AutoZone's Growth Story Intact, Analysts Highlight Commercial Strength and Expansion Plans

AutoZone, Inc. (AZO), the leading retailer of automotive replacement parts and accessories in the Americas, reported mixed second-quarter results on Tuesday. Despite missing analyst estimates for earnings per share (EPS) and sales, the company's strong commercial performance and resilient gross margins have analysts optimistic about its long-term growth prospects. In this article, we will explore the key factors driving AutoZone's growth story, its commercial strength, and expansion plans.



Commercial Strength and Expansion Plans

AutoZone's commercial sales program, which provides prompt delivery of parts and other products, as well as commercial credit to local, regional, and national repair garages, dealers, service stations, fleet owners, and other accounts, has been a key driver of the company's growth. In the second quarter of fiscal 2025, commercial sales continued to perform well, contributing to the company's overall revenue growth. Raymond James analyst Bobby Griffin maintained a Strong Buy rating and raised the price target from $3,850 to $4,000, highlighting the company's strong commercial performance, resilient gross margins, and long-term growth prospects (Benzinga, 2025).

Guggenheim analyst Steven Forbes retained a Buy rating and raised the price forecast from $3,750 to $3,850, noting that the results support his thesis of continued sequential improvement, highlighted by stronger DIY and DIFM comps. While higher-than-expected investments in field labor led to a slight EBIT(DA) shortfall, the analyst anticipates these investments will mature in the next 12 months, setting up for stronger comp growth in the second half of 2025 (Benzinga, 2025).

International Expansion and Growth Initiatives

AutoZone's international expansion has been another key driver of its growth story. The company's international business delivered strong results in the second quarter of 2025, with same-store sales growing 9.5% on a constant currency basis. Raymond James analyst Bobby Griffin noted that the International growth, with ~100 new stores, remains a bright spot, despite near-term foreign exchange headwinds. The Mega-Hub expansion remains key, with plans for 300 locations to boost both domestic retail (DIY) and DIFM availability, per the analyst (Benzinga, 2025).

AutoZone's commitment to investing in its business to support growth initiatives, such as the Mega-Hub expansion, is expected to mature in the next 12 months, setting up for stronger comp growth in the second half of 2025. This expansion is expected to support stronger comp growth in the second half of 2025, as analysts anticipate that the investments in field labor will mature and contribute to improved profitability.



Resilient Gross Margins and Financial Health

Despite investments in growth initiatives, autozone has maintained resilient gross margins. In the second quarter of 2025, gross profit as a percentage of sales was flat to last year at 53.9%. The company's financial health is bolstered by steady revenue growth, strong free cash flow (generating $1.9 billion over the past year), and excellent margins. AutoZone's GARP (growth at a reasonable price) score of 88/100 suggests attractive growth potential relative to the stock's valuation (Benzinga, 2025).

Conclusion

AutoZone's growth story remains intact, driven by its strong commercial performance, resilient gross margins, and long-term growth prospects. The company's commitment to investing in its business, expanding internationally, and strengthening its commercial sales program positions it well for continued success. With analysts raising price targets and maintaining optimistic outlooks, AutoZone appears poised for further growth and value creation for shareholders. As the company continues to execute on its strategic initiatives, investors can expect AutoZone to deliver on its long-term growth prospects.