AutoZone Inc.AZO

Morningstar Rating

Stock Research and Analysis

by Zoe Tan

AutoZone is the clear leader in auto-parts retailing in terms of sales and profitability. Solid brand recognition, a vast store network, and power over suppliers afforded by its economies of scale have helped the firm build a narrow economic moat, in Read more

Bulls Say

With the average age of cars on the road at 9.5 years and rising, the $200 billion automotive aftermarket should benefit from increased demand. Sluggish new-car sales amid the uncertain economic climate also bode well for this trend.

AutoZone has the largest store network, with more 4,000 locations in the U.S. and Mexico. This gives it considerable advantages in buying power with suppliers and the ability to leverage its fixed costs.

Sales to professional installers represent a largely untapped source of revenue for the firm. AutoZone holds only 1.3% market share in this segment, leaving plenty of room to expand.

The firm has great growth prospects in Mexico, which has an abundance of old cars, a shortage of quality parts, and few organized chains. Read more

Bears Say

AutoZone faces much stiffer competition in its West Coast operations with O'Reilly's acquisition of CSK Auto. O'Reilly's experience and expertise in auto parts retailing, particularly related to the commercial business, could threaten AutoZone's market share in the region.

AutoZone is behind its competitors in expanding into the faster-growing commercial market, which could prove to be detrimental to its positioning in the aftermarket parts industry.

Further consolidation among parts manufacturers could lead to increased prices for AutoZone, as it could lose some of its bargaining power. Read more

Strategy

In addition to building its do-it-yourself business through unit expansion, AutoZone has been shifting its focus toward capturing share in the faster-growing commercial market. Therefore, the firm has Read more

Management

William Rhodes III, who has been with the firm for more than 10 years, became the fourth CEO in the company's 25-year history after Steve Odland left in 2005. In June 2007, Rhodes also took on the role of chairman of the board of directors. While we'd Read more

Profile

AutoZone is the largest specialty retailer of automotive parts and accessories to do-it-yourself individuals and professional installers. As of August 2009, the firm had Read more

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