Q1 2025 Autozone Inc Earnings Call
Can only mode. After management's prepared remarks, there will be a question and answer session.
Before we begin the client would like to read the forward looking statement. Please go ahead.
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 1095 forward looking statements are not guarantees of future performance. Please refer to this morning's press release and the company's most recent annual report on Form 10-K, and other filings with the Securities and Exchange Commission.
For a discussion of important risks and uncertainties that could cause actual results to differ materially from expectations forward looking statements speak only as of that they've made and the company undertakes no obligation to update such statements. Today's call will also include certain non-GAAP measures a reconciliation of GAAP to non-GAAP financial measures can be found in our press release.
Phil Danielle: I would now like to turn the floor over to Phil Danielle the floor is yours.
Thank you.
Speaker Change: Good morning, and thank you for joining us today for Autozone is 25 2025 first quarter conference call with me today are Jim Meer, Jackson, Chief Financial Officer, and Brian Campbell, Vice President Treasurer, Investor Relations and tax.
Speaker Change: Regarding the first quarter I Hope you had the opportunity to read our press release and learn about our quarter's results.
If not the press release, along with slides complementing our comments today are available on our website www dot Autozone dot com under the Investor Relations link.
Please click on quarterly earnings conference call to see them.
Speaker Change: As we begin I want to thank our more than 125000 autozone or is across the globe for their commitment to the first line of our pledge, which states Autozone has always put customers first.
Speaker Change: Their contributions continue to drive our performance.
Speaker Change: We knew this first quarter would be similar to last quarter as our expectations for domestic same store sales were muted and our international sales would be up against a difficult FX rate comparison as.
Speaker Change: As we mentioned on our previous conference call. We did not expect the macro environment to positively impact our results.
Speaker Change: We are however, optimistic that our improved execution and customer service initiatives are on track.
Speaker Change: The environment will improve as we experienced winter weather and the uncertainty of the election are now behind us.
Speaker Change: While the macro environment has led customers to be cautious with their spending we remain confident that we will continue to gain share over time in both domestic DIY and commercial.
Speaker Change: For the quarter with our continued focus on what we call Wow customer service. Our total sales grew two 1% while earnings per share decreased 0.1%.
Speaker Change: We delivered positive one 8% total company same store sales with domestic same store sales growth of 0.3% and our domestic commercial sales grew three 2% and up 9% on a two year stack basis.
International same store sales up 13, 7% on a constant currency basis.
Speaker Change: While our international business continued to comp impressively up almost 14% in local currencies, we faced approximately 3500 basis points of currency headwind, which resulted in an unadjusted, 1% international comp the.
Speaker Change: The stronger U S dollar had a negative impact on our reported sales operating profit and EPS Jameer will provide more color concerning the foreign foreign currency impact on our business and what we are thinking regarding the impact on our financial results for Q2, and the remainder of the year.
Speaker Change: While there will always be tailwind and headwinds in any quarters results. What has been consistent is our focus on driving sustainable long term results. We continue to invest improve and improved customer service product assortment initiatives, our supply chain and believe we are well positioned for future upswings.
Speaker Change: Consumer demand.
Speaker Change: Now, let me dive into our sales results first off our domestic DIY results showed a slightly improved and slight improvement to last quarter as Q1's, DIY comp sales were down 0.4%.
Speaker Change: Our discretionary merchandise categories continue to be a drag on our domestic DIY sales similar to the last several quarters.
Speaker Change: For our first quarter discretionary category sales were approximately 17% of our mix in these categories continue to underperform our expectations.
Speaker Change: While better on a percentage basis than last quarter's results. We are now comping against last year's mid single digit declines in the discretionary categories.
Speaker Change: Our belief is that sales will continue to be pressured until the customer gets some economic relief and consumer confidence improves.
Speaker Change: With regard to inflation impact on DIY sales, we saw the average like for like SKU inflation up approximately one 6% for the quarter, while the average DIY ticket was up one 3%.
Speaker Change: The difference between inflation and ticket growth was driven by the mix of goods sold.
Speaker Change: We were encouraged with the uptick in our average ticket and expect that trend to continue into Q2.
Speaker Change: We continue to expect inflation in our ticket to be approximately 3% over time and we anticipate average ticket growth will remain we will return to historic industry growth rates as we move further away from the hyperinflation of the last couple of years.
Speaker Change: We also saw DIY transaction count down one 8% this too was better than the down 2%, we experienced last quarter while.
Speaker Change: While we do not have final share data for the last segment of the quarter. We were encouraged by the recent favorable trends. We believe we have a best in class product and service offering and this gives us confidence that when customers return to their historic shopping habits, we will be beneficiaries.
Speaker Change: Secondly, I will speak to our regional DIY performance.
Speaker Change: We saw a noticeable underperformance in the northeast mid Atlantic and the rest of what we call. The rest belt. These markets were down negative one 8% versus negative 0.1% in the rest of the domestic markets.
Speaker Change: This doesn't surprise us as these markets have underperformed due to the milder than normal temperatures and lower than usable you usual precipitation levels. The last couple of years.
Speaker Change: Third I will address whether and what we believe the impact was on our DIY business.
Speaker Change: This quarter was impacted by several markets, having hurricanes, although these storms are difficult for our customers and our autozone or they did not have a meaningful impact on our DIY business also across much of the country. The weather pattern was similar to the previous year, we do not believe weather played a meaningful role on our DIY.
Speaker Change: <unk> in Q1.
Speaker Change: Next I will touch on our U S commercial business, our commercial sales were up three 2% for the quarter compared to last quarter's four 5% total commercial growth the.
Speaker Change: The first four weeks were the weakest as sales grew only one 8% primarily because of the hurricanes.
Speaker Change: More broadly across the U S and similar to what we saw with our DIY customers, we noticed underperformance in the northeast mid Atlantic and Rustbelt markets.
Speaker Change: The spread between these markets and the rest of the country was approximately 400 basis points we.
Speaker Change: We exited the quarter with stronger sales and believe we are continuing to gain share.
Speaker Change: While we have continued to see wide variations in performance across these more sensitive.
Speaker Change: Weather markets, we remained steadfast with our initiatives. We are encouraged with our improved satellite store inventory availability significant improvements and hub and Mega hub coverage. The continued strength of our <unk> brand and good execution on our initiatives to improve speed of delivery and improved customer service, which gives us confidence.
Speaker Change: As we move through the year.
Speaker Change: This quarter on like for likes on a like for like SKU basis, our commercial business was.
Speaker Change: Down, which contributed a negative <unk>, 7% to average ticket.
Speaker Change: The lack of inflation continued to pressure sales or sales growth will be driven by our continued ability to gain market share and an expectation that like for like retail SKU inflation will accelerate by the end of FY 'twenty five.
Speaker Change: For the quarter, we opened a total of 23 net domestic stores, we remain committed to more aggressively opening regular stores hubs and mega hub stores and for the remainder of FY 'twenty five our openings will be continued to be skewed towards the back half of the year hubs and mega hubs lead to.
Speaker Change: Better comp results that are growing faster than the balance of the chain and we are going to continually aggressively deploy these important assets.
Speaker Change: For the second quarter, we expect both DIY and commercial sales trends to modestly improve as our comparisons become slightly easier and we gained momentum from our sales growth initiatives.
We will as always be transparent about what we're seeing and provide color on our markets and outlook as trends emerge.
Speaker Change: Before turning the call to <unk> I'd like to take a moment and discuss our international business in Mexico, and Brazil, We opened a total of 11 stores in the quarter and now have 932 <unk>.
Speaker Change: Total international stores as you can see from the press release, our same stores were just under 14% on a constant currency basis and accelerated from last quarter's 10%.
Speaker Change: Today, we have just under 13% of our total store base outside of the U S and expect this number to grow materially as we accelerate our international store openings.
Speaker Change: For the fiscal year, we expect to open around 100 international stores.
Speaker Change: As you would expect we continue to take our U S store learnings and introduce them into our international operations. We are very excited about the future and international stores.
Speaker Change: In summary, we have continued to invest in driving traffic and sales growth. This year, we expect to again invest more than $1 billion in capex in order to drive our strategic growth priorities.
Speaker Change: We are invested investing in accelerated store growth, specifically hubs and mega hubs, placing inventory closer to our customers.
Speaker Change: Distribution centers that drive efficiency and reduce supply chain cost and leveraging technology and our it systems that improve our autozone or ability to serve our customers.
Speaker Change: We believe that this is exactly the right time to invest in these initiatives.
Speaker Change: In order to be ready when industry demand ramps up now I will turn the call over to Jim Meer Jackson.
Speaker Change: Thanks, Bill good morning, everyone for the quarter total sales were $4 3 billion up two 1% our domestic same store sales grew three tenths of a percent.
Speaker Change: International comp was up 13, 7% on a constant currency basis.
Speaker Change: Total company EBIT was down nine tenths of a percent and our EPS was down a 10th of a percent.
Speaker Change: As Phil discussed earlier, we had a headwind from foreign exchange rates this quarter for Mexico, FX rates, we can 13% versus the U S dollar for the quarter, resulting in a $58 million headwind to sales of $17 million headwind to EBIT and a 68 a share drag on EPS versus the prior year.
Speaker Change: We continue to deliver solid results despite the challenging economic backdrop the field as discussed earlier as the efforts of our Autozone is in our stores and distribution centers have enabled us to continue to grow our business.
Speaker Change: Let me take a few moments to elaborate on the specifics in our P&L for Q1, I'll start with giving a little more color on sales on our growth initiatives, starting with our domestic commercial business for the first quarter, our domestic <unk> sales increased three 2% to $1 1 billion.
Speaker Change: For the quarter, our domestic commercial sales represented 30% of our domestic auto part sales and 26% of our total company sales. Our average weekly sales per program were $15900 flat to last year as we lap several new programs that we opened that are not at maturity.
Speaker Change: Our commercial acceleration initiatives are continuing to deliver good results as we grow share by winning new business and increasing our share of wallet with existing customers. We continue to 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.
Speaker Change: We opened 37 net new programs, finishing with 5935 total programs importantly, we continue to have lots of opportunities to expand sales per program and open new ones, we plan to aggressively pursue growth across our domestic commercial customers, which represents a tremendous sales opportunity for our company.
Speaker Change: To support our commercial growth, we now have 111 Mega hub locations, while I mentioned, a moment ago that our commercial weekly sales per program average was $15900 per program.
Speaker Change: The 111 Mega hubs averaged significantly higher sales and are growing much faster than the balance of the commercial business in Q1.
Speaker Change: As a reminder, our mega hubs typically carry over 100000, Skus and drive tremendous sales lift inside the store box as well as serve as an expanded assortment 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 the fulfillment capability for the surrounding autozone stores is giving our customers access to thousands of additional parts and lifting the entire network.
Speaker Change: We have now set a new objective to have just under 300 Mega hubs at full build out.
Speaker Change: Our customers are excited by our commercial offering as we deploy more parts in 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.
Speaker Change: 4% for the quarter.
Speaker Change: Poorly we maintained share in DIY, and we're well positioned when the industry Reaccelerate as.
Speaker Change: As Phil mentioned, we saw traffic down one 8% along with a positive one 3% ticket growth as.
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 our long term historical trends for the business driven by changes in technology and the durability of new parts. Our DIY share has remained strong behind our growth initiatives.
Speaker Change: Accordingly, the market is experiencing 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. These dynamics ticket growth growth initiatives and macro Carpark tailwind. We believe will continue to drive a resilient DIY business environment for FY 'twenty.
Speaker Change: <unk>.
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. During the quarter. We opened six new stores in Mexico to finish with 800 stores and five new stores in Brazil, ending with 132, our same store sales grew 13, 7% on a constant currency basis and 1%.
Speaker Change: On a reported basis, we remain committed to international and given our success in these markets, we will accelerate the store opening pace going forward.
Speaker Change: Bullish on international being an attractive and meaningful contributor to autozone future sales and operating profit growth.
Speaker Change: Now, let me spend a few minutes on the rest of the P&L and gross margins for the quarter. Our gross margin was 53% up 16 basis points. This quarter, while we did not book any LIFO adjustments, we did have a $2 million unfavorable LIFO comparison of last year.
Speaker Change: Excluding LIFO from both years, we had a 21 basis point improvement in gross margin driven by continued improvement in merchandising margins.
Speaker Change: As a reminder for Q2 last year, we had a $14 million credit and we do not expect to have any credits. This Q2 as freight cost increases are offsetting deflation in the remainder of our cost of goods.
Speaker Change: Quarter end, we still have $19 million in cumulative LIFO charges, yet to be reversed through our P&L and as I've said previously once we credit back the $19 million through the P&L, we will not take any more credits and we will begin to rebuild and unrecorded LIFO reserve.
Speaker Change: Moving to operating expenses, our expenses were up four 5% versus last year is SG&A as a percentage of sales Deleveraged 75 basis points, while we are managing our SG&A spend in a slower growth environment in a disciplined way we will continue to invest at an accelerated pace in <unk> and capex to underpin our growth initiatives. We believe these.
Speaker Change: Investments will pay dividends in customer experience speed and productivity and are important enablers for us to gain future market share.
Speaker Change: We will remain committed to being disciplined on SG&A growth as we move forward and we will manage our SG&A.
SG&A expenses in line with sales growth over time.
Speaker Change: Moving to the rest of the P&L EBIT for the quarter was $841 million down nine tenths of a percent versus the prior year as I previously said FX rates reduced our EBIT by approximately $17 million on a constant currency basis, our EBIT would have been up approximately 1%.
Speaker Change: Interest expense for the quarter was $107 $6 million up 18% from Q1, a year ago as our debt outstanding at the end of the quarter was $9 billion versus $8 $6 billion a year ago.
Speaker Change: We are planning interest in the $108 million range for the second quarter of FY, 'twenty five versus $102 $6 million last year higher.
Speaker Change: Higher debt levels and borrowing rates across the curve are continuing to drive interest expense increases.
Speaker Change: For the quarter, our tax rate was 23% and up from last year's first quarter or 21, 6%. This quarter's rate benefited 72 basis points from stock options exercised while last year. It benefited 147 basis points.
Speaker Change: For the second quarter of FY 'twenty five we suggest investors model us at approximately 23, 4% before any assumption on credits due to stock option exercises.
We are assuming Q2 option exercises or less in Q2 last year, which had $23 million of credits.
Speaker Change: Moving to net income and EPS net income for the quarter was $565 million down four 8% versus last year or.
Speaker Change: Our diluted share count of $17 4 million was four 7% lower than last year's first quarter.
Speaker Change: The combination of lower net income and lower share count drove earnings per share for the quarter to $32 52.
Speaker Change: A 10th of percent for the quarter.
Speaker Change: As a reminder, the unfavorable FX comparison drove our EPS down approximately 68 cents a share.
Speaker Change: Now, let me talk about our free cash flow for the first quarter, we generated $565 million in free cash flow versus $595 million last year in Q1, driven by lower net income and higher Capex, we expect to continue being an incredibly strong cash flow generator going forward.
Main committed to turning meaningful amounts of cash to our shareholders regarding our balance sheet, our liquidity position remains very strong and our leverage ratio finished at two five times EBITDAR our inventory per store was up five 4% versus Q1 last year, while total inventory increased eight 7% over the same period last year.
Speaker Change: Given by new store growth and inventory placement to support new growth opportunities.
Speaker Change: Net inventory defined as merchandise inventories less accounts payable on a per store basis was negative $166000 versus a negative $197000 last year and negative $163000 last quarter. As a result accounts payable as a percent of gross inventory finished the quarter at 119, 5% versus.
Speaker Change: Last year's Q1 of 124, 4%.
Speaker Change: Lastly, estimate a moment on capital allocation and our share repurchase program.
Speaker Change: Repurchased $505 million of Autozone stock in the quarter and at quarter end, we had $1 7 billion remaining under our share buyback authorization.
Speaker Change: Our ongoing strong earnings balance sheet and powerful free cash continues to allow us to return a significant amount of cash to our shareholders through our buyback program.
Speaker Change: We have bought back over 100% of outstanding shares of stock since our buyback inception 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 excess cash to our shareholders. Our strategy continues to work.
Speaker Change: We're growing our market share and improving our competitive positioning in a disciplined way.
Speaker Change: As we look forward to the balance of our fiscal year, we're bullish on our growth prospects behind the resilient DIY business, a fast growing international business and domestic commercial business that is continuing to grow share.
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 autozone before handing the call back to Phil I want to remind you that we report revenue comps on a constant currency basis to reflect our operating performance. We generally don't take on transactional risk.
Speaker Change: So our results primarily reflect the translation impact for reporting purposes.
Speaker Change: As I mentioned earlier in the quarter foreign currency resulted in a headwind on revenue and the EPS if yesterday's spot rates held for Q2, and we expect approximately a $95 million drag on revenue of $30 million drag on EBIT and a $1 30, a share drag on EPS and if rates remained at the current spot rates for the full fill.
Speaker Change: Full year of 2025, we would expect approximately a $355 million impact to revenues.
Speaker Change: $20 million impact to EBIT, and a $4 90, a share impact the full year EPS and now I'll turn it back to Phil.
Speaker Change: Thank you Jim here, we are proud of our autozone or across the globe and the results. Our team delivered this past quarter, we promise to continue to focus on improving our execution and driving while customer service.
Speaker Change: While our sales increases don't reflect it quite yet we believe we've made meaningful progress on our initiatives and are well positioned to grow sales across our domestic and international store basis with both our retail and our commercial customers are gross margins are solid and our operating expense is appropriate for future growth.
Speaker Change: We continue to put our capital at work, where it will have the biggest impact on sales our stores distribution centers and leveraging technology to build a superior customer 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 in our domestic commercial business and continuing our momentum in international.
Speaker Change: We believe we have a solid plan in place for the balance of the fiscal year.
Speaker Change: We know our focus on parts availability and our Wow customer service culture will lead to sales growth and gains in market share. We're excited to start calendar 2025.
Speaker Change: In September we hosted our field leadership teams here in Memphis for Autozone is 2025 national sales meeting the energy and excitement about our plans and what we can accomplish was fantastic our operating theme for this new year, great people Great service was on full display over those four days.
Speaker Change: Could not be more proud of the effort being exhibited across our organization.
Speaker Change: This year, we will focus on our auto centers like never before we are determined to improve upon an already outstanding culture of customer service.
Speaker Change: In this difficult macro environment, we cannot rest on our laurels, we have to make sure every store is staffed right every hour of the day, our processes need to function correctly always we must meet our store opening goals and timelines simply put we have to remain the execution machine that we have always been.
Speaker Change: Fiscal 2025 top priorities are based on improving execution and wild customer service, we will continue to invest in the following strategic projects.
Speaker Change: Re accelerating our new hub and Mega hub openings as we said recently, we now plan to have more than 285 domestic hubs and Mega hubs. These stores do take time, but we are incredibly excited about their continued performance.
Speaker Change: Effectively and efficiently opening our new distribution centers and optimizing our direct import facility.
Speaker Change: Ramping up our domestic and international store growth as discussed our international teams posted same store sales comps on a constant currency base of nearly 13.
Speaker Change: There are 14% continuing several years of strong growth.
Speaker Change: And most importantly, reaccelerate, our domestic commercial sales growth.
Speaker Change: As the macro environment has remained challenging auto centers have been focused on improving execution and leveraging our culture of outstanding customer service. The automotive aftermarket is always going to go through change and we look to take advantage of that change and focus on gaining additional market share. We are excited about what we can accomplish in our auto centers of <unk>.
Speaker Change: <unk> delivered delivering better results in 2025, we believe Autozone is best days are ahead of us now.
Speaker Change: Now, we'd like to open up the call for questions.
Speaker Change: Certainly.
Speaker Change: At this time, we will be conducting the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue.
Speaker Change: Participants using speaker equipment, it may be necessary to pick up your handset before pressing Mr. Keyes.
Do ask to please limit yourself to two questions. If you have any additional questions you may reenter the queue by pressing star one please hold just a moment, while we poll for any questions.
Speaker Change: Your first question is coming from Bret Jordan with Jefferies. Please pose your question your line is live.
Bret Jordan: Hey, good morning, guys.
Speaker Change: Good morning, everyone and Brett Hey, could you talk a little bit about what youre seeing on the West Coast is one of your peers is shutting stores and exiting that region I guess in the short term, how you see inventory liquidation and maybe any price disruption I think in the longer term.
How you see that market share filtering out obviously there'll be some share gain potential.
Speaker Change: Yes, I would say.
Speaker Change: This is early innings and what they're doing obviously there is they're closing their stores, they've ramped up their discounting and things of that nature.
Speaker Change: It's very early.
Speaker Change: And as you as you could imagine.
Speaker Change: It's hard to tell what that looks like over time, I think that'll be a benefit for us out there as we will see share gains as they exit those markets.
Speaker Change: They are discounting that could potentially be a slight headwind in the short term.
Speaker Change: As you know there's discounted prices in what's a pretty inelastic business.
Speaker Change: And it's kind of wait and see at this point, but long term I think those will be great opportunities for us to gain some market share out there.
Speaker Change: Okay, and then could you talk about the cadence of the first quarter I guess in into the second quarter. I think you called out that the first four weeks, where the weakest in commercial but could you talk about what we've seen as winter has begun to show up.
Speaker Change: Yes, that's correct. The first if you think about the DIY business.
We talked we've talked a lot about the underperformance in kind of those rust belt markets, that's kind of continued but pretty consistent and there wasn't a whole lot of weather impact.
Speaker Change: In the quarter on the DIY side of the business. The commercial business. Those first four weeks is where those hurricanes came across a lot of the southeast markets.
Speaker Change: That has a more material impact initially on the commercial side of the business as those shops get disrupted.
And that's what we saw in the first four weeks of the quarter and then it kind of returned to more normal volumes in the back half of the quarter on the commercial side of the business Okay.
Speaker Change: Okay have you seen in the later part of the quarter and the beginning of the second quarter improved with cold weather or is it really not meaningful enough yet again in a quarter just ended.
It's so early in the quarter, we like the initial part of the winter, but we've got a long way to go in winter to see that materialize and again I think what matters. The most over time.
Speaker Change: Is does that those rustbelt markets.
Speaker Change: The cold and snow markets do they get precipitation and cold weather throughout the winter, which really hasn't happened over the last couple of years.
Speaker Change: Great. Thank you.
Speaker Change: Thanks.
Speaker Change: Your next question is coming from Simeon Gutman with Morgan Stanley. Please pose your question your line is live.
Good morning, everyone. My question is on operating income growth and you mentioned ex the FX. It would have been up slightly my question is if this backdrop of sluggish macro doesn't change in comps more or less stay in this area.
It's so early in the quarter, we like the initial part of the winter, but we've got a long way to go in winter to see that materialize and again I think what matters. The most over time is does the rust belt markets.
Speaker Change: Is that a good a good way to think about EBIT I know you don't guide, but my question is.
Can you strengthened comps.
The cold and snow markets do they get precipitation and cold weather throughout the winter, which really hasn't happened over the last couple of years.
Speaker Change: With keeping EBIT in this slightly up range or are you debating to invest more.
For some period of time and taken a little bit lower.
Speaker Change: Great. Thank you.
Speaker Change: Yes, I think a couple of dynamics stand out to US one as you know we do expect the <unk>.
Speaker Change: Thanks.
Speaker Change: Your next question is coming from Simeon Gutman with Morgan Stanley. Please pose your question your line is nice.
Speaker Change: Comps to improve as we move through the year.
Simeon Gutman: Good morning, everyone. My question is on operating income growth and you mentioned ex the FX. It would have been up slightly my question is if this backdrop of sluggish macro doesn't change in comps more or less stay in this area.
Speaker Change: And we're positioning ourselves both in terms of inventory and infrastructure to take advantage of some of those opportunities I think the second dynamic is that we expect gross margins to remain strong.
Speaker Change: As we move through we're taking good actions on the merchandising margin side of the business and the teams are doing a fantastic job of executing there and then the third is we're able to manage our SG&A and a very disciplined way now we are going to invest.
Simeon Gutman: Is that a good a good way to think about EBIT I know you don't guide, but my question is.
Can you strengthened comps.
Simeon Gutman: With keeping EBIT in this slightly up range or are you debating to invest more.
In infrastructure and opportunities to take advantage of of sort of the competitive environment and the opportunities for us to grow share, but we believe that we can do that without it having a neck.
Speaker Change: For some period of time and take it a little bit lower.
Speaker Change: Yes, I think a couple of dynamics stand out towards one as you know we do expect.
Speaker Change: Comps to improve as we move through the year.
Speaker Change: Negative impact on operating income and a lower comp environment, you would expect us to be disciplined in the middle of the P&L, but we are going to invest in a disciplined way to take advantage of those growth opportunities.
Speaker Change: And we're positioning ourselves both in terms of inventory and infrastructure to take advantage of some of those opportunities I think the second dynamic is that we expect gross margins to remain strong.
Speaker Change: Okay. That's helpful. Jimmy My question My second question, a follow up it's on like.
Speaker Change: As we move through we're taking good actions on the merchandising margin side of the business and the teams are doing a fantastic job of executing there and then a third as you know we're able to manage our SG&A and a very disciplined way now we are going to invest in infrastructure and opportunities to take advantage of of sort of the <unk>.
Like pricing and CPI and tariffs. So the CPI is picking up curious if theres any bearing.
Speaker Change: So the real world with it they are getting.
Speaker Change: Getting into 3% to 4% range year over year, and then when Biden put back the section 301 tariffs earlier in the year. Some prices went up but just curious how that example could play into potential future terrorists, meaning did the suppliers take them did they take price are you taking pricing how is that working.
Speaker Change: Competitive environment and the opportunities for us to grow share, but we believe that we can do that without it having a negative.
Yes.
Speaker Change: The impact on operating income, so and a lower comp environment, you would expect us to be disciplined in the middle of the P&L, but we are going to invest in a disciplined way to take advantage of those growth opportunities.
Tariffs are an interesting question and I'll start off by saying at this point, we really don't know.
Speaker Change: What's going to happen our merchant teams have been dealing with tariffs now for the better part of a decade and I think if you go back historically and look early on when those tariffs happen. The vast majority of our supply chain was pretty dedicated to.
Speaker Change: Okay. That's helpful. Jimmy or my question My second question a follow up it's on.
Speaker Change: Pricing and C. P I N and tariffs so the CPI is picking up curious if theres any bearing.
Speaker Change: Certain countries of origin since that timeframe, we've done a lot of work to make sure that our country of origin has been diversified.
So the real world with their you know getting into 3% to 4% range year over year, and then when Biden put back the section 301 tariffs earlier in the year. Some prices went up but just curious how that example could play into potential future terrorists, meaning did the suppliers take them did they take price are you taking price like how how is that working.
Speaker Change: We have more than one category in the vast majority more than one provider in the in the category than we had back then and we've become pretty nimble in our supply chain. So.
Speaker Change: We will continue to exercise against that playbook and.
Speaker Change: Yes.
Speaker Change: Tariffs are an interesting question and I'll start off by saying at this point, we really don't know.
Speaker Change: Long term I think this industry has been very disciplined in the pricing strategies and I suspect that that will continue.
Speaker Change: What's going to happen you know our merchant teams have been dealing with tariffs now for the better part of a decade and I think if you go back historically and look early on when those tariffs happen. The vast majority of our supply chain was pretty dedicated to.
But it's very early in this cycle to see what ultimately is going to happen with tariffs I think on the inflation front, while we are starting to see some some moving in CPI I mean, a little bit closer to home we've seen a great start to spike up we expect that to make its way in the cost of goods and ultimately in AR and the pricing and tickets over.
Speaker Change: Certain countries of origin since that timeframe, we've done a lot of work to make sure that our country of origin has been diversified.
Speaker Change: We have more than one category in the vast majority more than one provider in the in the category than we had back then and we've become pretty nimble in our supply chain. So.
Speaker Change: Time.
Speaker Change: And I think the labor markets are thawed, a little bit. So we're not seeing what we saw when we saw hyperinflation there but to the extent that there is some inflation it's.
Speaker Change: As Phil mentioned in his prepared comments, we expect the normal inflation that we see inside the industry to return and that should have a positive impact on what we see in like for like inflation on an SKU basis and as you know this industry has been very disciplined about taking pricing when we see that kind of inflation. So I.
Speaker Change: We will continue to exercise against that playbook.
Speaker Change: And long term I think this industry has been very disciplined in the pricing strategies and I suspect that that will continue.
Speaker Change: But it's very early in this cycle to see what ultimately is going to happen with tariffs and I think on the inflation front. While you know we are starting to see some some moving in CPI I mean, a little bit closer to home we've seen a great start to spike up we expect that to make its way into cost of goods and ultimately in AR and the pricing and tickets over.
Speaker Change: I think net net it will potentially be a tailwind, but it's going to work its way through over a over a relatively slow period of time, we believe.
Speaker Change: Agreed okay. Thanks.
Speaker Change: Your next question is coming from Kate Mcshane with Goldman Sachs. Please pose your question your line is live.
Speaker Change: Time.
Speaker Change: And I think the labor markets are thawed, a little bit. So we're not seeing what we saw when we saw hyperinflation there but to the extent that there is some inflation it's.
Mark Jordan: Good morning, This is mark Jordan on for Kate Mcshane.
Just thinking about share repurchases it came in a little bit lower than we were expecting for the quarter how.
Speaker Change: As Phil mentioned in his prepared comments, we expect the normal inflation that we see inside the industry to return and that should have a positive impact on what we see in like for like inflation on an SKU basis and as you know this industry has been very disciplined about taking pricing when we see that kind of inflation. So I think net net it will potentially be a tail.
Mark Jordan: How should we think about capital allocation going forward here, how do you feel about current debt levels.
Mark Jordan: Are you planning on still rolling over the notes that are coming due in April of this year.
Mark Jordan: Yes, so no change in our capital allocation policy as.
Mark Jordan: As I mentioned, we're going to be a significant free cash flow generator.
Speaker Change: But it's going to work its way through over a.
Mark Jordan: We're going to hold our leverage target in the two five times area that gives us a tremendous amount of financial firepower to invest in our existing assets to grow our business and give us significant amount of cash back to shareholders and we're going to continue to run that play over time.
Speaker Change: A relatively slow period of time, we believe.
Speaker Change: Agreed okay. Thanks.
Speaker Change: Your next question is coming from Kate Mcshane with Goldman Sachs. Please pose your question your line is live.
Speaker Change: Good morning, This is mark Jordan on for Kate Mcshane.
Mark Jordan: You can expect us as it relates to our debt stack to continue to manage to a two five times leverage target and that will impact what we do.
Speaker Change: Just thinking about share repurchases it came in a little bit lower than we were expecting for the quarter.
Speaker Change: How should we think about capital allocation going forward here, how do you feel about current debt levels.
Mark Jordan: On any debt that's due.
Speaker Change: Okay, perfect and just as a follow up kind of piggybacking on the tariff comments that were made earlier do you have the option and do you plan on maybe accelerating some purchases ahead of any tariffs that might come across.
Speaker Change: Are you planning on still rolling over the notes that are coming due in April of this year.
Speaker Change: Yeah, So no change in our capital allocation policy as.
Speaker Change: As I mentioned, we're going to be a significant free cash flow generator.
Yes, I mean, our merchants are looking at that today.
Speaker Change: We're going to hold our leverage target in the two and a half times area that gives us a tremendous amount of financial firepower to invest in our existing assets to grow our business and give us significant amount of cash back to shareholders and we're going to continue to run that play over time.
Speaker Change: Keep in mind, the vast majority of the categories that we operate in are pretty low turning.
We will take opportunities where that makes sense to do that.
Speaker Change: And the merchants are pretty studious and adept in this type of.
Speaker Change: Of of environment, and we'll act accordingly, what's in the best.
Speaker Change: You can expect us as it relates to our debt stack to continue to manage to a two five times leverage target and that will impact what we do.
Speaker Change: Thoughts for us and obviously for our customer.
Speaker Change: Thank you.
On any debt that's due.
Your next question is coming from Michael Lasser with UBS. Please pose your question. Your line is open.
Speaker Change: Okay perfect.
Speaker Change: As a follow up kind of piggybacking on the tariff comments that were made earlier do you have the option and do you plan on maybe accelerating some purchases ahead of any tariffs that might come across.
Good morning. Thank you so much for taking my question.
Speaker Change: Given the extra week, you had last year in your calendar.
Speaker Change: Yeah, our I mean, our merchants are looking at that today keep in mind. The vast majority of the categories that we operate in are pretty low turning.
Speaker Change: Did the shift in how you measure your same store sales impact.
Speaker Change: This quarter and how would you expect that to play out over the next few quarters.
Speaker Change: We will take opportunities where that makes sense to do that.
Speaker Change: That's a good question, Michael we didn't talk about it specifically, but it did impact our comps about a point in the quarter negatively impacted our comps about a point in the quarter and we would expect just given the shifts in the calendar.
Speaker Change: And the merchants are pretty studious and adept in this type of of of environment, and we'll act accordingly, what's in the best.
Speaker Change:
Speaker Change: Thoughts for us and obviously for our customer.
Speaker Change: That potentially pick up an extra bump later in the spring that could impact our comps, but it was worth about a point and it will play out over the next couple of quarters or so, particularly as we get into the spring months.
Speaker Change: Thank you.
Speaker Change: Your next question is coming from Michael Lasser with UBS. Please pose your question your line of sight.
Michael Lasser: Good morning. Thank you so much for taking my question.
Speaker Change: Given the extra week, you had last year in your calendar.
Speaker Change: The Geneva, it'll be continue to be a drag in the next quarter and then it will reverse in the third and fourth quarter of the year is that right.
Speaker Change: The shift.
Speaker Change: And how you measure your same store sales impact your comp this quarter and how would you expect that to play out over the next few quarters.
Speaker Change: That's the right way to think about it.
Speaker Change: Okay and my follow up question is if you look at the story.
Speaker Change: That are being serviced by the hubs what is the what is the average commercial sales per week in those locations versus stores that are not currently being serviced.
That's a good question, Michael we didn't talk about it specifically, but it did impact our comps about a point in the quarter negatively impacted our comps about a point in the quarter and we would expect just given the shifts in the calendar that potential.
Speaker Change: By a hub and is it a good rule of thumb to think about that would be.
Speaker Change: Potentially pick up an extra bump later in the spring that could impact our comps, but it was worth about a point and it will play out over the next couple of quarters or so, particularly as we get into the spring months.
Speaker Change: The less productive commercial programs could reach the more.
Speaker Change: Commercial programs as you accelerate the rollout of these over the next several quarters, especially given the consolidation that's happening in the market with all of these foreclosures. Thank you.
Did you mean, it'll be a continue to be a drag in the next quarter and then it will reverse in the third and fourth quarter of the year is that right.
That's right way to think about it.
Speaker Change: Okay and my follow up question is if you look at the stores that are being serviced by the hubs.
Yeah, Michael Great Great question, and we're not we don't break out all those numbers and share them publicly but you can suffice it to say that when a hub or a mega hub gets put into a market those stores over perform a satellite store as you would probably imagine they have deeper inventory and they also lift the market.
Speaker Change: Is it what is the average commercial sales per week in those locations versus stores that are not currently being serviced.
Speaker Change: By our hope and is it a good rule of thumb for us to think about that would be.
Speaker Change: Frankly on both sides on DIY and the commercial side of the business.
Speaker Change: The less productive commercial programs, including reach the more.
Speaker Change: But delineating those is.
Speaker Change: Inductive commercial programs as you ask.
Speaker Change: In many cases hubs may have been serviced stores may have been serviced by a mega hub that was say.
Speaker Change: Accelerate the rollout of these hubs.
Speaker Change: Over the next several quarters, especially given the consolidation that's happening in the market with all of these foreclosures. Thank you.
Speaker Change: 100, or 200 miles away as you can imagine if you put closer inventory closer to the customer it lifts all of those boats in that market. If you will.
Speaker Change: Yeah, Michael Great Great question, and we're not we don't break out all those numbers and share them publicly but you can suffice it to say that when a hub or a mega hub gets put into a market those stores over perform a satellite store as you would probably imagine they have deeper inventory and they also lift the market.
Speaker Change: So it's better for US again today, we have.
Speaker Change: If you think about our our store placement that where we have these deeper inventories in both hubs and Mega hubs, we're just under 7%.
Speaker Change: Of our stores, having these deeper assortments closer to them.
Speaker Change: Over time, we will take up those mega hubs pretty significantly and that will lift both DIY and commercial sales in those markets.
Speaker Change: <unk>.
Speaker Change: Frankly on both sides on DIY and the commercial side of the business.
Speaker Change: But delineating those as you know.
Speaker Change: The closer you can get the inventory to the customer the bigger bigger advantage you have.
Speaker Change: In many cases hubs may have been serviced stores may have been serviced by a mega hub that was say.
Hopefully that answers your question.
Speaker Change: 100, or 200 miles away as you can imagine if you put closer inventory closer to the customer it lifts all of those boats in that market. If you will so it's better for US again today, we have you know.
Speaker Change: Your next question is coming from Christopher <unk> with Jpmorgan. Please pose your question your line is live.
Christopher: Thanks. Good morning, guys. So my first question is on the gross margin you talked about the LIFO headwind, presumably there was some DIY mix headwind if you back that out it looks like you're generating 40 basis points of expansion from from lower product cost. So can you talk about what's going on there.
Speaker Change: If you think about our our store placement that where we have these deeper inventories in both hubs and Mega hubs, we're just under 7%.
Of our stores, having these deeper assortments closer to them.
Speaker Change: Over time, we will take up those mega hubs pretty significantly and that will lift both DIY and commercial sales in those markets.
Speaker Change: It seems that level seems pretty consistent.
Speaker Change: With where you've been in the past couple of quarters. So how far you into that initiative and how how much longer do you think we can continue to benefit those that level of improvement.
Speaker Change: Closer you can get the inventory to the customer the bigger bigger advantage you have.
Hopefully that answers your question.
Yes, I mean, we have a few moving pieces in the gross margin line, but I'll say a couple of things number one from a merchandising margin standpoint, we're doing extremely well both in terms of our merchandising the work that we're doing with our supply base.
Speaker Change: Your next question is coming from Christopher <unk> with J P. Morgan. Please pose your question your line is live.
Speaker Change: Thanks. Good morning, guys. So my first question is on the gross margin you talked about the LIFO headwind, presumably there was some DIY mix headwind if you back that out it looks like you're generating 40 basis points of expansion from from lower product cost. So can you talk about what's going on there that.
Speaker Change: The products that we have in the marketplace I feel pretty good with where we are.
Speaker Change: There are a couple of dynamics that are happening, though we're not raising prices as fast as we were when we saw you know sort.
Speaker Change: Sort of more inflation in the marketplace and more like for like inflation. So we're offsetting that to some extent with the.
Speaker Change: Seems that level seems pretty consistent where with where you've been in the past couple of quarters. So you know how far are you into that initiative and how how much longer do you think we can continue to benefit those that level of improvement.
Speaker Change: Tremendous actions that we have for merchandising margin standpoint life.
Speaker Change: LIFO wasn't that big of a deal this quarter, we only had a couple of million dollars of credits last quarter. We didn't book anything in this quarter and you know just given where freight is in some of the inflationary impacts that we've talked about it's not likely that we're booking.
Yeah, I mean, we have a few moving pieces in the gross margin line, but I'll say a couple of things number one from a merchandising margin standpoint, we're doing extremely well both in terms of how we're merchandising the work that we're doing with our supply base.
Speaker Change: LIFO credits next quarter and in fact, we could we could actually see some headwinds just dependent on where.
Speaker Change: The mix of products that we have in the marketplace I feel pretty good with where we are.
Speaker Change: We are.
Speaker Change: And then I'll say the third dynamic that we have is we've got a couple of new Dcs that are coming online and those D. CS are clearly not at maturity and that's a little bit of a drag on the gross margin line. So net net when you when you put it all together I'm very pleased that were up 21 basis points on an ex LIFO basis, I think we're running them.
Speaker Change: There are a couple of dynamics that are happening that we're not raising prices as fast as we were when we saw sort of more inflation in the marketplace and more like for like inflation. So we're offsetting that to some extent with the tremendous actions that we have from merchandising margin standpoint, LIFO. It wasn't that big of a deal.
Speaker Change: Gross margin play like we always do with intensity.
Speaker Change: This quarter, we only had a couple of million dollars of credits last quarter. We didn't book anything this quarter and you know just given where I'm afraid is in some of the inflationary impacts that we've talked about it's not likely that we're booking any LIFO credits next quarter and in fact, we could we could actually see some headwinds just dependent on where.
Speaker Change: And we should be managing gross margins to be positive as we move through the back half of the year.
Speaker Change: Got it and then as it relates to the.
Speaker Change: The balance sheet I know in the previous previous question and talk about staying around two five times based on <unk>.
Speaker Change: So you don't guide, but you know based on.
Speaker Change: We are and.
Speaker Change: And then I'll say the third dynamic that we have as you know we've got a couple of new Dcs that are coming online and those D. CS are clearly not at maturity and that's a little bit of a drag on the gross margin line. So net net when you when you put it all together I'm very pleased that were up 21 basis points on an ex LIFO basis, I think we're running them.
Speaker Change: Maintaining the current level of debt assuming more of a gradual improvement in comps over the balance of the year. It would seem like it could it could really draw down on the amount of share repurchases you could make in the past we've seen you move up a little bit higher than two and a half maybe into the $2 six to eight range.
Speaker Change: Gross margin play like we always do with intensity and you know we should be managing gross margins to be positive as we move through the back half of the year.
Speaker Change: To what extent.
Speaker Change: Do you see flexibility in your ability to.
Speaker Change: Just take it up and keep that investment grade rating.
Yes, I mean, we clearly have a tremendous amount of flexibility there and you'll hear me often talk about it as the two and a half times area.
Got it and then as it relates to.
Speaker Change: The balance sheet I know in the previous previous question and talk about you know staying around two and a half times based on I know you don't guide, but you know based on.
Speaker Change: And so that two five times area. It gives us the ability at different points in time to tick it up a little bit or even ticked down a little bit as you've seen us do in the past so.
Speaker Change: Maintaining the current level of debt assuming more of a gradual improvement in comps over the balance of the year. It would seem like you know it could it could really draw down on the the amount of share repurchases you could make in the past we've seen you move up a little bit higher than two and a half maybe into the $2 six to eight range.
Speaker Change: But we like being in that two five times area as I said it gives us a tremendous amount of flexibility.
Speaker Change: Just in the business.
Speaker Change: You know to grow.
Speaker Change: With our growth initiatives and to give a lot of cash back to shareholders and we're going to continue to run that play over time.
Speaker Change: Great. Thanks very much.
Speaker Change: To what extent.
Yes.
Speaker Change: Do you see flexibility in and your ability to just take it up and keep that investment grade rating.
Speaker Change: Your next question is coming from Steven Forbes with Guggenheim Securities. Please pose your question your line is live.
Speaker Change: I mean, we clearly have a tremendous amount of flexibility there and you hear me often talk about it as the two five times area.
Steven Forbes: Good morning, Phil.
Steven Forbes: Maybe just a follow up on the Mega hubs and hubs strategy I believe you raised the target for the end state to 300, maybe 200, plus so curious what drove that so maybe learnings that are driving that decision and if theres been any change in the planned cadence of openings over the next years to come.
Speaker Change: And so that two and a half times area. It gives us the ability at different points in time to pick it up a little bit or even ticked down a little bit as you've seen us do in the past so but.
Speaker Change: But we like being in that two five times area as I said it gives us a tremendous amount of flexibility.
Steven Forbes: Yeah, so the the change.
Speaker Change: First in the business.
Steven Forbes: <unk> strategy.
Steven Forbes: If you go all the way back ultimately we thought we would have somewhere between 25% and 40 of these mega hubs, a long time and it's a long time ago.
Speaker Change: You know to grow.
Speaker Change: With our growth initiatives and to give a lot of cash back to shareholders and we're going to continue to run that play over time.
Steven Forbes: And then we updated we've updated the guidance several times.
Speaker Change: Great. Thanks very much.
Steven Forbes: The benefit of these stores as we continue to see outsized performance from the hubs and specifically the Mega hubs.
Speaker Change: Your next question is coming from Steven Forbes with Guggenheim Securities. Please pose your question your line is live.
Steven Forbes: And it's kind of interesting as you look back over time, we kind of thought.
Good morning, Phil.
Speaker Change: Bill maybe just a follow up on the Mega hubs and hubs strategy I believe you raised the target for the end state to 300 from maybe 200, plus so curious what drove that so maybe any learnings that are driving that decision and if theres been any change in the planned cadence of openings over the next years to come.
Steven Forbes: We've reached the the hype of what these stores will be able to produce for us and at the end of the day, they continue to grow and become more and more productive as we continue to optimize our inventory in those stores.
Steven Forbes: To leverage the power of our brands add incremental brands and incremental assortment and they help on both we talk specifically about the commercial side of the business, but they do help on both sides of the business they kind of become epicenters for the surrounding stores and they helped drive both commercial and DIY sales results. So we like this asset.
Speaker Change: Yeah. So the.
Speaker Change: The change in strategy. If you go if you go all the way back ultimately we thought we would have somewhere between 25% and 40 of these mega hubs long time, it's a long time ago.
Speaker Change: And then we updated we've updated the guidance several times.
Steven Forbes: As I've said before we wish we can open them faster they do take time.
Speaker Change: The benefit of these stores as we continue to see outsized performance from the hubs and specifically the Mega hubs.
Steven Forbes: <unk> now got a.
Steven Forbes: Pipeline full of about 80 of these stores that are essentially ready to go.
And it's kind of interesting as you look back over time, we kind of thought.
Speaker Change: We've reached the the hype of what these stores will be able to produce for us and at the end of the day, they continue to grow and become more and more productive as we continue to optimize our inventory in those stores.
But it does take us almost two years to get these stores open on average so it takes time, but we're excited about them again, just under 7% of our stores today have stores with.
Speaker Change: To leverage the power of our brands, adding incremental brands and incremental assortment and they all help on both we talk specifically about the commercial side of the business, but they do help on both sides of the business they kind of become epicenters for the surrounding stores and they helped drive both commercial and DIY sales results. So we like this asset.
Steven Forbes: Deeper assortments, thats, including hubs and Mega hubs and as a reminder, the mega hubs have roughly 100000 skus in them and the hubs have somewhere between 45 and 60000 Skus and again, we like these assets and we're going to go as fast as we can to keep opening up I think one of the things you've heard me mentioned over the last couple of years is that.
Speaker Change: As I've said before we wish we could open up faster they do take time Jimmy.
Steven Forbes: We were testing Mega hub density in several markets and as we've.
Steven Forbes: Wrapped up those tests one of the things that.
<unk> now got a pipeline full of about 80 of these stores that are essentially ready to go but.
Steven Forbes: We've learned is that we can jam mega hubs closer together.
Speaker Change: But it does take us almost two years to get these stores open on average so it takes time, but we're excited about them again, just under 7% of our stores today have stores with.
Steven Forbes: Very little in terms of cannibalization, so to Phil's point, when we put those those boxes in the marketplace, we're seeing a lift to both the DIY and the commercial business. So as we've wrapped up that Mega hub density tests, that's given us a lot of confidence about the.
Speaker Change: Deeper assortments, thats, including hubs and Mega hubs and as a reminder, the mega hubs have roughly 100000 skus in them and the hubs have somewhere between 45 and 60000 Skus and again, we like these assets and we're going to go as fast as we can to keep opening them. Yeah. I think one of the things you've heard me mentioned over the last couple of years is that.
Steven Forbes: The number that we can put into the marketplace, where we should put them in as we said we were rapidly building the pipeline moving forward.
Speaker Change: And then maybe as a follow up sticking with real estate top focus area ramping up store growth you gave targets in the past for sort of out year domestic and international stores per year and any updates on how we should be reframing are rethinking.
Speaker Change: We were testing Mega hub density in several markets and as we've wrapped up those tests one of the things that.
Speaker Change: We've learned is that we can jam mega hubs closer together.
Speaker Change: The curve or the slope of new store openings.
Speaker Change: We see very little in terms of cannibalization so to Phil's point, when we put those those boxes in the marketplace, we're seeing a lift to both the DIY and the commercial.
Speaker Change: So Phil smiling at me.
Speaker Change: If it happens.
Speaker Change: One of my Big Kpis inside of the company, but we feel very good about the pace that we're that we're ramping up stores, we're going to we're going to open.
Speaker Change: Business, so as we've wrapped up that Mega hub density tests, that's given us a lot of confidence about the number that we can put into the marketplace, where we should put them in as we said we are rapidly building the pipeline moving forward.
Speaker Change: Significantly more stores domestically this year than we did last year, they will be back half loaded.
Speaker Change: And then as Phil talked about in his prepared comments, we will open roughly 100 stores internationally here. So the target of doing you know.
And then maybe as a follow up sticking with real estate, a top focus area ramping up store growth you gave targets in the past for sort of out year domestic and international stores per year and any updates on how we should be reframing. We're rethinking.
Speaker Change: 300, domestic and 200 international we're on the right glide path to do that towards the end of the decade.
Speaker Change: Rebuilt our our store development pipelines here, we've got some attractive opportunities, we're going as fast as we can to get them open and you know this will be a good.
Speaker Change: The curve or the slope of new store openings.
Speaker Change: So Phil smiling at me.
Speaker Change: A significant piece of our growth strategy as we move forward.
Happens.
Speaker Change: One of my Big Kpis inside of the company, but we feel very good about the pace that we're that we're ramping up stores, we're going to we're going to open a significantly more stores domestically. This year than we did last year, they will be back half loaded and.
Speaker Change: I think I would say, we're much more confident in our ability to hit.
Speaker Change: Those timelines for this year and get towards that roughly 500 stores open in all markets domestically being roughly 300 in international 200 by that.
Speaker Change: And then as Phil talked about in his prepared comments, we will open roughly 100 stores internationally here. So the target of doing you know 300 domestic and 200 international we're on the right glide path to do that towards the end of the decade.
Speaker Change: 28 timeframe that Jimmy mentioned, so we feel good about where we're headed again these stores take a long time that the tales on these stores are pretty long from the time, you decided to open up a store to the day. It actually brings up its first sale takes quite a bit of time, but we're excited about where we're headed and feel pretty confident that we'll be able to meet our goals.
Speaker Change: Rebuilt our our store development pipelines here, we've got some attractive opportunities, we're going as fast as we can to get them open and you know this will be a good.
Speaker Change: Thank you.
Speaker Change: Your next question is coming from Steven Zircon with Citi. Please pose your question your line is live.
Speaker Change: A significant piece of our growth strategy as we move forward.
Great. Good morning, Thanks, very much for taking my question I wanted to focus on the <unk>.
Speaker Change: I think I would say we are much more confident in our ability to hit.
Speaker Change: Those timelines for this year and get towards that roughly 500 stores open in all markets domestically being roughly 300 in international 200 by that too.
Speaker Change: Sequentially it looks like the comps got a little bit weaker now you've called out some weakness in those first four weeks, but could you just talk through how transactions performed do you attribute the sequential step down largely those first four weeks.
Speaker Change: 28 timeframe that <unk> mentioned, so we feel good about where we're headed again these stores take a long time.
Speaker Change: There anything you've seen in the industry that would suggest the overall industry backdrop for difm's gotten a little bit weaker yes.
Sales on these stores are pretty long from the time, you decided open up a store to the day. It actually brings up its first sale takes quite a bit of time, but we're excited about where we're headed and feel pretty confident that we'll be able to meet our goals.
Speaker Change: Yes, we did we did decelerate.
Speaker Change: Elevate a little bit from our Q4 comp.
Speaker Change: Comp.
Speaker Change: The first four weeks we're <unk>.
Speaker Change: Thank you.
Speaker Change: Definitely impacted and mostly in those markets, where we saw the impacts from those hurricanes.
Speaker Change: Your next question is coming from Steven second with Citi. Please pose your question your line is live.
Speaker Change: Kind of think about what we've talked about with transactions and ticket average that ticket average on the commercial side of the business has been more muted. Although we are seeing some transaction growth, which we're pretty happy about.
Speaker Change: Great. Good morning, Thanks, very much for taking my question I wanted to focus on the D. I F N.
Speaker Change: Sequentially it looks like the comps got a little bit weaker now you've called out some weakness in those first four weeks, but could you just talk through how transactions performed do you attribute the sequential step down largely those first four weeks.
Speaker Change: We exited the quarter with some improving comps versus the first four weeks.
Speaker Change: There are lingering effects to those hurricanes and I'll also say we have if you look inside of our commercial business, we don't share all this detail, but if.
Speaker Change: There anything you've seen in the industry that would suggest the overall industry backdrop for difm's gotten a little bit weaker yes.
Speaker Change: If you think about any of our customers that are new and used car related those segments of business have been pretty poor over the last couple of quarters not so sure that segment of business respond as quickly as you think about the new car sales used car sales are down over the.
Yeah, we did we did decelerate a little bit from our Q4 comp.
Speaker Change: Total comp.
Speaker Change: The first four weeks were.
Speaker Change: Definitely impacted and mostly in those markets, where we saw the impacts from those hurricanes. If you kind of think about what we've talked about with transactions and ticket average that ticket average on the commercial side of the business has been more muted. Although we are seeing some transaction growth, which we're pretty happy about we exited the quarter with some improve.
Speaker Change: The.
Speaker Change: He called the pandemic highs of.
Speaker Change: Over 40 million used cars sold in a year in interest rates continue to be high so I'm not sure. Those particular segments recover we do like what we see in the other parts of our business. The uds customers are pretty resoundingly and positive area and we think thats a positive trend for us going forward.
Speaker Change: <unk> comps versus the first four weeks.
Speaker Change: You know there are lingering effects to those hurricanes and I'll also say we have if you look inside of our commercial business, we don't share all this detail, but if.
Speaker Change: Okay. That's helpful. And then just to shift SG&A dollar growth rate was one of the lowest in quite some time is there anything to call out there in terms of some of the fixed cost pressure on the business, maybe wage inflation is that moderating or and how do you think about that SG&A growth rate over the balance of the year.
Speaker Change: If you think about any of our customers that are new and used car related those segments of business have been pretty poor over the last couple of quarters not so sure that segment of business respond as quickly as you think about the new car sales used car sales are down over the.
Speaker Change: Yes, I mean, what we've said is that we're going to grow SG&A in a disciplined way as we continue to.
Speaker Change: The.
Speaker Change: He called the pandemic highs of <unk>.
Over 40 million used cars sold in a year and.
Speaker Change: Our focus on growing our business as we move forward.
Speaker Change: And interest rates continue to be high.
Speaker Change: We're continuing to invest at a very healthy clip and our growth initiatives.
Speaker Change: So I'm not sure of those particular segments recover we do like what we see in the other parts of our business. The uds customers are are pretty resoundingly and positive area and we think that's a positive trend for us going forward.
Speaker Change: That are really focused on speed and productivity and improving our customer service levels. We.
Speaker Change: We have seen wages are cool off some and so you know that.
Speaker Change: Okay. That's helpful. And then just to shift SG&A dollar growth rate was one of the lowest in quite some time is there anything to call out there in terms of some of the fixed cost pressure in that business, maybe wage inflation is that moderating or and how do you think about that SG&A growth rate over the balance of the year.
Speaker Change: That has given us an opportunity to not see the same sort of growth rates that we saw when SG&A was.
Speaker Change: Significantly more elevated the growth rate in SG&A was significantly more elevated so.
Speaker Change: What I'll say overall is that we've run this play with intensity over time, we're investing in a disciplined way and to the extent that there are market opportunities for us to grow share. We've got the inventory in the infrastructure in place to take advantage of those opportunities.
Speaker Change: Yes, I mean, what we've said is that we're gonna grow SG&A in a disciplined way as we continue to.
Speaker Change: Focus on growing our business as we move forward we're.
Speaker Change: Thanks for the detail.
Speaker Change: New invest at a very healthy clip and our growth initiatives that are really focused on speed and productivity and improving our customer service levels.
Speaker Change: Your next question is coming from Scot Ciccarelli with Qos. Please pose your question your line is live.
Scot Ciccarelli: Good morning, guys. So first clarification, hi, looking for clarification on your comments about expecting better DIY and commercial performance based on where we are with the macro are you also expecting improvement in domestic that comp trends or is the improvement you referenced just fully due to easier comparisons.
Speaker Change: We have seen wages cool off some and so you know that.
Speaker Change: That has given us an opportunity to not see the same sort of growth rates that we saw when SG&A was.
Speaker Change: Significantly more elevated the growth rate in SG&A with significantly more elevated so.
Speaker Change: What I'll say overall is that we've run this play with intensity over time, we're investing in a disciplined way and to the extent that there are market opportunities for us to grow share. We've got the inventory in the infrastructure in place to take advantage of those opportunities.
Scot Ciccarelli: Well I think you've got a couple of things going on and clearly we've got some easier comps in the back half of the year and I'm, specifically thinking about what we have on the on the commercial side of the business.
Scot Ciccarelli: But I think you layer on top of that the progress that we're making with our growth initiatives and you know we've been on a steady diet of.
Speaker Change: Thanks for the detail.
Your next question is coming from Scot Ciccarelli with Charlie Please pose your question your line is live.
Scot Ciccarelli: Focusing on putting more inventory in the local markets closer to customers, we've been really focused on driving speed and service and those things even in a.
Scot Ciccarelli: Good morning, guys. So mourning for a clarification looking for clarification on your comments about expecting better DIY and commercial performance based on where we are with the macro are you also expecting improvement domestic stacked comp trends or is the improvement you referenced just fully due to easier comparisons.
Scot Ciccarelli: Commercial market that is not seeing the same levels of growth that we've seen over the last couple of years. Those are the kinds of things that gives us a lot of confidence as we as we move forward.
And then we think theyre going to be some share opportunities available for us both on the DIY and the commercial side as we move through the year. So those are the things that give us.
Speaker Change: Well I think you've got a couple of things going on and clearly we've got some easier comps in the back half of the year and I'm, specifically thinking about what we have on the on the commercial side of the business.
Speaker Change: Our bullish outlook on where we're going to finish up the year I think all of those things that Jim Mircera true. We've also we've spent we've talked pretty extensively over the last 18 months or so about improving our execution.
Speaker Change: But I think you layer on top of that the progress that we're making with our growth initiatives and you know we've been on a steady diet of.
Speaker Change: Turnover at the store level has started to moderate.
Speaker Change: Focusing on putting more inventory in the local markets closer to customers.
Spent money and effort towards training, our autozone or is it the store both on the DIY side and the commercial side of the business. So I think we feel like we've kind of got a running start going into this the next <unk>.
Speaker Change: Really focused on driving speed and service and those things even in our in our commercial market that you know is not seeing the same levels of growth that we've seen over the last couple of years. Those are the kinds of things that give us a lot of confidence as we as we move forward.
Speaker Change: <unk> opportunities that are going to come we believe we will get a more normal weather pattern, which hopefully will help specifically in those rustbelt markets. We've talked about that have been a little more depressed. So we're pretty excited about where we're headed and we feel like we're well positioned with the strategies that we have in place.
Speaker Change: And then we think theyre going to be some share opportunities available for us both on the DIY and the commercial side as we move through the year. So those are the things that give us you know.
Speaker Change: <unk> point, where we've deployed inventory put our effort towards focus on the customer both on the DIY side and the commercial side.
Speaker Change: This outlook on where we're going to finish up the year I think all of those things that Jim Mircera true. We've also we've spent we've talked pretty extensively over the last 18 months or so about improving our execution.
Our execution among our strategies on delivering better service to the commercial customer specifically and speed of delivery of all.
Speaker Change: Turnover at the store level has started to moderate.
Speaker Change: Improved and we like where we are and we believe we will be we are well prepared to take the share opportunities we have in the future.
We've spent money and effort towards training, our autozone or is it the store both on the DIY side and the commercial side of the business. So I think we feel like we've kind of got a running start going into this the next seasonal opportunities that are going to come we believe we'll get a more normal weather pattern, which hopefully will help specifically in those rustbelt markets. We've talked about that had been a little more depressed so.
Speaker Change: I appreciate that and then just a quick follow up if I can.
Speaker Change: There is a very large retailer out there that has become increasingly price competitive across a lot of product categories, including auto parts, I think especially with batteries have you seen any change in the competitive environment outside of your direct peers, which are typically very consistent in their pricing strategies.
Speaker Change: We're pretty excited about where we're headed and we feel like we're well positioned with the strategies that we have in place.
Speaker Change: Yes, if you think about mass theyre doing they always are going to have changes and we've competed against those mass players for.
Speaker Change: <unk> point, where we've deployed inventory put our effort towards focus on the customer both on the DIY side and the commercial side, our execution among our strategies on delivering better service to the commercial customer specifically and speed of delivery have all improved.
Speaker Change: For decades at this point in the automotive arena they.
They don't play in the vast majority of our hard parts. If you think about it that way they do play in batteries and oil and some of those other categories that are generally front of store and we like the strategy. We put in place several years ago on the DIY and specifically the sales for part of our business and we're continuing to maintain those strategies, we don't see.
Improved and we like where we are and we believe we will be we are well prepared to take the share opportunities we have in the future.
Speaker Change: I appreciate that and then just a quick follow up if I can there there is a very large retailer out there that's become increasingly price competitive across a lot of product categories, including auto parts, I think especially batteries have you seen any change in the competitive environment outside of your direct peers, which are typically very consistent in their pricing strategies.
Speaker Change: Any reason to change those at this point.
Speaker Change: Excellent thanks, guys.
Speaker Change: Okay.
Speaker Change: Thank you and your next question is coming from David Bellinger with Mizuho Securities. Please pose your question. Your line is live.
Speaker Change: Yes.
Speaker Change: Thing about mass Theyre doing they always are going to have changes and we've competed against those mass players for <unk>.
David Bellinger: Hey, good morning, Thanks for the questions.
David Bellinger: Other one on the Mega hub target moving up closer to 300, I believe you already have more than 90% of domestic stores with access to Mega hub inventory.
Speaker Change: For decades at this point in the automotive arena.
Speaker Change: They don't play in the vast majority of our hard parts. If you think about it that way they do play in batteries and oil and some of those other categories that are generally front of store and we like the strategy. We put in place several years ago on the DIY and specifically in the sales for part of our business and we're continuing to maintain those strategies we don't.
David Bellinger: So are you getting to a point now where it's more normal to have multiple mega hubs that are servicing a store location, maybe two or three and can you talk about the returns associated with that kind of strategy.
David Bellinger: Yes. So if you think about that inventory again, it really is about how.
David Bellinger: Forward place that inventory is within a given market.
Speaker Change: Any reason to change those at this point.
Speaker Change: Excellent thanks, guys.
David Bellinger: If you think about some of these large metro markets.
Speaker Change: Okay.
David Bellinger: Take New York, La Chicago, Miami, just pick one.
Thank you and your next question is coming from David Bellinger with Mizuho Securities. Please pose your question. Your line is live.
David Bellinger: The Mega hub may have been on one side of the of the city and driving all the way to the other side of the city takes a long period of time, we believe the closer we can get this inventory to the customer we will benefit as <unk> talked about earlier, we've done some of these mega hub density tests and they have proved that we can add multiple neg.
Speaker Change: Hey, good morning, Thanks for the questions.
Speaker Change: Another one on the Mega hub target moving up closer to 300, I believe you already have more than 90% of domestic stores with access to Mega hub inventory.
Speaker Change: So are you getting to a point now where it's more normal to have multiple mega hubs that are servicing a store location, maybe two or three and can you talk about the returns associated with that kind of strategy.
David Bellinger: Hubs in a given market depending on the size and the amount of vehicles in those markets and not have a lot of cannibalization and ultimately those stores perform incredibly well on their own and then ultimately they begin to lift the surrounding stores.
Speaker Change: Yes. So if you think about that inventory again is it.
Speaker Change: Really is about how.
Speaker Change: Forward place that inventory is within a given market.
David Bellinger: On both the DIY side of the business and the commercial side of the business ultimately at proximity of hard to find parts close to the customer either DIY or commercial and they benefit us.
If you think about some of these large metro markets, you know take New York L. A Chicago Miami just pick one the Mega hub may have been on one side of the of the city and driving all the way to the other side of the city. It takes a long period of time, we believe the closer we can get this inventory to the customer we will benefit as Jr talked about earlier.
Speaker Change: Got it and then just one quick follow up I think before you mentioned something like 7% of stores have a deeper assortment closer to them.
Speaker Change: Can you talk about what the makeup of that inventory is that lean more to commercial and just by having these mega hubs in the market. What are your delivery times look like it did those get sped up as well. Thank you.
We've done some of these mega hub density tests and they have proved that we can add multiple mega hubs in a given market depending on the size and the amount of vehicles in those markets and not have a lot of cannibalization and ultimately those stores perform incredibly well on their own and then ultimately they begin to lose.
Speaker Change: So the.
Speaker Change: 7% of stores are either that's including both hubs and Mega hubs again hubs have roughly 50000, Skus and then mega hubs have over 100000, Skus and delivery times.
Speaker Change: The surrounding stores on both the DIY side of the business and the commercial side of the business ultimately at proximity of hard to find parts close to the customer either DIY or commercial and they benefit us.
Speaker Change: Assortment depth is generally speaking on the hard part side of the category. So starters alternators fuel pumps things of that nature.
Speaker Change: Got it and then just one quick follow up I think before you mentioned something like 7% of stores are a deeper assortment closer to them.
Speaker Change: And as those parts get deployed closer to the commercial customer instead of it taking 346 hours to get to that commercial customer. It may take 45 minutes or an hour to get there so that lifts the market as you get those parts closer to the customer and it also helps on DIY.
Speaker Change: Talk about what the makeup of that inventory is it does that lean more to commercial and just by having these mega hubs and in that market, but what are your delivery times looked liked it to those get sped up as well. Thank you.
Speaker Change: So the 7% of stores are either that's including both hubs and Mega hubs again hubs have roughly 50000, skus and them Mega hubs have over 100000 skus.
Speaker Change: They're great assets for us and we like them.
Speaker Change: I appreciate it thanks Bill.
Speaker Change: Great question.
Speaker Change: Your next question is coming from Greg Melick with Evercore. Please pose your question your line is live.
Speaker Change:
Speaker Change: And delivery times.
Speaker Change: <unk> depth is generally speaking on the hard part side of the category. So starters alternators fuel pumps things of that nature.
Speaker Change: Hi, Thanks, guys two questions just wanted to dig a little deeper on the inflation deflation.
Speaker Change: I guess on commercial we have the same SKU inflation in DIY.
Speaker Change:
Speaker Change: And as those parts get deployed closer to the commercial customer instead of it taking 346 hours to get to that commercial customer. It may take 45 minutes or an hour to get there so that lifts the market as you get those parts closer to the customer and it also helps on DIY.
Speaker Change: But why was do it for me deflationary I think you said 70 or 80 bps in the quarter.
Speaker Change: But you've seen we've seen just continued pressure on the commercial side of the business.
Speaker Change:
We try to watch our competitors there all the time and it's a pretty small number again less than 1%, but we have seen a little bit more deflation on the ticket average on the commercial side of the business relative to the to the DIY, we do believe over time.
Speaker Change: They're great assets, great job for us and we like them.
Speaker Change: I appreciate it thanks Bill.
Speaker Change: Great question.
Speaker Change: Your next question is coming from Greg Melick with Evercore. Please pose your question your line of sight.
Those numbers will start to get back to more historic numbers, but it's not going to be a snap back it's going to take multiple quarters.
Hi, Thanks, guys two questions just wanted to dig a little deeper on the inflation deflation.
Speaker Change: But I think the <unk>.
Speaker Change: I guess on commercial we have the same SKU inflation in DIY.
Speaker Change: Remiss of your question have we seen irrational behavior on the commercial side of the business and the answer is no.
Speaker Change: But why was do it for me deflationary I think you said 70 or 80 bps in the quarter.
Speaker Change: <unk> seen some pretty significant inflation on.
Speaker Change: But you've seen we've seen just continued pressure on the commercial side of the business.
Speaker Change: Like SKU inflation on the commercial side of the business over the last several years, but ultimately thats moderated and it's become slightly deflationary over the last quarter or two we think that will return back to more normal historical trends over time.
Speaker Change: On the <unk>.
Speaker Change: Try to watch our competitors there all the time and it's a pretty small number again less than 1%, but we have seen a little bit more deflation on the ticket average on the commercial side of the business relative to the to the DIY, we do believe over time that there.
Speaker Change: Just to be clear that do it for me number that was.
Speaker Change: And average ticket number so thats really mix, that's driving that rather than same skewed deflation on commercial that's correct. That's correct got it a little bit of both but it's a little bit of both but.
Speaker Change: Those numbers will start to get back to more historic numbers, but it's not going to be a snapback, it's going to take multiple quarters.
Speaker Change: You are correct.
Speaker Change: Got it. So then on the second question was could you just level set us now on where your Cogs come from what percentage of imported will come from China, what are in direct and indirect.
Speaker Change: But I think the premise of your question have we seen irrational behavior on the commercial side of the business and the answer is no.
We have seen some pretty significant inflation on.
Speaker Change: As we figure out how this plays out into next year.
Speaker Change: Like SKU inflation on the commercial side of the business over the last several years, but ultimately thats moderated and it's become slightly deflationary over the last quarter or two we think that will return back to more normal historical trends over time just.
Speaker Change: Yeah.
Speaker Change: I mean, we've never shared that externally I can tell you we buy from all over the world.
Speaker Change: We sell in a given year roughly 500000 individual skus and product assortment comes from all over the world lots of it comes domestically and tons of it come from an international perspective, and our global sourcing team is very good at finding ways to reduce cost from those.
Speaker Change: Just to be clear that do it for me number that was a and average ticket number and so that's really mix, that's driving that rather than same skewed deflation on commercial that's correct. That's correct got it a little bit of both but it's a little bit of both but yes.
Products that come from overseas and frankly in the domestic arena as well so.
Speaker Change: You are correct.
Speaker Change: Got it. So then on the second question was could you just level set us now on where your Cogs come from what percentage are imported will come from China, what are in direct and indirect.
Speaker Change: It's a significant number.
Speaker Change: But I'll go back to what our merchants have done over the last decade has spent a lot of time diversifying both country of origin as well as having multiple suppliers in each category and it allows us to be more nimble and reduce those risks.
As we figure out how this plays out into next year.
Yeah.
Speaker Change: I mean, we've never shared that externally I can tell you we buy from all over the world we sell in a given year or roughly 500000 individual skus and product assortment comes from all over the world lots of it comes domestically and tons of it come from an international perspective, and our our global sourcing team is very good.
Speaker Change: Inflation and tariffs and all the other things that come with any sort of global sourcing activity.
Speaker Change: Great well, thanks, and good luck guys.
Speaker Change: Sure. Thank you.
Speaker Change: Okay, I think that is our last call we have <unk>.
Speaker Change: One more I'm sorry, one more.
Speaker Change: Yes, you have one more your last question is coming from Scott <unk> with Roth.
Speaker Change: And finding ways to reduce cost from those products.
Speaker Change: Please pose your question your line is live.
Speaker Change: Products that come from overseas and frankly in the domestic arena as well so.
Scott <unk>: Great and thanks for taking my question guys.
Speaker Change: It's a significant number.
Speaker Change: Thank you.
Speaker Change: Wanted to dig into the international side of the equation. The member is focusing on the domestic piece, but can you maybe break out.
Speaker Change: But I'll go back to what our merchants have done over the last decade has spent a lot of time diversifying both country of origin as well as having multiple suppliers in each category and it allows us to be more nimble and reduce those risk of.
Speaker Change: The sales growth or the performance by region in Mexico versus Brazil, and Mexico in particular, maybe just talk about what's driving that.
Speaker Change: Inflation and tariffs and all the other things that come with any sort of global sourcing activity.
Speaker Change: Meteoric growth that you're seeing there and how do you expect that to play out for the rest of the year.
Speaker Change: Okay, well, thanks, and good luck guys.
Speaker Change: Thanks, Rick Thank you.
Speaker Change: Our international markets, and we don't break them out between that Brazil or in the Mexico markets, we've talked about them in total, but our international markets have been great for us. They are growing very quickly obviously, it's much more weighted towards Mexico than Brazil, because of the store count we have just over 100 stores in Brazil.
Speaker Change: Okay, I think that is our last call.
Speaker Change: We have one more I'm sorry, one more.
Speaker Change: Yes, you have on my last question is coming from Scott Stenberg with Ross M. K M. Please pose your question your line is live.
Speaker Change: Oh, great. Thanks for taking my question guys.
Speaker Change: Thank you.
Speaker Change: To <unk> point earlier, we have over 800 in Mexico.
Speaker Change: Wanted to dig into the international side of the equation, but everybody is focusing on the domestic piece, but can you maybe break out.
Speaker Change: But.
Speaker Change: The reason, we're seeing such great performance out there as they are they're great markets and we've exported a lot of the domestic strategies into those markets. We've also said the biggest opportunity for us to grow domestically as commercial and it is the same on those international markets as well.
Speaker Change: The sales growth or the performance by region in Mexico versus Brazil, and Mexico in particular, maybe you could just talk about what's driving that.
Speaker Change: Meteoric growth that you're seeing there and how do you expect that to play out for the rest of the year.
Speaker Change: We like the strategy that we have in place and we think they'll continue to accelerate both in store count and in productivity.
Speaker Change: Our international markets, and we don't break them out between the Brazil or in the Mexico market and we've talked about them in total, but our international markets have been great for us. They are growing very quickly obviously, it's much more weighted towards Mexico than Brazil, because of the store count we have just over 100 stores in Brazil.
Speaker Change: And then a follow up have you ever disclosed what the DIY versus do it yourself mixes in Mexico.
Speaker Change: No we have not.
Speaker Change: Okay.
Speaker Change: Got it alright, that's all I have thank you.
Speaker Change: Okay, great. Thank you.
Speaker Change: To <unk> point earlier, we have over 800 in Mexico.
Speaker Change: Alright, before we conclude the call I want to take a moment to reiterate we believe our industry is in a strong position and our business model is solid.
Speaker Change: But the reason, we're seeing such great performance out there as they are they're great markets and we've exported a lot of the domestic strategies into those markets. We've also said the biggest opportunity for us to grow domestically as commercial and it is the same on those international markets as well.
Speaker Change: We are excited about our growth prospects for the year, but we will take nothing for granted as we understand our customers have alternatives. We have exciting plans that should help to succeed for the future, but I want to stress that this is a marathon and not a sprint as we continue to focus on flawless execution, Wow customer service and strive to optimize shareholder value.
Speaker Change: And we like the strategy that we have in place and we think they'll continue to accelerate both in store count and in productivity.
Speaker Change: And then a follow up have you ever disclosed what the DIY versus do it yourself mixes in Mexico.
<unk> for the future we are confident autozone will be successful.
Speaker Change: Finally, autozone is everywhere want to wish everyone, a happy and healthy holiday season, and thank you for participating on today's call.
Speaker Change: No we have not.
Speaker Change: Right.
Speaker Change: Got it alright, that's all I have thank you.
Speaker Change: Great. Thank you.
Speaker Change: Thank you everyone. This does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.
Alright, before we conclude the call I want to take a moment to reiterate we believe our industry is in a strong position and our business model is solid we're excited about our growth prospects for the year, but we will take nothing for granted as we understand our customers have alternatives. We have exciting plans that should help to succeed for the few.
Speaker Change: But I want to stress that this is a marathon and not a sprint as we continue to focus on flawless execution Wow customer service and strive to optimize shareholder value for the future. We are confident autozone will be successful.
Speaker Change: Finally, autozone is everywhere want to wish everyone, a happy and healthy holiday season, and thank you for participating on today's call.
Speaker Change: Thank you everyone. This does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.