AutoZone (NYSE:AZO) reported an 8.1% increase in second-quarter sales on Tuesday, as the company’s aggressive store expansion and inflation-driven pricing offset a dip in net income caused by technical accounting charges.
The Memphis-based auto parts retailer posted net sales of $4.3 billion for the 12-week period ended February 14, 2026.
Despite the top-line growth, net income fell to $468.9 million, down from $487.9 million in the prior-year period.
Diluted earnings per share followed suit, decreasing to $27.63 from $28.29.
The decline in profitability was primarily linked to a 137-basis-point drop in gross margin, which landed at 52.5%.
Management attributed nearly the entire decrease to a 138-basis-point non-cash LIFO (last-in, first-out) charge, a common accounting adjustment in inflationary environments.
Operating expenses remained relatively stable at 36.1% of sales, though they saw slight deleverage due to ongoing investments in growth initiatives.
Operating profit for the quarter edged down 1.2% to $698.5 million.
AutoZone also continued its long-standing strategy of aggressive capital return, repurchasing 85,000 shares of its common stock during the quarter for a total investment of $310.8 million.
The average price per share stood at $3,666.
At the end of the period, the company still had $1.4 billion remaining in its current share repurchase authorization.
The retailer’s physical footprint continues to widen, particularly in international markets.
During the quarter, AutoZone opened 64 net new stores, including 43 in the U.S., 18 in Mexico, and three in Brazil.
This brings the company’s total global store count to 7,774.
Inventory levels rose 13.1% year-over-year, a jump driven by a combination of new store openings and the rising cost of goods.
On a per-store basis, net inventory (merchandise inventories less accounts payable) was negative $105,000—a figure that remains negative due to the company's efficient supply chain and vendor financing, but has tightened from negative $161,000 a year ago.
While the LIFO charge masked some of the company’s underlying operational strength, the 8% sales growth suggests that the "do-it-yourself" automotive market remains resilient as consumers keep older vehicles on the road for longer periods in a high-interest-rate environment.