AZO - BUY - Weather-Related Headwinds Foster a Mixed 3Q—Proactively Lowering Estimates & PT

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AZO - BUY - Weather-Related Headwinds Foster a Mixed 3Q—Proactively Lowering Estimates & PT

May 26, 2026

Steven Forbes, CFA, CPA steven.forbes@guggenheimpartners.com AZO - BUY - Weather-Related Headwinds Foster a

212 381 4188 Mixed 3Q—Proactively Lowering Estimates & PT

John Heinbockel

john.heinbockel@guggenheimpartners.com

212 381 4135 Key Message: As detailed in Exhibit 1, AZO's 3Q 2026 operating results were mixed

—as evidenced by a modest top-line miss (~90 basis points) yet solid bottom-line Julio Marquez

julio.marquez@guggenheimpartners.com beat (EBITDA: ~4.2% and EPS: ~8.8%). Importantly, we believe domestic comp trends

212 823 6605 were between 4.5-5.0% heading into the last two weeks of the quarter, with cooler &

wetter weather weighing on comps to end the period, accounting for the entire top-line Jacob Nivasch shortfall—with both domestic commercial ("DIFM") and domestic retail ("DIY") trends jacob.nivasch@guggenheimpartners.com

212 338 8837 moderating 300-350 basis points. In addition, management reiterated its outlook for

new hub openings—to ~60 in 2026 (including ~38 mega-hubs), up from 40 in 2025

Max Horowitz (including 24 mega-hubs), and 19 in 2024 (including 11 mega-hubs)—and an accelerated max.horowitz@guggenheimpartners.com

new store opening cadence, setting the stage for sequential acceleration in DIFM comp 212 518 9974

transaction trends. When combined with better-than-we-expected SG&A expense control

(~3% expense per store growth), we are only slightly lowering our estimates as we await

increased clarity around the various waterfall benefits (including new stores & commercial

valuation multiple, our 12-month price target is reduced to $4,000 (from $4,400).AZO BUY programs) while reiterating our BUY-rating. Given the recent moderation in consumer