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    AutoZone’s Expansion-Led Margin Squeeze Could Be A Game Changer For AutoZone (AZO)

    Simply Wall St·01/08/2026 05:30:28
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    • In late 2025, AutoZone reported narrowing profit margins even as its business continued to grow and it pushed ahead with international expansion across the Americas, while keeping a possible move into Europe as a longer-term option.
    • More recently, an analyst downgrade highlighted how AutoZone’s plan to accelerate store openings and build over 160 new distribution hubs could lift operating costs and slow share repurchases, prompting investors to reassess the balance between growth and profitability.
    • Next, we’ll examine how AutoZone’s higher planned operating expenses and expansion push could reshape the company’s existing investment narrative.

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    AutoZone Investment Narrative Recap

    To own AutoZone, you need to believe the core parts and repair business can keep generating solid cash while management invests heavily in growth without letting margins erode too far. The recent margin pressure and analyst downgrade sharpen the focus on whether higher operating costs and slower buybacks could become the key short term overhang, while execution on the expansion plan remains the main near term catalyst.

    The board’s October 2025 decision to lift the share repurchase authorization by another US$1,500 million stands out in this context, because the latest commentary suggests elevated capital spending could now constrain the pace of future buybacks. For shareholders, that tension between reinvestment in new stores and hubs and the historical role of repurchases in supporting earnings per share may be one of the most important developments to watch as the new investment cycle progresses.

    But while the store expansion story is front and center, investors also need to be aware of the risk that rising SG&A and margin pressure could...

    Read the full narrative on AutoZone (it's free!)

    AutoZone's narrative projects $22.5 billion revenue and $3.1 billion earnings by 2028. This requires 6.0% yearly revenue growth and about a $0.5 billion earnings increase from $2.6 billion today.

    Uncover how AutoZone's forecasts yield a $4331 fair value, a 31% upside to its current price.

    Exploring Other Perspectives

    AZO 1-Year Stock Price Chart
    AZO 1-Year Stock Price Chart

    Two fair value estimates from the Simply Wall St Community span roughly US$3,242 to US$4,331 per share, underlining how far apart individual views can be. Against that backdrop, the plan to accelerate store openings and build over 160 new hubs, while already weighing on margins, gives you a concrete focal point for comparing these different expectations for AutoZone’s future performance.

    Explore 2 other fair value estimates on AutoZone - why the stock might be worth as much as 31% more than the current price!

    Build Your Own AutoZone Narrative

    Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

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    This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.