The Intrinsic Value Podcast - The Investor’s Podcast Network

TIVP007: AutoZone (AZO): Under The Hood w/ Shawn O’Malley

Feb 16, 2025

Dive into the impressive journey of AutoZone, where a mundane auto parts retailer transforms into a financial powerhouse. Discover how the company repurchased over 90% of its shares, showcasing a unique business model thriving against e-commerce giants. Learn about its clever use of mega hubs for inventory management and why customers prioritize service quality over price. Explore the impact of electric vehicles on the market and uncover the intricacies of valuing this resilient stock.

01:10:57

AI Summary

AI Chapters

Episode notes

Podcast summary created with Snipd AI

Quick takeaways

AutoZone has achieved remarkable financial success through aggressive share repurchases and maintaining high returns on invested capital around 30%.

The company’s strategic store locations and unique customer service initiatives significantly enhance customer loyalty and drive sales growth.

AutoZone faces evolving challenges from the rise of electric vehicles and international expansion risks that could impact its traditional auto parts business.

Deep dives

Strong Historical Performance

AutoZone has demonstrated impressive financial metrics since its IPO in 1991, compounding annual shareholder returns at over 20%. The company maintains high returns on invested capital approaching 30% annually, along with consistent revenue growth of 9% per year over the last decade. One of the driving factors behind its earnings success is the significant share repurchase program, which has reduced outstanding shares by approximately half since 2015, thereby boosting earnings per share. This disciplined financial management has garnered AutoZone a reasonable price-to-earnings ratio of 21, considering its profitability and growth potential.

Intro

19min

AutoZone's Strategic Share Repurchase Success

35min

The Impact of Electric Vehicles on Auto Parts and Investment

6min

Evaluating AutoZone's Stock Potential: Growth, Buybacks, and Valuation Risks

4min

Exploring AutoZone's Valuation and Upcoming Investor Meetups

2min

In today’s episode, Shawn O’Malley (@Shawn_OMalley_) breaks down AutoZone, ticker: AZO, a 100-bagger stock that continues to wow investors with its massive share repurchases after already buying back more than 90% of its total shares outstanding in the past two decades. AutoZone is a seemingly mundane auto parts retailer, a common store you’ve probably driven past or visited dozens of times, but its returns on capital are anything but average.

Shawn goes through the company’s surprising origin story, how it scaled nationwide and internationally with a simple business model, why the business is so profitable and why it has been able to fend off Amazon so well, and whether this quality stock is attractively valued today, plus so much more!

Prefer to watch? Click here to watch this episode on YouTube.

IN THIS EPISODE, YOU’LL LEARN

00:00 - Intro

05:51 - How AutoZone was born out of a family grocery chain.

11:30 - How AutoZone leverages “mega hubs” to keep an inventory of over 100,000 SKUs.

13:45 - Why AutoZone is able to boost its free cash flows with negative working capital.

13:45 - How is AutoZone able to repurchase so much of its stock?

28:37 - What has made the company so resistant to e-commerce and pressures from Amazon?

35:58 - Why AutoZone’s customers are price insensitive and value service quality more than anything.

53:40 - Where AutoZone is expanding internationally and how that affects the business’s growth prospects.

59:59 - How to think about the company’s intrinsic value and how expected returns fluctuate based on your purchase price per share.

01:05:05 - Whether Shawn adds AutoZone to The Intrinsic Value Portfolio.

And much, much more!

*Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences.

BOOKS AND RESOURCES

Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Kyle and the other community members.
Get smarter about valuing businesses in just a few minutes each week through our newsletter, The Intrinsic Value Newsletter.
Value Investors Club post on AZO.
Quartr’s deep dive into AZO.
CNBC on how AutoZone has fended off Amazon.
Attend the 2025 Berkshire Hathaway shareholder meeting and meet-ups with The Investors Podcast Network
Check out the books mentioned in the podcast here.
Enjoy ad-free episodes when you subscribe to our Premium Feed.

NEW TO THE SHOW?

Follow our official social media accounts: X (Twitter) | LinkedIn | Instagram | Facebook | TikTok.
Browse through all our episodes (complete with transcripts) here.
Try Shawn's favorite tool for picking stock winners and managing our portfolios: TIP Finance.
Enjoy exclusive perks from our favorite Apps and Services.
Learn how to better start, manage, and grow your business with the best business podcasts.

SPONSORS

Support our free podcast by supporting our sponsors:

Connect with Shawn: Twitter | LinkedIn | Email

HELP US OUT!

Help us reach new listeners by leaving us a rating and review on Spotify! It takes less than 30 seconds and really helps our show grow, which allows us to bring on even better guests for you all! Thank you – we really appreciate it!

Learn more about your ad choices. Visit megaphone.fm/adchoices

Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

Get the Snipd
podcast app

Unlock the knowledge in podcasts with the podcast player of the future.

AI-powered
podcast player

Listen to all your favourite podcasts with AI-powered features

Discover
highlights

Listen to the best highlights from the podcasts you love and dive into the full episode

Save any
moment

Hear something you like? Tap your headphones to save it with AI-generated key takeaways

Share
& Export