AutoZone opens 53 new stores while navigating inflation and tariff cost increases

Auto parts retailer AutoZone is planning to continue to expand its portfolio of brick and mortar locations as the auto industry faces higher prices.

AutoZone said that in the quarter that ended on Nov. 22, the company opened 39 new stores in the U.S., along with 12 in Mexico and two in Brazil for a net 53 new stores. As of that date, AutoZone had 6,666 stores in the U.S., plus 895 in Mexico and 149 in Brazil for a total of 7,710 stores globally.

"Our domestic and international businesses performed well throughout the quarter as we continue to execute on our growth initiatives," AutoZone CEO Phil Daniele said in the company's earnings announcement.

"We were especially pleased to open 53 net new stores globally in the quarter and we plan to aggressively open stores over the remainder of the fiscal year as we continue our focus on gaining market share." 

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"As we invest in growing our business, we will remain committed to our disciplined approach of increasing earnings and cash flow to drive shareholder value," Daniele added.

AutoZone is a retailer and distributor of replacement auto parts and aftermarket accessories, with a broad product line to cover cars, SUVs, trucks, vans and more. Daniele noted that inflation and tariffs have pushed costs and sales figures higher, though

"We think the inflation is going to increase through what would be our third quarter on a year-over-year basis," Daniele said on Tuesday's earnings call. "We'll start to lap some of that, I suspect there'll still be some increases, but they'll probably be a little bit less muted in the latter part of what would be our Q4, more like the summertime."

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Daniele said that in the last few years the lower-end consumer has been under pressure for "quite some time" but they have remained relatively stable, adding that there "hasn't been a significant wobble" among that category of consumer. 

Most of the tariff-induced price hikes were seen in discretionary categories, as opposed to items that are necessary for repairs, which he said is a relatively small part of their business. Those categories struggled the last few years but have stabilized in the last year.

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He said that AutoZone has seen little "trade down" from consumers because there are only certain product categories where the company has a range of options at different price points.

"We don't have a lot of categories where you would see trade down. We have some good, better, best opportunities in batteries and brakes and wiper blades, things of that nature," Daniele said. 

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"But the vast majority of our inventory is generally one part that fits a particular vehicle, and there's not a whole lot of upsell opportunities based on good, better, best opportunities. There's a little bit, but it's really not been that meaningful," he added.