AutoZone (AZO) management projects that domestic same-store sales will remain flat to up low single digits for the full fiscal year 2027, signaling that the company is approaching a period of zero growth in its core do-it-yourself segment. This guidance comes as the stock has lost 22.7% over the past year, underperforming the S&P 500’s 17.4% gain over the same period.
In its fiscal fourth quarter of 2026, domestic same-store sales to do-it-yourself customers fell 0.6%, while domestic commercial sales grew 8.6%. On a September 22, 2026, earnings call, executives stated that while the average do-it-yourself ticket rose roughly 5%, a decline in transaction volume offset that increase. Management attributed the drop to financially challenged customers deferring repairs and trading down to cheaper options.
The primary financial impact of flat sales will be felt in margins and free cash flow. Management anticipates that overhead expenses per location will increase by approximately 4% during the initial quarter of fiscal 2027. Operating margin has already declined from 20.7% in the twelve months ending May 2024 to 18.0% in the twelve months ending May 9, 2026.
Cash flow constraints further complicate the outlook. Management plans to invest approximately $1.65 billion in fiscal 2027, primarily for new store construction. In the twelve months ending May 9, 2026, cash from operations was $3.07 billion, yielding about $1.42 billion in free cash flow based on that period's data. However, management noted that free cash reached roughly $1.8 billion for the full fiscal year, a figure that was already below the company’s $2 billion share buyback in fiscal 2026. If sales remain flat, free cash flow is likely to fall further below the level of current buyback commitments.
Despite the DIY slowdown, AutoZone retains certain structural advantages. The company’s interest coverage remains strong, with operating income covering interest expense 7.5 times in the twelve months ending May 9, 2026. Additionally, the commercial segment provides a growth cushion; domestic commercial sales reached just under $5.8 billion in fiscal 2026, growing just under 11%. Management expects commercial sales to grow at a high single to low double-digit rate in fiscal 2027.
AutoZone also demonstrated relative resilience during previous market shocks, falling less than the S&P 500 in three of four recent downturns, including a 13.0% peak drawdown during the 2022 inflation shock compared to the index's 24.0% drop. The company plans to open approximately 400 stores in fiscal 2027, up from 374 in the prior year.
Investors will await AutoZone’s next earnings report, expected in early December 2026, to see if domestic do-it-yourself same-store sales stall as guided.