AutoZone Q3 2025: Sales Grow but Rising Costs Squeeze Profits

In this post, we're digging into the latest quarterly report from AutoZone, covering the period ending May 10, 2025. The filing highlights a familiar challenge for many large retailers: achieving sales growth while navigating rising costs that are beginning to squeeze profitability. The auto parts giant continues to expand its top line, but a look deeper into the income statement reveals pressure on the bottom line.

Sales Growth Continues, Led by Commercial Segment

AutoZone posted net sales of $4.46 billion for the quarter, a 5.4% increase from the $4.24 billion reported in the same period last year. This performance was supported by a solid 3.2% increase in total company same-store sales.

A significant engine of this growth is the company's sustained focus on the commercial "do-it-for-me" (DIFM) market. For the 36-week period, domestic commercial sales jumped 7.1% to reach $3.5 billion, demonstrating the success of AutoZone's strategy to serve professional repair shops. This expansion within its core Auto Parts Stores segment underscores a robust operational execution.

Navigating Profitability Headwinds

Despite the healthy sales figures, profitability faced headwinds. Net income for the quarter declined to $608.4 million from $651.7 million a year ago. This resulted in a diluted earnings per share (EPS) of $35.36, down from $36.69 in the prior-year quarter.

The flow from revenue to profit, and the costs along the way, is illustrated below.

The filing points to two main factors for the margin pressure. First, the gross profit margin narrowed to 52.7% from 53.5%, which the company attributed to higher inventory shrink, costs associated with new distribution centers, and a growing mix of lower-margin commercial sales. Second, operating, selling, general, and administrative (SG&A) expenses rose as a percentage of sales, driven by higher self-insurance costs and investments in growth initiatives.

Continued Shareholder Returns

AutoZone remains committed to returning capital to its shareholders through its stock repurchase program. During the quarter, the company bought back $250.3 million of its common stock. According to the report, these buybacks provided a $0.26 boost to diluted EPS, partially offsetting the decline from lower net income.

In summary, AutoZone's third-quarter results depict a company successfully executing its growth plans, particularly in the crucial commercial sector. However, this growth comes with margin trade-offs. Investors will be watching closely to see how the company balances its strategic expansion with the need to manage costs and protect its bottom line in the coming quarters.