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.
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ANECDOTE

Unexpected Origins

  • AutoZone's founder, Pitt Hyde, had a background in groceries, not auto parts.
  • He was inspired by Walmart's model and applied it to the auto parts industry.
INSIGHT

Mega Hub Strategy

  • AutoZone's supply chain uses "mega hubs" to stock a vast array of products.
  • Smaller satellite stores carry locally relevant inventory, backed by the hubs' wider selection.
INSIGHT

Negative Working Capital Advantage

  • AutoZone benefits from negative working capital, receiving customer payments before paying suppliers.
  • This allows them to use the "float" as effectively interest-free financing.
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