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AutoZone (AZO) is displaying impressive resiliency in the face of another tariff-induced selloff across the broader stock market after the auto parts retailer reported mixed 2Q25 results. At first glance, the relative strength looks rather surprising given that AZO missed EPS expectations for the third consecutive quarter. Furthermore, AZO's same store sales of +0.5% came up just short of analysts' estimates.

However, the primary driver behind the EPS and same store sales misses is tied to greater-than-anticipated foreign exchange headwinds, rather than operational issues. With 813 stores in Mexico and 136 in Brazil, AZO has significant exposure to foreign currency fluctuations -- in particular, a stronger U.S. dollar against the Mexican Peso and Brazilian Real is pressuring AZO's results.

• When looking at AZO's results on a constant currency basis, its performance looks much better. For instance, total same store sales were +2.9% in constant currency, with strong international comps of +9.5% compared to (8.2)% on a reported basis. Despite the current FX headwinds, AZO plans to keep its foot on the gas in terms of international store expansion. After opening 13 new stores in Mexico and 4 in Brazil in Q2, AZO is planning to open another 100 international stores in FY25.
• Another area of strength is the domestic commercial business, which sells parts and services to repair shops through its stores, hubs, and distribution centers. Expanding this business has been a focal point for AZO and that strategy is paying off as domestic commercial sales grew by 7.3% in Q2. An aging U.S. vehicle fleet and an apprehensive consumer who would rather repair an existing car than add a large car payment to their monthly budget is helping to support this business.
• The domestic DIY business has been a soft spot for AZO, driven by weakness in product categories that are more discretionary in nature, such as accessories, appearance chemicals, and tools. This business, though, continues to gradually trend in the right direction. Following a -0.4% comp in Q4, domestic DIY comps swung into positive territory last quarter at +0.3% and edged higher again in Q2 to +0.5%.

The main takeaway is that the FX headwinds tarnished AZO's headline numbers, but when looking under the hood, its results were actually quite solid. AZO is experiencing healthy growth in its international and domestic commercial business, while the DIY business is showing steady improvement. AZO has momentum behind it, but tariffs could throw a wrench in the company's performance this year.