AutoZone Shows Why Repair Businesses Perform Well During Recessions

The Signal: US stocks have gone through one of the wildest rides in recent weeks as the coronavirus pandemic has spread across the globe. At the bottom of the market, the S&P 500 officially entered bear market territory (a 20% index decline) for the first time in more than a decade.

Over this span, two of the worst-performing segments of the S&P 500 have been:

• Travel: Cruise liners (Carnival, Norwegian Cruise, Royal Carribean) and airlines (American Airlines, United, Delta, Alaska) have tumbled as the travel and tourism industry have abruptly shut down.
  
• Energy: A Saudi-initiated oil price war has shaken the oil and gas industry, with oil prices falling some 30%.

But two other sectors have (relatively speaking) weathered the storm better:

• Consumer Staples: Firms that provide basic consumer goods — particularly items that are apt to be stockpiled — have outperformed the market (e.g., Kroger, Campbell’s, Clorox, General Mills).
  
• Healthcare: A number of pharmaceutical companies (Gilead, Regeneron, Eli Lilly) that are searching for coronavirus treatments have also outperformed.

One other outperformer stands out: AutoZone. The Memphis-based company is America’s largest seller of aftermarket auto parts and accessories.

AutoZone performed well during the 2008-09 financial crisis and — with the odds of a recession recently rising sharply — we looked into the firm’s old financials to see how it was able to navigate the previous crisis.