AUTOZONE INC, 10-K, 1997-11-06

AUTOZONE INC
10-K, 1997-11-06
AUTO & HOME SUPPLY STORES

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended August 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number 1-10714

AUTOZONE, INC.
(Exact name of registrant as specified in its charter)

NEVADA 62-1482048

(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

123 SOUTH FRONT STREET, MEMPHIS, TENNESSEE 38103
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (901) 495-6500

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
Title of each class on which registered
------------------- ---------------------
COMMON STOCK
($.01 PAR VALUE) NEW YORK STOCK EXCHANGE

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (<section> 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]

The aggregate market value of the 117,609,895 shares of voting stock of the
registrant held by non-affiliates of the registrant (excluding, for this
purpose, shares held by officers, directors, or 10% stockholders) was
$3,770,867,258 based on the last sales price of the Common Stock on October 10,
1997, as reported on the New York Stock Exchange.

The number of shares of Common Stock outstanding as of October 10, 1997, was
151,446,220.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to Stockholders for the year ended August 30,
1997 are incorporated by reference into Parts I and II.

Portions of the Proxy Statement for the annual stockholders' meeting to be held
December 18, 1997 are incorporated by reference into Part III.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Annual Report on Form 10-K are forward-
looking statements. These statements discuss, among other things, expected
growth, store development and expansion strategy, business strategies, future
revenues and future performance. The forward-looking statements are subject to
risks, uncertainties and assumptions including, but not limited to competitive
pressures, demand for the Company's products, the market for auto parts, the
economy in general, inflation, consumer debt levels and the weather. Actual
results may materially differ from anticipated results described in these
forward-looking statements.
<PAGE>

PART I

ITEM 1 BUSINESS

INTRODUCTION
- ------------

AutoZone is the nation's leading specialty retailer of automotive parts and
accessories, primarily focusing on "Do-It-Yourself" ("D-I-Y") customers. The
Company began operations in 1979 and at August 30, 1997, operated 1,728 stores
in 32 states, principally located in the Sunbelt and Midwest regions of the
United States. Each AutoZone store carries an extensive product line,
including new and re-manufactured automotive hard parts, such as alternators,
starters, water pumps, brake shoes and pads, carburetors, clutches and engines;
maintenance items, such as oil, antifreeze, transmission, brake and power
steering fluids, engine additives, protectants and waxes; and accessories,
such as car stereos and floor mats. The Company carries parts for domestic and
foreign cars, vans and light trucks. The Company also has a commercial sales
program which provides commercial credit and prompt delivery of parts and
other products to local repair garages, dealers and service stations. This
program was offered in 1,265 of the Company's stores at August 30, 1997.
AutoZone does not perform automotive repairs or installations.

AutoZone is dedicated to a marketing and merchandising strategy to provide
customers with superior service, value and parts selection at conveniently
located, well-designed stores. The Company has implemented this strategy
primarily with knowledgeable and motivated store personnel trained to emphasize
prompt and courteous customer service, through an everyday low price policy and
by maintaining an extensive product line with an emphasis on automotive hard
parts. AutoZone's stores are generally situated in high-visibility locations
and provide a distinctive merchandise presentation in an attractive store
environment.

At August 30, 1997, AutoZone had stores in the following 32 states:

Alabama 77 Louisiana 70 South Carolina 49
Arizona 64 Maryland 1 Tennessee 106
Arkansas 39 Michigan 27 Texas 264
California 8 Mississippi 61 Utah 19
Colorado 32 Missouri 72 Virginia 34
Florida 82 Nevada 1 West Virginia 13
Georgia 96 New Mexico 23 Wisconsin 5
Illinois 56 New York 11 Wyoming 3
Indiana 85 North Carolina 87 -----
Iowa 10 Ohio 166
Kansas 31 Oklahoma 60
Kentucky 48 Pennsylvania 28 Total 1,728
=====

MARKETING AND MERCHANDISING STRATEGY
- ------------------------------------

AutoZone's marketing and merchandising strategy is to provide customers with
superior service, value and parts selection at conveniently located,
well-designed stores. Key elements of this strategy are as follows:

CUSTOMER SERVICE

The Company believes that D-I-Y customers place a significant value on
customer service. As a result, the Company emphasizes customer service as the
most important element in its marketing and merchandising strategy. The
Company attempts to promote a corporate culture which "always puts customers
first" and emphasizes knowledgeable and courteous service. To do so, the
Company employs parts personnel with technical expertise to advise customers
regarding the correct part type and application, utilizes a wide range of
training methods to educate and motivate its store personnel, and provides
store personnel with significant opportunities for promotion and incentive
<PAGE>
compensation. Customer service is enhanced by proprietary electronic parts
catalogs which assist in the selection of parts; free testing of starters,
alternators, batteries, and sensors and actuators; and liberal return and
warranty policies. AutoZone also has a satellite system for all its stores
which, among other things, enables the Company to speed credit card and check
approval processes and locate parts at neighboring AutoZone stores. AutoZone
stores generally open at 8 a.m. and close between 8 and 10 p.m. (with some open
to midnight) Monday through Saturday and typically open at 9 a.m. and close
between 6 and 7 p.m. on Sunday.

During fiscal year 1997, the Company discontinued the operations of the
Memphis and Houston call centers and offered to transfer all call center
employees to stores in the Memphis and Houston area. The Company anticipates
that the discontinuation of the call center operations will result in ongoing
savings to the Company.

Alldata Corporation, a wholly-owned subsidiary of AutoZone, has developed a
database system that provides comprehensive and up-to-date automotive
diagnostic, service and repair information which it markets to professional
repair shops.

PRODUCT SELECTION

The Company offers a wide selection of automotive parts and other products
designed to cover a broad range of specific vehicle applications. AutoZone's
stores generally carry between 17,000 and 20,000 stock keeping units ("SKUs").
Each AutoZone store carries the same basic product line with some regional
differences based on climate, demographics and age and type of vehicle
registration. The Company's "flexogram" program enables the Company to tailor
its hard parts inventory to the makes and models of the automobiles in each
store's trade area. In addition to brand name products, the Company sells a
number of products, including batteries and engines, under the "AutoZone" and
"Duralast" names and a selection of automotive hard parts, including starters,
alternators, water pumps, brakes, and filters, under its private label names.
In addition to products stocked in stores, the Company offers a range of
products, consisting principally of automotive hard parts, through its
Express Parts program. The Express Parts program provides air-freight delivery
of lower turnover products to AutoZone's stores.

PRICING

The Company employs an everyday low price strategy and attempts to be the
price leader in hard parts categories. Management believes that its prices
overall compare favorably to those of its competitors.

COMMERCIAL SALES PROGRAM

The Company's commercial sales program provides credit and prompt delivery
of parts and other products to local repair garages, dealers and service
stations. At August 30, 1997,this program was offered in 1,265 of the Company's
stores. Commercial customers generally pay the same everyday low prices for
parts and other products as paid by the Company's D-I-Y customers.

STORE DESIGN AND VISUAL MERCHANDISING

AutoZone seeks to design and build stores with a high visual impact.
AutoZone stores are designed to have an industrial "high tech" appearance by
utilizing colorful exterior signage, exposed beams and ductwork, and brightly
lighted interiors. Merchandise in stores is attractively displayed, typically
utilizing diagonally placed gondolas for maintenance and accessory products as
well as specialized shelving for batteries and, in many stores, oil products.
The Company employs a uniform ("planogrammed") store layout system to promote
consistent merchandise presentation in all of its stores. In-store signage and
special displays are used extensively to aid customers in locating merchandise
and promoting products.

<PAGE>

STORE DEVELOPMENT AND EXPANSION STRATEGY
- ----------------------------------------

The following table sets forth the Company's store development activities
during the past five fiscal years:

FISCAL YEAR
------------------------------------------------------
1993 1994 1995 1996 1997

Beginning Stores 678 783 933 1,143 1,423
New Stores 107 151 210 280 308
Replaced Stores (1) 20 20 29 31 17
Closed Stores (1) (22) (21) (29) (31) (20)
----- ----- ----- ----- -----
Ending Stores 783 933 1,143 1,423 1,728
===== ===== ===== ===== =====

(1) Replaced stores are either relocations or conversions of existing
smaller stores to larger formats. Closed stores include replaced stores.

The Company opened 305 net new stores in fiscal 1997, representing an
increase in total square footage from fiscal 1996 of approximately 23%, and had
52 stores under construction at the end of fiscal 1997. The Company plans to
open approximately 350 stores in fiscal 1998, representing an increase in total
store square footage of approximately 22%, as compared with the end of fiscal
1997.

The Company believes that expansion opportunities exist both in markets
which it does not currently serve and in markets where it can achieve a larger
presence. The Company attempts to obtain high visibility sites in high traffic
locations and undertakes substantial research prior to entering new markets.
Key factors in selecting new site and market locations include population,
demographics, vehicle profile and number and strength of competitors' stores.
The Company generally seeks to open new stores within or contiguous to existing
market areas and attempts to cluster development in new urban markets in a
relatively short period of time in order to achieve economies of scale in
advertising and distribution costs. The Company may also expand its operations
through acquisitions of existing stores from third parties. The Company
regularly evaluates potential acquisition candidates, in new as well as
existing market areas.

AutoZone's net sales have grown significantly in the past several years,
increasing from $1,217 million in fiscal 1993 to $2,691 million in fiscal 1997.
The continued growth and financial performance of the Company will be
dependent, in large part, upon management's ability to open new stores on a
profitable basis in existing and new markets and also upon its ability to
continue to increase sales in existing stores. There can be no assurance the
Company will continue to be able to open and operate new stores on a timely and
profitable basis or will continue to attain increases in comparable store
sales.

STORE OPERATIONS
- ----------------

STORE FORMATS

Substantially all of AutoZone's stores are based on standard store formats
resulting in generally consistent appearance, merchandising and product mix.
Although the smaller store formats were generally used by the Company for its
earlier stores, the Company has increasingly used larger format stores starting
with its 8,100 square foot store introduced in 1987, its 6,600 square foot
store introduced in 1991 and its 7,700 square foot store introduced in 1993.
In fiscal 1998, the 6,600 square foot and larger store formats are expected to
account for more than 85% of new and replacement stores. Total store space
as of August 30, 1997 was as follows:
<PAGE>
Total Store
STORE FORMAT NUMBER OF STORES SQUARE FOOTAGE(1)
------------ ------------------ -----------------
8,100 sq. ft 230 1,863,000
7,700 sq. ft. 415 3,195,500
6,600 sq. ft. 610 4,026,000
5,400 sq. ft. 453 2,446,200
4,000 sq. ft. 20 80,000
----- ----------
Total 1,728 11,610,700
===== ==========

(1) Total store square footage is based on the Company's standard store
formats, including normal selling, office, stockroom and receiving space, but
excluding excess space not utilized in a store's operations.

Approximately 85% to 90% of each store's square footage is selling space,
of which approximately 30% to 40% is dedicated to automotive parts inventory
The parts inventory area is fronted by a counter staffed by knowledgeable
parts personnel and equipped with proprietary electronic parts catalogs.
The remaining selling space contains gondolas for accessories, maintenance
items, including oil and air filters, additives and waxes, and other parts
together with specifically designed shelving for batteries and, in many stores,
oil products.

Approximately three quarters of the Company's stores are freestanding, with
the balance principally located within strip shopping centers. Freestanding
large format stores typically have parking for approximately 45 to 50 cars on a
lot of approximately 3/4 to one acre. The Company's 5,400 and 4,000 square
foot stores typically have parking for approximately 25 to 40 cars and are
usually located on a lot of approximately 1/2 to 3/4 acre.

STORE PERSONNEL AND TRAINING

While subject to fluctuation based on seasonal volumes and actual store
sales, the 4,000, 5,400 and 6,600 square foot stores typically employ 8 to 20
persons, including a manager and an assistant manager, and the larger stores
typically employ 9 to 21 persons. The Company generally hires personnel with
prior automotive experience. Although the Company relies primarily on on-the-
job training, it also provides formal training programs, which include regular
store meetings on specific sales and product issues, standardized training
manuals and a specialist program under which store personnel can obtain Company
certification in several areas of technical expertise. The Company supplements
training with frequent store visits by management.

The Company provides financial incentives to store managers through an
incentive compensation program and through participation in the Company's stock
option plan. In addition, AutoZone's growth has provided opportunities for the
promotion of qualified employees. Management believes these opportunities are
an important factor in AutoZone's ability to attract, motivate and retain
quality personnel.

The Company supervises store operations primarily through approximately 286
area advisors who report to one of 33 district managers, who, in turn, report
to one of seven regional managers, as of August 30, 1997. Purchasing,
merchandising, advertising, accounting, cash management, store development,
systems technology and support, and other store support functions are
centralized in the Company's store support center in Memphis, Tennessee. The
Company believes that such centralization enhances consistent execution of the
Company's merchandising and marketing strategy at the store level.

STORE AUTOMATION

In order to assist store personnel in providing a high level of customer
service, all stores have proprietary electronic parts catalogs that provide
parts information based on the make, model and year of an automobile. The
catalog display screens are placed on the hard parts inventory counter so that
both employees and customers can view the screen. In addition, the Company's
satellite system enables the stores to speed up credit card and check approval
processes and locate parts at neighboring AutoZone stores.
<PAGE>
All stores utilize the Company's computerized Store Management System, which
includes optical character recognition scanning and point-of-sale data
collection terminals. The Store Management System provides productivity
benefits, including lower administrative requirements and improved personnel
scheduling at the store level, as well as enhanced merchandising information
and improved inventory control. The Company believes the Store Management
System also enhances customer service through faster processing of transactions
and simplified warranty and product return procedures.

PURCHASING AND DISTRIBUTION
- ---------------------------

Merchandise is selected and purchased for all stores at the Company's
store support center in Memphis. No one class of product accounts for as much
as 10% of the Company's total sales. In fiscal 1997, the Company purchased
products from approximately 300 suppliers and no single supplier accounted
for more than 7% of the Company's total purchases. During fiscal year 1997,
the Company's ten largest suppliers accounted for approximately 33% of
the Company's purchases. The Company generally has few long-term contracts for
the purchase of merchandise. Management believes that AutoZone's relationships
with suppliers are excellent. Management also believes that alternative
sources of supply exist, at similar cost, for substantially all types of
product sold.

Substantially all of the Company's merchandise is shipped by vendors to the
Company's distribution centers. Orders are typically placed by stores on a
weekly basis with orders shipped from the warehouse in trucks operated by the
Company on the following day.

COMPETITION
- -----------

The Company competes principally in the D-I-Y and, more recently, the
commercial automotive aftermarket. Although the number of competitors and the
level of competition experienced by AutoZone's stores varies by market area,
the automotive aftermarket is highly fragmented and generally very competitive.
The Company believes that the largest share of the automotive aftermarket is
held by independently owned jobber stores which, while principally selling to
wholesale accounts, have significant D-I-Y sales. The Company also competes
with other automotive specialty retailing chains and, in certain product
categories, such as oil and filters, with discount and general merchandise
stores. The principal competitive factors which affect the Company's business
are store location, customer service, product selection and quality and price.
While AutoZone believes that it competes effectively in its various geographic
areas, certain of its competitors have substantial resources or have been
operating longer in particular geographic areas.

TRADEMARKS
- ----------

The Company has registered several service marks and trademarks in the
United States Patent and Trademark office, including its service mark
"AutoZone" and its trademarks "AutoZone," "Duralast," "Valucraft," "Ultra
Spark," "Deutsch," "Albany" and "Alldata". The Company believes that the
"AutoZone" service mark and trademarks have become an important component in
its merchandising and marketing strategy.

EMPLOYEES
- ---------

As of August 30, 1997, the Company employed approximately 28,700 persons,
approximately 20,000 of whom were employed full-time. Approximately 86% of
the Company's employees were employed in stores or in direct field supervision,
approximately 7% in distribution centers and approximately 7% in store support
functions.

The Company's employees currently are not members of any unions. The
Company has never experienced any material labor disruption. Management
believes that its labor relations are generally good.

<PAGE>

EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------

The following table lists AutoZone's executive officers. The title of each
executive officer includes the words "Customer Satisfaction" which reflects the
Company's commitment to customer service as part of its marketing and
merchandising strategy. Officers are elected by and serve at the discretion of
the Board of Directors.

JOHNSTON C. ADAMS, JR., 49--CHAIRMAN, CHIEF EXECUTIVE OFFICER, AND DIRECTOR
Johnston C. Adams, Jr., has been a director since 1996. Mr. Adams was
elected Chairman and Chief Executive Officer in March 1997, had been President
and Chief Executive Officer since December 1996, and had been Vice Chairman and
Chief Operating Officer since March 1996. Previously, he was Executive Vice
President-Distribution since 1995. From 1990 to 1994, Mr. Adams was a co-owner
of Nicotiana Enterprises, Inc., a company primarily engaged in food
distribution. From 1983 to 1990, Mr. Adams was President of the Miami Division
of Malone & Hyde., Inc. ("Malone & Hyde") the former parent company of
AutoZone.

TIMOTHY D. VARGO, 46--PRESIDENT, CHIEF OPERATING OFFICER, AND DIRECTOR
Timothy D. Vargo has been a director since 1996 and was elected
President and Chief Operating Officer in March 1997. Previously, Mr. Vargo had
been Vice Chairman and Chief Operating Officer since 1996, Executive
Vice President-Merchandising and Systems Technology since 1995 and had been
Senior Vice President-Merchandising in 1995. Mr. Vargo was Senior Vice
President-Merchandising from 1986 to 1992 and was Director of Stores for
AutoZone from 1984 to 1986.

LAWRENCE E. EVANS, 53--EXECUTIVE VICE PRESIDENT-STORE DEVELOPMENT AND ASSISTANT
SECRETARY
Lawrence E. Evans has been Executive Vice President-Store Development since
1995. Previously he was Senior Vice President-Development from 1993 to 1995
and Vice President-Real Estate since 1992. Mr. Evans was Director of Real
Estate from 1991, and had been an attorney for either Malone & Hyde or AutoZone
since 1986. Mr. Evans was first employed by Malone & Hyde from 1969 until 1976
and returned to Malone & Hyde in 1986.

ROBERT J. HUNT, 48--EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER
AND DIRECTOR
Robert J. Hunt was elected a director in September 1997 and has
been Executive Vice President and Chief Financial Officer since 1994. Prior to
that time, Mr. Hunt was Executive Vice President, Chief Financial Officer, and
a Director of the Price Company from 1991 to 1993. Previously, Mr. Hunt had
been employed by Malone & Hyde since 1984, where he was Executive Vice
President and Chief Financial Officer from 1988 to 1991.

SHAWN P. MCGHEE, 34--EXECUTIVE VICE PRESIDENT-MERCHANDISING
Shawn P. McGhee was elected Executive Vice President-Merchandising in 1996.
Previously, he was Senior Vice President-Merchandising since 1994, Vice
President-Merchandising since 1993, and a Senior Product Manager since 1991.
Mr. McGhee commenced his employment with the Company in 1988.

GERALD E. COLLEY, 45--SENIOR VICE PRESIDENT-STORES
Gerald E. Colley was elected Senior Vice President-Stores in October 1997.
He had been Vice President-Stores since April 1997, and had been a Regional
Manager for the Company since February 1997. Previously, Mr. Colley had been
an Executive Vice President for Tire Kingdom, Inc., in 1996, and had been
President of Rose Auto Stores Florida, Inc., in 1995. Prior to that time Mr.
Colley had been employed by AutoZone since 1987, and had been a Vice President
of the Company from 1988 until 1995.

HARRY L. GOLDSMITH, 46--SENIOR VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
Harry L. Goldsmith was elected Senior Vice President, Secretary and General
Counsel in 1996. Previously he was Vice President, General Counsel, and
Secretary from 1993 to 1996. Prior to that time, he was an attorney at Federal
Express Corporation since 1989.

ANTHONY DEAN ROSE, JR., 37--SENIOR VICE PRESIDENT-ADVERTISING
Anthony Dean Rose, Jr. has been Senior Vice President-Advertising since
1995. Prior to that time, he had been Vice President-Advertising since 1989
and a Director of Advertising since 1987. Mr. Rose has been employed by
AutoZone or Malone & Hyde since 1982.

<PAGE>
STEPHEN W. VALENTINE, 35--SENIOR VICE PRESIDENT-SYSTEMS TECHNOLOGY AND SUPPORT
AND CHIEF INFORMATION OFFICER
Stephen W. Valentine has been Senior Vice President-Systems Technology and
Support since 1995. Prior to that time, he had been Vice President-Systems
Technology and Support since 1994, and a Director of Store Management Systems
since 1990. Mr. Valentine commenced his employment with the Company in 1989.

DAVID J. WILHITE, 35--SENIOR VICE PRESIDENT-MERCHANDISING
David J. Wilhite was elected a Senior Vice President-Merchandising in
September 1997. Previously Mr. Wilhite was a Vice President-Merchandising
since 1996. He has been an employee of AutoZone or Malone & Hyde since 1984.

MICHAEL E. BUTTERICK, 46--VICE PRESIDENT-CONTROLLER
Michael E. Butterick has been Vice President-Controller since 1995. Prior
to that time, Mr. Butterick was Chief Financial Officer of United Medical
Incorporated from 1993 to 1995. From 1990 to 1993 Mr. Butterick was Vice
President-Finance of the Mid South General Merchandise Division, a division of
Fleming Companies. Previously, Mr. Butterick had been employed by Malone &
Hyde or AutoZone since 1983, where he was Controller of AutoZone from 1986 to
1990.

ANDREW M. CLARKSON, 60--DIRECTOR AND CHAIRMAN OF THE FINANCE COMMITTEE
Andrew M. Clarkson has been a director of the Company since 1986 and is
employed by the Company as the Chairman of the Finance Committee. Mr. Clarkson
had been Vice President and Treasurer of the Company in 1986, Senior Vice
President and Treasurer of the Company from 1986 to 1988, was Secretary from
1988 to 1993 and was Treasurer from 1990 to 1995. Previously, Mr. Clarkson was
Chief Financial Officer of Malone & Hyde from 1983 to 1988.

ITEM 2 PROPERTIES

The following table sets forth certain information concerning AutoZone's
principal properties:
SQUARE NATURE OF
LOCATION PRIMARY USE FOOTAGE OCCUPANCY
-------- ----------- ------- ---------

Memphis, TN Store Support Center 360,000 Owned
Lavonia, GA Distribution Center 421,700 Owned
Lexington, TN Distribution Center 341,000 Owned
Danville, IL Distribution Center 304,500 Owned
Memphis, TN Express Parts and
Fixture Warehouse 233,100 Leased
Lafayette, LA Distribution Center 464,000 Owned
San Antonio, TX Distribution Center 217,000 Owned
Phoenix, AZ Distribution Center 212,000 Owned
Zanesville, OH Distribution Center 550,000 Owned

The lease of the Express Parts and Fixture warehouse in Memphis expires in
March 2000. The Company also rents additional warehouse space, various
district offices and training and other office facilities which are not
material in the aggregate.
<PAGE>
At August 30, 1997, the Company leased 595 and owned 1,133 of its 1,728
store properties. Original lease terms generally range from five to 20 years
with renewal options. Leases on 361 stores that are currently operating expire
prior to the end of fiscal 2002; however, leases on 334 of such stores contain
renewal options.

ITEM 3 LEGAL PROCEEDINGS

The Company was a defendant in a purported class action entitled "Jack
Elliot and Greg Dobson, on behalf of themselves and all others similarly
situated, vs. AutoZone, Inc. and AutoZone Stores, Inc." filed on or about
May 9, 1997, in the Circuit Court for Roane County, Tennessee. AutoZone
Stores, Inc., is a wholly-owned subsidiary of the Company. In their
complaint, which was similar to class action complaints filed against several
other retailers of aftermarket automotive batteries, the plaintiffs alleged
that the Company sold "old," "used," or "out of warranty" automotive batteries
to customers as if the batteries were new, and purported to state causes of
action for unfair or deceptive acts or practices, breaches of contract,
breaches of the duty of good faith and fair dealing, intentional misrepresenta-
tion, fraudulent concealment, civil conspiracy, and unjust enrichment. The
plaintiffs were seeking an accounting of all moneys wrongfully received by the
Company, compensatory and punitive damages, as well as plaintiffs' costs. On
September 4, 1997, on the plaintiffs' motion, the court dismissed the case
without prejudice.

The Company is a defendant in a purported class action entitled "Joe C.
Proffitt, Jr., on behalf of himself and all others similarly situated, vs.
AutoZone, Inc., and AutoZone Stores, Inc.," filed in the Circuit Court for
Jefferson County, Tennessee, on or about October 17, 1997. Along with the
complaint, the Plaintiff filed a motion to conditionally certify a multistate
class. In the complaint, which is similar to the class action complaint in the
action "Elliott v. AutoZone, Inc." described above (and with substantially the
same lawyers representing the plaintiff), and is similar to other class action
complaints filed against several other retailers of aftermarket automotive
batteries, the plaintiff alleges that the Company sold "old," "used," or "out
of warranty" automotive batteries to customers as if the batteries were new,
and purports to state causes of action for unfair or deceptive acts or
practices, breach of contract, breach of the duty of good faith and fair deal-
ing, intentional misrepresentation, fraudulent concealment, civil conspiracy,
and unjust enrichment. The plaintiffs are seeking an accounting of all moneys
wrongfully received by the Company, compensatory and punitive damages, as well
as plaintiffs' costs. The Company believes the claims are without merit and
intends to vigorously defend this action.

The Company is also a party to various claims and lawsuits arising in the
ordinary course of business. The Company does not believe that such claims
and lawsuits, individually or in the aggregate, will have a material adverse
effect on its results of operations or financial condition.

PART II

ITEM 5 MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Common Stock Market Prices for the Company's stock as traded on the New York
Stock Exchange on page 16 of the annual stockholders report for the year ended
August 30, 1997 are incorporated herein by reference.

At October 10, 1997, there were 3,331 stockholders of record, excluding the
number of beneficial owners whose shares were represented by security position
listings.

ITEM 6 SELECTED FINANCIAL DATA

Selected Financial Data on pages 14 and 15 of the annual stockholders report
for the year ended August 30, 1997, is incorporated herein by reference.
<PAGE>

ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of
Operations on pages 17 through 18 of the annual stockholders report for the
year ended August 30, 1997, are incorporated herein by reference.

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements included on pages 19 through 27 and the quarterly
summary on page 16 of the annual stockholders report for the year ended August
30, 1997, are incorporated herein by reference.

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

None.

PART III

ITEM 10 DIRECTORS AND OFFICERS OF THE REGISTRANT

The information required by this item is incorporated by reference to Part I
of this document and to the Company's definitive Proxy Statement filed pursuant
to Regulation 14A under the Securities Exchange Act of 1934 in connection with
the Company's annual meeting of stockholders.

ITEM 11 EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to the
Company's definitive Proxy Statement filed pursuant to Regulation 14A under the
Securities Act of 1934 in connection with the Company's annual meeting of
stockholders.

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The information required by this item is incorporated by reference to the
Company's definitive Proxy Statement filed pursuant to Regulation 14A under the
Securities Exchange Act of 1934 in connection with the Company's annual meeting
of stockholders.

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 10-K

(a) 1. Financial Statements
The following financial statements included on pages 19 through 27
in the annual report to stockholders for the year ended
August 30, 1997, are incorporated by reference in Item 8:

Report of Independent Auditors
Statements of Income for the fiscal years ended August 30, 1997,
August 31, 1996, and August 26, 1995
Balance Sheets as of August 30, 1997 and August 31, 1996
Statements of Stockholders' Equity for the fiscal years ended
August 30, 1997, August 31, 1996 and August 26, 1995
Statements of Cash Flows for the fiscal years ended August 30, 1997,
August 31, 1996 and August 26, 1995
Notes to Financial Statements

2. Financial Statement Schedule II - Valuation and Qualifying Accounts

All other schedules are omitted because the information is not
required or because the information required is included in
the financial statements or notes thereto.

3. Exhibits
The following exhibits are filed as part of this annual report:

3.1 Articles of Incorporation of AutoZone, Inc. Incorporated by
reference to Exhibit 3.1 to the Form 10-K dated November 22, 1994.

3.2 Amendment to Articles of Incorporation of AutoZone, Inc. dated
December 16, 1993, to increase its authorized shares of common stock
to 200,000,000. Incorporated by reference to Exhibit 3.2 to the
Form 10-K dated November 22, 1994.

3.3 By-laws of AutoZone, Inc. Incorporated by reference to Exhibit 3.2
to the February 1992 Form S-1.

4.1 Form of Common Stock Certificate. Incorporated by reference to
Exhibit 4.1 to Pre-Effective Amendment No. 2 to the February 1992
Form S-1.

4.2 Registration Rights Agreement, dated as of February 18, 1987, by and
among Auto Shack, Inc. and certain stockholders. Incorporated by
reference to Exhibit 4.9 to the Form S-1 Registration Statement filed
by the Company under the Securities Act (No. 33-39197)
(the "April 1991 Form S-1").

4.3 Amendment to Registration Rights Agreement dated as of August 1,
1993. Incorporated by reference to Exhibit 4.1 to the Form S-3
Registration Statement filed by the Company under the Securities Act
(No. 33-67550).

10.1 Amended and Restated Stock Option Plan of AutoZone, Inc., as amended
on February 26, 1991. Incorporated by reference to Exhibit 10.4 to
the April 1991 Form S-1.

10.2 Amendment No. 1 dated December 18, 1992, to the Amended and Restated
Stock Option Plan. Incorporated by reference to Exhibit 10.5 to
the Form 10-K for the fiscal year ended August 28, 1993.

10.3 1996 Stock Option Plan. Incorporated by reference to Exhibit A of
the 1996 Proxy Statement dated November 8, 1996.

10.4* Employment and Non-Compete Agreement between John C. Adams, Jr.
and AutoZone, Inc. dated June 11, 1997.

10.5* Employment and Non-Compete Agreement between Timothy D. Vargo and
AutoZone, Inc. dated June 11, 1997.

10.6* Employment and Non-Compete Agreement between Robert J. Hunt and
AutoZone, Inc. dated June 11, 1997.

10.7* Employment and Non-Compete Agreement between Shawn P. McGhee and
AutoZone, Inc. dated June 17, 1997.

10.8* Employment and Non-Compete Agreement between Harry L. Goldsmith and
AutoZone, Inc. dated June 11, 1997.

10.9* Employment and Non-Compete Agreement between Stephen W. Valentine
and AutoZone, Inc. dated July 7, 1997.

11.1 Computation of Earnings Per Common Share Equivalents.

13.1 Annual Report to Stockholders for the fiscal year ended
August 30, 1997.

21.1 Subsidiaries of the Registrant.

23.1 Consent of Ernst & Young LLP.

27.1 Financial Data Schedule. (SEC use only)

(b) The Company did not file a Form 8-K during the last quarter of the
fiscal year ended August 30, 1997.

* Management contract or compensatory plan or arrangement.

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

AUTOZONE, INC.

By: /s/ J. C. ADAMS, JR. November 6, 1997
-------------------------
J. C. Adams, Jr.
Chairman, Chief Executive Officer
and Director

Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated:

SIGNATURE TITLE DATE
--------- ----- ----

/s/ J. C. ADAMS, JR. Chairman, November 6, 1997
------------------------- Chief Executive Officer
( J. C. Adams, Jr.) and Director (Principal
Executive Officer)

/s/ TIMOTHY D. VARGO
------------------------- President, Chief Operating November 6, 1997
(Timothy D. Vargo) Officer and Director

/s/ ROBERT J. HUNT Executive Vice President, November 6, 1997
------------------------- Chief Financial Officer
(Robert J. Hunt) and Director
(Principal Financial Officer)

/s/ MICHAEL E. BUTTERICK Vice President and November 6, 1997
--------------------------- Controller
(Michael E. Butterick) (Principal Accounting Officer)

/s/ ANDREW M. CLARKSON Director November 6, 1997
--------------------------
(Andrew M. Clarkson)

/s/ N. GERRY HOUSE Director November 6, 1997
---------------------------
(N. Gerry House)

/s/ J.R. HYDE, III Director November 6, 1997
---------------------------
(J. R. Hyde, III)

Director
---------------------------
(James F. Keegan)

/s/ MICHAEL W. MICHELSON Director November 6, 1997
---------------------------
(Michael W. Michelson)

/s/ JOHN E. MOLL Director November 6, 1997
---------------------------
(John E. Moll)

/s/ GEORGE R. ROBERTS Director November 6, 1997
---------------------------
(George R. Roberts)

/s/ RONALD A. TERRY Director November 6, 1997
--------------------------
(Ronald A. Terry)

<PAGE>

<TABLE>

SCHEDULE II
AUTOZONE, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

<CAPTION>
COL A COL B COL C COL D COL E

ADDITIONS
Balance Deductions- Balance at
CLASSIFICATION Beginning of Describe End of Period
Period (1) (2)
Charged to Charged to Other
Costs and Expenses Accounts-Describe

Year Ended August 26, 1995:
Reserve for warranty claims $ 9,061 $23,124 $19,572 (1) $12,613
Other reserves 5,840 9,229

Year Ended August 31, 1996:
Reserve for warranty claims $12,613 $26,982 $25,443 (1) $14,152
Other reserves 9,299 9,015

Year Ended August 30, 1997:
Reserve for warranty claims $14,152 $40,303 $35,333 (1) $19,122
Other reserves 9,015 11,227

(1) Cost of product for warranty replacements, net of salvage and amounts
collected from customers.

</TABLE>
<PAGE>

EXHIBIT 10.4

EMPLOYMENT AND NON-COMPETE AGREEMENT

THIS AGREEMENT is between AutoZone, Inc., a Nevada corporation and its
various subsidiaries (collectively "AutoZone"), and John C. Adams, Jr., an
individual ("Employee") dated as of June 11, 1997 ("Effective Date").

For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties are agreed as follows:

1. EMPLOYMENT. AutoZone agrees to employ Employee and Employee agrees to
remain in the employment of AutoZone, or a subsidiary or affiliate,
until the expiration or earlier termination of this Agreement.

2. TERM. This agreement shall be effective as of the Effective Date and
shall expire five years thereafter, unless earlier terminated as
provided in Paragraphs 8 or 9.

3. SALARY. Employee shall receive a salary from AutoZone as follows:
During the term of this Agreement, Employee shall receive annual
compensation of five hundred thousand dollars ($500,000), subject to
increases as determined by the Compensation Committee of the Board of
Directors ("Base Salary"). The Base Salary amount shall be paid on a
pro-rated basis for all partial years based on a 364 day year. AutoZone
reserves the right to increase the Base Salary above the amounts stated
above in its sole discretion. All salary shall be paid at the same time
and in the same manner that AutoZone's other officers are paid.

4. BONUS. During the term of this Agreement, Employee shall receive a
bonus up to 75% of his Base Salary in accordance with policies and
procedures established by AutoZone's Compensation Committee and Board of
Directors which shall be based upon the financial and operational goals
and objectives for the Employee and AutoZone established by the
Compensation Committee for each of AutoZone's fiscal years ("Target") in
accordance with AutoZone's Executive Incentive Compensation Plan. The
Target is established at the sole discretion of the Compensation
Committee and Board of Directors and is subject to review and revision
at any time upon notification to the Employee. All bonuses shall be
paid at the same time and in the same manner that AutoZone's other
officers are paid.

5. DUTIES. Employee shall serve as AutoZone's Chairman and CEO performing
such duties as AutoZone's Board of Directors may direct from time to
time and as are normally associated with such a position. AutoZone may,
in its sole discretion, alter, expand or curtail the services to be
performed by Employee or position held by Employee from time to time,
without adjustment in compensation. Employee shall devote his entire
time and attention to AutoZone's business. During the term of this
Agreement, Employee shall not engage in any other business activity that
conflicts with his duties with AutoZone, regardless of whether it is
pursued for gain or profit. Employee may, however, invest his assets in
or serve on the Board of Directors of other companies so long as they do
not require Employee's services in the day to day operation of their
affairs and do not violate AutoZone's conflict of interest policy.
Notwithstanding, Employee may from time to time invest deminimus amounts
in the publicly traded stock of Competitors upon written approval of
AutoZone's General Counsel.

6. OTHER BENEFITS. Other benefits to be received by Employee from AutoZone
shall be the ordinary benefits received by AutoZone's other executive
officers, which may be changed by AutoZone in its sole discretion from
time to time.

7. TAXES. Employee understands that all salary, bonus and other benefits
will be subject to reduction for amounts required to be withheld by law
as taxes and otherwise.

8. TERMINATION BY AUTOZONE.

(a) WITHOUT CAUSE. AutoZone may terminate this Agreement without
Cause at any time upon notice to Employee. In such event, Employee shall
continue to be paid his then current Base Salary (on a pro-rated basis
in the same manner as Employee is then receiving his base salary) until
three years after the termination date ("Continuation Period"). During
the Continuation Period, Employee shall not receive any bonus payments.
During the Continuation Period, Employee shall continue to be an
employee of AutoZone or a subsidiary (on leave of absence), and
Employee's stock options shall continue to vest and be exercised in the
manner set forth in the respective stock option agreements until the end
of the Continuation Period, at which time Employee's employment with
AutoZone shall be terminated and further stock option exercise and
vesting shall be governed by the terms of the stock option agreement.
During the Continuation Period, Employee shall receive such other
benefits as other employees of AutoZone, including, but not limited to,
health and life insurance, on the same terms and conditions. AutoZone
shall have no other obligations other than those stated herein upon the
termination of this Agreement and Employee hereby releases AutoZone from
any and all obligations and claims except those as are specifically set
forth herein.

(b) WITH CAUSE. AutoZone shall have the right to terminate this
Agreement and Employee's employment with AutoZone for Cause at any time.
Upon such termination for Cause, Employee shall have no right to receive
any compensation, salary, or bonus and shall immediately cease to
receive any benefits (other than those as may be required pursuant to
the AutoZone Pension Plan or by law) and any stock options shall be
governed by the respective stock option agreements in effect between the
Employee and AutoZone at that time. "Cause" shall mean the willful
engagement by the Employee in conduct which is demonstrably or
materially injurious to AutoZone, monetarily or otherwise. For this
purpose, no act or failure to act by the Employee shall be considered
"willful" unless done, or omitted to be done, by the Employee not in
good faith and without reasonable belief that his action or omission was
in the best interest of AutoZone.

9. TERMINATION BY EMPLOYEE. Employee may terminate this Agreement at
anytime upon written notice to AutoZone. Upon such termination,
Employee's employment shall terminate and Employee shall cease to
receive any further salary, benefits, or bonus, and all stock options
granted shall be governed by the respective stock option agreement(s)
between the Employee and AutoZone.

10. TERMINATION BY EMPLOYEE UPON A CHANGE OF CONTROL. Employee may
terminate this Agreement upon a Change of Control of AutoZone by giving
written notice to AutoZone within sixty days of the occurrence of a
Change of Control. Upon giving such notice to AutoZone, Employees
employment shall terminate and Employee shall cease to receive any
payments or benefits pursuant this Agreement and all stock options held
by Employee shall be govern by the respective stock option agreement(s).
Any of the following events shall constitute a "Change of Control": (a)
the acquisition after the date hereof, in one or more transactions, of
beneficial ownership (as defined in Rule 13d-3(a)(1) under the
Securities Exchange Act of 1934, as amended ("Exchange Act")), by any
person or entity or any group of persons or entities who constitute a
group (as defined in Section 13(d)(3) under the Exchange Act) of any
securities such that as a result of such acquisition such person, entity
or group beneficially owns AutoZone, Inc.'s then outstanding voting
securities representing 51% or more of the total combined voting power
entitled to vote on a regular basis for a majority of the board of
Directors of AutoZone, Inc. or (b) the sale of all or substantially all
of the assets of AutoZone (including, without limitation, by way of
merger, consolidation, lease or transfer) in a transaction where
AutoZone or the beneficial owners (as defined in Rule 13d-3(a)(1) under
the Exchange Act) of capital stock of AutoZone do not receive (i) voting
securities representing a majority of the total combined voting power
entitled to vote on a regular basis for the board of directors of the
acquiring entity or of an affiliate which controls the acquiring entity
or (ii) securities representing a majority of the total combined equity
interest in the acquiring entity, if other than a corporation; provided
however, that the foregoing provisions of this Paragraph 10 shall not
apply to any transfer, sale or disposition of shares of capital stock of
AutoZone to any person or persons who are affiliates of AutoZone on the
date hereof.

11. EFFECT OF TERMINATION. Any termination of Employee's service as an
officer of AutoZone shall be deemed a termination of Employee's service
on all boards and as an officer of all subsidiaries of AutoZone.

12. NON-COMPETE. Employee agrees that he will not, for the period
commencing on the termination date of this Agreement pursuant to
Paragraph 8 or 9 (whichever is applicable) of this Agreement and ending
on

(i) the date three years after said termination date of this Agreement
if either Employee voluntarily terminates this Agreement or this
Agreement is terminated by AutoZone for Cause or

(ii) the end of the Continuation Period if this Agreement is
terminated by AutoZone without Cause,

be engaged in or concerned with, directly or indirectly, any business
related to or involved in the retail sale of auto parts to "DIY"
customers, or the wholesale or retail sale of auto parts to commercial
installers in any state, province, territory or foreign country in
which AutoZone operates now or shall operate during the term set forth
in this non-compete paragraph (herein called "Competitor"), as an
employee, director, consultant, beneficial or record owner, partner,
joint venturer, officer or agent of the Competitor.

The parties acknowledge and agree that the time, scope, geographic area and
other provisions of this Non-Compete section have been specifically
negotiated by sophisticated commercial parties and specifically hereby
agree that such time, scope, geographic area and other provisions are
reasonable under the circumstances and are in exchange for the
obligations undertaken by AutoZone pursuant to this Agreement.

Further, Employee agrees not to hire, for himself or any other entity,
encourage anyone or entity to hire, or entice away from AutoZone any
employee of AutoZone during the term of this non-compete obligation.

If at any time a court of competent jurisdiction holds that any portion of
this Non-Compete section is unenforceable for any reason, then Employee
shall forfeit his right to any further salary, bonus, stock option
exercises, or benefits from AutoZone during any Continuation Period.
This Paragraph 12 shall not apply to a termination by Employee pursuant
to Paragraph 10.

13. CONFIDENTIALITY. Unless otherwise required by law, Employee shall hold
in confidence any proprietary or confidential information obtained by
him during his employment with AutoZone, which shall include, but not be
limited to, information regarding AutoZone's present and future business
plans, vendors, systems, operations and personnel. Confidential
information shall not include information: (a) publicly disclosed by
AutoZone; (b) rightfully received by Employee from a third party without
restrictions on disclosure (c) approved for release or disclosure by
AutoZone; or (d) produced or disclosed pursuant to applicable laws,
regulation or court order. Employee acknowledges that all such
confidential or proprietary information is and shall remain the sole
property of AutoZone and all embodiments of such information shall
remain with AutoZone.

14. BREACH BY EMPLOYEE. The parties further agree that if, at any time,
despite the express agreement of the parties hereto, Employee violates
the provisions of this Agreement by violating the Non-Compete or
Confidentiality sections, or by failing to perform his obligations under
this Agreement, Employee shall forfeit any unexercised stock options,
vested or not vested, and AutoZone may cease paying any further salary
or bonus. In the event of breach by Employee of any provision of this
Agreement, Employee acknowledges that such breach will cause irreparable
damage to AutoZone, the exact amount of which will be difficult or
impossible to ascertain, and that remedies at law for any such breach
will be inadequate. Accordingly, AutoZone shall be entitled, in
addition to any other rights or remedies existing in its favor, to
obtain, without the necessity for any bond or other security, specific
performance and/or injunctive relief in order to enforce, or prevent
breach of any such provision.

15. DEATH OF EMPLOYEE OR DISABILITY. If Employee should die or become
disabled (such that he is no longer capable of performing his duties)
during the term of this Agreement, then all salary and bonus shall cease
as of the date of his death or disability, all stock options shall be
governed by the terms of the respective stock option agreements, and
Employee shall receive disability or death benefits as may be provided
under AutoZone's then existing policies and procedures related to
disability or death of AutoZone employees.

16. WAIVER. Any waiver of any breach of this Agreement by AutoZone shall
not operate or be construed as a waiver of any subsequent breach by
Employee. No waiver shall be valid unless in writing and signed by an
authorized officer of AutoZone.

17. ASSIGNMENT. Employee acknowledges that his services are unique and
personal. Accordingly, Employee shall not assign his rights or delegate
his duties or obligations under this Agreement. Employee's rights and
obligations under this Agreement shall inure to the benefit of and be
binding upon AutoZone successors and assigns. AutoZone may assign this
Agreement to any wholly-owned subsidiary operating for the use and
benefit of AutoZone.

18. ENTIRE AGREEMENT. This Agreement contains the entire understanding of
the parties related to the matters discussed herein. It may not be
changed orally but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension,
or discharge is sought.

19. JURISDICTION. This Agreement shall be governed and construed by the
laws of the State of Tennessee, without regard to its choice of law
rules. The parties agree that the only proper venue for any dispute
under this Agreement shall be in the state or federal courts located in
Shelby County, Tennessee.

20. SURVIVAL. Sections 8, 12, 13, 14 and 19 of this Agreement shall
survive any termination of this Agreement or Employee's employment with
AutoZone (including, without limitation termination pursuant to
Paragraphs 8, 9, or 10).

IN WITNESS WHEREOF, the respective parties execute this Agreement.

AUTOZONE, INC.

By: /S/ TIMOTHY D. VARGO /S/ JOHN C. ADAMS, JR.
-------------------- ----------------------
Title: President and COO Employee

6/11/97
--------
By: /S/ HARRY L. GOLDSMITH Date
----------------------
Title: Senior Vice President

EXHIBIT 10.5

EMPLOYMENT AND NON-COMPETE AGREEMENT

THIS AGREEMENT is between AutoZone, Inc., a Nevada corporation and its
various subsidiaries (collectively "AutoZone"), and Timothy D. Vargo, an
individual ("Employee") dated as of June 11, 1997 ("Effective Date").

For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties are agreed as follows:

2. TERM. This agreement shall be effective as of the Effective Date and
shall expire five years thereafter, unless earlier terminated as
provided in Paragraphs 8 or 9.

3. SALARY. Employee shall receive a salary from AutoZone as follows:
During the term of this Agreement, Employee shall receive annual
compensation of four hundred thousand dollars ($400,000), subject to
increases as determined by the Compensation Committee of the Board of
Directors ("Base Salary"). The Base Salary amount shall be paid on a
pro-rated basis for all partial years based on a 364 day year. AutoZone
reserves the right to increase the Base Salary above the amounts stated
above in its sole discretion. All salary shall be paid at the same time
and in the same manner that AutoZone's other officers are paid.

5. DUTIES. Employee shall serve as AutoZone's President and COO performing
such duties as AutoZone's Board of Directors may direct from time to
time and as are normally associated with such a position. AutoZone may,
in its sole discretion, alter, expand or curtail the services to be
performed by Employee or position held by Employee from time to time,
without adjustment in compensation. Employee shall devote his entire
time and attention to AutoZone's business. During the term of this
Agreement, Employee shall not engage in any other business activity that
conflicts with his duties with AutoZone, regardless of whether it is
pursued for gain or profit. Employee may, however, invest his assets in
or serve on the Board of Directors of other companies so long as they do
not require Employee's services in the day to day operation of their
affairs and do not violate AutoZone's conflict of interest policy.
Notwithstanding, Employee may from time to time invest deminimus amounts
in the publicly traded stock of Competitors upon written approval of
AutoZone's General Counsel.

7. TAXES. Employee understands that all salary, bonus and other benefits
will be subject to reduction for amounts required to be withheld by law
as taxes and otherwise.

8. TERMINATION BY AUTOZONE.

(a) WITHOUT CAUSE. AutoZone may terminate this Agreement without
Cause at any time upon notice to Employee. In such event, Employee shall
continue to be paid his then current Base Salary (on a pro-rated basis
in the same manner as Employee is then receiving his base salary) until
three years after the termination date ("Continuation Period"). During
the Continuation Period, Employee shall not receive any bonus payments.
During the Continuation Period, Employee shall continue to be an
employee of AutoZone or a subsidiary (on leave of absence), and
Employee's stock options shall continue to vest and be exercised in the
manner set forth in the respective stock option agreements until the end
of the Continuation Period, at which time Employee's employment with
AutoZone shall be terminated and further stock option exercise and
vesting shall be governed by the terms of the stock option agreement.
During the Continuation Period, Employee shall receive such other
benefits as other employees of AutoZone, including, but not limited
to, health and life insurance, on the same terms and conditions.
AutoZone shall have no other obligations other than those stated herein
upon the termination of this Agreement and Employee hereby releases
AutoZone from any and all obligations and claims except those as are
specifically set forth herein.

10. TERMINATION BY EMPLOYEE UPON A CHANGE OF CONTROL. Employee may
terminate this Agreement upon a Change of Control of AutoZone by giving
written notice to AutoZone within sixty days of the occurrence of a
Change of Control. Upon giving such notice to AutoZone, Employees
employment shall terminate and Employee shall cease to receive any
payments or benefits pursuant this Agreement and all stock options held
by Employee shall be govern by the respective stock option
agreement(s). Any of the following events shall constitute a "Change of
Control": (a) the acquisition after the date hereof, in one or more
transactions, of beneficial ownership (as defined in Rule 13d-3(a)(1)
under the Securities Exchange Act of 1934, as amended ("Exchange Act")),
by any person or entity or any group of persons or entities who
constitute a group (as defined in Section 13(d)(3) under the Exchange
Act) of any securities such that as a result of such acquisition such
person, entity or group beneficially owns AutoZone, Inc.'s then
outstanding voting securities representing 51% or more of the total
combined voting power entitled to vote on a regular basis for a majority
of the board of Directors of AutoZone, Inc. or (b) the sale of all or
substantially all of the assets of AutoZone (including, without
limitation, by way of merger, consolidation, lease or transfer) in a
transaction where AutoZone or the beneficial owners (as defined in Rule
13d-3(a)(1) under the Exchange Act) of capital stock of AutoZone do not
receive (i) voting securities representing a majority of the total
combined voting power entitled to vote on a regular basis for the board
of directors of the acquiring entity or of an affiliate which controls
the acquiring entity or (ii) securities representing a majority of the
total combined equity interest in the acquiring entity, if other than a
corporation; provided however, that the foregoing provisions of this
Paragraph 10 shall not apply to any transfer, sale or disposition of
shares of capital stock of AutoZone to any person or persons who are
affiliates of AutoZone on the date hereof.

(i) the date three years after said termination date of this Agreement
if either Employee voluntarily terminates this Agreement or this
Agreement is terminated by AutoZone for Cause or

(ii) the end of the Continuation Period if this Agreement is
terminated by AutoZone without Cause,

IN WITNESS WHEREOF, the respective parties execute this Agreement.

AUTOZONE, INC.

By: /s/ J.C. Adams /s/ Timothy D. Vargo
---------------- ----------------------
Title: Chairman & CEO Employee

6/13/97
By: Harry L. Goldsmith ---------------------
-------------------- Date
Title: Senior Vice President

EXHIBIT 10.6

EMPLOYMENT AND NON-COMPETE AGREEMENT

THIS AGREEMENT is between AutoZone, Inc., a Nevada corporation and its
various subsidiaries (collectively "AutoZone"), and Robert J. Hunt, an
individual ("Employee") dated as of June 11, 1997 ("Effective Date").

For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties are agreed as follows:

2. TERM. This agreement shall be effective as of the Effective Date and
shall expire five years thereafter, unless earlier terminated as
provided in Paragraphs 8 or 9.

3. SALARY. Employee shall receive a salary from AutoZone as follows:
During the term of this Agreement, Employee shall receive annual
compensation of two hundred eighty-five thousand dollars ($285,000),
subject to increases as determined by the Compensation Committee of the
Board of Directors ("Base Salary"). The Base Salary amount shall be
paid on a pro-rated basis for all partial years based on a 364 day year.
AutoZone reserves the right to increase the Base Salary above the
amounts stated above in its sole discretion. All salary shall be paid at
the same time and in the same manner that AutoZone's other officers are
paid.

4. BONUS. During the term of this Agreement, Employee shall receive a
bonus up to 60% of his Base Salary in accordance with policies and
procedures established by AutoZone's Compensation Committee and Board of
Directors which shall be based upon the financial and operational goals
and objectives for the Employee and AutoZone established by the
Compensation Committee for each of AutoZone's fiscal years ("Target") in
accordance with AutoZone's Executive Incentive Compensation Plan. The
Target is established at the sole discretion of the Compensation
Committee and Board of Directors and is subject to review and revision
at any time upon notification to the Employee. All bonuses shall be
paid at the same time and in the same manner that AutoZone's other
officers are paid.

5. DUTIES. Employee shall serve as AutoZone's Executive Vice President and
Chief Financial Officer performing such duties as AutoZone's Board of
Directors may direct from time to time and as are normally associated
with such a position. AutoZone may, in its sole discretion, alter,
expand or curtail the services to be performed by Employee or position
held by Employee from time to time, without adjustment in compensation.
Employee shall devote his entire time and attention to AutoZone's
business. During the term of this Agreement, Employee shall not engage
in any other business activity that conflicts with his duties with
AutoZone, regardless of whether it is pursued for gain or profit.
Employee may, however, invest his assets in or serve on the Board of
Directors of other companies so long as they do not require Employee's
services in the day to day operation of their affairs and do not violate
AutoZone's conflict of interest policy. Notwithstanding, Employee may
from time to time invest deminimus amounts in the publicly traded stock
of Competitors upon written approval of AutoZone's General Counsel.

7. TAXES. Employee understands that all salary, bonus and other benefits
will be subject to reduction for amounts required to be withheld by law
as taxes and otherwise.

8. TERMINATION BY AUTOZONE.

(a) WITHOUT CAUSE. AutoZone may terminate this Agreement without
Cause at any time upon notice to Employee. In such event, Employee shall
continue to be paid his then current Base Salary (on a pro-rated basis
in the same manner as Employee is then receiving his base salary) until
three years after the termination date ("Continuation Period"). During
the Continuation Period, Employee shall not receive any bonus payments.
During the Continuation Period, Employee shall continue to be an
employee of AutoZone or a subsidiary (on leave of absence), and
Employee's stock options shall continue to vest and be exercised in the
manner set forth in the respective stock option agreements until the end
of the Continuation Period, at which time Employee's employment with
AutoZone shall be terminated and further stock option exercise and
vesting shall be governed by the terms of the stock option agreement.
During the Continuation Period, Employee shall receive such other
benefits as other employees of AutoZone, including, but not limited
to, health and life insurance, on the same terms and conditions.
AutoZone shall have no other obligations other than those stated herein
upon the termination of this Agreement and Employee hereby releases
AutoZone from any and all obligations and claims except those as are
specifically set forth herein.

10. TERMINATION BY EMPLOYEE UPON A CHANGE OF CONTROL. Employee may
terminate this Agreement upon a Change of Control of AutoZone by giving
written notice to AutoZone within sixty days of the occurrence of a
Change of Control. Upon giving such notice to AutoZone, Employees
employment shall terminate and Employee shall cease to receive any
payments or benefits pursuant this Agreement and all stock options held
by Employee shall be govern by the respective stock option
agreement(s). Any of the following events shall constitute a "Change of
Control": (a) the acquisition after the date hereof, in one or more
transactions, of beneficial ownership (as defined in Rule 13d-3(a)(1)
under the Securities Exchange Act of 1934, as amended ("Exchange Act")),
by any person or entity or any group of persons or entities who
constitute a group (as defined in Section 13(d)(3) under the Exchange
Act) of any securities such that as a result of such acquisition such
person, entity or group beneficially owns AutoZone, Inc.'s then
outstanding voting securities representing 51% or more of the total
combined voting power entitled to vote on a regular basis for a majority
of the board of Directors of AutoZone, Inc. or (b) the sale of all or
substantially all of the assets of AutoZone (including, without
limitation, by way of merger, consolidation, lease or transfer) in a
transaction where AutoZone or the beneficial owners (as defined in Rule
13d-3(a)(1) under the Exchange Act) of capital stock of AutoZone do not
receive (i) voting securities representing a majority of the total
combined voting power entitled to vote on a regular basis for the board
of directors of the acquiring entity or of an affiliate which controls
the acquiring entity or (ii) securities representing a majority of the
total combined equity interest in the acquiring entity, if other than a
corporation; provided however, that the foregoing provisions of this
Paragraph 10 shall not apply to any transfer, sale or disposition of
shares of capital stock of AutoZone to any person or persons who are
affiliates of AutoZone on the date hereof.

(i) the date three years after said termination date of this Agreement
if either Employee voluntarily terminates this Agreement or this
Agreement is terminated by AutoZone for Cause or

(ii) the end of the Continuation Period if this Agreement is
terminated by AutoZone without Cause,

IN WITNESS WHEREOF, the respective parties execute this Agreement.

AUTOZONE, INC.

By: /s/ J.C. Adams, Jr. /s/ ROBERT J. HUNT
------------------------------- -------------------------------
Title: Chairman and CEO Employee

9/27/97
---------------------------------
By: /s/ Timothy D. Vargo Date
------------------------------
Title: President and COO

EXHIBIT 10.7

EMPLOYMENT AND NON-COMPETE AGREEMENT

THIS AGREEMENT is between AutoZone, Inc., a Nevada corporation and its
various subsidiaries (collectively "AutoZone"), and Shawn P. McGhee, an
individual ("Employee") dated as of June 17, 1997 ("Effective Date").

For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties are agreed as follows:

2. TERM. This agreement shall be effective as of the Effective Date and
shall expire five years thereafter, unless earlier terminated as
provided in Paragraphs 8 or 9.

3. SALARY. Employee shall receive a salary from AutoZone as follows:
During the term of this Agreement, Employee shall receive annual
compensation of three hundred thousand dollars ($300,000), subject to
increases as determined by the Compensation Committee of the Board of
Directors ("Base Salary"). The Base Salary amount shall be paid on a
pro-rated basis for all partial years based on a 364 day year. AutoZone
reserves the right to increase the Base Salary above the amounts stated
above in its sole discretion. All salary shall be paid at the same time
and in the same manner that AutoZone's other officers are paid.

5. DUTIES. Employee shall serve as AutoZone's Executive Vice President,
performing such duties as AutoZone's Board of Directors may direct from
time to time and as are normally associated with such a position.
AutoZone may, in its sole discretion, alter, expand or curtail the
services to be performed by Employee or position held by Employee from
time to time, without adjustment in compensation. Employee shall devote
his entire time and attention to AutoZone's business. During the term of
this Agreement, Employee shall not engage in any other business activity
that conflicts with his duties with AutoZone, regardless of whether it
is pursued for gain or profit. Employee may, however, invest his assets
in or serve on the Board of Directors of other companies so long as they
do not require Employee's services in the day to day operation of their
affairs and do not violate AutoZone's conflict of interest policy.
Notwithstanding, Employee may from time to time invest deminimus amounts
in the publicly traded stock of Competitors upon written approval of
AutoZone's General Counsel.

7. TAXES. Employee understands that all salary, bonus and other benefits
will be subject to reduction for amounts required to be withheld by law
as taxes and otherwise.

8. TERMINATION BY AUTOZONE.

10. TERMINATION BY EMPLOYEE UPON A CHANGE OF CONTROL OR CHANGE IN
MANAGEMENT. Employee may terminate this Agreement upon a Change of
Control or Change in Management of AutoZone by giving written notice to
AutoZone within sixty days of the occurrence of a Change of Control or
Change of Management. Upon giving such notice to AutoZone, Employees
employment shall terminate and Employee shall cease to receive any
payments or benefits pursuant this Agreement and all stock options held
by Employee shall be govern by the respective stock option agreement(s).
Any of the following events shall constitute a "Change of Control": (a)
the acquisition after the date hereof, in one or more transactions, of
beneficial ownership (as defined in Rule 13d-3(a)(1) under the
Securities Exchange Act of 1934, as amended ("Exchange Act")), by any
person or entity or any group of persons or entities who constitute a
group (as defined in Section 13(d)(3) under the Exchange Act) of any
securities such that as a result of such acquisition such person, entity
or group beneficially owns AutoZone, Inc.'s then outstanding voting
securities representing 51% or more of the total combined voting power
entitled to vote on a regular basis for a majority of the board of
Directors of AutoZone, Inc. or (b) the sale of all or substantially all
of the assets of AutoZone (including, without limitation, by way of
merger, consolidation, lease or transfer) in a transaction where
AutoZone or the beneficial owners (as defined in Rule 13d-3(a)(1) under
the Exchange Act) of capital stock of AutoZone do not receive (i) voting
securities representing a majority of the total combined voting power
entitled to vote on a regular basis for the board of directors of the
acquiring entity or of an affiliate which controls the acquiring entity
or (ii) securities representing a majority of the total combined equity
interest in the acquiring entity, if other than a corporation; provided
however, that the foregoing provisions of this Paragraph 10 shall not
apply to any transfer, sale or disposition of shares of capital stock of
AutoZone to any person or persons who are affiliates of AutoZone on the
date hereof. A "Change in Management" shall be deemed to occur only
upon the current Chief Executive Officer or Chief Operating Officer of
AutoZone changing.

(i) the date three years after said termination date of this Agreement
if either Employee voluntarily terminates this Agreement or this
Agreement is terminated by AutoZone for Cause or

(ii) the end of the Continuation Period if this Agreement is
terminated by AutoZone without Cause,

IN WITNESS WHEREOF, the respective parties execute this Agreement.

AUTOZONE, INC.

By: /s/ Tim Vargo /s/Shawn P. McGhee
------------- --------------------
Title: President Employee

7/27/97
By: /s/ J.C. Adams, Jr. --------------------
------------------- Date
Title: Chairman and CEO

EXHIBIT 10.8

EMPLOYMENT AND NON-COMPETE AGREEMENT

THIS AGREEMENT is between AutoZone, Inc., a Nevada corporation and its
various subsidiaries (collectively "AutoZone"), and Harry L. Goldsmith, an
individual ("Employee") dated as of June 11, 1997 ("Effective Date").

For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties are agreed as follows:

2. TERM. This agreement shall be effective as of the Effective Date and
shall expire five years thereafter, unless earlier terminated as
provided in Paragraphs 8 or 9.

3. SALARY. Employee shall receive a salary from AutoZone as follows:
During the term of this Agreement, Employee shall receive annual
compensation of one hundred seventy-five thousand dollars ($175,000),
subject to increases as determined by the Compensation Committee of the
Board of Directors ("Base Salary"). The Base Salary amount shall be
paid on a pro-rated basis for all partial years based on a 364 day year.
AutoZone reserves the right to increase the Base Salary above the
amounts stated above in its sole discretion. All salary shall be paid at
the same time and in the same manner that AutoZone's other officers are
paid.

4. BONUS. During the term of this Agreement, Employee shall receive a
bonus up to 50% of his Base Salary in accordance with policies and
procedures established by AutoZone's Compensation Committee and Board of
Directors which shall be based upon the financial and operational goals
and objectives for the Employee and AutoZone established by the
Compensation Committee for each of AutoZone's fiscal years ("Target") in
accordance with AutoZone's Executive Incentive Compensation Plan. The
Target is established at the sole discretion of the Compensation
Committee and Board of Directors and is subject to review and revision
at any time upon notification to the Employee. All bonuses shall be
paid at the same time and in the same manner that AutoZone's other
officers are paid.

5. DUTIES. Employee shall serve as AutoZone's Senior Vice President and
General Counsel performing such duties as AutoZone's Board of Directors
may direct from time to time and as are normally associated with such a
position. AutoZone may, in its sole discretion, alter, expand or curtail
the services to be performed by Employee or position held by Employee
from time to time, without adjustment in compensation. Employee shall
devote his entire time and attention to AutoZone's business. During the
term of this Agreement, Employee shall not engage in any other business
activity that conflicts with his duties with AutoZone, regardless of
whether it is pursued for gain or profit. Employee may, however, invest
his assets in or serve on the Board of Directors of other companies so
long as they do not require Employee's services in the day to day
operation of their affairs and do not violate AutoZone's conflict of
interest policy. Notwithstanding, Employee may from time to time invest
deminimus amounts in the publicly traded stock of Competitors upon
written approval of AutoZone's General Counsel.

7. TAXES. Employee understands that all salary, bonus and other benefits
will be subject to reduction for amounts required to be withheld by law
as taxes and otherwise.

8. TERMINATION BY AUTOZONE.

(a) WITHOUT CAUSE. AutoZone may terminate this Agreement without
Cause at any time upon notice to Employee. In such event, Employee shall
continue to be paid his then current Base Salary (on a pro-rated basis
in the same manner as Employee is then receiving his base salary) until
three years after the termination date ("Continuation Period"). During
the Continuation Period, Employee shall not receive any bonus payments.
During the Continuation Period, Employee shall continue to be an
employee of AutoZone or a subsidiary (on leave of absence), and
Employee's stock options shall continue to vest and be exercised in the
manner set forth in the respective stock option agreements until the end
of the Continuation Period, at which time Employee's employment with
AutoZone shall be terminated and further stock option exercise and
vesting shall be governed by the terms of the stock option agreement.
During the Continuation Period, Employee shall receive such other
benefits as other employees of AutoZone, including, but not limited to,
health and life insurance, on the same terms and conditions. AutoZone
shall have no other obligations other than those stated herein upon the
termination of this Agreement and Employee hereby releases AutoZone
from any and all obligations and claims except those as are specifically
set forth herein.

10. TERMINATION BY EMPLOYEE UPON A CHANGE OF CONTROL. Employee may
terminate this Agreement upon a Change of Control of AutoZone by giving
written notice to AutoZone within sixty days of the occurrence of a
Change of Control. Upon giving such notice to AutoZone, Employees
employment shall terminate and Employee shall cease to receive any
payments or benefits pursuant this Agreement and all stock options held
by Employee shall be govern by the respective stock option
agreement(s). Any of the following events shall constitute a "Change of
Control": (a) the acquisition after the date hereof, in one or more
transactions, of beneficial ownership (as defined in Rule 13d-3(a)(1)
under the Securities Exchange Act of 1934, as amended ("Exchange Act")),
by any person or entity or any group of persons or entities who
constitute a group (as defined in Section 13(d)(3) under the Exchange
Act) of any securities such that as a result of such acquisition such
person, entity or group beneficially owns AutoZone, Inc.'s then
outstanding voting securities representing 51% or more of the total
combined voting power entitled to vote on a regular basis for a majority
of the Board of Directors of AutoZone, Inc. or (b) the sale of all or
substantially all of the assets of AutoZone (including, without
limitation, by way of merger, consolidation, lease or transfer) in a
transaction where AutoZone or the beneficial owners (as defined in Rule
13d-3(a)(1) under the Exchange Act) of capital stock of AutoZone do not
receive (i) voting securities representing a majority of the total
combined voting power entitled to vote on a regular basis for the board
of directors of the acquiring entity or of an affiliate which controls
the acquiring entity or (ii) securities representing a majority of the
total combined equity interest in the acquiring entity, if other than a
corporation; provided however, that the foregoing provisions of this
Paragraph 10 shall not apply to any transfer, sale or disposition of
shares of capital stock of AutoZone to any person or persons who are
affiliates of AutoZone on the date hereof. A "Change in Management"
shall be deemed to occur only upon the current Chief Executive Officer
or Chief Operating Officer of AutoZone changing.

(i) the date three years after said termination date of this Agreement
if either Employee voluntarily terminates this Agreement or this
Agreement is terminated by AutoZone for Cause or

(ii) the end of the Continuation Period if this Agreement is
terminated by AutoZone without Cause,

IN WITNESS WHEREOF, the respective parties execute this Agreement.

AUTOZONE, INC.

By: /s/ J.C. Adams, Jr. /s/ Harry L. Goldsmith
------------------- ----------------------
Title: Chairman & CEO Employee

6/11/97
By: /s/ Timothy D. Vargo ----------------------
-------------------- Date
Title: President

EXHIBIT 10.9

EMPLOYMENT AND NON-COMPETE AGREEMENT

THIS AGREEMENT is between AutoZone, Inc., a Nevada corporation and its
various subsidiaries (collectively "AutoZone"), and Stephen W. Valentine,
an individual ("Employee") dated as of July 7, 1997 ("Effective Date").

For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties are agreed as follows:

2. TERM. This agreement shall be effective as of the Effective Date and
shall expire five years thereafter, unless earlier terminated as
provided in Paragraphs 8 or 9.

3. SALARY. Employee shall receive a salary from AutoZone as follows:
During the term of this Agreement, Employee shall receive annual
compensation of two hundred thousand dollars ($200,000), subject to
increases as determined by the Compensation Committee of the Board of
Directors ("Base Salary"). The Base Salary amount shall be paid on a
pro-rated basis for all partial years based on a 364 day year. AutoZone
reserves the right to increase the Base Salary above the amounts stated
above in its sole discretion. All salary shall be paid at the same time
and in the same manner that AutoZone's other officers are paid.

5. DUTIES. Employee shall serve as AutoZone's Senior Vice President
performing such duties as AutoZone's Board of Directors may direct from
time to time and as are normally associated with such a position.
AutoZone may, in its sole discretion, alter, expand or curtail the
services to be performed by Employee or position held by Employee from
time to time, without adjustment in compensation. Employee shall devote
his entire time and attention to AutoZone's business. During the term of
this Agreement, Employee shall not engage in any other business activity
that conflicts with his duties with AutoZone, regardless of whether it
is pursued for gain or profit. Employee may, however, invest his assets
in or serve on the Board of Directors of other companies so long as they
do not require Employee's services in the day to day operation of their
affairs and do not violate AutoZone's conflict of interest policy.
Notwithstanding, Employee may from time to time invest deminimus amounts
in the publicly traded stock of Competitors upon written approval of
AutoZone's General Counsel.

7. TAXES. Employee understands that all salary, bonus and other benefits
will be subject to reduction for amounts required to be withheld by law
as taxes and otherwise.

8. TERMINATION BY AUTOZONE.

10. TERMINATION BY EMPLOYEE UPON A CHANGE OF CONTROL. Employee may
terminate this Agreement upon a Change of Control of AutoZone, Inc. by
giving written notice to AutoZone within sixty days of the occurrence of
a Change of Control. Upon giving such notice to AutoZone, Employee's
employment shall terminate and Employee shall cease to receive any
payments or benefits pursuant this Agreement and all stock options held
by Employee shall be governed by the respective stock option
agreement(s). Any of the following events shall constitute a "Change of
Control": (a) the acquisition after the date hereof, in one or more
transactions, of beneficial ownership (as defined in Rule 13d-3(a)(1)
under the Securities Exchange Act of 1934, as amended ("Exchange Act")),
by any person or entity or any group of persons or entities who
constitute a group (as defined in Section 13(d)(3) under the Exchange
Act) of any securities such that as a result of such acquisition such
person, entity or group beneficially owns AutoZone, Inc.'s then
outstanding voting securities representing 51% or more of the total
combined voting power entitled to vote on a regular basis for a majority
of the board of Directors of AutoZone, Inc. or (b) the sale of all or
substantially all of the assets of AutoZone (including, without
limitation, by way of merger, consolidation, lease or transfer) in a
transaction where AutoZone. or the beneficial owners (as defined in Rule
13d-3(a)(1) under the Exchange Act) of capital stock of AutoZone do not
receive (i) voting securities representing a majority of the total
combined voting power entitled to vote on a regular basis for the board
of directors of the acquiring entity or of an affiliate which controls
the acquiring entity or (ii) securities representing a majority of the
total combined equity interest in the acquiring entity, if other than a
corporation; provided however, that the foregoing provisions of this
Paragraph 10 shall not apply to any transfer, sale or disposition of
shares of capital stock of AutoZone to any person or persons who are
affiliates of AutoZone on the date hereof.

(i) the date three years after said termination date of this Agreement
if either Employee voluntarily terminates this Agreement or this
Agreement is terminated by AutoZone for Cause or

(ii) the end of the Continuation Period if this Agreement is
terminated by AutoZone without Cause,

IN WITNESS WHEREOF, the respective parties execute this Agreement.

AUTOZONE, INC.

By: /s/ Tim Vargo /s/ Stephen W. Valentine
---------------- ---------------------------
Title: President Employee

By: J.C. Adams, Jr. 07/07/97
----------------- ---------------------------
Title: CEO Date

<TABLE>
<CAPTION>
EXHIBIT 11.1

COMPUTATION OF EARNINGS PER COMMON SHARE EQUIVALENTS

Fiscal Year Ended
-------------------------------------------------
AUGUST 26, AUGUST 31, AUGUST 30,
1995 1996 1997
-------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

PRIMARY:
<S> <C> <C> <C>
Average shares outstanding 146,189 148,476 150,726
Net effect of dilutive
stock options, based on
the treasury stock
method, using average
fair market value 3,113 2,762 1,809
-----------------------------------------
Total shares used in
computation 149,302 151,238 152,535
=========================================
Net income $138,781 $167,165 $195,008
=========================================
Net income per share $ 0.93 $ 1.11 $ 1.28
=========================================
FULLY
DILUTED:
Average shares outstanding 146,189 148,476 150,726
Net effect of dilutive
stock options, based on
the treasury stock
method, using higher of
average or year-end fair 3,155 2,762 2,156
market value -----------------------------------------

Total shares used in
computation 149,344 151,238 152,882
==========================================
Net income $138,781 $167,165 $195,008
==========================================
Net income per share $ 0.93 $ 1.11 $ 1.28
==========================================
</TABLE>

EXHIBIT 13.1

[PHOTOGRAPH OF AN AUTOZONE STORE IN BACKGROUND APPEARS HERE]

1 9 9 7 A N N U A L R E P O R T
<PAGE>

[PHOTOGRAPH OF A MAN AND 2 YOUTHS LOOKING AT A VEHICLE FRONT WITH HOOD UP
APPEARS HERE]

Company Description

AutoZone is the nation's leading auto parts chain. We sell a broad line of
replacement parts, accessories, chemicals and motor oil. With 1,728 stores in 32
states, we operate more stores than any auto parts retailer in America. On
average, we open the doors on a new AutoZone store nearly every day.

Our primary customers are do-it-yourselfers who repair their own cars to
save money. We also sell and deliver parts to professional repair shops whose
technicians install parts for a living.

The first AutoZone store opened in Forrest City, Arkansas, on July 4, 1979.
Eighteen years later, we still attribute much of our success to our fanatical
commitment to customer satisfaction. There's a pledge you'll hear recited
throughout AutoZoneland that helps us keep our focus:

AutoZoners always put customers first.

We know our parts and products.

Our stores look great.

And we've got the best merchandise at the right price.

[MAP OF THE UNITED STATES APPEARS HERE]
<PAGE>

Financial Highlights
<TABLE>
<CAPTION>
1997 1996* % Change

<S> <C> <C> <C>
Sales $2,691,440,000 $2,242,633,000 +20%
Operating Profit $321,351,000 $268,934,000 +19%
Net Income $195,008,000 $167,165,000 +17%
Earnings Per Share $1.28 $1.11 +15%
Stockholders' Equity $1,075,208,000 $865,582,000 +24%
Number of Stores 1,728 1,423 +21%
</TABLE>

*includes a 53rd week

[MID TO EASTERN UNITED STATES MAP APPEARS HERE]

. Store Support Center
Memphis, TN

. Distribution Centers
Danville, IL
Lafayette, LA
Lavonia, GA
Lexington, TN
Phoenix, AZ
San Antonio, TX
Zanesville, OH

AutoZone Stores
By State

. Alabama.................. 77
. Arizona.................. 64
. Arkansas................. 39
* California............... 8
. Colorado................. 32
. Florida.................. 82
. Georgia.................. 96
. Illinois................. 56
. Indiana.................. 85
* Iowa..................... 10
. Kansas................... 31
. Kentucky................. 48
. Louisiana................ 70
* Maryland................. 1
. Michigan................. 27
. Mississippi.............. 61
. Missouri................. 72
* Nevada................... 1
. New Mexico............... 23
* New York................. 11
. North Carolina........... 87
. Ohio.....................166
. Oklahoma................. 60
. Pennsylvania............. 28
. South Carolina........... 49
. Tennessee................106
. Texas....................264
. Utah..................... 19
. Virginia................. 34
. West Virginia............ 13
. Wisconsin................ 5
. Wyoming.................. 3

* Indicates a new state for F97
<PAGE>

SALES
($ millions)

[BAR GRAPH APPEARS HERE]

93 94 95 96 97
-- -- -- -- --

1,217 1,508 1,808 2,243 2,691

NET
Income
($ millions)

[BAR GRAPH APPEARS HERE]

93 94 95 96 97
-- -- -- -- --

87 116 139 167 195

OPERATING
Profit
($ millions)

[BAR GRAPH APPEARS HERE]

93 94 95 96 97
-- -- -- -- --

141 191 228 269 321

EARNINGS
Per Share ($)

[BAR GRAPH APPEARS HERE]

93 94 95 96 97
-- -- -- -- --

.59 .78 .93 1.11 1.28

To our Customers, AutoZoners and Stockholders:

Fiscal 1997 -- the year we finally answered the frequently asked question, "When
will AutoZone be in California?" That answer came on July 4 -- our 18th birthday
- -- when we opened our doors in the town of El Centro. While we're excited about
saying we now serve customers from coast to coast, we've continued to focus on
being our customers' neighborhood auto parts store everywhere we do business.

El Centro was just one of 305 net new stores we opened in fiscal 1997. And
one of many we opened in markets where we didn't have a presence 12 months ago.
That means our customer base both the do-it-yourself (DIY) market and the
professional mechanic sector we call commercial -- continues to expand, along
with the number of AutoZone neighborhoods. We also:

. Entered five new states California, Iowa, Maryland, Nevada and New York.
. Turned a profit in our commercial sales program.
. Surpassed the $1 billion mark in stockholders' equity.

Fiscal 1997 was another record year financially:

. Sales rose 20% to $2.69 billion.
. Comparable store sales increased by 8%.
. Net income increased 17% to $195 million.
. Earnings per share rose 15% to $1.28.

We're particularly pleased with our financial gains, given the fact that
we're measuring ourselves against a 53-week year in fiscal 1996. We're gaining
leverage on expenses through a revival of our culture of thrift -- more commonly
known outside AutoZone as tight expense control.

Less than two years ago we were kicking off the commercial program in our
first store. Today that business accounts for more than 10% of our total sales.
And although DIY sales were soft industrywide for the first half of the year,
we've felt a real momentum shift since the third quarter. Looking ahead, we will
maintain our focus on our core DIY business and expect the commercial business
to continue to have a favorable impact on same store sales and earnings as it
grows.

Once again, our new store openings are among the best in retailing. With
the addition of 305 net new stores, we ended the year with 1,728 stores in 32
states. We're confident there's still lots of room for expansion, and we project
350

2
<PAGE>

AFTER TAX RETURN
On Capital

[BAR GRAPH APPEARS HERE]

93 94 95 96 97
-- -- -- -- --

18% 19% 19% 18% 16%

[PHOTOGRAPH OF TIM VARGO AND JOHN ADAMS APPEARS HERE]

President Tim Vargo and Chairman John Adams

new stores in the coming year.

Professional technicians across the nation are reaping the benefits of the
research and development investment we've made this year in ALLDATA. In the
coming year, we believe ALLDATA's software will rise to a new level - clearly
establishing itself as the unassailable leader in automotive diagnostic and
repair information.

We'd like to take this opportunity to thank Pitt Hyde and Tom Hanemann for
their leadership and service to AutoZone. Tom retired after 23 years, dating
back to his days with Malone & Hyde, our former parent company. He was vital in
developing AutoZone's culture and his influence will be felt for years to come.

Pitt retired 18 years after founding AutoZone and 30 years after joining
Malone & Hyde. His vision of taking customer service to a new level in the auto
parts industry is what made AutoZone the best in the business. Pitt continues to
offer his expertise as a member of our board.

If you've followed AutoZone closely as we've grown, you won't find our
strategy for the coming year all that unusual. We'll continue to profitably
expand our store count faster than anyone else in our industry. We'll continue
to seek out competitive advantages in areas like technology, store design and
product quality. And we will always look for new opportunities to create more
value for our customers.

Wall Street may see AutoZone as a rapidly growing chain of more than 1,700
stores spread across 32 states. But we know that to our millions of loyal
customers, AutoZone is the man or woman in the red shirt behind the counter of
the neighborhood auto parts store just a few minutes from home. As we focus on
growing our business and gaining new customers, we'll never lose sight of our
obligation to invest in the more than 28,000 AutoZoners who continue to find new
ways to deliver extraordinary customer service every day.

/s/ John Adams /s/ Tim Vargo

John Adams Tim Vargo
Chairman & CEO President & COO
Customer Satisfaction Customer Satisfaction

3
<PAGE>

Your neighborhood auto parts store -- all across America.

4
<PAGE>

From Sumter, South Carolina to El Centro, California. From Indianapolis, Indiana
to Brownsville, Texas. From Detroit, Michigan to Andalusia, Alabama. It's
something that's as common in small town America as it is in our bustling big
cities. The neighborhood AutoZone store.

It was born in Forrest City, Arkansas, in 1979. Needless to say, we've come
a long way since then. We've grown from a small time operation in the South to
the nation's leading auto parts chain with stores from coast to coast. We've
introduced and helped develop new products. We're constantly fine-tuning the way
our stores are designed and operated. We're even into the development of
automotive diagnostic and repair software.

Fact of the matter is, we've enhanced our business in more ways than we
have room to mention here. But for all the enhancements, there's a part of our
business we don't want to change a bit. And that's the way we relate to our
customers. We can create whizbang systems `til the cows come home, but if we
don't treat our customers like friends and give them the service they deserve,
we can kiss it all goodbye.

Because when it's all said and done, AutoZone is still the place where
somebody's dad, somebody's mom, somebody's uncle, friend or neighbor goes to buy
parts. The place where we know the regulars and they know us. Where we can tell
newcomers the best way to fix a leaky radiator or just the best place to get a
bite to eat. Because while we're in a lot more neighborhoods than ever before,
we're still your neighborhood auto parts store.

[PHOTOGRAPH OF A YOUTH STANDING IN FRONT OF AN ANTIQUE CADILLAC APPEARS HERE]

5
<PAGE>

[PHOTO OF MOUNTAIN APPEARS HERE]
Yucaipa
California

Nestled in the foothills of the San Bernardino mountains is the community of
Yucaipa. The Serrano Indians first viewed this land from the backs of horses and
gave the town its name, which means "green valley." The current natives still
rely on horsepower, but their horses tend to reside under the hoods of their
cars and trucks.

[PHOTO OF TWO PEOPLE APPEARS HERE]

More than 500 Yucaipa residents are members of the town's four car clubs -- a
tribute to Southern California's hot rod heritage. One local car enthusiast is
AutoZone customer Jeff Ranney. And his pride and joy is a `68 Chevy pickup.

[PHOTO OF TRUCK APPEARS HERE]

Jeff is co-owner of a local repair shop and was one of our very first
customers when we opened our doors in July. "When you buy as many parts as I do,
you've got to trade with people who are serious about quality," he says. "The
price has to be right on, because I have to watch my bottom line, too. And of
course, there`s also my reputation. I can't risk it on poor quality parts. I
trust the people at AutoZone. They always take the time to help you out and let
you know your business is appreciated."

[PHOTO OF CARS APPEARS HERE]
[PHOTO OF TRUCK APPEARS HERE]

That's a testimonial we're pretty proud of from somebody who's eager to be
one of our first commercial customers in the state of California. At press time,
Yucaipa`s commercial program wasn`t in place. That`s because in new stores, we
get our core do-it-yourself business up and running before we roll out
commercial. But rest assured, Jeff is at the top of our list. And we know he`ll
be in good company with our thousands of other commercial customers all across
the country.

[PHOTO OF SIGN STATING "WELCOME TO YUCAIPA" APPEARS HERE]

6
<PAGE>

[PHOTO OF AUTOZONE STORE WITH ANTIQUE CARS PARKED IN FRONT APPEARS HERE]

7
<PAGE>

[PHOTO OF CITY SKYLINE APPEARS HERE]
Cedar Rapids
Iowa

If rolling cornfields and dusty farm roads are the only images you associate
with Iowa, you probably haven't been there lately. In Cedar Rapids, towering
grain silos and windmills share the skyline with office buildings, manufacturing
facilities and neighborhood stores, like AutoZone.

[PHOTO OF TWO PEOPLE APPEARS HERE]

Mark Petersen manages the AutoZone store on Blairs Ferry Road -- one of
three that opened in Cedar Rapids this year and one of 305 that opened up all
across America. If you had driven down Blairs Ferry Road five years ago, you
would've seen nothing but corn. Today it's one of the busiest shopping areas in
town.

[PHOTO OF SIGN STATING "WELCOME TO CEDAR RAPIDS" APPEARS HERE]

Mark grew up in the area, and he's excited to work for a company that's
part of the city`s growth. "When I returned home after four years in the Air
Force, I almost didn't recognize some parts of town," Mark said. "But what's
great is that we still look out for each other, no matter how big Cedar Rapids
has gotten. When new people move here, they aren't strangers very long."

[PHOTO OF TRACTOR APPEARS HERE]

Although his store isn't a year old yet, Mark already has a list of regular
customers a mile long. "We knew many of our customers before AutoZone ever came
to town. And when new people come through the doors, we make it a point to get
to know them, too." Mark says this is one of the things that sets AutoZone
apart. "If we know what our customers drive and the kinds of problems they've
been having, we'll be able to solve their problems better the next time they
come in."

Customers in Cedar Rapids -- whether they're lifelong residents or new to
the area -- can count on us for everything from alternators for their 1979
Oldsmobile Cutlasses to control modules for their 1995 Chevy Luminas. And just
in case, we even carry batteries for 1994 John Deere model 8960 tractors.

[PHOTO OF AUTOZONE STORE APPEARS HERE]

8
<PAGE>

[PHOTO OF AUTOZONE TRUCK APPEARS HERE]

9
<PAGE>

[PHOTO OF TRAFFIC APPEARS HERE]
HOUSTON
TEXAS

People in Texas are proud of their reputation for doing things in big ways. From
the vast plains of the West Texas cattle ranches to the sprawling oil refineries
of Beaumont, that same pride is found in our 264 stores throughout the Lone Star
State. Perhaps none more so than at a store in Houston fondly referred to as
"Sergeant Garcia."

[PHOTO OF TWO PEOPLE APPEARS HERE]

Located in the heart of a Hispanic neighborhood, this store sits next
to a quiet side street named after WWII hero Sergeant Juan Garcia. The store has
been a part of the community so long that a few of the AutoZoners have become
almost as legendary as the Sergeant himself. Joe Calvillo is a great example.
Having worked in other parts stores for many years, Joe came to AutoZone about
nine years ago. When he did, many of his customers came with him.

[PHOTO OF THREE PEOPLE APPEARS HERE]

They like the way he goes the extra mile to get the job done right. It's
because of people like Joe that the Sergeant Garcia store is one of the
company's highest volume stores. It was one of the first stores to receive
multiple deliveries of merchandise a week to serve its customers better. And
like the folks in their neighborhood, each and every AutoZoner at Sergeant
Garcia speaks fluent Spanish.

[PHOTO OF TRUCK APPEARS HERE]

So how has the store remained so successful despite other parts stores
moving into the neighborhood? Joe probably summed it up best, "Tratamos a
nuestros clientes como queremos ser tratados." That's "We treat our customers
the way we'd want to be treated." -- for the Spanish impaired.

Joe speaks other languages his customers appreciate, as well. Ford and
Chevy, just to name a couple.

[PHOTO OF TWO PEOPLE WORKING ON CAR APPEARS HERE]

10
<PAGE>

[PHOTO OF AUTOZONE STORE APPEARS HERE]

11
<PAGE>

[PHOTO OF TOWN APPEARS HERE]
Johnstown
Pennsylvania

The state of Pennsylvania is well known as the home of "the City of Brotherly
Love." But due west of Philadelphia, at the junction of the Conemaugh and
Stonycreek rivers is a town you may not have heard quite as much about,
Johnstown -- "the Friendly City."

[PHOTO OF TWO PEOPLE APPEARS HERE]

With our focus on pleasing customers, we knew we'd be right at home in a
town with this motto, but our customer service has impressed even the
friendliest of residents. Take Ken Bilger, the service manager at the Horner
Street Service Station, for example. Ken's been coming by a couple of times a
day ever since we opened our doors. "There's just something different about the
way they treat you here," Ken says. "They don't just sell parts -- they really
listen to your problem and help you try to solve it."

[PHOTO OF AUTOZONE STORE APPEARS HERE]

Those are the kind of comments Lynn Shumate likes to hear. After all, she's the
manager of our Johnstown store. Lynn and her husband, Ron, moved to Johnstown
from Memphis. His job? He's the manager of the AutoZone in nearby Somerset,
Pennsylvania. "We kept hearing about how the company needed experienced
AutoZoners in this market," Lynn said. "We're glad we got this opportunity. We
feel a little bit like pioneers, spreading the AutoZone culture in a new
district."

[PHOTO OF PERSON WORKING ON VEHICLE APPEARS HERE]

Since our Johnstown store was the first we opened in the area, Lynn and Ron
trained six new crews for stores in neighboring towns. "The thing that sets
AutoZone apart is our culture -- and that boils down to our people. It was neat
to teach new AutoZoners how we treat our customers," Lynn said. "We were
responsible for seeing that the same service we've been delivering down South
was happening up here." These two transplanted Southerners have found their new
home to be just what it claims to be -- "the Friendly City." What they haven't
found is a place that serves grits.

[PHOTO OF SIGN STATING "JOHNSTOWN WELCOMES YOU" APPEARS HERE]
12
<PAGE>

[PHOTO OF TOWN APPEARS HERE]

13
<PAGE>

Ten-Year Review
(in thousands, except per share data and selected operating data)

5-Year 10-Year
Compound Compound ------------------------------------
Growth Growth 1997 1996*
------------------------------------
<S> <C> <C> <C> <C>
Income Statement Data
Net sales....................................................... 22% 22% $ 2,691,440 $ 2,242,633
Cost of sales, including warehouse and delivery expenses........ 1,559,296 1,307,638
Operating, selling, general and administrative expenses......... 810,793 666,061
------------------------------------
Operating profit................................................ 25% 35% 321,351 268,934
Interest income (expense)....................................... (8,843) (1,969)
------------------------------------
Income before income taxes...................................... 24% 42% 312,508 266,965
Income taxes.................................................... 117,500 99,800
------------------------------------
Net income...................................................... 25% 47% $ 195,008 $ 167,165
------------------------------------
Net income per share............................................ 24% 46% $1.28 $1.11
====================================
Average shares outstanding, including common stock equivalents.. 152,535 151,238

Balance Sheet Data
Current assets.................................................. $778,802 $613,097
Working capital................................................. 186,350 219
Total assets.................................................... 1,884,017 1,498,397
Current liabilities............................................. 592,452 612,878
Debt ........................................................... 198,400 94,400
Stockholders' equity............................................ 1,075,208 865,582

Selected Operating Data
Number of stores at beginning of year........................... 1,423 1,143
New stores................................................ 308 280
Replacement stores........................................ 17 31
Closed stores............................................. 3 0
Net new stores............................................ 305 280
Number of stores at end of year................................. 1,728 1,423
Total store square footage (000's).............................. 11,611 9,437
Percentage increase in square footage........................... 23% 26%
Percentage increase in comparable store net sales............... 8% 6%
Average net sales per store (000's)............................. $1,691 $1,702
Average net sales per store square foot......................... $253 $258
Total employment................................................ 28,700 26,800
Gross profit -- percentage of sales............................. 42.0% 41.7%
Operating profit -- percentage of sales......................... 11.9% 12.0%
Net income -- percentage of sales............................... 7.2% 7.5%
Debt-to-capital -- percentage................................... 15.6% 9.8%
Inventory turnover.............................................. 2.5x 2.7x
Return on average equity........................................ 20% 22%
</TABLE>

* 53 weeks. Comparable store sales, average net sales per store and average net
sales per store square foot for fiscal year 1996 and 1991 have been adjusted
to exclude net sales for the 53rd week.

14
<PAGE>

<TABLE>
<CAPTION>
Fiscal Year Ended August
------------------------------------------------------------------
1995 1994 1993 1992 1991*
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Statement Data
Net sales..................................................... $1,808,131 $1,508,029 $1,216,793 $1,002,327 $817,962
Cost of sales, including warehouse and delivery expenses...... 1,057,033 886,068 731,971 602,956 491,261
Operating, selling, general and administrative expenses....... 523,440 431,219 344,060 295,701 247,355
------------------------------------------------------------------
Operating profit.............................................. 227,658 190,742 140,762 103,670 79,346
Interest income (expense)..................................... 623 2,244 2,473 818 (7,295)
------------------------------------------------------------------
Income before income taxes.................................... 228,281 192,986 143,235 104,488 72,051
Income taxes.................................................. 89,500 76,600 56,300 41,200 27,900
------------------------------------------------------------------
Net income.................................................... $ 138,781 $ 116,386 $ 86,935 $ 63,288 $ 44,151
------------------------------------------------------------------
Net income per share.......................................... $0.93 $0.78 $0.59 $0.43 $0.33
==================================================================
Average shares outstanding, including common stock equivalents 149,302 148,726 147,608 145,940 134,656

Balance Sheet Data
Current assets................................................ $447,822 $424,402 $378,467 $279,350 $233,439
Working capital............................................... 30,273 85,373 92,331 72,270 55,807
Total assets.................................................. 1,111,778 882,102 696,547 501,048 397,776
Current liabilities........................................... 417,549 339,029 286,136 207,080 177,632
Debt ......................................................... 13,503 4,252 4,458 7,057 7,246
Stockholders' equity.......................................... 684,710 528,377 396,613 278,120 204,628

Selected Operating Data
Number of stores at beginning of year......................... 933 783 678 598 538
New stores.............................................. 210 151 107 82 60
Replacement stores...................................... 29 20 20 14 4
Closed stores........................................... 0 1 2 2 0
Net new stores.......................................... 210 150 105 80 60
Number of stores at end of year............................... 1,143 933 783 678 598
Total store square footage (000's)............................ 7,480 5,949 4,839 4,043 3,458
Percentage increase in square footage......................... 26% 23% 20% 17% 14%
Percentage increase in comparable store net sales............. 6% 9% 9% 15% 12%
Average net sales per store (000's)........................... $1,742 $1,758 $1,666 $1,570 $1,408
Average net sales per store square foot....................... $269 $280 $274 $267 $246
Total employment.............................................. 20,200 17,400 15,700 13,200 11,700
Gross profit -- percentage of sales........................... 41.5% 41.2% 39.8% 39.8% 39.9%
Operating profit -- percentage of sales....................... 12.6% 12.6% 11.5% 10.3% 9.7%
Net income -- percentage of sales............................. 7.7% 7.7% 7.1% 6.3% 5.4%
Debt-to-capital -- percentage................................. 1.9% 0.8% 1.1% 2.5% 3.4%
Inventory turnover............................................ 2.9x 3.0x 3.2x 3.0x 2.6x
Return on average equity...................................... 23% 25% 26% 26% 31%

<CAPTION>
Fiscal Year Ended August
--------------------------------------------------
1990 1989 1988 1987
--------------------------------------------------
<S> <C> <C> <C> <C>
Income Statement Data
Net sales..................................................... $671,725 $535,843 $437,399 $354,205
Cost of sales, including warehouse and delivery expenses...... 416,846 341,130 277,043 224,878
Operating, selling, general and administrative expenses....... 205,609 169,786 142,868 113,123
--------------------------------------------------
Operating profit.............................................. 49,270 24,927 17,488 16,204
Interest income (expense)..................................... (10,936) (9,799) (8,826) (7,107)
--------------------------------------------------
Income before income taxes.................................... 38,334 15,128 8,662 9,097
Income taxes.................................................. 14,840 6,200 3,770 4,980
--------------------------------------------------
Net income.................................................... $ 23,494 $ 8,928 $ 4,892 $ 4,117
--------------------------------------------------
Net income per share.......................................... $0.19 $0.07 $0.04 $0.03
==================================================
Average shares outstanding, including common stock equivalents 121,212 119,320 119,936 119,096

Balance Sheet Data
Current assets................................................ $191,736 $177,824 $137,098 $124,569
Working capital............................................... 26,803 35,831 35,226 26,760
Total assets.................................................. 327,368 296,546 232,977 213,076
Current liabilities........................................... 164,933 141,993 101,872 97,809
Debt ......................................................... 74,851 93,293 77,138 65,500
Stockholders' equity.......................................... 80,356 54,592 45,608 40,795

Selected Operating Data
Number of stores at beginning of year......................... 504 440 396 313
New stores.............................................. 38 70 47 84
Replacement stores...................................... 7 7 1 0
Closed stores........................................... 4 6 3 1
Net new stores.......................................... 34 64 44 83
Number of stores at end of year............................... 538 504 440 396
Total store square footage (000's)............................ 3,031 2,758 2,318 2,029
Percentage increase in square footage......................... 10% 19% 14% 30%
Percentage increase in comparable store net sales............. 13% 10% 6% 10%
Average net sales per store (000's)........................... $1,289 $1,135 $1,046 $999
Average net sales per store square foot....................... $232 $211 $201 $198
Total employment.............................................. 9,300 7,900 7,100 6,300
Gross profit -- percentage of sales........................... 37.9% 36.3% 36.6% 36.5%
Operating profit -- percentage of sales....................... 7.3% 4.6% 4.0% 4.6%
Net income -- percentage of sales............................. 3.5% 1.7% 1.1% 1.2%
Debt-to-capital -- percentage................................. 48.2% 63.1% 62.8% 61.6%
Inventory turnover............................................ 2.4x 2.4x 2.3x 2.3x
Return on average equity...................................... 35% 18% 11% 11%
</TABLE>

15
<PAGE>

QUARTERLY SUMMARY
(Unaudited)
<TABLE>
<CAPTION>
Sixteen
Twelve Weeks Ended Weeks Ended
-------------------------------------------------------------------
(in thousands, except per share data)
NOVEMBER 23, FEBRUARY 15, MAY 10, AUGUST 30,
1996 1997 1997 1997
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales.................................... $569,145 $538,012 $637,895 $946,388
Increase in comparable store sales........... 7% 10% 7% 8%
Gross profit................................. $240,298 $226,956 $268,975 $395,915
Operating profit............................. 61,898 49,217 76,775 133,461
Income before income taxes................... 60,725 47,107 74,103 130,573
Net income................................... 37,975 29,407 46,103 81,523
Net income per share......................... 0.25 0.19 0.30 0.53
Stock price range:
High....................................... $ 30.63 $ 27.50 $ 26.13 $ 29.50
Low........................................ $ 24.50 $ 20.13 $ 22.25 $ 22.25

<CAPTION>
Seventeen
Weeks Ended
-------------------------------------------------------------------
NOVEMBER 18, FEBRUARY 10, MAY 4, AUGUST 31,
1995 1996 1996 1996
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales.................................... $463,029 $425,838 $524,175 $829,591
Increase in comparable store sales........... 5% 3% 8% 7%
Gross profit................................. $193,220 $176,033 $215,531 $350,211
Operating profit............................. 55,397 43,424 60,432 109,681
Income before income taxes................... 55,397 43,424 59,705 108,439
Net income................................... 34,797 27,324 37,605 67,439
Net income per share......................... 0.23 0.18 0.25 0.44
Stock price range:
High....................................... $ 29.63 $ 30.13 $ 37.50 $ 37.13
Low........................................ $ 24.75 $ 24.13 $ 25.75 $ 27.00
</TABLE>

16
<PAGE>

FINANCIAL REVIEW

Results of Operations

The following table sets forth income statement data of AutoZone expressed as
a percentage of net sales for the periods indicated:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------
AUGUST 30, AUGUST 31, AUGUST 26,
1997 1996 1995
----------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%

Cost of sales, including warehouse
and delivery expenses 58.0 58.3 58.5
----------------------------------
Gross profit 42.0 41.7 41.5
Operating, selling, general
and administrative expenses 30.1 29.7 28.9
----------------------------------
Operating profit 11.9 12.0 12.6
Interest expense -- net 0.3 0.1
Income taxes 4.4 4.4 4.9
----------------------------------
Net income 7.2% 7.5% 7.7%
==================================
</TABLE>

FISCAL 1997 COMPARED TO FISCAL 1996

Net sales for fiscal 1997 increased by $448.8 million or 20.0% over net sales
for fiscal 1996. This increase was due to a comparable store net sales increase
of 8% (which was primarily due to sales growth in the Company's newer stores and
the added sales of the Company's commercial program) and an increase in net
sales of $313.1 million for stores opened since the beginning of fiscal 1996,
offset by net sales for the 53rd week of fiscal 1996. At August 30, 1997, the
Company had 1,728 stores in operation, a net increase of 305 stores, or
approximately 23% in new store square footage for the year.

Gross profit for fiscal 1997 was $1,132.1 million, or 42.0% of net sales,
compared with $935.0 million, or 41.7% of net sales, for fiscal 1996. The
increase in gross profit percentage was due primarily to improved leveraging of
warehouse and delivery expenses.

Operating, selling, general and administrative expenses for fiscal 1997
increased by $144.7 million over such expenses for fiscal 1996 and increased as
a percentage of net sales from 29.7% to 30.1%. The increase in the expense ratio
was primarily due to operating costs of ALLDATA and to costs of the Company's
commercial program.

Net interest expense for fiscal 1997 was $8.8 million compared with $2.0
million for fiscal 1996. The increase in interest expense was primarily due to
higher levels of borrowings.

AutoZone's effective income tax rate was 37.6% of pre-tax income for fiscal
1997 and 37.4% for fiscal 1996.

FISCAL 1996 COMPARED TO FISCAL 1995

Net sales for fiscal 1996 increased by $434.5 million or 24.0% over net sales
for fiscal 1995. This increase was due to a comparable store net sales increase
of 6% (which was primarily due to sales growth in the Company's newer stores and
added sales of the Company's commercial program), an increase in net sales of
$275.1 million for stores opened since the beginning of fiscal 1995 and net
sales for the fifty-third week of fiscal 1996. At August 31, 1996, the Company
had 1,423 stores in operation, a net increase of 280 stores, or approximately
26% in new store square footage for the year.

Gross profit for fiscal 1996 was $935.0 million, or 41.7% of net sales,
compared with $751.1 million, or 41.5% of net sales, for fiscal 1995. The
increase in gross profit percentage was due primarily to improved leveraging of
warehouse and delivery expenses, favorable results of store and distribution
center inventories and the added sales of higher margin ALLDATA products.

Operating, selling, general and administrative expenses for fiscal 1996
increased by $142.6 million over such expenses for fiscal 1995 and increased as
a percentage of net sales from 28.9% to 29.7%. The increase in the expense ratio
was primarily due to acquisition and operating costs of ALLDATA and to costs of
the Company's commercial program.

Net interest expense for fiscal 1996 was $2.0 million compared with interest
income of $0.6 million for fiscal 1995. The increase in interest expense was
primarily due to higher levels of borrowings.

AutoZone's effective income tax rate was 37.4% of pre-tax income for fiscal
1996 and 39.2% for fiscal 1995. The decrease in the tax rate was primarily due
to a reduction in state income taxes.

17
<PAGE>

Liquidity and Capital Resources

The Company's primary capital requirements have been the funding of its
continued new store expansion program, the increase in distribution centers and
inventory requirements. The Company has opened 1,050 net new stores and
constructed four new distribution centers from the beginning of fiscal 1993 to
August 30, 1997. The Company has financed this growth through a combination of
internally generated funds and, to a lesser degree, borrowings. Net cash
provided by operating activities was $177.5 million in fiscal 1997, $174.2
million in fiscal 1996 and $180.1 million in fiscal 1995.

Capital expenditures were $297.5 million in fiscal 1997, $288.2 million in
fiscal 1996, and $258.1 million in fiscal 1995. The Company opened 305 net new
stores in fiscal 1997. Construction commitments totaled approximately $52
million at August 30, 1997.

The Company's new store development program requires significant working
capital, principally for inventories. Historically, the Company has negotiated
extended payment terms from suppliers, minimizing the working capital required
by its expansion. The Company believes that it will be able to continue
financing much of its inventory growth by favorable payment terms from
suppliers, but there can be no assurance that the Company will be successful in
obtaining such terms.

The Company anticipates that it will rely primarily on internally generated
funds to support a majority of its capital expenditures and working capital
requirements; the balance of such requirements will be funded through
borrowings. The Company has an unsecured revolving credit agreement with several
banks providing for borrowings up to $275 million. At August 30, 1997, the
Company had available borrowings under these agreements of $76.6 million.

At August 30, 1997, the Company had outstanding stock options to purchase
10,599,254 shares of Common Stock. Assuming all such options become vested and
are exercised, such options would result in proceeds of $210.3 million to the
Company. Such proceeds constitute an additional source for liquidity and capital
resources for the Company. For fiscal 1997, proceeds from sales of stock under
stock option and employee stock purchase plans were $14.6 million, including
related tax benefits.

Inflation

The Company does not believe its operations have been materially affected by
inflation. The Company has been successful, in many cases, in mitigating the
effects of merchandise cost increases principally due to economies of scale
resulting from increased volumes of purchases, selective forward buying and the
use of alternative suppliers.

Seasonality and Quarterly Periods

The Company's business is somewhat seasonal in nature, with the highest sales
occurring in the summer months of June through August, in which average weekly
per store sales historically have run about 20% to 30% higher than in the
slowest months of December through February. The Company's business is also
affected by weather conditions. Extremely hot or extremely cold weather tends to
enhance sales by causing parts to fail and spurring sales of seasonal products.
Mild or rainy weather tends to soften sales as parts' failure rates are lower in
mild weather and elective maintenance is deferred during periods of rainy
weather.

Each of the first three quarters of AutoZone's fiscal year consists of twelve
weeks and the fourth quarter consists of sixteen weeks (seventeen weeks in
fiscal 1996). Because the fourth quarter contains the seasonally high sales
volume and consists of sixteen weeks (seventeen weeks in fiscal 1996) compared
to twelve weeks for each of the first three quarters, the Company's fourth
quarter represents a disproportionate share of the annual net sales and net
income. For fiscal 1997 and 1996, the fourth quarter represented 35.2% and
37.0%, respectively, of annual net sales and 41.8% and 40.3%, respectively, of
net income.

Forward-Looking Statements

Certain statements contained in the Financial Review and elsewhere in this
annual report are forward-looking statements. These statements discuss, among
other things, expected growth, future revenues and future performance. The
forward-looking statements are subject to risks, uncertainties and assumptions
including, but not limited to competitive pressures, demand for our products,
the market for auto parts, the economy in general, inflation, consumer debt
levels and the weather. Actual results may materially differ from anticipated
results described in these forward-looking statements.

18
<PAGE>

Consolidated Statements of Income

Year Ended
--------------------------------------------------
August 30, August 31, August 26,
1997 1996 1995
(52 Weeks) (53 Weeks) (52 Weeks)
--------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C>
Net sales $2,691,440 $2,242,633 $1,808,131
Cost of sales, including warehouse and delivery expenses 1,559,296 1,307,638 1,057,033
Operating, selling, general and administrative expenses 810,793 666,061 523,440
- ---------------------------------------------------------------------------------------------------------------------
Operating profit 321,351 268,934 227,658
Interest income (expense) net (8,843) (1,969) 623
- ---------------------------------------------------------------------------------------------------------------------
Income before income taxes 312,508 266,965 228,281
Income taxes 117,500 99,800 89,500
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 195,008 $ 167,165 $ 138,781
=====================================================================================================================
Net income per share $1.28 $1.11 $0 .93
=====================================================================================================================
Average shares outstanding, including common
stock equivalents 152,535 151,238 149,302
=====================================================================================================================
</TABLE>

See Notes to Consolidated Financial Statements.

<PAGE>

<TABLE>
<CAPTION>
Consolidated Balance Sheets

August 30, August 31,
1997 1996
-------------------------------------

(in thousands, except per share data)

<S> <C> <C> <C>
Assets Current assets:
Cash and cash equivalents $ 4,668 $ 3,904
Accounts receivable 18,713 15,466
Merchandise inventories 709,446 555,894
Prepaid expenses 20,987 19,225
Deferred income taxes 24,988 18,608
------------------------------------------------------------------------------------------------------------
Total current assets 778,802 613,097
Property and equipment:
Land 243,587 190,660
Buildings and improvements 682,710 523,240
Equipment 267,536 248,275
Leasehold improvements and interests 45,667 36,708
Construction in progress 97,411 62,283
------------------------------------------------------------------------------------------------------------
1,336,911 1,061,166
Less accumulated depreciation and amortization 255,783 198,292
------------------------------------------------------------------------------------------------------------
1,081,128 862,874
Other assets:
Cost in excess of net assets acquired, net of accumulated amortization
of $8,084 in 1997 and $7,467 in 1996 16,570 17,187
Deferred income taxes 4,339 2,938
Other assets 3,178 2,301
------------------------------------------------------------------------------------------------------------
24,087 22,426
------------------------------------------------------------------------------------------------------------
$1,884,017 $1,498,397
============================================================================================================
Liabilities Current liabilities:
and Accounts payable $ 449,793 $ 401,309
Stockholders' Accrued expenses 122,580 104,909
Equity Income taxes payable 20,079 12,260
Short-term debt 94,400
------------------------------------------------------------------------------------------------------------
Total current liabilities 592,452 612,878
Long-term debt 198,400
Other liabilities 17,957 19,937

Commitments and contingencies (See notes G and I)
Stockholders' equity:
Preferred Stock, authorized 1,000 shares; no shares issued
Common Stock, par value $.01 per share, authorized 200,000 shares;
issued and outstanding 151,313 shares in 1997 and 150,137 shares in 1996 1,513 1,501
Additional paid-in-capital 249,853 235,247
Retained earnings 823,842 628,834
------------------------------------------------------------------------------------------------------------
1,075,208 865,582
------------------------------------------------------------------------------------------------------------
$1,884,017 $1,498,397
============================================================================================================
</TABLE>

See Notes to Consolidated Financial Statements.

<PAGE>

Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>

Year Ended
------------------------------------
August 30, August 31, August 26,
1997 1996 1995
(52 Weeks) (53 Weeks) (52 Weeks)
------------------------------------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating
activities:
Net income $ 195,008 $ 167,165 $ 138,781
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization
of property and equipment 77,163 62,919 47,733
Amortization of intangible
and other assets 658 622 616
Deferred income tax expense
(benefit) (7,781) 6,082 (7,240)
Net loss (gain) on disposals
of property and equipment (16) (735) 832
Net increase in accounts
receivable and prepaid
expenses (5,009) (7,564) (6,091)
Net increase in merchandise
inventories (153,552) (158,673) (61,687)
Net increase in accounts
payable and accrued expenses 66,155 94,916 64,666
Net increase in income taxes
payable 7,819 6,493 578
Net change in other assets
and liabilities (2,898) 2,930 1,880
---------------------------------------------------------------------
Net cash provided by
operating activities 177,547 174,155 180,068

Cash flows from investing
activities:
Capital expenditures (297,467) (288,182) (258,060)
Proceeds from disposals of
property and equipment 2,066 8,680 1,364
------------------------------------------------------------------------
Net cash used in investing
activities (295,401) (279,502) (256,696)

Cash flows from financing
activities:
Repayment of long-term debt (4,003) (249)
Net borrowings under debt
agreements 104,000 84,900 9,500
Net proceeds from sale of Common
Stock, including related tax
benefit 14,618 17,699 17,552
------------------------------------------------------------------------
Net cash provided by
financing activities 118,618 98,596 26,803
------------------------------------------------------------------------

Net increase (decrease) in cash and
cash equivalents 764 (6,751) (49,825)
Cash and cash equivalents at
beginning of year 3,904 6,411 56,236
Beginning cash balance of pooled
entity 4,244
- ---------------------------------------------------------------------------
Cash and cash equivalents at end of
year $ 4,668 $ 3,904 $ 6,411
- ---------------------------------------------------------------------------

Supplemental cash flow information:
Interest paid, net of interest
cost capitalized $ 8,779 $ 1,971 $ 160
Income taxes paid $ 109,681 $ 69,791 $ 81,862
</TABLE>

See Notes to Consolidated Financial Statements.

21
<PAGE>

Consolidated Statements of Stockholders' Equity

<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings Total
-------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Balance at August 27, 1994 $1,454 $179,090 $347,833 $ 528,377
Net income 138,781 138,781
Sale of 1,635 shares of Common Stock under stock option and stock purchase plans 17 5,335 5,352
Tax benefit of exercise of stock options 12,200 12,200
-------------------------------------------
Balance at August 26, 1995 1,471 196,625 486,614 684,710
Net income 167,165 167,165
Equity of pooled entity (issued 1,697 shares) 17 20,936 (24,945) (3,992)
Sale of 1,386 shares of Common Stock under stock option and stock purchase plans 13 6,836 6,849
Tax benefit of exercise of stock options 10,850 10,850
-------------------------------------------
Balance at August 31, 1996 1,501 235,247 628,834 865,582
Net income 195,008 195,008
Sale of 1,176 shares of Common Stock under stock option and stock purchase plans 12 7,676 7,688
Tax benefit of exercise of stock options 6,930 6,930
-------------------------------------------
Balance at August 30, 1997 $1,513 $249,853 $823,842 $1,075,208
===========================================
</TABLE>

See Notes to Consolidated Financial Statements.

22
<PAGE>

Notes To Consolidated Financial Statements

Note A -- Significant Accounting Policies

Business: The Company is a specialty retailer of automotive parts and
accessories. At the end of fiscal 1997, the Company operated 1,728 stores in 32
states.

Fiscal Year: The Company's fiscal year consists of 52 or 53 weeks ending on
the last Saturday in August.

Basis of Presentation: The consolidated financial statements include the
accounts of AutoZone, Inc. and its wholly owned subsidiaries (the Company). All
significant intercompany transactions and balances have been eliminated in
consolidation.

Merchandise Inventories: Inventories are stated at the lower of cost or
market using the last-in, first-out (LIFO) method.

Property and Equipment: Property and equipment is stated at cost.
Depreciation is computed principally by the straight-line method over the
estimated useful lives of the assets. Leasehold interests and improvements are
amortized over the terms of the leases.

Amortization: The cost in excess of net assets acquired is amortized by the
straight-line method over 40 years.

Preopening Expenses: Preopening expenses, which consist primarily of payroll
and occupancy costs, are expensed as incurred.

Advertising Costs: The Company expenses advertising costs as incurred.
Advertising expense, net of vendor rebates, was approximately $24,622,000,
$23,129,000 and $18,531,000 in fiscal 1997, 1996 and 1995, respectively.

Warranty Costs: The Company provides the retail consumer with a warranty on
certain products. Estimated warranty obligations are provided at the time of
sale of the product.

Financial Instruments: The Company has certain financial instruments which
include cash, accounts receivable, accounts payable and debt. The carrying
amounts of these financial instruments approximate fair value because of their
short maturities or variable interest rates.

Income Taxes: The Company accounts for income taxes under the liability
method. Deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.

Cash Equivalents: Cash equivalents consist of investments with maturities of
90 days or less at the date of purchase.

Use of Estimates: Management of the Company has made a number of estimates
and assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.

Net Income Per Share: Net income per share of common stock is computed using
the weighted average number of shares of common stock outstanding during each
period, including common stock equivalents, consisting of stock options
calculated using the treasury stock method, when dilutive.

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." SFAS No.
128 requires dual presentation of basic earnings per share (EPS) and diluted EPS
on the face of all statements of earnings issued after December 15, 1997. Basic
EPS is computed as net earnings divided by the weighted-average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur from common shares issuable through stock-based compensation
including stock options. Assuming the Company had adopted the provisions of
SFAS No. 128, EPS as reported and pro forma for the last three fiscal years
would be as follows 1997 -- as reported: $1.28, basic: $1.29, 1996 -- as
reported: $1.11, basic: $1.13; 1995 -- as reported: $0.93, basic: $0.95. The
Company's reported EPS calculations are the same as pro forma diluted EPS.

Impairment of Long-Lived Assets: In fiscal 1997 the Company adopted SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." This statement requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Also, in general, long-lived
assets and certain identifiable intangibles to be disposed of should be reported
at the lower of carrying amount or fair value less cost to sell. This
pronouncement did not have a material effect on the Company's financial position
or results of operations.

Note B -- Accrued Expenses

Accrued expenses consist of the following:

August 30, August 31,
1997 1996
----------------------
(in thousands)

Medical and casualty
insurance claims $ 35,121 $ 33,800
Accrued compensation
and related payroll taxes 26,481 18,490
Property and sales taxes 27,161 21,485
Other 33,817 31,134
----------------------
$122,580 $104,909
----------------------

23
<PAGE>

Note C -- Income Taxes

At August 30, 1997, the Company has net operating loss carryforwards (NOLs)
of approximately $13.3 million that expire in years 2000 through 2009. These
carryforwards resulted from the Company's acquisition of ALLDATA Corporation
(ALLDATA) during fiscal 1996. The use of the NOLs is limited to future taxable
earnings of ALLDATA and is subject to annual limitations. A valuation allowance
of $5,247,000 and $5,573,000 in fiscal 1997 and 1996, respectively, has been
recognized to offset the deferred tax assets related to those carryforwards. If
realized, the tax benefit for those NOLs will reduce income tax expense.

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
Year Ended
-------------------------------------
August 30, August 31, August 26,
1997 1996 1995
-------------------------------------
(in thousands)
<S> <C> <C> <C>
Current:
Federal $114,113 $86,469 $81,460
State 11,168 7,249 15,280
-------------------------------------
125,281 93,718 96,740

Deferred:
Federal (6,427) 5,531 (6,160)
State (1,354) 551 (1,080)
-------------------------------------
(7,781) 6,082 (7,240)
-------------------------------------
$117,500 $99,800 $89,500
=====================================
</TABLE>

Significant components of the Company's deferred tax assets and liabilities are
as follows:
<TABLE>
<CAPTION>

August 30, August 31,
1997 1996
------------------------
(in thousands)
<S> <C> <C>
Deferred tax assets:
Insurance reserves $12,078 $11,282
Unearned income 5,620 6,296
Net operating loss carryforwards 5,247 5,573
Property and equipment 1,901
Other 9,728 5,767
------------------------
34,574 28,918
Less valuation allowance 5,247 5,573
------------------------
29,327 23,345
Deferred tax liabilities:
Property and equipment 1,799
------------------------
Net deferred tax assets $29,327 $21,546
</TABLE>

A reconciliation of the provision for income taxes to the amount computed by
applying the federal statutory tax rate of 35% to income before income taxes
is as follows:
<TABLE>
<CAPTION>
Year Ended
----------------------------------
August 30, August 31, August 26,
1997 1996 1995
----------------------------------
(in thousands)
<S> <C> <C> <C>
Expected tax at statutory rate $109,378 $93,438 $79,898
State income taxes, net 6,379 5,070 9,230
Other 1,743 1,292 372
----------------------------------
$117,500 $99,800 $89,500
==================================
</TABLE>
Note D -- Financing Arrangements

During December 1996, the Company executed an agreement with a group of
banks for a $275 million five-year unsecured revolving credit facility to
replace the existing revolving credit agreements. The rate of interest payable
under the agreement is a function of the London Interbank Offered Rate (LIBOR),
or the lending bank's base rate (as defined in the agreement), or a competitive
bid rate, at the option of the Company. At August 30, 1997, the Company's
borrowings under this agreement were $198.4 million and the weighted average
interest rate was 5.79%. At August 31, 1996, revolving credit borrowings were
$94.4 million and the weighted average interest rate was 5.67%. The unsecured
revolving credit agreement contains a covenant limiting the amount of debt the
Company may incur relative to its total capitalization. Based on the term of the
Company's new five-year credit facility, amounts outstanding under the revolving
credit facility have been classified as long-term.

On March 27, 1997, the Company executed a negotiated rate unsecured
revolving credit agreement totaling $25 million which extends until March 26,
1998. There were no amounts outstanding under this agreement as of August 30,
1997.

Interest costs of $2,119,000 in fiscal 1997, $2,416,000 in fiscal 1996, and
$981,000 in fiscal 1995 were capitalized.

24
<PAGE>

Note E -- Equity

The Company has granted options to purchase common stock to certain employees
under various plans at prices equal to the market value of the stock on the
dates the options were granted. Options are generally exercisable over a three
to seven year period, and generally expire in 10 years. A summary of outstanding
stock options is as follows:

Wtd. Avg. Number
Exercise Price of Shares
---------------------------------
<S> <C> <C>
Outstanding August 26, 1995 $14.77 9,503,981
Assumed 4.46 221,841
Granted 28.50 1,621,395
Exercised 4.55 (1,332,588)
Canceled 24.38 (254,873)
---------------------------------
Outstanding August 31, 1996 17.96 9,759,756
Granted 22.69 2,707,370
Exercised 4.93 (1,032,989)
Canceled 25.54 (834,883)
---------------------------------
Outstanding August 30, 1997 $19.84 10,599,254
=================================

</TABLE>

The following table summarizes information about stock options outstanding at
August 30, 1997:

Options Outstanding Options Exercisable
----------------------------------------------------------------
Wtd. Avg. Wtd. Avg. Wtd. Avg.
Range of Exercise No. of Exercise Contractual No. of Exercise
Price Options Price Life (in years) Options Price
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$1.00 -- 20.13 4,163,226 $10.15 5.13 2,619,363 $4.99
22.69 -- 25.25 4,069,178 24.89 7.49
25.75 -- 35.13 2,366,850 28.19 8.40
- -------------------------------------------------------------------------------------------------------------------
$1.00 -- 35.13 10,599,254 $19.84 6.77 2,619,363 $4.99
===================================================================================================================

</TABLE>

Options to purchase 2,619,363 shares at August 30, 1997, and 2,901,140 shares
at August 31, 1996, were exercisable. Shares reserved for future grants were
4,199,055 shares at August 30, 1997, and 725,363 at August 31, 1996.

The Company adopted the disclosure requirement of SFAS No. 123, "Accounting
for Stock-Based Compensation," issued in October 1995. In accordance with the
provisions of SFAS No. 123, the Company applies APB Opinion 25 and related
interpretations in accounting for its stock option plans and, accordingly no
compensation expense for stock options has been recognized. If the Company had
elected to recognize compensation cost based on the fair value of the options
granted at the grant date prescribed in SFAS No. 123, the Company's net income
and earnings per share would have been reduced to the pro forma amounts
indicated below. The effects of applying SFAS No. 123 and the results obtained
through the use of the Black-Scholes option pricing model in this pro forma
disclosure are not indicative of future amounts. SFAS No. 123 does not apply to
awards prior to fiscal 1996. Additional awards in future years are anticipated.

Net Income 1997 1996
-----------------------

($000) As reported $195,008 $167,165
Pro forma $191,118 $165,992
Earnings
per share As reported $1.28 $1.11
Pro forma $1.26 $1.10

The weighted-average fair value of the stock options granted during fiscal
1997 and 1996 was $9.26 and $12.25, respectively. The fair value of each option
is estimated on the date of the grant using the Black-Scholes option pricing
model with the following weighted-average assumptions for grants in 1997 and
1996: expected price volatility of .34; risk-free interest rates ranging from
5.7 to 5.98 percent; and expected lives between 3.75 and 7.75 years.

The Company also has an employee stock purchase plan under which all eligible
employees may purchase Common Stock at no less than 85% of fair market value
(determined quarterly) through regular payroll deductions. Annual purchases are
limited to $4,000 per employee. Under the plan, 308,141 shares were sold in
fiscal 1997 and 226,541 shares were sold in fiscal 1996, including 168,362 and
173,572 shares, respectively, purchased by the Company for sale under the plan.
No shares of Common Stock are reserved for future issuance under this plan.

25
<PAGE>

Note F -- Pension Plan

Substantially all full-time employees are covered by a defined benefit pension
plan. The benefits are based on years of service and the employee's highest
consecutive five-year average compensation.

The Company's funding policy is to make annual contributions in amounts at
least equal to the minimum funding requirements of the Employee Retirement
Income Security Act of 1974.

The following table sets forth the plan's funded status and amounts recognized
in the Company's financial statements (in thousands):

August 30, August 31,
1997 1996
-------------------------
<S> <C> <C>
Actuarial present value of accumulated benefit
obligation, including vested benefits of
$22,005 in 1997 and $17,225 in 1996 $26,886 $20,400
=========================
Projected benefit obligation
for service rendered to date $42,687 $31,533

Less plan assets at fair value, primarily stocks
and cash equivalents 39,598 27,367
-------------------------
Projected benefit obligation in excess
of plan assets 3,089 4,166
Unrecognized prior service cost (289) (427)
Unrecognized net loss from past experience
different from that assumed and effects of
changes in assumptions (3,721) (3,470)
Unrecognized net asset 118 268
-------------------------
Accrued (prepaid) pension cost $(803) $537
=========================
Net pension cost included the following components (in thousands):

</TABLE>

Year Ended
-------------------------------------
August 30, August 31, August 26,
1997 1996 1995
-------------------------------------
<S> <C> <C> <C>
Service cost of benefits earned
during the year $6,034 $4,580 $3,536
Interest cost on projected benefit
obligation 2,496 1,748 1,367
Actual return on plan assets (5,616) (3,677) (1,289)
Net amortization and deferral 2,820 2,518 481
-------------------------------------
Net periodic pension cost $5,734 $5,169 $4,095
=====================================

</TABLE>

The actuarial present value of the projected benefit obligation was determined
using weighted-average discount rates of 7.94% and 7.93% at August 30, 1997 and
August 31, 1996, respectively, and assumed increases in future compensation
levels of 6%. The expected long-term rate of return on plan assets was 9.5%, 7%
and 7% at August 30, 1997, August 31, 1996 and August 26, 1995, respectively.
Prior service cost is amortized over the estimated average remaining service
lives of the plan participants, and the unrecognized net experience gain or loss
is amortized over five years.

Note G -- Leases

A portion of the Company's retail stores and certain equipment are leased.
Most of these leases include renewal options and some include options to
purchase and provisions for percentage rent based on sales.

Rental expense was $39,078,000 for fiscal 1997, $30,626,000 for fiscal 1996
and $26,460,000 for fiscal 1995. Percentage rentals were insignificant.

Minimum annual rental commitments under non-cancelable operating leases are as
follows (in thousands):

Year Amount
------------------------

1998 $35,096
1999 31,760
2000 29,164
2001 24,861
2002 15,097
Thereafter 66,716
------------------------
$202,694
========================

Note H -- Related Party Transactions

Management fees of $272,000 for fiscal 1996 and $371,000 for fiscal 1995 were
paid to KKR Associates (KKR), which directly and through several limited
partnerships, of which it is a general partner, owned approximately 13% of the
Company's outstanding Common Stock at August 30, 1997 and August 31, 1996. There
were no management fees paid to KKR during fiscal 1997.

Note I -- Commitments and Contingencies

Construction commitments, primarily for new stores, totaled approximately $52
million at August 30, 1997.

The Company is a party to various claims and lawsuits arising in the normal
course of business which, in the opinion of management, are not, singularly or
in aggregate, material to the Company's financial position or results of
operations.

The Company is self-insured for workers` compensation, automobile, general and
product liability losses. The Company is also self-insured for health care
claims for eligible active employees. The Company maintains certain levels of
stop loss coverage for each self-insured plan. Self-insurance costs are accrued
based upon the aggregate of the liability for reported claims and an estimated
liability for claims incurred but not reported.

Note J -- Business Combination

On March 29, 1996, ALLDATA became a wholly owned subsidiary of AutoZone in a
stock-for-stock merger, accounted for as a pooling of interests. Under the terms
of the merger agreement, AutoZone issued approximately 1.7 million shares of
Common Stock and stock options covering approximately 200,000 shares of Common
Stock. Financial information of ALLDATA has been included in the results of
operations from the date of acquisition. Financial statements for periods prior
to the date of combination have not been restated as the effect is not material
to the Company's financial condition and results of operations. The assets and
liabilities of ALLDATA were approximately $17.4 million and $21.4 million,
respectively, at the date of combination.

26
<PAGE>

Management's Report

AutoZone's management takes responsibility for the integrity and
objectivity of the financial statements in this annual report. These financial
statements were prepared from accounting records which management believes
fairly and accurately reflect the operations and financial position of AutoZone.

The financial statements in this report were prepared in conformity with
generally accepted accounting principles. In certain instances, management used
its best estimates and judgments based upon currently available information and
management's view of current conditions and circumstances.

Management maintains a system of internal controls designed to provide
reasonable assurance that assets are protected from improper use and accounted
for in accordance with its policies and that transactions are recorded
accurately in the Company's records. The concept of reasonable assurance is
based upon a recognition that the cost of the controls should not exceed the
benefit derived.

The financial statements of AutoZone have been audited by Ernst & Young
LLP, independent auditors. Their accompanying report is based on an audit
conducted in accordance with generally accepted auditing standards, including a
review of internal accounting controls and financial reporting matters.

/s/ Robert J. Hunt
Robert J. Hunt
Executive Vice President - Finance
Chief Financial Officer
Customer Satisfaction

Corporate Information

Transfer Agent and Registrar Auditors
First Chicago Trust Company of New York Ernst & Young LLP
P.O. Box 2500 Memphis, Tennessee
Jersey City, New Jersey 07303-2500
(800) 756-8200 Store Support Center
(201) 324-0498 123 South Front Street
Memphis, Tennessee 38103-3607
Stock Exchange Listing (901) 495-6500
New York Stock Exchange
Ticker Symbol: AZO AutoZone Web Site
http://www.autozone.com

Report of Independent Auditors

Stockholders
AutoZone, Inc.

We have audited the accompanying consolidated balance sheets of AutoZone,
Inc. as of August 30, 1997 and August 31, 1996, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended August 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of AutoZone, Inc.
at August 30, 1997 and August 31, 1996, and the consolidated results of its
operations and its cash flows for each of the three fiscal years in the period
ended August 30, 1997 in conformity with generally accepted accounting
principles.

/s/ Ernst & Young LLP

Memphis, Tennessee
September 19, 1997

Annual Meeting

The Annual Meeting of Stockholders of AutoZone will be held at 10:00 a.m. on
December 18, 1997, at AutoZone's store support center, 123 South Front Street,
Memphis, Tennessee.

SEC Form 10-K/Quarterly Reports

AutoZone does not produce quarterly reports because the information is not
timely and is costly to distribute. Stockholders may obtain free of charge a
copy of the Company's annual report on Form 10-K as filed with the Securities
and Exchange Commission or our quarterly press releases by writing to
Stockholder Relations, P.O. Box 2198, Memphis, Tennessee 38101.

Copies of all documents filed by the company with the Securities and Exchange
Commission, including Form 10-K and Form 10-Q, are also available at the SEC's
EDGAR server at http://www.sec.gov.

Stockholders of Record

As of September 30, 1997, there were 3,330 stockholders of record, excluding the
number of beneficial owners whose shares were represented by security position
listings.

27
<PAGE>

OFFICERS SENIOR VICE PRESIDENTS
CUSTOMER SATISFACTION
Johnston C. Adams Jr.
Chairman and CEO Gerald E. Colley
Customer Satisfaction Stores

Timothy D. Vargo Harry L. Goldsmith
President and COO General Counsel
Customer Satisfaction and Secretary

Anthony D. Rose Jr.
Advertising

Stephen W. Valentine
Chief Information Officer
Systems Technology
& Support

David J. Wilhite
Merchandising
EXECUTIVE VICE PRESIDENTS
CUSTOMER SATISFACTION

Lawrence E. Evans
Store Development

Robert J. Hunt
Chief Financial Officer

Shawn P. McGhee
Merchandising

VICE PRESIDENTS
CUSTOMER SATISFACTION

Richard F. Adams Jr. Mark D. Hamm
Merchandising Analysis Systems Technology
& Support & Support

Michael B. Baird Phillip J. Jackson
Stores Distribution

David W. Barczak Michael E. Longo
Real Estate Distribution

Jon A. Bascom William R. McCawley Jr.
Systems Technology Stores
& Support
Steven R. McClanahan
B. Craig Blackwell Stores
Stores
Grantland E. McGee Jr.
Francis C. Brown III Stores
Human Resources
John Minervini
Michael E. Butterick Business Development
Controller
David W. Nichols
William L. Cone Stores
Loss Prevention
Robert F. Osswald
Brett D. Easley AutoZoner Development
Merchandising Systems & Training

Tara C. Elliot William C. Rhodes
Treasurer Operations Analysis
& Support
William D. Gilmore
Store Design & Construction Richard C. Smith
Stores
Frank B. Goodman
Business Planning Dennis P. Tolivar Sr.
& Analysis Stores

Clifford E. Green
Merchandising

OTHER CORPORATE OFFICERS
CUSTOMER SATISFACTION

Emma Jo Kauffman
Assistant Treasurer

Donald R. Rawlins
Assistant Secretary

BOARD OF DIRECTORS

Johnston C. Adams Jr. John E. Moll(1)
Chairman and CEO Retired President
Customer Satisfaction The Fleming Companies, Inc.

Timothy D. Vargo George R. Roberts
President and COO Member
Customer Satisfaction Kohlberg Kravis Roberts
& Co. LLC
James F. Keegan(1*, 2)
Chairman Andrew M. Clarkson (3*)
Staff Line, Inc. Chairman
Finance Committee
Michael W. Michelson(3) Customer Satisfaction
Member
Kohlberg Kravis Roberts Dr. N. Gerry House(2)
& Co. LLC Superintendent
Memphis City Schools
Robert J. Hunt
Executive Vice President Ronald A. Terry(1, 2*)
and CFO Retired Chairman
Customer Satisfaction First Tennessee
National Corporation
Joseph R. Hyde III
Former Chairman and CEO
Customer Satisfaction

(1) Audit Committee
(2) Compensation Committee
(3) Finance Committee
(*) Committee Chairman

28
<PAGE>

[PHOTO OF PITT HYDE APPEARS HERE]

Pitt Hyde was convinced that the lessons of value and customer service he'd
learned in the grocery business could be applied to the automotive aftermarket
with great results. Eighteen years later, there's little question he was right.

As chairman and CEO of AutoZone, Pitt guided the company he founded to
be the leading auto parts chain in the country. He started by establishing a
strong culture that revolved around the people on both sides of the parts
counter. For our customers, his vision was to make AutoZone the best customer
service provider in the business. For AutoZoners, Pitt wanted them to know what
it was like to be part of a winning team and to understand how their efforts
contributed to AutoZone's growth.

Creating this culture wasn't easy, but seeing the impact it's had on
AutoZone's success is. Today, there are more than 28,000 AutoZoners carrying the
culture forward -- a testament to Pitt's ability to spread his ideas throughout
the organization.

[PHOTO OF PLAQUE STATING:

J.R. HYDE III
STORE SUPPORT CENTER
DEDICATED TO PITT HYDE,
THE FOUNDER OF AUTOZONE,
WHOSE PASSION FOR CUSTOMER SATISFACTION
IS AN INSPIRATION TO AUTOZONERS EVERYWHERE.
MAY 8, 1997

APPEARS HERE]

The relentless pursuit of the ultimate customer service experience is
a passion that lives on at AutoZone. He's taught us well. Pitt retired as
chairman in March. In his honor at a companywide meeting of store managers in
May, we renamed our headquarters building -- the J. R. Hyde III Store Support
Center. Yet, the biggest tribute we can pay him is to continue to find new ways
to amaze our customers.
<PAGE>

[PHOTO OF MAN CHECKING TRUCK ENGINE APPEARS HERE]

[AUTOZONE(R) LOGO APPEARS HERE]

EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

STATE OR COUNTRY OF ORGANIZATION
SUBSIDIARY OR INCORPORATION
- ---------- --------------------------------

Alldata Corporation Delaware
AutoZone Development Corporation Nevada
AutoZone Marketing Company Nevada
AutoZone Properties, Inc. Nevada
AutoZoners, Inc. Nevada
AutoZone Stores, Inc. Nevada
AutoZone Texas, L.P. Delaware
AutoZone Management, L.P. Delaware
AutoZone Leadership, Inc. Nevada
AutoZone de Mexico, S. de R.L. de C.V. Mexico

EXHIBIT 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in this Annual Report
(Form 10-K) of AutoZone, Inc. of our report dated September 19, 1997,
included in the 1997 Annual Report to Stockholders of AutoZone, Inc.

Our audits also included the financial statement schedule of
AutoZone, Inc. listed in Item 14(a). This schedule is the
responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, the financial
statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.

We also consent to the incorporation by reference in the
Registration Statement (Form S-8 No. 33-41308) pertaining to the
AutoZone, Inc. Employee Stock Purchase Plan, the Registration State-
ment (Form S-8 and Form S-3 No. 33-41618) pertaining to the Amended
and Restated Stock Option Plan of AutoZone, Inc. and the Registration
Statement (Form S-8 No. 333-19561) pertaining to the AutoZone,Inc.,
1996 Stock Option Plan of our report dated September 19, 1997, with
respect to the consolidated financial statements and schedule of
AutoZone, Inc. included or incorporated by reference in the Annual
Report (Form 10-K) for the year ended August 30, 1997.

/s/ ERNST & YOUNG LLP

Memphis, Tennessee
November 4, 1997

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from financial
statements for fiscal year ended August 30, 1997, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-30-1997
<PERIOD-END> AUG-30-1997
<CASH> 4668
<SECURITIES> 0
<RECEIVABLES> 18713
<ALLOWANCES> 0
<INVENTORY> 709446
<CURRENT-ASSETS> 778802
<PP&E> 1336911
<DEPRECIATION> 255783
<TOTAL-ASSETS> 1884017
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0
0
<COMMON> 1513
<OTHER-SE> 1073695
<TOTAL-LIABILITY-AND-EQUITY> 1884017
<SALES> 2691440
<TOTAL-REVENUES> 2691440
<CGS> 1559296
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<OTHER-EXPENSES> 810793
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<INTEREST-EXPENSE> 8843
<INCOME-PRETAX> 312508
<INCOME-TAX> 117500
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</TABLE>