AutoZone: No Change to Fair Value Estimate or Ratings Amid Leadership Change

We are maintaining our fair value estimate of $2,070 per share, narrow moat rating, and exemplary capital allocation rating after AutoZone AZO announced that long-time CEO, president, and chairman William Rhodes will transition to executive chairman in January 2024. Philip Daniele, currently serving as executive vice president of merchandising, marketing, and supply chain, will succeed as CEO and join the board.

Daniele is an AutoZone veteran, having served for nearly 30 years in leadership roles throughout the company. Given Daniele’s long history at AutoZone, the roughly six-month transition timeline, and Rhodes’ continued involvement as executive chairman, we expect a continuation of the company’s prudent approach to leverage and exceptional investment record.

AutoZone benefits from strong brand intangible assets borne of its nationwide presence, effective customer engagement driven by its high standard of service, and the success of its proprietary-label products. Coupled with a cost advantage generated by its scope of distribution and leading DIY market share, the firm stands to benefit from consolidation behind national chains that can efficiently provide reliable part availability. Still, shares trade well above our fair value estimate, so we suggest investors await a more attractive entry point.