarter was kind of running along at that better than double-digit number, then the last two weeks were pretty significantly impacted. Again, it was a pretty wide area that stores got impacted going all the way from Dallas, you know, Little Rock, Oklahoma City, all the way across, you know, here in Memphis, Nashville, Louisville, all the way to D.C., had a pretty big impact, you know, initially during that timeframe.

As you went a little further south, you ended up with pretty significant ice. You know, I'll give you an anecdotal example. Most of the schools in Tennessee and Arkansas were shut down for two weeks. I mean, people were pretty much locked in their house for a time frame. That was a temporary impact. It was late in the quarter to recover it, but, you know, we see nothing that indicates that we're not gonna have pretty strong sales growth on the commercial side of the business, you know, going forward.

Yeah, I mean, if you think about it, Bret Jordan, I mean, you know, the first quarter results, we expected our second quarter to perform pretty similarly and excluding sort of the severe weather and the prolonged impacts on both our DIY and commercial business. We would have, you know, printed a number in the second quarter very similar to that. I think what's important to us is that our DIY business continues to remain resilient and our commercial business has sort of snapped back. You know, the results that we saw in the first quarter, you know, we see us performing somewhere in that ZIP Code as we move forward.

Then, you know, Phil, to your previous comments about typical lag of a benefit to the business off a cold and snowy winter. As you think about that benefit, historically, does the business accelerate from that recent trend because of that? As you think about sequential growth of inflation into the third quarter here, what would hold back the business from not accelerating from what sounds like something in the 4% baseline? Thank you.

Yeah, again, I think the tailwinds that you get from the tougher winter weather and those markets that are impacted, we believe those would be a net positive in the go forward. As we move through summer, there's, you know, the other side of the weather equation that we've got to have is a normal to hot summer, which we're expecting to have at least a normal summer at this point. I think all of those are benefits. You know, as we said, we expect a slightly larger tax refund season. It'll be, we'll have to wait and see how that ultimately pans out, but I think those are positive trends for us as we move forward.

Is coming from Steven Zaccone with Citi. Your line is live.

Great. Good morning. Thanks very much for taking my question. I wanted to ask a question on pricing on a different way. When we get to peak pricing, how do you think about elasticity of transactions on the other side? You know, the industry doesn't typically see deflation. Just help us understand your expectations for elasticity of transactions once pricing growth starts to moderate.

I think we think about the business in kind of three different discrete buckets of types of product. You've got, you know, discretionary product. That business has been pretty tough, although it's slightly better than it's been over since the pandemic, frankly. Slightly better. Those are probably the more elastic or inelastic categories. Maintenance has a tendency to sometimes be in a higher elevated average ticket growth. You will get some delayed maintenance. Typically the customer understands that if I delay maintenance, I end up with a failure going forward. If the part is a failure mode, ultimately you have to replace it. There's not a whole lot of it's break fix, and that hasn't really changed over a very long period of time.

Discretionary gets impacted the most. We would expect, you know, as you get further out from inflationary items in the average ticket, that business probably recovers a little bit, but it's a relatively small percentage of our total overall volume. Most of our business is break fix failure and maintenance business, and those will continue to be pretty strong for us, we believe.

Okay, thanks for that. My follow-up question on the topic of investments in general. You've been on this journey to increase your Hubs, Hub count, grow SG&A spending. How would you assess, you know, where we are in the investment cycle? What inning are we in, and how do we think about the pace of some of these investments as we go through the next couple of quarters?

I would say we're in the middle innings. You know, one of the things we highlighted was that we expect to, by FY 2028, to grow our domestic store count by 300 stores a year. You know, we're gonna continue to ramp there. That means an incremental 40-50 stores next year and then the following fiscal year. We're kind of in the middle innings of that ramp. What I'll say is that our pipeline is very strong and the stores are ahead of our pro forma in terms of our performance. We like the, you know, we like the progress that we've made. We like the sales growth that we're seeing. We like the market share gains that we're getting from that.

It has put some pressure on our SG&A, as we've been very transparent about, probably to the tune of 1.5%-2%. You know, we're managing the rest of the SG&A in a very disciplined way. You know, as we move through, you know, I expect this to result in a faster growing top-line business, and a faster growing EBIT business as a result of it.

Thank you. Our next question is coming from Zachary Fadem with Wells Fargo. Your line is live.

Hey, good morning. First, to clarify, it sounds like weather was about a one-1.5 point hit to comp in Q2. Just wanna make sure that's right. Second, when you look at DIY traffic or volumes down about 3.5%, similar in Q1 and Q2, how much of this would you categorize as deferred maintenance, and how should we think about the path and timeframe, towards getting those volumes back?

Yeah, great. I think your estimation on what the impact was, is kind of right on target, of how it impacted the very end of our Q2. As far as, you know, deferred maintenance and that sort of thing, it's always a little bit hard to tell, but we feel like those will accelerate coming into the second half of our year, you know, on the backs of, like we've already said, some of this tax time should, generally speaking, when you get more tax money, or money in the marketplace, the customer will reinvest in the car, and they'll tackle some of those bigger failure projects. And we believe that that's going to continue into the second half of the year.

Got it. Then, Jamere, it sounds like the SG&A spend is peaking to some extent and should moderate a touch from here. I think we do at this point all have a good sense of what that level will of spend will be, both in terms of investing in SG&A and new stores. But perhaps you could spend some time talking about the size of the prize in terms of expected returns and payback on these investments. Is it fair to say we would see outsized top line and EBIT growth as soon as 2027?

Yeah, that's certainly our expectation that you'll start to see these stores mature and that you'll see our top line growth, you know, accelerate in FY 2027 and FY 2028. In terms of, size of the price, you know, in addition to seeing a faster-growing business, you know, you're also going to see a business that has very healthy, you know, returns on invested capital. You know, we model these stores in a very disciplined way, even though we're very conservative. You know, they get to, sort of the targeted, returns on invested capital, in a very, very short period of time. I mean, most of these stores will mature in the 4-5 year, kind of time frame.

What I'll suggest is that Mega Hubs have been, you know, improving their performance over time and are actually doing better, significantly better than what we had modeled. We feel pretty good about it. Again, we're very disciplined on making sure that we're driving the returns on invested capital associated with this strategy. You'll have a faster growing business, you know, that has, you know, faster-growing EBIT growth as a result of that, with very good returns on invested capital.

Thank you. Our next question is coming from Simeon Gutman with Morgan Stanley. Your line is live.

Morning. There was a comment made in the prepared remarks, growing market share in a disciplined manner. There's been talk about growing EBIT faster. Can you phrase it in terms of margins? Can the margins of the business re-expand, or should we think about it in terms of EBIT dollar growth?

Good, good question. I'll say, you know, we kind of think about how we manage margin rate on the two sides of the business. What I would say is, I think we can incrementally grow both of them. You know, if you start at the highest level of margin, gross margin rate, both on DIY, we have slight margin improvement, and we think we can improve gross margin in the commercial side of the business over time as well. We, we still believe that we're gonna grow commercial faster than DIY, so you'll end up with some margin mix pressure. We're okay with that because at the end of the day, that commercial business throws off a pretty good amount of operating profit in EBIT. There'll be a little bit of top line margin pressure because of mix.

Overall, to Jamere's point, we'll have a faster growing EBIT business, as these stores mature and as we move forward. We believe we're growing share on both DIY, commercial, and in our international markets. All of those are, we believe, very healthy for us.

Yeah. I mean, if you think about, you know, the way that we've sort of managed the business historically, I mean, in that 18%-19% sort of operating margin range, we will operate the business in that ZIP Code as we move forward. Nothing's changed about the way that we think about the operating margin profile of the business. We will have the mix pressure, but one of the things that we've done pretty consistently, and you've seen it the last couple of quarters, is we continue to manage, you know, gross margins with intensity. You know, for example, this past quarter, we had about 27 basis points of rate pressure purely from our commercial mix.

Our merchants and our supply chain has done a really good job of sort of offsetting that and keeping gross margins flat year-over-year. That's the kind of operating discipline we have in the, in the company. As you think about, you know, the business in the future, it's, you know, similar operating margin rates with a faster top-line growth.

I guess to zoom in on the mechanics of that, I realize you don't give a lot of guidance points, the comp rate of this business that was prevailing that you should grow faster from, is it fair that 3%-4% is the baseline that you're hoping to grow faster than? I know you haven't endorsed a specific number. I don't know if that's a fair baseline to think you're gonna grow faster. Then it does sound like it's the SG&A tapering that will enable EBIT to grow faster, given what Phil said around the margin pressure of mix coming from commercial.

I think you got two dynamics, Simeon. One is, you know, we're clearly adding more stores at a faster clip. As those stores mature, you're going to see that, you know, have some lift to the comp rate overall. That is, you know, is part of the calculus there. From an SG&A standpoint, I mean, we'll be back to, you know, managing SG&A where we have historically. You know, that's what gives us the confidence that, you know, even with a faster-growing commercial business, which is, you know, part of that equation for a faster comp rate, you know, we can keep the operating margins, you know, close to where they've been historically.

Thank you. Our next question is coming from Michael Lasser with UBS. Your line is live.

Good morning. Thank you so much for taking my question. Given the slowdown in the commercial business attributed to the weather, don't these jobs still get done? Wouldn't that imply the commercial business should have accelerated as meaningfully as the weather improved? If not, does that suggest anything about where AutoZone sits on the call list, meaning in these times where volumes are more constrained, these commercial customers focus their supplier relationships on the top call, and that can contribute to outsized volatility in the commercial business for AutoZone?

No, that's Michael, I don't think so. I think the impact of the slowing at the end of our quarter was just literally that, at the very end of our quarter. Those shops were closed for the most part and didn't open. It was, again, right at the very end of the quarter. We've seen a pretty nice snapback. We're very early in our quarter of Q3. I think what's been true over time is we continue to gain share on the commercial side of the business on the backs of our strategies, putting more assortment closer to the customer through Mega Hubs and Hubs, continually improving our satellite store assortments, and working on strategies that make us easier to do business with and getting those hard to find parts or faster to those customer shops.

We think we're executing very well at that. We think we have a strategy that will continue to only get better, which is, as we drop these Hubs and Mega Hubs, we continue to gain market share, and they also help the satellite stores perform better on commercial. By the way, we don't talk much about it, but those same Mega Hubs and Hubs put that same product closer to the DIY customer as well. We think we gain over that. I think the impact in the last four weeks was just that, and you'll see that we've seen that business recover already, as those shops opened up. We think over time, we continue to move up the call list.

Again, we're gaining with both new customers and share of wallet in what we call up and down the street and in traditionals and national accounts. We're gaining in all of those segments, and we like how healthy that commercial business is.

Thank you for that. My follow-up question was there anything unique about the operating expense performance in the second quarter? Meaning you maybe you anticipated this slowdown in sales, so you pulled back on some operating expenses such that it's gonna significantly accelerate from here. As part of that, if you do see this potential improvement in comps over the next couple of quarters, given all the factors that have been discussed today, would you lean in and accelerate some of your investments such that operating expense growth will revert back to this high double-digit rate that was experienced last quarter? Thank you so much.

AutoZone Q2 2026 Earnings Call Transcript | Fortune

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AutoZone (AZO) Q2 2026 Earnings Call Transcript

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