After a wild week of President Donald Trump’s tariff roulette, it’s clear that nobody knows where the market is heading in the short term. The decisions of one person are moving trillions of dollars in market value, creating a challenging environment for investors to navigate.

• Uncertainty surrounding trade policy and the global economy remains
• Businesses are hesitant to invest and hire due to the volatile market conditions
• Investors need to find safe stocks that can perform well regardless of the market environment

At times like these, one of the best choices investors can make is to put their money into safe stocks that can thrive in any market environment. AutoZone (AZO), the aftermarket auto parts retailer, is an excellent example of such a stock. It has consistently outperformed the market over its history, even in bear markets, and has generated superior returns in virtually every kind of market environment.

What’s more impressive about AutoZone is that it has demonstrated remarkable resilience in the face of disruptions like Trump’s tariffs. On April 3, the first day of the drop after Trump announced the tariffs, AutoZone stock gained 0.4%, a testament to its ability to weather the storm.

The Countercyclical Nature of AutoZone’s Business

AutoZone operates in a countercyclical business, meaning that demand for aftermarket auto parts tends to increase in challenging times. People forego or delay purchasing a new car, leading to increased spending on repairs instead of buying new vehicles. This trend benefits AutoZone as car owners spend on repairs, rather than buying new cars.

This phenomenon is evident in the company’s comparable sales, which typically accelerate during recessions. In fact, AutoZone has consistently reported higher sales during economic downturns, making it an attractive option for investors seeking stable returns.

Strong Business Operations and Execution

Another key advantage AutoZone has is its strong business operations and execution. The company has over 7,000 stores across the U.S., Mexico, and Brazil, with 6,000 locations in the U.S. alone. Its store count has grown significantly over the years, and it has expanded its product offerings to meet the diverse needs of its customers.

AutoZone’s business model is based on the DIY channel, with 80% of its sales coming from walk-in customers. The remaining 20% comes from sales to repair shops and other professional businesses. The company’s product range is extensive, with most stores carrying between 20,000 to 25,000 SKUs. This ensures that customers have access to a wide variety of products to meet their needs.

AutoZone’s hub-and-spoke model is also a significant strength. Hub stores carry 40,000 to 50,000 SKUs, while mega-hub stores carry 80,000 to 110,000 SKUs. This model allows the company to reinforce smaller stores as needed, ensuring that customers have access to a consistent range of products.

The company’s proprietary systems, including an electronic catalog and point-of-sale, also contribute to its operational success. These systems help with customer service, inventory management, merchandising, and product returns, among other tasks.

Passing On Tariffs and Maintaining Margin Profile

Like most retailers, AutoZone is exposed to tariffs, which can impact its profitability. However, management is confident that it can handle tariffs and maintain its margin profile. In the recent earnings call, CFO Jamere Jackson stated that the lion’s share of AutoZone’s business is relatively inelastic, meaning that customers are less likely to reduce their spending in response to tariffs.

AutoZone’s ability to pass on costs due to its inelastic business model is a significant advantage. As CFO Jackson explained: “The lion’s share of our business is relatively inelastic.” This means that the company can maintain its margin profile even if tariffs increase the cost of goods sold.

A Strong Track Record and Countercyclical Business

AutoZone’s tariff plan demonstrates its ability to navigate challenging market conditions. The company’s strong track record and countercyclical business model make it an attractive option for investors seeking stable returns.

In a rocky market, AutoZone stock looks well-positioned for growth. With its proven track record, operational success, and countercyclical business, AutoZone is a reliable investment choice for investors seeking to navigate turbulent markets.

Management has also driven the stock’s outperformance through consistent share buybacks, reducing shares outstanding by about 50% over the last 10 years. This strategy has helped to increase the company’s profitability and improve its competitive position.

AutoZone’s tariff plan is a testament to its ability to adapt to changing market conditions. By passing on costs and maintaining its margin profile, the company is well-positioned to continue generating superior returns in any market environment.

In conclusion, AutoZone is a safe haven in turbulent markets. Its countercyclical business, strong business operations, and ability to pass on tariffs make it an attractive option for investors seeking stable returns.