Q4 2024 Autozone Inc Earnings Call
Speaker Change: Before we begin, please note that today's call includes forward-looking statements that are subject to the safe harbor provisions of the private securities litigation reform act of 1995.
Speaker Change: for Relicance Statements, our Mac guarantees a future performance.
Speaker Change: Please refer to this morning's press release in the time-face-most recent annual report on Form 10K and other filings with the Securities and Change Commission for discussion on important risks and uncertainties that could cause actual results to deteriorate early for next vacations.
Speaker Change: for relating statements speak only as the date made and the company undertakes no obligation to update such statements. Today's call also includes certain non-gap measures, a reconciliation of gap to non-gap financial measures can be found in our press release.
Speaker Change: Good day, everyone, and welcome to AutoZone's 2024 fourth quarter earnings release conference call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions in comments after the presentation.
Phil Daniele: It is now my pleasure to kind of forward over to your host, Phil Daniele, CEO of AutoZone, Sir the Flores yours.
Speaker Change: Thank you. Good morning and thank you for joining us today for Autosomes 2020-244th Quarter Conference Call. With me today are Jamere Jackson, a chief financial officer and Brian Campbell, Vice President, Treasurer, Investor Relations and Tax.
Speaker Change: Regarding the fourth quarter, I hope you had an opportunity to rear press release and learn about our quarter's results. If not, the press release, along with slides, complementing our comments today, or available on our website at www.autosome.com Under the Investor Relations link.
Speaker Change: Please click on the quarterly earnings conference call to see them.
Speaker Change: As we begin this morning, I want to thank our more than 120,000 audis owners for their contributions during fiscal 2024 that resulted in our solid performance.
Speaker Change: As the first line of our pledge states, they continue putting our customers first, which resulted in total sales growth of 5.9% for the fiscal year, while earnings per share increased 13%.
Speaker Change: As a reminder, this fiscal year had an extra week of results, so excluding the 53rd week, our sales were up 3.8% while our EPS was up 10.4%.
Speaker Change: In the fourth quarter, with our continued focus on what we call Wild Customer Service. Our total sales were up 9% while EPS was up 11% on a 16-week basis. Our Q4 sales were up 2.6%.
Speaker Change: While our EPS was up to 3.5%.
Speaker Change: We also delivered 1.3% total company same store sales, domestic same store sales growth of 0.2% and international same store sales up 9.9%.
Speaker Change: Our domestic commercial sales accelerated sequentially, finishing up 4.5% vs last year's Q4 of 3.9%. This is on a 16-week versus 16-week basis.
Speaker Change: We were up 10.9% on a 17-week versus 16-week basis.
Speaker Change: While our international business continued to comp up approximately 10% in local currencies. We face a nearly 500 point.
Speaker Change: Points of Currency Headwind, and our reported growth rate is approximately 5%. As you know, the weaker U.S. dollar has been a tailwind for our reported results since we became reporting international comps last year in our fourth quarter earnings report.
Speaker Change: The stronger dollar had a meaningful impact on our reported sales, operating profit and EPS this quarter. Jamere will update the potential impact of foreign currency on FY25 later in the call.
Speaker Change: While there will always be tailwinds and headwinds and a quarter's results, what has been consistent is that we could not have achieved both this quarter's and this year's success without exceptional efforts across the entire organization.
Jamere: So let me dive into our sales results. First off, I will say that our domestic DIY results were very similar to last quarter. Q4's DIY comp sales were down about 1%.
Jamere: The impact from the headwind on our discretionary merchandise categories drove the bulk of this decline, similar to last quarter.
Jamere: For our fourth quarter, discretionary category sales were approximately 18% of our mix, and they were down roughly 5% year over year. Again, similar to our results in previous quarters this fiscal year.
Jamere: We have seen this trend for the entire fiscal year and our belief is that these categories will continue to be pressured until the consumer gets some economic relief and customer competence improves.
Jamere: Consumer confidence improves.
Jamere: With regards to our inflation impact on the DIY comp, we saw both average ticket and like for like skewed inflation up approximately 1% for the quarter.
Jamere: While still low versus historical norms, the growth is a good trend for us, as we would expect inflation in our ticket average to be approximately 3% over time.
Jamere: We anticipate average ticket growth will return to historical industry growth rates as we move farther away from the high-per-inflation of the last couple of years.
Jamere: We also saw DIY transactions count down 2%.
Jamere: While our industry overall sales growth rate for DIY appears to be down over the last quarter, it was very encouraging to see our market share growth in DIY.
Jamere: We believe we have a best-in-class offering and this gives us confidence that when our consumers return to their historical shopping habits, we will be the beneficiaries of that app swing.
Jamere: Secondly, I'll speak to our regional DIY performance. Simply put, it was consistent across the country, as each of our 10 reporting census regions delivered approximately a 1% negative comp.
Speaker Change: Third, I will dress weather.
Speaker Change: and what we believe the impact was on our DIY business.
Speaker Change: We clearly saw hot weather across the U.S. this past summer and in those markets where the weather was hot, our sales increased accordingly. However, across the majority of the country, the weather pattern was similar to the previous year and therefore did not have a meaningful impact on our performance.
Speaker Change: Next, I will touch on our U.S. commercial business.
Speaker Change: While we reported this morning that our commercial sales were up 10.9% for the quarter, on a 16-week comparable basis to last year, our sales were up 4.5%.
Speaker Change: We were encouraged to see our U.S. commercial sales growth. This past quarter marked another quarter of sequential increases to year over year D.I.F. in sales.
Speaker Change: We saw very little variation in the commercial sales across regions as the entire country was basically running at the overall sales growth rate of 4.5% on a 16-week basis.
Speaker Change: While we are encouraged by the progress we are making, we still have significant opportunities in front of us to grow market share, with improved satellite store inventory availability, significant improvements in hub and mega hub coverage.
Speaker Change: The strength of our Dural Ask Brand and good execution on our initiatives to improve speed of delivery and improve customer service. We are confident about our future.
Speaker Change: This quarter, inflation on a light-collect skew-base was essentially flat, which drove flat pricing and average ticket for commercial.
Speaker Change: We have seen pricing remain relatively flat, as inflation has cooled for goods in our industry. We expect to see slightly more inflation next year, and our assumption is, like for likes, skew, retail inflation will be in the low single digits in FY25.
Speaker Change: For the year we opened 8 hubs and 11 mega hubs, which is roughly half of what we did in FY23. We are excited about the ability to resume aggressively opening these important assets in FY25, although openings will be somewhat second half loaded.
Speaker Change: Hubs and mega hubs lead to comp results that grow faster than the balance of the chain and we are going to continue to aggressively deploy these assets.
Speaker Change: For our first quarter of FY25, we expect both DIY and commercial sales trends to modestly improve.
Speaker Change: We expect better sales performance in Q2 and the Q3 timeframes. We will, as always, be transparent about what we are seeing and provide color on our markets and outlook as trends change.
Speaker Change: Before turning the call to Jamere, I would like to take a moment to discuss our international business. We revisit the opening stores this quarter.
Jamere: Between Mexico and Brazil, we opened 49 new stores and now have 921 international stores. As you can see from our press release, our same store sales.
Speaker Change: We're just under 10%.
Speaker Change: We remain committed to growing the number of stores in both Mexico and Brazil.
Jamere: Today, we have 13% of our total store-based outside of the U.S. and expect that number will continue to grow. We plan to accelerate our openings by 2028 and we are targeting around 200 international openings per year.
Jamere: We continue to take our U.S. store learnings and introduce them to the international store operations, and we are very excited about our future in international.
Jamere: In summary, we have continued to invest in making in-market inventory assortments better to drive future traffic growth and sales, enhancing our IT systems and our supply chain.
Jamere: and FY25 will continue to ramp up our store openings, specifically our hubs and mega hubs and drive efficiencies from our new DCs which are expected to come online in 2025.
Jamere: at AutoZone, we are investing in our future growth initiatives.
Jamere: In FY24, we invested more than $1 billion in capex and are focused on our strategic growth priorities. In FY25, you will see more of the same. We are investing in accelerated store growth, specifically hubs and mega hubs, placing inventory closer to our customers.
Jamere: Distribution Centers that will drive efficiency and reduce supply chain costs, IT systems that will improve customer service and improve our autosunders ability to help our customers.
Jamere: We believe that our industry is strong and we have an opportunity to grow market share, domestically and internationally.
Jamere: Now I will turn the call over to Jamere Jackson.
Jamere Jackson: Thanks, Phil, and good morning, everyone. Before I unpack our results, I want to remind you that each year our fiscal year ends on the last Saturday in August. Based on the way the calendar fell this year, we had an extra week in our fiscal year, and the fourth quarter is based on 17 weeks versus 16.
Jamere Jackson: For comparison, our same store sales comps are based on a 16-week basis, all our total sales, even an EPS result will be discussed on a 17-week basis.
Jamere Jackson: As Phil is previously discussed, we've reported 9% total company sales growth on a 16-week basis total company sales were up to 0.6%. Our domestic same store sales group, 0.2% and our international comp was up 9.9% on a constant currency basis.
Jamere Jackson: Total Company, even through 6.1% and our EPS screw 11%.
Jamere Jackson: I also want to point out that we had a headwind from foreign exchange rates in this quarter. We had a $500 basic point strike on international sales that resulted in a $32 million headwind in sales.
Jamere Jackson: and $8 million headwind of even and a 32-centice share of drag on EPS versus the prior year.
Jamere Jackson: We continue to deliver solid results despite the economic backdrop and the efforts of our auto zoneers and our stores and distribution centers have enabled us to grow our business in our earnings and a meaningful way.
Speaker Change: Let me take a few moments to elaborate on the specifics in our P&L for Q4. For the quarter total sales, we test over $6.2 billion, and as I just mentioned, was up 9%.
Speaker Change: for the year, our total sales for $18.5 billion, up $5.9% versus last fiscal year.
Speaker Change: and let me give a little color on our sales and our growth initiatives starting with our domestic commercial business for the fourth quarter, our domestic DIF and sales increase 10.9% to $1.7 billion. On a 16-week basis, our domestic commercial business group, 4.5%.
Speaker Change: for FY24, our commercial sales were $4.9 billion up to $6.2% versus last year. In the quarter sales toward domestic DIFM customers represented 31% of our domestic auto-part sales and 27% of our total company sales.
Speaker Change: Our average weekly sales program, or $16,700, flat to last year as we let new programs that we open that are not at maturity.
Speaker Change: Our commercial acceleration initiatives are continued to deliver good results as we grow share by winning new business and increasing our share of wallet with existing customers.
Speaker Change: We now have our commercial program in approximately 92% of our domestic stores, which leverages our DIY infrastructure, and we're building our business with national regional and local accounts. This quarter we opened 55 net new programs, finishing with 5,898 total programs.
Speaker Change: Importantly, we have a lot of runway in front of us and we will aggressively pursue roads in commercial, which represents a tremendous growth opportunity for our companies.
Speaker Change: To support a commercial growth, we now have 109 mega hub locations, while I mentioned a moment ago our commercial weekly sales program average with $16,700 per program. The 109 mega hub's average significantly higher sales are growing much faster than the balance of the commercial business in Q4.
Speaker Change: As a reminder, I'd mega house typically carry over a hundred thousand SKUs and drive tremendous lift inside the store box as well as serve as an expanded fulfillment source for other stores.
Speaker Change: The expansion of coverage and parts availability continues to deliver a meaningful sales lift to both our commercial and DIY business.
Speaker Change: These assets are performing well individually and fulfillment capability for the surrounding autosone stores is giving our customers access the thousands of additional parts and lifting the entire network.
Speaker Change: We have an objective to have well north of 200 mega hubs that fool build out. Our customers are excited by our commercial offering as we deploy more parts in the local markets. Closer to the customer while improving our service levels.
Speaker Change: On the domestic retail side of our business, our DIY comp was down 1.1% for the quarter, for all of FY24, our DIY comp was down 6th tenth of a percent.
Speaker Change: The spike industry softness, we continue to gain share in DIY and we are well positioned when the industry re-excelerates. As Phil mentioned, we saw traffic down 2% along with 1% ticket growth.
Speaker Change: As we move forward, we would expect to see slightly declining transaction counts, offset by low to mid-single digit ticket growth, in line with a long-term historical transfer to the business driven by changes in technology and the durability of new parts. Our DIY business has continued to gain share behind our growth initiatives.
Speaker Change: Importantly, the market has experienced in a growing and aging car park and a challenging new and used car sales market for our customers which continues to provide a tailwind for our business.
Speaker Change: These dynamics, ticket growth, growth initiatives, and macro-car park tailwinds we believe will continue to drive a resilient DIY business environment for FY25.
Speaker Change: Now, I'll say a few words regarding our international business, we continue to be pleased with the progress we're making in our international markets.
Speaker Change: During the quarter, we opened 31 new stores in Mexico to finish with 794 stores.
Speaker Change: and 18 new stores in Brazil, ending with 127, our same store sales grew 9.9% on a cost and currency basis, and 4.9% when taking an account for an exchange rate.
Speaker Change: We remain committed to international and given our success in these markets, we will accelerate the store opening pay school and forward. We're bullish on international being and attractive and meaningful contributor to autosone future sales and operating profit growth.
Speaker Change: I'll let me spend a few minutes on the rest of the P&L and Gross margins. For the quarter, our gross margin was 52.5% down 21 basis points driven primarily by an unfavorable life-al-comparecent of last year.
Speaker Change: Excluding life role from both years, we had a 32 basis point improvement in gross margin driven by continued improvement and merchandising margins.
Speaker Change: For Q4 last year, we had a $30 million rifle credit, while this year we did not have any credits. We previously said that we thought we would have approximately $10 million of rifle credits in the quarter, which would have been quite a to 16 depths of higher gross margins or 45 cents a share.
Speaker Change: At year in, we had $19 million in cumulative life-of-charge as yet to be reversed to a P&L.
Speaker Change: At the moment, we're not anticipating any charges of credits to our P&O for Q1 of FY-25 as inflation is not materially impacted our life o-Mintoria County results.
Speaker Change: I will remind you that in last year's first quarter we booked $2 million life of credit and as a reminder once we credit back to $19 million through the P&L we will not take any more credits and we will begin to rebuild an unrequited life of reserve.
Speaker Change: Moving on operating expenses, our expenses were up to 10.4% versus last year's Q4 as STNA as a percentage of sales, D1137 basis points. On a 16-week basis, our STNA was up 4.6%.
Speaker Change: The growth in STNA has been purposeful as we continue to invest at an accelerated pace in IT and payroll to underpin our growth initiatives.
Speaker Change: These investments will pay dividends and customer experience, speed and productivity.
Speaker Change: We're committed to being a discipline on SNA growth as we move forward and we will manage expenses and line with sales growth over time.
Speaker Change: Moving to the rest of the P&L, even for the quarter was $1.3 billion of 6.1% versus the prior year. Even for FY24 was just under $3.8 billion, up $9.1% versus the prior year, driven by top line growth and growth margin improvement.
Speaker Change: 10th of 6 minutes for the quarter was 153.2 million dollars out 41% from Q4 a year ago as our debt outstanding at the end of the quarter was $9 billion versus $7.7 billion a Q4 in last year.
Speaker Change: We're planning interest in the $18 million range for the first quarter of FY25 versus 91.4 million in this year in this past year's first quarter. Higher debt levels and borrowing rates across the curve are driving this increase.
Speaker Change: For the quarter, our tax rate was 21.1% and down from last year's fourth quarter of 22.4%. This quarter's rate benefited 80 basis points from stock options exercise while last year had benefited 22 basis points.
Speaker Change: For the first quarter of FY25 we suggest investors model us at approximately 23.4% before any assumption on credit to do to stock option exercises.
Speaker Change: Moving to net income in EPS, net income for the quarter was $9.2 million, up $4.3% versus last year. Our deluded share count of 17 and a half million was 6% lower than last year's fourth quarter.
Speaker Change: The combination of higher net income and lower share count growth earnings per share for the quarter to $51.58 up to 11% for the quarter.
Speaker Change: for FY24, net income was $2.7 billion, up 5.3% and earnings per share was $149.55 up 13%.
Speaker Change: I'll talk about our free cash flow for the fourth quarter we generated $723 million in free cash flow. And for the year we generated $1.9 billion in free cash.
Speaker Change: with respect to continuing being in an incredibly strong cash flow generator going forward. We're going to make committed to returning meaningful amounts of cash to our shareholders.
Speaker Change: We're guarding our balance sheet, our liquidity position remains very strong, and our leverage ratio finished at 2.5 times EBITDA, or even our inventory for storm is up 3.7% versus Q4 last year, while total inventory increased 6.8% over the same period last year driven by new store growth.
Speaker Change: Net inventory defined as merchandise inventory less accounts payable on a per store basis. Was the negative $163,000 versus negative $211,000 last year and negative $168,000 last quarter.
Speaker Change: As a result, accounts payable as a percentage growth inventory finished a quarter at a hundred and nineteen point five percent versus last year's Q4 of a hundred and twenty four point nine percent.
Speaker Change: Lastly, I'll spend a moment on capital allocation in our shared repurchase program. We repurchase $711 million of bottles on stock in the quarter and a quarter in, we had just under $2.2 billion remaining under our shared buyback authorization.
Speaker Change: The strong earnings balance sheet and powerful free cash we generated this year as it allows to buy back 6% of the shares outstanding since the beginning of the fiscal year.
Speaker Change: We have bought back over 100% of the thin outstanding shares of stocks since our buyback conception in 1998, while investing in our existing assets and growing our business.
Speaker Change: We remain committed to this disciplined capital allocation approach that will enable us to invest in the business and return meaningful amounts of cash to shareholders.
Speaker Change: To wrap up, we remain committed to driving long-term shareholder value by investing in our growth initiatives, driving robust earnings and cash and returning excellence cash to our shareholders. Our strategy continues to work.
Speaker Change: We're growing our market share domestically and internationally and improving our competitive positioning in a disciplined way.
Speaker Change: and as we look forward to FY25, we're bullish on our growth prospect behind a resilient DIY business, a fast growing international business and a domestic commercial business that is continuing the growth year.
Speaker Change: I continue to have tremendous confidence in our ability to drive significant and ongoing value for our shareholders behind a strong industry, a winning strategy and an exceptional team of autosons.
Speaker Change: Before handing the call back to Phil, I want to remind you that we report revenue counts on a constant currency basis to reflect our operating performance.
Phil Daniele: We generally don't take on transactional risks, so our results reflect the translation impact for reporting purposes.
Speaker Change: As I mentioned earlier in the quarter form, friends, you resulted in a headwind on revenue in EPS.
Phil Daniele: If yesterday's spot rates held constant for Q1 FY25, then we expect an approximate $55 million drag on revenue, a $16 million drag on EBIT and a 63 cents a shared drag on EPS.
Phil Daniele: and if rates remain at the current spot rates for the full fiscal year 2025, we would expect an approximate $265 million in fact, the revenues, a $90 million in fact, the EBIT and a $3.64 percent of share and tax before your EBIT.
Speaker Change: and now I'll turn it back to the field.
Jamere Jackson: Thank you, Jamere.
Speaker Change: We're proud of our autosunders across the globe and the results our team delivered this past quarter.
Speaker Change: In FY24, we focused on improving execution and driving wild customer service. We made meaningful progress and are well positioned to grow sales across our domestic and international store bases with both our retail and our commercial customers.
Speaker Change: Our gross margins are solid and our operating expense is appropriate for future growth.
Speaker Change: We continue to put our capital to work, where we'll have the biggest impact on sales, our stores, distribution centers and leveraging technology to build a superior customer service experience where we are able to say yes to our customers needs.
Speaker Change: The top focus areas for fiscal 2025 will remain growing, share, and our domestic commercial business and continuing our momentum in our international markets.
Speaker Change: We believe we have a solid plan in place for growth over the next 12 months. We know our focus on parts availability, flawless execution, and what we call wow-customer service will lead to sales growth and gains in market share. We're excited to start 2025.
Speaker Change: This time of year, we also enjoy reflecting on the past. Our team achieved some impressive milestones this past fiscal year. $18.5 billion in sales headed toward the $20 billion milestone.
Speaker Change: Commercial sales are about to eclipse five billion dollars. It wasn't that long ago we just crossed across two billion dollars. That was only twenty-seven-team. Average weekly sales domestically of forty-seven thousand dollars a week, equating to just under two point five million per store annually.
Speaker Change: Our Mexico and our all-day-to-teams both broke multiple records and Brazil has now more than 100 stores and is growing.
Speaker Change: We bought back $3.2 billion in ozone stock, marking $37 billion in buyback since the start of our program back in 98.
Speaker Change: As we start our new fiscal year, I'd like to take a moment and discuss our operating theme for this new year, great people, great service.
Speaker Change: I am asked frequently what differentiates autosone from others.
Speaker Change: My answer always goes back to the same point over and over again, our autosunders and autosones amazing culture. Our autosunders have built this culture. This year we focused on our autosunders like never before. We are determined to improve upon an already existing culture of service.
Speaker Change: Next week we'll mark the start of our national sales meeting here in Memphis.
Speaker Change: Just over 3,000 autosunders will be in Memphis to learn about our parts and products. Celebrate this past year's accomplishments as well as allowing our leadership to celebrate and recognize the best performing store and distribution center autosunders. We cannot wait to have everyone here.
Speaker Change: But we can't rest on our laurels and we aren't without our challenges, that's for sure. We must make sure that every store is staffed right every hour of every day. Our processes need to function properly, always.
Speaker Change: and we have to meet our new store opening goals and timelines. Simply put, we have to remain the execution machine that we have always been.
Speaker Change: This school 2025's top priorities will continue to be based on improving execution, and we will continue to invest in our following strategic projects, re-excelerate our new hub and mega hub openings.
Speaker Change: Effectively and efficiently open our new distribution centers and optimize our direct import facility.
Speaker Change: Rampop our domestic and international store growth, as discussed, our international teams posted same-store sales counts on a constant currency basis of 10.2 percent, continuing several years of very strong growth.
Speaker Change: and most importantly re-accelerate our domestic commercial sales growth and continue to gain market share on DIY.
Speaker Change: Also this morning, I'd like to remind everyone that Ken J. Cox joined Autism this past quarter as our Senior Vice President Commercial. Ken is a strong addition for us, having served most recently at U.S. Steel where he served as their Senior Vice President and Commercial Chief Officer.
Speaker Change: He has extensive experience in the B2B space and has developed and led world-class sales teams. He is a great cultural fit and we are fortunate to have Ken Join us.
Speaker Change: We are excited about what we can accomplish, and our audis owners are committed to delivering even better results. We believe in our potential for future growth. We believe in audis owns best days, lie ahead of us.
Speaker Change: Now we'd like to open up the call for questions.
Speaker Change: Certainly, everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time. We do ask that while posing a question, please pick up your handset if speaking on speaker phone to provide optimum sound quality.
Speaker Change: We do ask the participants please ask one question and one follow-up.
Speaker Change: Once again, if you have any questions or comments please press star 1 on your phones.
Speaker Change: Your first question is coming from Simeon Gutman from Morgan Stanley, your line is live.
Simeon Gutman: Good morning. Hey Phil. You mentioned accelerating commercial sales growth. You made a higher recently and we talked about hubs on the call and I think you're tweaking inventory. Can you talk about timing what should investors expect what you expect out of the organization when we can see commercial sales move to that next level?
Speaker Change: The Drift.
Speaker Change: Yes, sir.
Phil Daniele: Great question. Thanks, Timion. I think we'll just sequentially improve from here. Again, I'd like to talk about on the last couple of calls. I think it's a progressive.
Phil Daniele: Improvement, I don't think it's going to be a snapback.
Speaker Change: You know, you look at the environment out there the consumer.
Speaker Change: It's still pressure and we think that's showing up on both DIY and the commercial side of the business, but we like our strategies that we have in place as far as.
Speaker Change: Exactly what you said, and criminally improving the store side of shortments at the satellite stores, opening up these hubs and mega hubs.
Speaker Change: and adding inventory closer to the customers and then, you know, we're also working on ways to streamline customer service, specifically improving speed to customer on those harder to find parts. So we like our strategy and we think we'll continue to build from here.
Speaker Change: and then quick follow up on Gross Margin, what's left and how I can go because I think discretionary being down would have hurt you, commercial being up would probably hurt you. So how do you, I guess, where's the, where's the strength of coming from and how much can it continue?
Speaker Change: Yeah, I think we've got a couple things working in our favor one, our merchants are doing a fantastic job driving.
Speaker Change: Merchandising margin improvements in negotiating with our supply base and that team has done a tremendous job for us.
Speaker Change: So I think as we move forward, we'll continue to drive merge margin improvement.
Speaker Change: Well, a little bit of a drag early on because we're adding a couple of DCs associated with the supply chain efforts that we have. But net net we think that the merchandising margin improvements will continue to power us moving forward.
Speaker Change: You know the one area that we're watching very closely is you know what's happening in the industry from a pricing standpoint it's still alluded to and I alluded to as well So we're not seeing the average ticket growth. That's largely a function of what we're seeing on the inflation side
Speaker Change: As we get some additional inflation that starts to make its way into the industry, we're looking forward to having an opportunity to push retails a little bit harder. So, a very disciplined approach, a very strong merchandising margin, and we're looking forward to a pretty good outlook for FYI 25.
Speaker Change: Thank you. Good luck.
Speaker Change: Thank you. Thank you. Your next question is coming from Brett Jordan from Jeffries. Your line is live.
Brett Jordan: Hey, good morning guys.
Speaker Change: Warner Bros.
Brett Jordan: I could you talk about, you know, what if any are the hurdles to re-excelerating the hub growth now that the three major players are all using a hub strategy as a real estate access issue or is it just sort of timing if your internal development team.
Brett Jordan: Bill always smiles when we get this question because I own stored development inside of our organization.
Brett Jordan: We feel very good about what we've done, essentially what we've done over the last
Brett Jordan: Years ago is rebuilding our pipeline and our capabilities, you know, obviously, and we've talked about it here on the call.
Brett Jordan: We struggled a little bit as we got through the pandemic, everything was generally delayed during that time frame.
Brett Jordan: Um...
Brett Jordan: But the reality is that there were things that we need to improve from an operational standpoint.
Brett Jordan: to really improve that pipeline. We're pretty excited about where we are on hubs and mega hubs.
Brett Jordan: We still have our plan to open 200 plus mega hubs versus our original estimate of 110. We'll build 20 plus and FY25.
Brett Jordan: and I'm really excited about the fact that we have about 70 mega hubs.
Brett Jordan: and the pipeline today, most of which are under construction. So I feel good about the team, what we've executed, etc. These are big 30,000 square foot boxes and tough to find locations.
Brett Jordan: But we've reorganized our team and doubled down on our efforts to get those boxes into the marketplace. I'm excited about what they'll contribute to our future growth prospects.
Speaker Change: Okay, I'm going to follow up on the commercial business, I mean, can you talk about the cadence through the quarter and then any dispersion between national account business versus the up and down the street business?
Speaker Change: Yeah, if you talk about the quarter, like I said, both regionally and the cadence across the quarter, we're all pretty similar, you know, the very beginning of the quarter was a little bit lighter, June was great.
Speaker Change: Some of it due to the hot weather came a little bit earlier this year and then when you got into July and August, it was pretty similar to last year from a weather perspective, so you didn't see meaningful change in July and August, from a compressive.
Speaker Change: I mean, where was hot? We saw all the categories take off like you would expect. So we had a good summer. It wasn't demonstrably different than last year though.
Speaker Change: and so that's kind of how we think about that from a quarter perspective.
Speaker Change: of the second part.
Speaker Change: and I guess National Account verses the up and down to free business. Are you saying any change in the independent of the DUD competitive William Escape out there around the up and down the street?
Speaker Change: Yeah, so on National Accounts, that's a great question. We kind of think of the up and down the street customer, we think about National Accounts and then we have what we call some verticals.
Speaker Change: and I'll explain kind of how we saw performance across those segments. The up and down the street customers have been very resilient and been one of the best growing segments for us. The National Accounts have improved quarter over quarter.
Speaker Change: and...
Speaker Change: Part of that improvement has come from, you know, a lot of those national accounts are heavily tied towards tires and tires are not as bad as they used to be. The trends have improved, we're seeing more tire replacements, even though those customers generally think are seeing down customer traffic, but tires are not the big drag that they have historically been.
Speaker Change: The one segment that has not performed very good for us, and I think you're going to make sense. It's anything related to new cars, used cars, or by-her-pair lots.
Speaker Change: as cars change hands. There's generally an uptick in maintenance.
Speaker Change: to a used car. They may refer, put tires on, put on new brakes, suspension items, change all the filters, do some maintenance, etc. And if that new customer picks up the new car, they may continue to personalize it.
Speaker Change: So that segment of the business, which we're highly penetrated in, has not performed as well. We think as the environment and the economy improves a little bit, and we see more used carps change hands, and new carps being sold out of help those two segments of the business.
Speaker Change: Thank you.
Speaker Change: Thank you. Your next question is coming from Chris Horvers from JP Morgan. Your line is live.
Chris Horvers: Thanks and good morning. Can you talk about what you think the DIY domestic DIY and domestic, you know, commercial markets are growing, you mentioned share gains.
Speaker Change: and DIY Bishop, you comp down one, so any thoughts on where you think those markets are grew during the quarter and how we think about the improvement in the backdrop over FY 25.
Speaker Change: Great question. Thank you. So on DIY, as we said, the biggest pressure point has really been in the...
Speaker Change: the discretionary part categories of the business.
Speaker Change: So think of that, you know, accessories, truck-telling, performance, things of that nature. That business has been pretty tough for us for at least a year.
Speaker Change: and when you look at the share gains, that sort of area is where we've seen the most challenging performance.
Speaker Change: and our maintenance categories and our failure categories.
Speaker Change: on the DIY side of the business have been pretty resilient, but if that's headwinds from the discretionary categories that have been tough, and we frankly don't know that that's going to change too much until that our pressure consumer starts to get some economic relief and frankly when their confidence starts to improve a bit.
Speaker Change: You know, on the commercial side, you know, we believe we're still one of the fastest growing in the industry. A little bit of a tougher comp scenario.
Speaker Change: But we believe we're growing share and we like our strategies of deploying inventory through the hub and the mega hub of the sortments and we have several strategies that are focused on improving customer service and commercial and we're seeing really good results from those.
Speaker Change: and I would say just to build on that, I mean if you think about the growth rates, we actually believe that the DIY market has been down kind of low single digits because of those dynamics that Philip talked about, but also...
Speaker Change: The fact that, you know, we're not seeing the same level of retail inflation, tickets are still growing slower than in historical levels and that's put some pressure on it. So, you know, a combination of the consumer sentiment.
Phil Daniele: In fact that we, you know, are not seeing retail inflation or sort of driving that business down a little bit. But what we're excited about is the fact that, you know, we continue to execute as Phil mentioned. And we're providing great service to the customer and is that.
Phil Daniele: and the industry re-accelerates.
Speaker Change: and we'll be in great shape and on the commercial side, I mean, as near as we can tell, I mean, commercials have been clapped at the climbing for slightly declining for a few quarters year and if we look at what we saw this quarter was probably in a similar sort of zip code.
Speaker Change: So we're excited about the fact that we've, you know, accelerated our current commercial sales growth and as we move forward, the execution on our initiatives that Phil talked about, the fact that we'll get more hubs and mega hubs in a marketplace, you know, all both well for us as we move forward.
Speaker Change: Got it, and then a couple quick margin follow-ups.
Speaker Change: First in the gross margin, it looks like that 53rd week the gross margin was maybe 80 days of this point slower. So is there something to read into that, you know, you talked about being positive on gross margin over the year, but some DC pressures, so is that just accounting nuance or something that we should think about in terms of cadence?
Speaker Change: and then secondly, on the potential FX headwind, the international opt implied operating margin for the year is materially higher than...
Speaker Change: The Quarter, so what you experience in the fourth quarter, so is that the 53rd week impactor is or something going on there?
Speaker Change: Yeah, so the State Art Work is always a little bit noisy for us just in the system general in terms of how allocation to happen, etc. So I wouldn't read much into how you think about it. I mean, overall for the total company.
Speaker Change: We had about $365 million of sales in about $87 million of even associated with that extra week when you look at it on a like for like place.
Speaker Change: and the margin impacts and SNA impacts and all those things can get a little bit skewed just based on how you do allocations in the quarter.
Speaker Change: What I'll say about international and the international margins is we think about it going forward. It's a very strong business force.
Speaker Change: and our business in Mexico is basically doubled.
Speaker Change: Over the last three fiscal years or so.
Speaker Change: So, given that significant revenue and even impact of our international footprint.
Speaker Change: and Swings and FX rates are going to impact us, et cetera. The teams are doing a great job of executing, and we want to be really transparent on what we see in terms of...
Speaker Change: and FX moving forward and what the margin impact is going to be going forward.
Speaker Change: Got it, thank you. Thank you.
Speaker Change: Thank you, your next question is coming from Stephen Forbes from Googanheim Securities. Your line is live.
Stephen Forbes: Good morning, Phil Jamere
Speaker Change: What is near you, sir?
Stephen Forbes: It's just a follow-up to start on the commercial business, maybe we just focus on sort of weekly sales per commercial program
Phil Jamere: If we adjust for the extra week contribution, it looks like the sales were sort of down, mid-single digits, year of year. Anyway to help contextualize sort of what's driving that and or write any sort of additional thoughts on how your initiatives.
Speaker Change: on the speed of delivery, ride customer service, you may help inflict that, right? As we look out over the coming quarters here, and potentially get it back to growing.
Speaker Change: Again, if you compare the 16 weeks to 16 weeks, we're up 4.5% versus last year. And it sequentially, from the last three quarters, that's three quarters in a row.
Speaker Change: Growing Trend on our commercial sales.
Speaker Change: If you look at what we're focused on with it.
Speaker Change: Obviously, improving our assortments is something we do all the time. I think our emergence have done a fantastic job of improving the store level assortments, and also improving the hub and mega hub assortments within any given market that may have one of those types of boxes.
Speaker Change: What we're focused on is...
Speaker Change: Utilizing deployed inventory in a given market, either in a hub or a satellite, and getting that inventory quicker to the customer at the shop level. So we think we think of it in.
Speaker Change: In terms of time, speed to shop. How quickly can we get that inventory from wherever it may be to the shop the fastest way to improve customer service. And as you back up to a hub or a mega hub, the assortment's get deeper and how do we get that product to those customers faster?
Speaker Change: We've deployed quite a bit of technology over the last couple of years, we continue to leverage that top knowledge and learn how to improve the customer service at the orders, for the orders owners, allowing them to help the customer better, as well as getting that inventory quicker to the customer.
Speaker Change: wherever that inventory may be. And we're seeing really good results.
Speaker Change: We like the strategy what I'll tell you is.
Speaker Change: It's dependent on having a hub and a mega hub, which is why this strategy of having more hubs deployed with those inventory assets closer to the customer is so important.
Speaker Change: We wish we could go faster.
Speaker Change: We'll start re-accelerating those hub and mega hubs later in the year and then we've got as Jamere mentioned, we've got a great pipeline, we feel good about the future, we know where we want all these big boxes to be.
Jamere Jackson: of all the dialects well north of 200 of them on the mega-outside. We know where they are, so it's a matter of negotiating and getting them open.
Speaker Change: of appreciate the color. And then just a quick follow-up for Jamere, right, appreciate the quantification of FX, assuming all things constant, the release obviously quantified the ebit contribution to the extra week. You also call that LIFO.
Speaker Change: Yeah, if we add these up, right, we have sort of a mid-single digit headwind to EBIT growth next year. Is that the right way to frame up sort of the non-controllable headwinds to EBIT growth or or anything else you want to add as we think about sort of cleansing the models here?
Speaker Change: So that's really two pieces. One is, you know, we got about $40 million of life old credits that rolled through the P&L this year.
Speaker Change: that become headwinds next year and now. Depending on what happens from an inflation standpoint, we've got about 19 million of credits still to come before we go back to an unrequited balance.
Speaker Change: You could offset maybe half of that 40 million benefit that you had this year on the life outside, so that should help you from a modeling standpoint.
Speaker Change: and then from an FX standpoint, you know, we try to be transparent about, you know, where the, where the spot rates are, we're certainly not making a prediction on where FX is going to land or lots of things that...
Speaker Change: will impact that certainly, you know, things that happen in the U.S. economy, things that happen in the international economies.
Speaker Change: and some of the political dynamics. So what we wanted to do was just be really transparent, parent about.
Speaker Change: where the spot rates currently are and what the impact could potentially be on our P&O. We'll update as we move through any year. It's been pretty volatile. You've seen a pretty significant spike, probably to the tune of 20 or 25%.
Speaker Change: and a very short period of time. And again, as I said, given the size of international and our P&L and the profitability of that business, it does have an impact. So we'll be transparent and share with you exactly what we see as it rolls its way through the P&L.
Speaker Change: Thank you.
Speaker Change: Thank you. Your next question is coming from Robbie Oames from Bank of America. Your line is live.
Robbie Oames: Oh, hey, good morning. Thanks for taking my question. I was hoping could you guys talk a little bit more about seeing inflation return and what the drivers, you know, to that normally are what what they could be.
Speaker Change: and maybe he is part of that, you know, remind us.
Speaker Change: You know, how historically tariffs and ports strikes and things like that impact, you know, inflation for you guys.
Speaker Change: Yeah, so let me kind of back up and...
Speaker Change: We've talked about this a couple of different times, you know, this historical growth rates versus what we're seeing today in ticket average.
Speaker Change: You know, it's been fairly muted over the last year or so at around, you know, this 1% retail inflation and ticket average inflation that's been muted both sides of the business.
Speaker Change: Similar numbers, they're down from the historical rates.
Speaker Change: Over the long term, and I'm talking literally somewhere between 20 and 30 years, the industry has generally seen somewhere between 3 and 5% in place in an average ticket.
Speaker Change: and around 1-3% decline in transactions, typically driven by inflation of parts, as well as technology, enhancements and quality of the product. We believe that.
Speaker Change: You know, some time in the near time horizon we would revert back to a historical growth rate on both of those metrics.
Speaker Change: What we typically see with drives inflation is mix of, or drives ticket averages. This mix of business converting to higher technology parts, which generally speaking are more expensive. And inflation caused by product cost.
Speaker Change: Over the last year, there hasn't been much product cost coming to the system.
Speaker Change: and we all believe that that's because of you look back through the pandemic years we had the supply chain constraints.
Speaker Change: We had massive inflation and cost and we took those retail and pushed them to the consumer.
Speaker Change: and we ended up with this hyper-inflation. We're now laughing a lot of that and that trend starts to slow down, kind of now going through the end of the year and we would expect that inflation would come back in, you know, sometime in 25 and get back to normal.
Speaker Change: as far as tariffs, your question there, those sorts of things have been blown over the years.
Speaker Change: If we get tariffs, we will pass those tariffs costs back to the consumer and we'll pass them through.
Speaker Change: As they turn through, we'll generally raise prices ahead of, we know what the tariffs will be, we generally raise prices ahead of that, you get some gross margin improvement as the cost of goods turn in and then it plattons out. So that's historically what we've done, I've seen no reason this industry has been...
Speaker Change: Very consistent on pricing and rational and we believe that all those same metrics are still in place.
Speaker Change: Thank you so much. Just a quick follow-up since you brought up the last 20 to 30 years. When over the last 20 to 30 years has the consumer been like this, you know, you guys are talking about on the DIY side at a challenge to consumer, you know, what happened last last time the consumer was like this.
Speaker Change: Garza, I don't know, well.
Speaker Change: That's a great question, you know, the consumers under a much different pressure, you know, the bottom in consumers have been pressured for the last, you know.
Speaker Change: 20 months or so, or maybe more. But it's evident flowed over recessions, et cetera. Have we seen the type of inflation that we saw over the last three years now?
Speaker Change: Not certainly not in my lifetime, but...
Speaker Change: Generally speaking, you know, in tougher economic times, people will generally defer maintenance and discretionary items early in the cycle, and then as we get further through the cycle they start to repair their cars because they realize a little bit of investment today, maintaining their vehicle.
Speaker Change: Divers a major repair into the future, so.
Speaker Change: We think it's going to have been pulled over time, but we feel like our execution are improvement in execution and our strategies are the right strategies for us and we'll work over the long term. Just a little more on the consumer. I mean, a couple of things really stand out to us. One is if you look at...
Speaker Change: The Economy just in general, I've said this for a while that you've had this sort of this two-speed world where the middle and upper-income consumers have strong balance sheets and are continued to spend as normal and the lower-end is filled in the pinch, particularly in the discretionary categories.
Speaker Change: The beauty of our business is that, you know, the lion's share of our businesses, relatively in elastic, it's break fix, it's essential maintenance.
Speaker Change: and Summers need their vehicles for mobility, so we tend to power our way through those.
Speaker Change: What encourages us about the consumer is that even in this environment you've got unemployment at 4.2% you've got wage growth at 4% so wage growth is finally keeping up our outpatient inflation.
Speaker Change: So we feel pretty good that is consumer sentiment improves.
Speaker Change: Moving forward, that you'll see some return of normalcy in terms of spending and our business will benefit from that. But, you know, the good news again is the line share of our business. That break-fix essential maintenance is pretty resilient really through all cycles.
Speaker Change: Really helpful. Thank you.
Speaker Change: Thank you. Your next question is coming from Michael Lasser from UBS. Your line is live.
Michael Lasser: The morning, thank you so much for taking my question.
Speaker Change: So, the motive.
Speaker Change: We're going to custom to Auto Zone growing its earnings by a double-digit clip.
Speaker Change #100: with mid-single digit operating income growth and the rest coming from share or purchases. It seems like your message today is...
Speaker Change #101: That algorithm might prove allusive for the next few quarters as the headwinds to our international business comes into play from effects and some of the other unique factors like life, so when is it realistic said?
Speaker Change #102: Autosone can get back to the WDS growth algorithm and it's really incumbent on an acceleration in placing that's going to both help to top line as well as the margins moving through 225. Thank you.
Speaker Change #103: Thank you for your question Michael. The first thing I'll say is that the long term algo is...
Speaker Change #103: Unchanged. I mean, this is a business that...
Speaker Change #103: You know we believe as we look forward will be a consistent, steady grower.
Speaker Change #103: has an opportunity to expand margins that will have a ton of free cash flow at the bottom of the waterfall and will buy back shares and do shareholder friendly things associated with it. In the near term, the things that you've alluded to, things like life-o.
Speaker Change #103: who will be a pressure on from an FX standpoint. May you impact that on a quarterly basis, but that long term.
Speaker Change #104: Algo doesn't change.
Speaker Change #105: I think what we're encouraged by is that the growth initiatives that we have as the macroenvironment improves, you'll see the acceleration in the top line.
Speaker Change #105: which is key to that alvo working as we move forward so all the things that we're working on from a growth initiative standpoint will really start to show up in the results.
Speaker Change #105: but in this environment we're...
Speaker Change #105: Particularly the consumers have been pressured, DIY has been a little bit soft. It's a little tough to print that, print that number quarter over quarter as we move forward. So we feel good about where we are, we feel good about the fundamentals of the business, the fundamentals of the industry, the fundamentals of our execution.
Speaker Change #105: but on a quarterly basis, it's difficult to print the algo as it has been. So long-term, no change. Short-term, you'll certainly see some impacts from the top line and some of these other drivers in the business.
Speaker Change #105: Okay, to reiterate, I mean, there definitely will be pressure on the given quarter, but the Mexico business and the international business is an incredible business and growing. We like the profitability of that market and we like our strategies both on the international markets and our opportunities that we still have here in the US.
Speaker Change #105: So we're happy with our strategies. Don't like the FX pressure we can't, that's not the one we can deal with at the moment.
Speaker Change #106: My follow question is the margin structure of auto zone has evolved a bit over the years.
Speaker Change #107: It's now more incumbent upon the gross margin expansion to drive stable to flat overall operating margins and offset some growth in the DNA.
Speaker Change #108: AutoZone is running into obstacles to grow its growth margin. Should a market expect that it can manage its S-C-8 to moderate that to keep its overall operating margin slattish moving forward?
Speaker Change #109: Yeah, I think two things associated with that one is we are continuing to run the gross margin play with intensity inside the company.
Speaker Change #109: and as I mentioned a little bit earlier, our merchandising teams are doing a fantastic job.
Speaker Change #109: a finding the way to give us expanding margins even in an environment where...
Speaker Change #109: We haven't had an opportunity to raise retail as fast, which is a pretty significant achievement for the company. I've also said that, in the middle of the P&L, that, to the extent that the top lines or the gross margins don't materialize that
Speaker Change #109: You know, we have the muscle and we'll make the decisions that are necessary to make sure that, you know, we're protecting our operating margins and total, and that includes the things that we do on the SG and any line.
Speaker Change #109: You know what we've been able to do over the last couple years is invest in a very disciplined way in things that are positioned as very well for the future in SGA. So things like IT.
Speaker Change #109: Payroll to improve service, the payroll that's necessary to support some of these growth initiatives and those things are all going to pay benefits for it.
Speaker Change #110: I think the message here is no change to the algo.
Speaker Change #110: No outlook that suggests that operating margins are going to be on the decline here.
Speaker Change #110: will work our way through these and as we see the top line, return and as we continue to work gross margins and work the middle of the P&L, the operating margin profile the company is protected.
Speaker Change #110: Thank you very much.
Speaker Change #110: Thank you. Thanks Michael. Next question is coming from Michael Baker from DA Davidson, your line is live.
Michael Baker: Okay, thanks guys. Two quick ones. You've alluded a little bit to pricing, competitive pricing. Can you just tell us what we know one of your competitors has been investing in price? Is that impacting the average ticket at all?
Speaker Change #112: Yeah, I would say that.
Speaker Change #113: They've heard that they're doing that and at the end of the day, we monitor our pricing all the time. We haven't seen any radical change.
Speaker Change #114: You know, I think that specifically on the commercial side of the business.
Speaker Change #115: The vast majority of the share is with the WDs.
Speaker Change #115: and that's who we focus on in our pricing strategies and we haven't seen any material change there. And I would say that if you ask if that's the pressure point for a lack of average ticket growth, the answer is no. The impetus for average ticket growth and retail inflation is really comes from cost.
Speaker Change #115: and as the cost comes in we'll push that cost to the consumer and that's where you get some of that retail average ticket inflation.
Speaker Change #115: I would say it's not, that is not the primary reason for the lack of inflation on ticket average. It goes back to this hyper-inflation that we had since the supply chain issues of the pandemic.
Speaker Change #115: and you're going to be saying that fast, particularly during the pandemic where we saw pretty significant increases and ticket that.
Speaker Change #115: and Flation is a bit of our friend when it comes to retails in that.
Speaker Change #116: That dynamic is because this Phil alluded to, this is a very disciplined, rational industry in terms of pricing. And so even when you are looking at changes that you're making dynamically from a pricing standpoint.
Speaker Change #117: because you're largely in a break-fix business where you don't necessarily stimulate demand from.
Speaker Change #117: Pressing downward pressure on pressing.
Speaker Change #117: You generally don't see that happening in our industry and this industry is rational today, it's been rational for decades
Phil: is exactly.
Speaker Change #119: Yeah, okay, pretty clear. One fall up, I guess maybe, in two quick parts, you said you expect first quarter comes to be, I think you said improving, why is that based on what you're seeing quarter to date, and then you also said accelerating or more store growth could continue to quantify that, how many stores?
Speaker Change #120: You gave us a mega hub number for next year. How many total stores should we expect in 2025?
Speaker Change #120: So, Jamere said, I think we're expecting somewhere north of 20 on the mega hubs, as I said, they'll also be kind of back in loaded, so think, you know, kind of after.
Jamere Jackson: Christmas or so would be where the vast majority of those will come in.
Speaker Change #121: and the latter part of the year. So, we like to re-excelerate those. We wish they were going to be earlier in the year. They just from a timing perspective are going to come.
Speaker Change #121: in the back half of the year. As far as the first quarter, what we said was, we expect to want to look pretty similar to the last quarter. We don't see a whole lot of the consumer is still under the same pressure they were back in over the summertime.
Speaker Change #121: Consumer Confidence, I think is pretty stable at the moment. We wish it would improve, but we don't see a whole lot of catalysts for it to improve. Frankly,
Speaker Change #121: You know, maybe until, you know, December time prime after the election, et cetera. So we expected to be pretty similar and we think it'll improve. We'll get back to a normal growth average, ticket growth later in the year. So that's kind of when we see things maybe having a better inflection point. We'd love for winner to get here and have a harsh winner.
Speaker Change #122: and I thought you said you expect first quarter to modestly improve so modestly improve from that perspective, that's correct.
Speaker Change #121: Okay.
Speaker Change #123: Thank you.
Speaker Change #123: Thank you, and our last question this morning is coming from Zack Fadeum from Wells Fargo, your line is live.
Zack Fadeum: Hey, good morning and thanks for squeezing me in, so...
Zack Fadeum: Jamere mentioned the car park as a tailwind, but...
Zack Fadeum: Since we're entering a period where new cars from 2018, 2019 are starting to come off warranty and new car sales lag during the pandemic, just curious why you wouldn't view this as an air pocket or headwind for the industry. Any thoughts on why that wouldn't be the case?
Speaker Change #125: Yeah, I think simply put, you know, the cars are lasting longer and they're staying on the road so even though the sars come down you're not seeing cars go to the boniards so as a result of that the car park is continued to take up
Speaker Change #125: and you can see that from the data that's out there, when the average age of a vehicle on the road is ticked up to 12.6 years and all the data suggests based on what we know today is that it's likely going to be one or two ticks higher next year and that's a combination of...
Speaker Change #125: You know, what consumer behavior is, but it's also, you know, the factor of what's happening with technology, the cars just simply last longer and you're seeing them stay in the car park.
Speaker Change #125: Um, much longer, which means the average household is fractionally going up a little bit more in terms of the number of vehicles that they have.
Speaker Change #125: and I think it's going to kind of your air pocket. I think that did happen to some degree back in the...
Speaker Change #125: You know the financial crisis, 2000.
Speaker Change #126: 789, your car, your new car, SARS, literally dipped below 10 million annually. And we haven't seen anywhere near that type of decline in SARS, so I don't think it's necessarily going to be an issue. Again.
Speaker Change #127: We love the fact that cars are now over 12 years on average, and the American consumer is driving a lot, those are great tailwinds for us, we like that.
Speaker Change #128: Got it, that makes sense, so maybe fewer cars entering the addressable market, but also fewer scraps, so that makes sense.
Speaker Change #129: is just separately when you look at your SGA.
Speaker Change #130: Growth on a per store basis, it was about 1% normalized, you know, step down, you know, from about 3.
Speaker Change #130: in Q4, and when you think about...
Speaker Change #131: Managing your business for 2025, could you talk about why this, you know, low single digit range is the right level for you, particularly in light of, you know, the investments that you're making and commercial and also in light of some of the peer stepping up to mid single digit to drive share gains.
Speaker Change #132: I mean, what we said about STNA is that we'll continue investing in a disciplined way to support our growth initiatives and so to the extent that there are opportunities for us to...
Speaker Change #133: and Vest and things like store payroll that work that we're continuing to do in IT to improve the customer experience and improve auto-zone experience. We're going to invest in that all day long.
Speaker Change #133: but we also, you know, very responsible in terms of how we manage that, that S.E.N.A. as we move forward. So in a softer sales environment.
Speaker Change #133: You know, we do the things that we need to do to make sure that we're running efficiently from an SGNA standpoint. So it's a balanced approach. We're not hesitating.
Speaker Change #133: to invest in growth initiatives. We haven't pulled back on any investment in growth initiatives, but we are disciplined about how we manage it when the top line is a little bit softer.
Speaker Change #134: appreciate the time.
Speaker Change #135: Thank you, appreciate the question.
Speaker Change #135: Thank you, that concludes our Q&A session. I will now hand the conference back to Phil Daniel, CEO of AutoZone for closing remarks. Please go ahead.
Phil Daniel: Thank you everyone for the questions today. Before we conclude the call, I'd like to take a moment to reiterate we believe our industry is in a strong position and our business model is solid. We are excited about our growth prospects for the year that we will take nothing for granted as we understand our customers have alternatives.
Phil Daniel: We have exciting plans that should help us succeed into the future, but I want to stress that this is a marathon and not a sprint. As we continue to focus on flawless execution,
Phil Daniel: and Wild Customer Service, and strive to optimize shareholder value for the future. We are competent, Autism will be successful. Thank you for participating in today's call.