President Donald Trump has barely been in office for two months, but his policies and proposals have already rocked the stock market.
The S&P 500 slipped into a brief correction in March, and the Nasdaq Composite remains there today. After two years of a roaring bull market, investors are adopting a defensive posture as consumer sentiment rapidly weakens, inflation proves stickier than expected, and Trump's on-again, off-again tariffs put America's titans of industry on edge.
Picking stocks isn't easy in a market like this, and almost every stock tends to be a loser in a recession. However, one company has proven its mettle time and again in challenging economic cycles. It's not a low-cost retailer like Walmart or a healthcare giant like Johnson & Johnson.
The stock I'm talking about is AutoZone (AZO 1.35%), the unsung auto parts stock that has cranked out gains in nearly every economic environment in modern history.
Image source: Getty Images.
A remarkable track record
Not only has AutoZone climbed through economic crises, such as the dot-com bust, the financial crisis, and the 2022 inflationary bear market, but it may also perform even better during stressful times.
The chart below shows AutoZone's performance in the 2000s compared to the S&P 500, with the recessions shaded in gray. As you can see, the stock bounced during both the dot-com recession and the financial crisis at the end of the decade.
The chart below shows the stock performance over the last five years. Again, you can see that the stock continued to gain through 2022, even while the broad market fell sharply.
Over the last five years and through multiple economic shocks, AutoZone was one of the few stocks to post solid gains in both 2021 and 2022, transitioning smoothly from the pandemic to the economic reopening. The end of that chart also shows that AutoZone has kicked off 2025 on the right foot, even as the S&P 500 is crumbling again. Shares of AutoZone are up 18% year to date through March 28, while the S&P 500 is down 4.3%.
AutoZone's secret sauce
The biggest reason for AutoZone's success is that auto parts is a countercyclical industry. People tend to spend more money on auto parts when times are tough because they delay buying new cars. When their existing cars break down, the only choice is to get them repaired. In this sense, aftermarket auto parts act as a cheap substitute for new or even used vehicles, so demand tends to rise for aftermarket auto parts in recessionary environments.
AutoZone's same-store sales have historically accelerated in recessions, especially at the tail end, when consumers have fully absorbed the downturn. For example, comparable sales jumped 9% in fiscal 2002 (which ended Aug. 31 of that year), up from 4% from the prior year. In fiscal 2010, comps rose 5.4%, up from 4.4% in fiscal 2009. And AutoZone's comparable sales soared through both 2021 and 2022, up 13.6% and 8.4%, respectively, as high used car prices propelled demand for replacement parts instead.
While industry dynamics explain some of its success, AutoZone deserves some of the credit as well. Though O'Reilly Automotive has also been a big winner on the stock market, AutoZone's returns have crushed those of peers like Advance Auto Parts and Genuine Parts, which owns Napa.
AutoZone has blanketed the country with stores, giving customers, including drivers and mechanics, convenient access to its inventory. It has also focused on the professional channel, meaning auto repair shops, where product availability and speed are crucial. Management has been an excellent capital allocator as well, aggressively buying backstock, which has accelerated its returns.
NYSE: AZO
Key Data Points
With tariffs on the way, is AutoZone a buy?
President Donald Trump just announced a 25% tariff on foreign auto imports last week. Shares of domestic automakers like General Motors and Ford Motor Company sank on the news, while AutoZone popped, a sign that investors believe it will benefit from higher car prices.
CEO Philip Daniele has said on previous earnings calls that the company will pass along any increased costs from tariffs to the consumer, showing its margins shouldn't be impacted by any new import taxes. That's also a reflection of AutoZone's competitive strength, as aftermarket parts generally represent the lowest-cost option for a necessary repair, so the company can pass along those costs without losing customers.
As economic uncertainty washes over the stock market, AutoZone looks poised to thrive once again. The stock is reasonably valued at a price-to-earnings ratio of 25. It continues to expand, with 241 new stores over the last year, and investors are already anticipating its outperformance, given the stock's double-digit gains this year.
If you're looking for a safe stock to ride out the trade war volatility, it's hard to find a better choice today than AutoZone.
