MW Tariffs aren't hurting as much as feared, but AutoZone's earnings still missed

By James Rogers

'We feel like we have our arms around [tariffs], even though it's changing every day,' says AutoZone CEO Phil Daniele

Shares of AutoZone Inc. extended their pullback on Tuesday, as a quarterly profit miss by the auto-parts retailer offset its first revenue beat in more than a year. But the company also gave a positive message about the impact of tariffs when it reported its fiscal third-quarter results.

AutoZone $(AZO)$ is coping with the fallout from the Trump administration's sweeping wave of tariffs, according to Chief Executive Phil Daniele. "We feel like we have our arms around it, even though it's changing every day," he said during a conference call to discuss the results. "It's not nearly as impactful as it appeared it was going to be several months ago."

Despite tariff-related uncertainty, other auto-parts retailers have also indicated their ability to weather the storm. Last month, AutoZone rival O'Reilly Automotive Inc. $(ORLY)$ raised its full-year earnings guidance, while Advance Auto Parts Inc. $(AAP.AU)$ reaffirmed its guidance last week, sending its stock skyrocketing.

AutoZone's stock rose initially in premarket trade, lifted by its fiscal third-quarter results, before reversing course. It was down 4.1% in morning trading, and has lost 4.7% amid a four-day losing streak since it closed at a record $3,880.15 on May 20.

The company's chief financial officer, Jamere Jackson, said that AutoZone saw minimal impact from the implementation of tariffs during the quarter. Going forward, Jackson cited several factors that could impact AutoZone's results due to tariffs, including vendor absorption, diversification, sourcing and pricing actions.

"Currently, we expect these actions to offset any Q4 tariff costs and not have a material impact on our gross margins," he added.

During the third quarter, AutoZone's gross margin, a key measure of profitability, was 52.7%, a fall of 0.77 percentage points, as the cost of sales rose 7.2% to outpace revenue growth of 5.4%.

AutoZone's biggest source of imports is China, according to CEO Daniele. "We've taken that number down pretty significantly over the last couple of years, specifically since the first round of tariffs back in 2016," he said, adding that some products also come from Eastern Europe and Mexico.

While the macro environment and uncertainty around tariffs have forced customers to be cautious with their spending, Daniele said AutoZone has seen an improving year-over-year trend in its failure and maintenance businesses. "Historically, when our consumer is under pressure, our maintenance and failure categories begin to outperform discretionary categories," he noted.

AutoZone's revenue for the fiscal third quarter ending May 10 rose to $4.46 billion from $4.24 billion in the same period last year, beating the analyst revenue estimate of $4.42 billion. That was the first top-line beat since the fiscal second quarter of 2024.

The company's net income was $608.44 million, or $35.36 a share, compared with $651.73 million, or $36.69 a share, in the prior year's quarter. Analysts surveyed by FactSet were looking for net income of $37.11 a share. That marked the fourth straight quarter of bottom-line misses.

Overall same-store sales, or sales for stores open at least one year, grew 3.2%, to match the FactSet consensus.

Domestic same-store sales grew 5%, while international same-store sales fell 9.2%. On a constant currency basis, total company same-store sales grew 5.4%, while domestic and international comparable sales rose 5% and 8.1%, respectively.

"While currency rate moves continued to pressure reported sales and earnings, we believe our international operations are positioned well as we continue to focus on opening more stores in these markets," Daniele said in a statement.

AutoZone said it opened 84 new stores during the quarter: 54 in the U.S., 25 in Mexico and five in Brazil, taking the company's total store count to 7,516. The company has 6,537 stores in the U.S., 838 in Mexico and 141 in Brazil.

Shares of AutoZone are up 14.7% in 2025, compared with the S&P 500 index's SPX decline of 0.3%.

-James Rogers

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May 27, 2025 12:46 ET (16:46 GMT)

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