AutoZone (NYSE:AZO) is the largest U.S. retailer of automotive parts and accessories to do-it-yourself (DIY) customers by number of stores. AutoZone operates over 4,000 stores, the majority (96%) of which are in the United States and Puerto Rico.^[1] The company places stores in regions that have large number of vehicles seven years old and older because of these cars’ need for repairs and maintenance. While the company seeks to open stores in high-traffic areas, AutoZone is largely a destination retailer - a retailer that generates its own traffic instead of relying on other nearby stores’ traffic base.^[2]

Operating in a mature and fragmented marketplace, AutoZone’s growth has been largely dependent upon increases in store count rather than its same store sales which have been lagging over the past 5 years. In addition, Autozone has been facing pressure in a consolidating auto parts manufacturer industry (related to the woes of the Big Three automakers); fewer auto parts manufacturers reduces the pricing power the company enjoys as the largest auto parts retailer in the U.S. because the company now has fewer suppliers to choose form. Finally, in the longer term, the company may see decreased demand in auto parts due to continually rising oil prices, which could decrease the mileage driven by American and thus decrease the demand for car repairs and maintenance.

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