AutoZone (AZO 1.24%) shareholders beat a rising market this week, with shares rising 15% through Thursday trading compared to a 4% boost in the wider market, according to data provided by S&P Global Market Intelligence. The rally added to relative gains for owners of the auto parts and services specialist, whose shares are down just 3% so far in 2022 compared to a 15% decline in the S&P 500.
It was powered by a positive earnings update from the management team.
AutoZone said on Tuesday that sales rose 6% in the most recent quarter, which ended on May 7. That growth came on top of soaring results a year ago and included gains in both the commercial and retailer segments of the business. "We are very proud to report solid same-store sales growth," CEO Bill Rhodes said in a press release.
AutoZone wasn't immune to supply chain and inflation pressures. Operating profit margin fell slightly, and adjusted operating earnings were down year over year. Yet investors were thrilled to see that the retailer is still generating solid sales growth and ample net income.
Wall Street was just as excited about AutoZone's bullish outlook for the fiscal fourth quarter. The auto repair industry is being lifted by fundamental factors like increased driving miles and a higher average age of vehicles on the road today. These factors translate into higher demand for car repairs, and this demand often holds up well during a recession when consumers look for ways to delay new car purchases.
AutoZone will announce its fourth-quarter results in mid-September, at which point the management team will also issue a detailed outlook for the fiscal year ahead. A lot can change by then, but the retailer's current trends suggest a good possibility that this update will be bullish.