This Reveals a Resilient Stock Amid Recession - Potential Investment of Choice
Let's Dig into the Blue-Collar Titan: AutoZone
Ever heard the phrase "get in the zone" and completed it? Well, you probably think about AutoZone (AZO 2.48%) when you do! This national auto parts retailer is a powerhouse thanks to its iconic, unforgettable jingle and a reputation as a trusted source for repair techs and DIYers alike.
AutoZone was born in 1979 by J.R. "Pitt" Hyde III, who focused on delivering top-notch customer service in clean, well-organized stores. Originating in Forrest City, Arkansas, AutoZone has since grown into a behemoth, with 6,500 locations across the U.S., and stores popping up in Mexico and Brazil too!
In its 2024 fiscal year (ended Aug. 31, 2024), AutoZone displayed its usual resilience, with year-over-year net sales climbing 5.8% to $18.5 billion, and earnings per share soaring 13% to $149.55. The third quarter of fiscal 2025 (May 10) didn't slow things down; net sales shot up 5.4% to $4.5 billion, with a 5% increase in domestic same-store sales.
While earnings per share dipped 3.6% year-on-year in Q3, it wasn't due to flagging demand or operational blunders. Instead, the decline is a result of AutoZone's strategic investments in growth, like expanding its distribution capacity, rapidly opening new stores, and intensifying its commercial and international efforts.
Much of these investments have aimed at capturing a larger share in the commercial, or "DIFM" (do-it-for-me), market. AutoZone has been ramping up delivery services, recruiting dedicated sales staff, and unveiling "mega-hub" stores to assist professional repair shops with quicker, broader parts availability.
Although these investments have put some strain on margins, AutoZone's brass has emphasized they're shooting for the long game, and the payoff could be huge.
Riding the Recession-Proof Wave
As economic fears persist, AutoZone shines as an undisputed league leader in one of retail's most recession-proof sectors: the automotive aftermarket. This $2.3+ trillion global industry encompasses everything you buy for your vehicle after purchase, from oil and replacement parts to fuzzy steering wheel covers and flashing neon ground lights (because why not?).
The automotive aftermarket benefits from inelastic demand, meaning people tend to purchase these essential items regardless of the economic environment. Whether your brakes are shot or your battery is kaput, you're headed for an auto parts supplier like AutoZone, not the Fed. While some purchases (like that 8-foot spoiler for your Toyota Camry) can be postponed, most aftermarket spending is tied to the safety and upkeep of vehicles—a huge advantage in periods of economic turmoil when consumer confidence takes a hit.
Key indicators support the aftermarket's growth potential, with the average age of vehicles on U.S. roads reaching a record 12.8 years in 2025. With a record 299 million vehicles on the road, America's aged fleet is more massive and ripe for the picking than ever.
So, what does this mean for investors? AutoZone's strategic positioning allows it to benefit from steady, structural demand, irrespective of broader economic pressures.
On a Share Buyback Spree
In addition to its stable revenue stream, one more reason to consider AutoZone is its aggressive, decades-long share buyback program. Since 1998, the company has reacquired approximately $38 billion worth of its own shares, shrinking its outstanding shares count significantly.
As of its latest quarter, AutoZone still had $1.1 billion left in its buyback authorization.
But is AutoZone stock a good buy? Given its low forward price-to-earnings ratio (around 25, compared to competitor O'Reilly Auto Parts' 31), and the U.S. automotive aftermarket's projected growth to $617 billion by 2027, AutoZone looks like a solid bet. The company is highly focused on expanding its 5% DIFM market share, and it has a considerable opportunity in front of it.
With a proven track record of consistent financial performance, a diminishing share count, the advantage of inelastic demand, and a massive, aging fleet of vehicles on the road, AutoZone is poised for long-term growth, regardless of economic conditions.
Investing in AutoZone could be a wise decision, given its strong performance in the recession-proof automotive aftermarket, which is projected to reach $617 billion by 2027. The company's strategic investments, such as expanding distribution capacity and opening new stores, aim to capture a larger share in the commercial market. Additionally, AutoZone's aggressive share buyback program, which has reacquired approximately $38 billion worth of its own shares since 1998, could potentially boost shareholder value.
