AutoZone: Tepid Results Don't Change Long-Term Outlook

We do not plan to make a large change to our $800 fair value estimate for narrow-moat

While AutoZone cited disappointing ship-to-home e-commerce results, we were encouraged that the larger pickup-in-store business performed well. This conforms to our contention that the industry is somewhat insulated from digital-only entrants. We anticipate customers will continue to prefer shopping in store to benefit from the services that AutoZone and its peers provide, including a trained salesforce that can ensure the shopper buys the right part and knows how to perform an often unfamiliar installation. Consequently, for do-it-yourself clients who do buy online, we anticipate pickup in store will remain the preferred method, as it allows the buyer to verify the part purchased is correct, obtain advice, and receive a component that is often needed to restore the vehicle to working order immediately. This favors large chains with dense store networks that can combine a robust digital effort with the valued in-store experience. As professional repair shops order digitally direct from retailers already, we expect AutoZone to perform well despite digital disruption elsewhere in retail.

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