AutoZone FY2026 Q4 Earnings: $2.57B Profit, $2.50B Deficit

AutoZone earned $2.57 billion in fiscal 2026 and ended the year with a stockholders' deficit of $2.50 billion. Both numbers are correct, and they are on the same balance sheet. On September 22, 2026 the auto-parts retailer reported full-year net sales of $20.34 billion (+7.4%) for the 52 weeks ended August 29, 2026, and a fourth quarter that was 16 weeks long: $6.59 billion of sales, $931.6 million of net income and diluted EPS of $56.05. The same release shows $2.0 billion of buybacks this year at an average $3,496 a share, $40.5 billion of cumulative repurchases since fiscal 1998, and suppliers whose payables cover 111.1% of the company's inventory. We rebuilt five fiscal years as a public Beancount ledger in which the equity accounts carry a debit balance, and the balance sheet still ties to the thousand dollars.

The Headline Numbers​

Two tables, two periods. The first is the fiscal 2026 annual (52 weeks), the figures the ledger fence below reproduces. The second is the 16-week fourth quarter from the same 8-K exhibit. AutoZone's fiscal year ends on the last Saturday of August. The first three quarters are 12 weeks each and the fourth is 16, so Q4 alone carries 31% of annual weeks. Its dollar figures are larger than the other quarters' for the calendar reason, not because demand was stronger.

For the year, sales grew 7.4% while net income grew only 3.0%. Gross margin slipped 30 basis points and operating expenses rose to 34.0% of sales from 33.6%. That is the cost of AutoZone's growth program: more stores, more Mega Hubs and a push into commercial accounts. Diluted EPS grew faster than net income, +5.3%, because the diluted share count fell 2.2% to 16.87 million. That gap is the buyback at work, and the buyback is also what built the deficit discussed below.

The fourth quarter looks better than the year, and the reason is in cost of sales. Gross margin rose 182 basis points. The release attributes 145 bp of that to tariff refunds and 105 bp to a net non-cash LIFO impact, "partially offset by higher commercial mix". Remove both and the quarter's gross margin is about 50.8%, down roughly 70 bp on the year before. Operating expenses deleveraged to 33.4% of sales from 32.4%. The 10.1% operating-profit gain came from two accounting lines, not from the merchandise itself.

Revenue Deep Dive​

AutoZone reports no segment revenue table in its release. It reports store counts, same-store sales and a commercial line, and those tell the growth story:

Commercial is the engine. Domestic commercial sales, meaning parts delivered to repair garages and fleets rather than sold across the counter to do-it-yourselfers, grew 10.6% for the year to $5.76 billion, about 28% of total sales. Programs grew to 6,443 stores, and average sales per program per week rose 6.0% to $17.7 thousand. Commercial also dilutes margin. Garages get volume pricing, which is why the release names "higher commercial mix" as the offset to the Q4 gross-margin gain.

International growth is mostly currency. Mexico and Brazil posted 13.5% reported same-store growth for the year but only 2.2% in constant currency. The peso and real did most of the work. Store growth abroad is real, though. Mexico reached 1,001 stores (+118 in the year) and Brazil 167 (+20).

Management signal scan. We read the release against the seven demand, supply and pricing themes we track. It contains no language about demand exceeding supply, tight supply, an industry upcycle, rising selling prices or product launches beating plan. The closest is a conditional forecast from CEO Phil Daniele: "Over the last eight weeks of the quarter our sales results strengthened, and we feel we are well positioned for sales growth in fiscal 2027," and "we expect sales in each of the three countries in which we operate to accelerate in the new fiscal year." He also names "a difficult selling environment the first eight weeks of our quarter." In the numbers, domestic same-store sales for the 16 weeks were +1.6%, against +4.8% in the same quarter a year earlier. A 16-week quarter with a weak first half and a stronger second half averages to a soft number, and the release says exactly that.

The Margin Story​

Gross margin has stayed in a narrow 52–53% band. Operating margin has not. It fell from 20.5% in FY2024 to 18.3% in FY2026 as operating expenses grew faster than sales. The costs of the growth program show up here before its revenue does: Mega Hubs, distribution centers, faster delivery and a store opened roughly every day of the year. The P&L below operating profit is also heavier than it used to be. Interest expense rose from $191.6 million in FY2022 to $472.6 million in FY2026, a 2.5× increase, because the debt that funds the buyback grew by half and rolled over at higher rates.

Two items inside cost of sales need to be read separately:

• Tariff refunds. In Q4 they added 145 bp of gross margin. That is roughly $96 million on $6.59 billion of sales (our arithmetic; the release gives basis points only). For the full year they added 48 bp, or about $98 million. A refund of duties already paid does not repeat, so it should be modeled as a one-off. The ledger records cost of sales as filed because the release does not give a dollar amount for either item. The period file's comment records both basis-point figures so the one-off stays visible.
• LIFO. AutoZone values inventory on last-in, first-out, so cost inflation reaches cost of sales through a non-cash LIFO charge. The full-year net LIFO impact was a 61 bp headwind. In Q4 alone the release lists a 105 bp net non-cash LIFO impact among the drivers of the margin increase, a favourable comparison against the prior-year quarter. The same accounting method cut the annual margin and lifted the quarterly one.

On pricing, the release says nothing about selling prices at all, and that absence matters for a retailer paying tariffs. Sales per average square foot were $122 in the quarter, flat on the year, while inventory per store rose 4.9% to $963 thousand. The numbers do not show pricing power. They show more product sitting in more locations.

The One Big Question: How Can a $2.6 Billion Earner Have Negative Equity?​

Equity is what is left after liabilities are paid from assets. At AutoZone that number is below zero:

The deficit is not a sign of losses. AutoZone has not reported an annual loss in this ledger's five years. It is the cumulative effect of buybacks. Since fiscal 1998 AutoZone has spent $40.5 billion repurchasing 156.2 million shares, and only 16.2 million remain outstanding. When a company returns more cash than it has ever retained as earnings, stockholders' equity becomes negative. The accumulated deficit was $(3,975.9) million at FY2025 year-end in the 10-K, before counting treasury stock.

This year the deficit shrank, from $(3,414.3) million to $(2,502.5) million. That is not a change of policy. FY2026 buybacks of $2.0 billion, up from $1.58 billion in FY2025 but down from $4.36 billion in FY2022, were smaller than the year's $2.57 billion of net income. The rest of the $911.8 million improvement comes from share-based compensation, option exercises and currency translation, which the FY2026 10-K will itemize.

What makes a negative-equity balance sheet workable is on the liabilities side. Suppliers finance the inventory. Accounts payable are 111.1% of inventory, so AutoZone's "net inventory" (inventory minus payables) is $(861.0) million, or −$107 thousand per store. The parts on the shelves are paid for by vendors before customers buy them. The FY2025 10-K shows how: $5.4 billion of the $8.0 billion of payables sat in supplier-finance programs, which let vendors collect early from a bank while AutoZone pays on the invoice's extended terms. That float is the cheapest financing the company has. It is also shrinking:

Four straight years of decline, from 129.5% to 111.1%. Inventory grew 10.1% this year, "driven primarily by growth initiatives", while payables grew 7.1%. Every point the ratio falls is inventory AutoZone now funds with its own cash or debt instead of its vendors'. At the current inventory level, a fall to 100% would cost about $860 million of working capital. That exceeds a third of this year's buyback budget.

Tracking a $20B Retailer With Negative Equity in Plain Text​

Double-entry forces the paradox into the open. A stockholders' deficit is not a missing number. It is an equity account with the "wrong" sign, and the balance sheet still has to tie. The conventions match every other company in the series: how we model every company. Income postings are credits (negative), expenses are debits (positive), and Equity:Adjustments absorbs net income so the transaction sums to zero. Because AutoZone reports in thousands, the ledger carries three decimals and every line equals the filing exactly.

; FY2026 Income Statement — 52 weeks ended August 29, 2026 (includes the 16-week Q4)
; Check: −20338.555 + 9693.581 + 0 + 6921.660 + 472.614 + 677.923 + 2572.777 = 0 ✓
 
2026-08-29 * "AutoZone, Inc." "FY2026 Income Statement"
  Income:Revenue                        -20338.555 MUSD  ; net sales
  Expenses:CostOfRevenue                  9693.581 MUSD  ; cost of sales, incl. warehouse and delivery (LIFO)
  Expenses:ResearchAndDevelopment                0 MUSD
  Expenses:SellingGeneralAdministrative   6921.660 MUSD  ; operating, SG&A expenses
  Expenses:OtherNet                        472.614 MUSD  ; interest expense, net
  Expenses:IncomeTax                       677.923 MUSD
  Equity:Adjustments                      2572.777 MUSD  ; net income offset (RE set by balance assertion)

Here is the negative equity itself. In Beancount, liabilities and ordinary equity carry negative (credit) balances. AutoZone's equity carries a positive (debit) balance, which is the filing's sign kept as it is, with no plug to "fix" it:

2026-08-29 balance Liabilities:Current:AccountsPayable        -8596.585 MUSD  ; accounts payable = 111.1% of inventory
2026-08-29 balance Liabilities:NonCurrent:LongTermDebt        -9078.320 MUSD  ; total debt
2026-08-29 balance Equity:RetainedEarnings                     2502.470 MUSD  ; total stockholders' deficit (2,502.5), debit balance

Two modeling choices are worth stating. First, the 16-week fourth quarter is not a separate period. It is folded into the FY2026 annual file dated to the fiscal year's true span, August 31, 2025 through August 29, 2026, so the ledger never counts those weeks twice or labels them as a calendar quarter. Second, the FY2026 10-K is not yet filed, so this year's figures come from the 8-K exhibit's full-year statements. That exhibit gives only the total deficit. Until the 10-K splits it into paid-in capital, treasury stock, accumulated deficit and other comprehensive loss, the ledger holds the whole $2,502.5 million on Equity:RetainedEarnings, and the file's banner says so. In the FY2022–FY2025 files, which come from the 10-Ks, the components are split out. In FY2022 and FY2023 even Equity:CommonStockAndAPIC is a debit, because treasury stock at cost exceeded all paid-in capital.

The balance-sheet number that carries the story is property and equipment. It rose from $5.17 billion to $8.06 billion in five years (+56%), while net sales grew 25%. That is the Mega Hub build-out, and it is where the operating-margin compression comes from.

The Multi-Year Arc​

FY2022–FY2025 buybacks are cash paid for repurchases per each 10-K's cash-flow statement. FY2026 is the change in cumulative repurchases reported in the 8-K ($40,543.3M less $38,517.7M) and will be restated from the 10-K.

The five-year arc shows a change in capital allocation. From FY2022 to FY2024, AutoZone spent more on buybacks than it earned ($11.2 billion against $7.6 billion of net income), added $2.9 billion of debt, and deepened the deficit to $(4.75) billion. In FY2025 buybacks fell by half and capital went into stores and distribution: property and equipment grew by $2.9 billion over the five years. Net income has been flat at about $2.4–2.7 billion for five years while sales grew 25%. Growth is funded, margins are compressing, and the per-share story now depends on a smaller buyback than before.

The Verdict: Bull vs. Bear​

Bull Case

• Domestic commercial sales grew 10.6% to $5.76 billion. The garage channel is taking share, and its per-program productivity rose 6.0%.
• Management reports that sales "strengthened" over the last eight weeks of Q4 and expects them to "accelerate" in all three countries in fiscal 2027. The weak first half of the 16-week quarter may have been the low point.
• Suppliers still fund all of the inventory (AP / inventory 111.1%), so AutoZone keeps growing its store base without tying up net working capital.
• Adjusted debt / EBITDAR held at 2.5× despite $2.0 billion of buybacks, so the investment-grade capital structure has room.
• The deficit is shrinking ($(4.75)B → $(2.50)B in two years) because earnings now exceed buybacks, which makes the balance sheet less fragile.

Bear Case

• The Q4 gross-margin gain was 145 bp tariff refunds + 105 bp LIFO, both non-recurring. Without them margin fell about 70 bp. None of the seven demand or pricing signals appear in the release.
• Operating margin fell from 20.5% (FY2024) to 18.3%. Growth spending is outpacing growth, and interest expense is up 2.5× since FY2022.
• The AP / inventory ratio has fallen four years running, from 129.5% to 111.1%. Supplier-finance terms are the cheapest financing AutoZone has, and they are fading.
• Domestic same-store sales for the quarter were only +1.6%, against +4.8% a year earlier. International growth is mostly currency (+13.5% reported, +2.2% constant-currency).
• Net income is flat for five years ($2.43B → $2.57B). EPS growth depends on a share count that now shrinks more slowly.

Our Take: AutoZone's negative equity is not a warning in itself. It is the result of a long record of returning more cash than the accounts retain, and the ledger shows the balance sheet ties with the deficit in place. The warning is in the working-capital line. The model depends on vendors funding the shelves, that funding has declined for four straight years, and the growth program is lowering operating margin while it does. A 16-week quarter helped by tariff refunds and a LIFO comparison is not evidence that the model has turned. The FY2027 test is simple: domestic same-store sales above 3% with gross margin excluding one-offs back above 52%, or the deficit's recent shrinkage will turn out to be a slower buyback, not a stronger business.