Q4 2026 Autozone Inc Earnings Call

September 22, 2026

Speaker #1: Good day, everyone, and welcome to AutoZone's 2026 fourth quarter earnings release conference call. At this time, all participants are placed on listen-only mode.

Operator: Good day everyone, and welcome to AutoZone's 2026 Q4 earnings release conference call. At this time, all participants are placed on a listen-only mode. At this time, the company would like to provide its forward-looking statement.

Speaker #1: At this time, the company would like to provide its forward-looking statement.

Speaker #2: Before we begin, please note that today's call includes forward-looking statements that are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Brian Campbell: Before we begin, please note that today's call includes forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 the date 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.

Speaker #2: Forward-looking statements are not guarantees of future performance. Please refer to this morning's press release, the company's most recent annual report on Form 10-K, and other filings with the Securities and Exchange Commission for discussion of important risks and uncertainties that could cause actual results to differ materially from expectations.

Speaker #2: Forward-looking statements speak only as to the date made, and the company undertakes no obligation to update such statements. Today's call will also include certain non-GAAP measures.

Speaker #2: A reconciliation of GAAP to non-GAAP financial measures can be found in our press release.

Speaker #3: Good morning, and thank you for joining us today for AutoZone's 2026 fourth quarter conference call. With me today are Jamere Jackson, Chief Financial Officer, and Brian Campbell, Vice President, Treasurer, and Investor Relations.

Phil B. Daniele III: Good morning, and thank you for joining us today for AutoZone's 2026 Q4 conference call. With me today are Jamere Jackson, Chief Financial Officer, and Brian Campbell, Vice President, Treasurer, and Investor Relations. Regarding the Q4, I hope you had an opportunity to read our press release and learn about the quarter's results. If not, the press release, along with slides complementing our comments today, are available on our website at www.autozone.com under the investor relations link. Please click on the quarterly earnings conference call to see them. To start out this morning, I want to thank our more than 130,000 AutoZoners across the company for continuing their relentless commitment to delivering on our pledge to always put customers first.

Phil Daniele: Good morning, and thank you for joining us today for AutoZone's 2026 Q4 conference call. With me today are Jamere Jackson, Chief Financial Officer, and Brian Campbell, Vice President, Treasurer, and Investor Relations. Regarding the Q4, I hope you had an opportunity to read our press release and learn about the quarter's results. If not, the press release, along with slides complementing our comments today, are available on our website at www.autozone.com under the investor relations link. Please click on the quarterly earnings conference call to see them. To start out this morning, I want to thank our more than 130,000 AutoZoners across the company for continuing their relentless commitment to delivering on our pledge to always put customers first.

Speaker #3: Regarding the fourth quarter, I hope you had an opportunity to read our press release and learn about the quarter's results. If not, the press release, along with slides complementing our comments today, are available on our website at www.autozone.com under the Investor Relations link.

Speaker #3: Please click on the quarterly earnings conference call to see them. To start out this morning, I want to thank our more than 130,000 Autozoners across the company for continuing their relentless commitment to delivering on our pledge to always put customers first.

Speaker #3: The operating theme for FY2026 was "Driving the Future Together," and we delivered on that theme this year as we grew our total store count, opening the most stores ever in a single year, improved on our assortment and in-stock positions, and continued to invest in systems to deliver even better customer service.

Phil B. Daniele III: The operating theme for FY26 was Driving the Future Together, and we delivered on that theme this year as we grew our total store count, opening the most stores ever in a single year, improved on our assortment and in-stock positions, and continued to invest in systems to deliver even better customer service. Our customer service levels and execution have improved this past year. This quarter, we continued to gain market share in a challenging macro environment. As an outline for this morning's call, first, we will discuss our domestic DIY and Commercial sales results and provide color on the cadence of our sales over the 16-week quarter, including traffic, ticket, and inflation trends. We will also provide an outlook and perspective on FY27 sales. Second, we will discuss our international sales results and the progress we are making on our new store build-out.

Phil Daniele: The operating theme for FY26 was Driving the Future Together, and we delivered on that theme this year as we grew our total store count, opening the most stores ever in a single year, improved on our assortment and in-stock positions, and continued to invest in systems to deliver even better customer service. Our customer service levels and execution have improved this past year. This quarter, we continued to gain market share in a challenging macro environment. As an outline for this morning's call, first, we will discuss our domestic DIY and Commercial sales results and provide color on the cadence of our sales over the 16-week quarter, including traffic, ticket, and inflation trends. We will also provide an outlook and perspective on FY27 sales. Second, we will discuss our international sales results and the progress we are making on our new store build-out.

Speaker #3: Our customer service levels and execution have improved this past year, and this quarter we continue to gain market share in a challenging macro environment.

Speaker #3: As an outline for this morning's call, first, we'll discuss our domestic DIY and commercial sales results and provide color on the cadence of our sales over the 16-week quarter, including traffic, ticket, and inflation trends.

Speaker #3: We will also provide an outlook and perspective on FY2027 sales. Second, we will discuss our international sales results and the progress we are making on our new store build-out.

Speaker #3: Third, we will talk about our store openings both domestically and internationally and provide perspective on store economics and the impact on return capital over the next several years.

Phil B. Daniele III: Third, we will talk about our store openings, both domestically and internationally, and provide perspective on store economics and the impact on return on invested capital over the next several years. Lastly, we will conclude with an additional commentary on how we see FY27 playing out. So let me start by unpacking our Q4 results. We delivered total sales growth of +5.6%. While we grew slower than Q3's rate, we felt we gained momentum as the quarter moved along, and we like our sales growth potential heading into the new year. Our earnings per share increased 15.1%. Similar to prior quarters, our gross margin operating profit and EPS were negatively impacted by a non-cash LIFO charge of $15 million. As a reminder, during last year's Q4, we recognized an $80 million LIFO charge. In addition, we saw a $96 million or $4.43 share benefit from the refunds of IEPA tariffs.

Phil Daniele: Third, we will talk about our store openings, both domestically and internationally, and provide perspective on store economics and the impact on return on invested capital over the next several years. Lastly, we will conclude with an additional commentary on how we see FY27 playing out. So let me start by unpacking our Q4 results. We delivered total sales growth of +5.6%. While we grew slower than Q3's rate, we felt we gained momentum as the quarter moved along, and we like our sales growth potential heading into the new year. Our earnings per share increased 15.1%. Similar to prior quarters, our gross margin operating profit and EPS were negatively impacted by a non-cash LIFO charge of $15 million. As a reminder, during last year's Q4, we recognized an $80 million LIFO charge. In addition, we saw a $96 million or $4.43 share benefit from the refunds of IEPA tariffs.

Speaker #3: Lastly, we'll conclude with an additional commentary on how we see fiscal year 2027 playing out. So let me start by unpacking our Q4 results. We delivered total sales growth of plus 5.6%. While we grew slower than Q3's rate, we felt we gained momentum as the quarter moved along, and we liked our sales growth potential heading into the new year.

Speaker #3: Our earnings per share increased 15.1%, similar to prior quarters, our gross margin operating profit and EPS were negatively impacted by a non-cash LIFO charge of $15 million.

Speaker #3: As a reminder, during last year's Q4, we recognized an $80 million LIFO charge. In addition, we saw a $96 million, or $4.43 per share, benefit from the refunds of IEPA tariffs.

Speaker #3: Finally, we opened 175 new stores this quarter, for the year we opened 374 new stores versus 304 stores last year. This year's total of 374 stores is the most ever in a fiscal year.

Phil B. Daniele III: Finally, we opened 175 new stores this quarter. For the year, we opened 374 new stores versus 304 stores last year. This year's total of 374 stores is the most ever in a fiscal year. We also hit some major milestones. We celebrated our 1,000th store in Mexico, and we opened our 8,000th store in August in our home state of Tennessee. We also held our grand opening for our relocated Monterrey, Mexico distribution center, which is almost 2 times the size of the previous distribution center, and we broke ground on our new León, Mexico DC, which will come online in late FY28 to support our international expansion. Let me touch on some same-store sales highlights for the quarter. Total company same-store sales grew +1.5% on a constant currency basis, with domestic same-store sales growth of +1.6%.

Phil Daniele: Finally, we opened 175 new stores this quarter. For the year, we opened 374 new stores versus 304 stores last year. This year's total of 374 stores is the most ever in a fiscal year. We also hit some major milestones. We celebrated our 1,000th store in Mexico, and we opened our 8,000th store in August in our home state of Tennessee. We also held our grand opening for our relocated Monterrey, Mexico distribution center, which is almost 2 times the size of the previous distribution center, and we broke ground on our new León, Mexico DC, which will come online in late FY28 to support our international expansion. Let me touch on some same-store sales highlights for the quarter. Total company same-store sales grew +1.5% on a constant currency basis, with domestic same-store sales growth of +1.6%.

Speaker #3: We also hit some major milestones. We celebrated our 1,000th store in Mexico, and we opened our 8,000th store in August in our home state of Tennessee.

Speaker #3: We also held our grand opening for our relocated Monterrey, Mexico, distribution center, which is almost twice the size of the previous distribution center. Additionally, we broke ground on our new León, Mexico, DC, which will come online in late fiscal year 2028 to support our international expansion.

Speaker #3: Let me touch on some same-store sales highlights for the quarter. Total company same-store sales grew 1.5% on a constant currency basis, with domestic same-store sales growth of 1.6%.

Speaker #3: Our domestic DIY same-store sales declined 0.6%, while our domestic commercial sales grew plus 8.6% versus last year's Q4. We saw our sales bottom in June, and then began to improve as the quarter moved along.

Phil B. Daniele III: Our domestic DIY same-store sales declined 0.6%, while our domestic commercial sales grew +8.6% versus last year's Q4. We saw our sales bottom in June and then begin to improve as the quarter moved along. We exited the quarter with good momentum, and we are optimistic about our sales trajectory for the new fiscal year. International same-store sales were up 1.3% on a constant currency basis, and our unadjusted international comp was +10.7% as exchange rates positively impacted our comps by over 900 basis points. Next, let me address our total domestic same-store sales results in a little more detail. Domestic same-store sales averaged around +1.4% over the first 3 months and then accelerated in August to +2.1%. Our domestic retail comps were -0.6 for the quarter and ran negative for the first 3 months before running essentially flat in August.

Phil Daniele: Our domestic DIY same-store sales declined 0.6%, while our domestic commercial sales grew +8.6% versus last year's Q4. We saw our sales bottom in June and then begin to improve as the quarter moved along. We exited the quarter with good momentum, and we are optimistic about our sales trajectory for the new fiscal year. International same-store sales were up 1.3% on a constant currency basis, and our unadjusted international comp was +10.7% as exchange rates positively impacted our comps by over 900 basis points. Next, let me address our total domestic same-store sales results in a little more detail. Domestic same-store sales averaged around +1.4% over the first 3 months and then accelerated in August to +2.1%. Our domestic retail comps were -0.6 for the quarter and ran negative for the first 3 months before running essentially flat in August.

Speaker #3: We exited the quarter with good momentum, and we are optimistic about our sales trajectory for the new fiscal year. International same-store sales were up 1.3% on a constant currency basis, and our unadjusted international comp was plus 10.7%, as exchange rates positively impacted our comps by over 900 basis points.

Speaker #3: Next, let me address our total domestic same-store sales results in a little more detail. Domestic same-store sales averaged around +1.4% over the first three months, and then accelerated in August to +2.1%.

Speaker #3: Our domestic retail comps were negative 0.6% for the quarter and ran negative for the first three months before running essentially flat in August. We began the quarter with milder-than-usual temperatures across the Southeast and South-Central markets, along with lower foot traffic.

Phil B. Daniele III: We began the quarter with milder than usual temperatures across the Southeast and the South Central markets, along with lower foot traffic. The impact of higher inflation from higher oil and gas prices likely dampened our traffic and sales results for most of the quarter. At the tail end of the quarter, our results were buoyed by stronger results in our hot weather categories. We saw mid-single digit like-for-like same-SKU inflation for the quarter, which contributed to our DIY average ticket being up roughly 5%, which was offset by traffic declines. For the first quarter of FY27, we expect same-store sales to be relatively flat with average ticket to remain around +5% that we saw in Q4. Next, I will touch on our domestic commercial business. As I mentioned, our commercial sales were up just under 9% for the quarter.

Phil Daniele: We began the quarter with milder than usual temperatures across the Southeast and the South Central markets, along with lower foot traffic. The impact of higher inflation from higher oil and gas prices likely dampened our traffic and sales results for most of the quarter. At the tail end of the quarter, our results were buoyed by stronger results in our hot weather categories. We saw mid-single digit like-for-like same-SKU inflation for the quarter, which contributed to our DIY average ticket being up roughly 5%, which was offset by traffic declines. For the first quarter of FY27, we expect same-store sales to be relatively flat with average ticket to remain around +5% that we saw in Q4. Next, I will touch on our domestic commercial business. As I mentioned, our commercial sales were up just under 9% for the quarter.

Speaker #3: The impact of higher inflation from higher oil and gas prices likely dampened our traffic and sales results, for most of the quarter. At the tail end of the quarter, our results were buoyed by stronger results in our hot-weather categories.

Speaker #3: We saw mid-single-digit, like-for-like, same-skew inflation for the quarter, which contributed to our DIY average ticket being up roughly 5%. This was offset by traffic declines.

Speaker #3: For the first quarter of FY 2027, we expect same-store sales to be relatively flat, with average ticket to remain around plus 5% that we saw in Q4.

Speaker #3: Next, I will touch on our domestic commercial business. As I mentioned, our commercial sales were up just under 9% for the quarter. The first three months of the quarter averaged just over 8%, while the last month was well over 9% growth.

Phil B. Daniele III: The first 3 months of the quarter averaged just over 8%, while the last month was well over 9% growth. Commercial growth was impacted earlier in the quarter by below-expectations performance in our hot weather categories that rebounded in the last month of the quarter as we experienced hotter summer temperatures. Similar to DIY, we saw ticket average growth of around 5%. We would expect this trend to continue into Q1. Our commercial business had a solid year, finishing up nearly 11% versus FY25. In summary, our domestic business was below our expectations, driven largely by the underperformance in DIY for most of the quarter. Milder temperatures earlier in the quarter certainly had an impact, along with lower foot traffic. We are encouraged by the performance late in the quarter and look to maintain momentum in Q1.

Phil Daniele: The first 3 months of the quarter averaged just over 8%, while the last month was well over 9% growth. Commercial growth was impacted earlier in the quarter by below-expectations performance in our hot weather categories that rebounded in the last month of the quarter as we experienced hotter summer temperatures. Similar to DIY, we saw ticket average growth of around 5%. We would expect this trend to continue into Q1. Our commercial business had a solid year, finishing up nearly 11% versus FY25. In summary, our domestic business was below our expectations, driven largely by the underperformance in DIY for most of the quarter. Milder temperatures earlier in the quarter certainly had an impact, along with lower foot traffic. We are encouraged by the performance late in the quarter and look to maintain momentum in Q1.

Speaker #3: Commercial growth was impacted earlier in the quarter by below-expectations performance in our hot-weather categories, which rebounded in the last month of the quarter as we experienced hotter summer temperatures.

Speaker #3: Similar to DIY, we saw ticket average growth of around 5%. We would expect this trend to continue into Q1. Our commercial business had a solid year, finishing up nearly 11% versus FY 2025.

Speaker #3: So, in summary, our domestic business was below our expectations, driven largely by the underperformance in DIY for most of the quarter. Milder temperatures earlier in the quarter certainly had an impact, along with lower foot traffic.

Speaker #3: We are encouraged by the performance late in the quarter and look to maintain momentum in Q1. Our commercial sales results continue to be driven by our improved satellite store inventory ability availability, significant improvements in hub and megahub coverage, the continued strength of our Duro-Last brand, and execution on our initiatives to improve speed of delivery and customer service for the professional.

Phil B. Daniele III: Our commercial sales results continue to be driven by our improved satellite store inventory availability, significant improvements in hub and Mega Hub coverage, the continued strength of our Duralast brand, and execution on our initiatives to improve speed of delivery and customer service for the professional. Our sales initiatives are driving growth with the smaller up-and-down-the-street customers, where we have the majority of our sales, but also have a tremendous market share opportunity. We see our Mega Hub and inventory initiatives as ways to accelerate our growth with these under-penetrated up-and-down-the-street customers. Thus far, our initiatives are delivering market share gains and gives us confidence as we move into FY27. As a reminder, in FY26, we opened 39 Mega Hubs and 11 net regular hubs. Now let me take a moment to discuss our international business.

Phil Daniele: Our commercial sales results continue to be driven by our improved satellite store inventory availability, significant improvements in hub and Mega Hub coverage, the continued strength of our Duralast brand, and execution on our initiatives to improve speed of delivery and customer service for the professional. Our sales initiatives are driving growth with the smaller up-and-down-the-street customers, where we have the majority of our sales, but also have a tremendous market share opportunity. We see our Mega Hub and inventory initiatives as ways to accelerate our growth with these under-penetrated up-and-down-the-street customers. Thus far, our initiatives are delivering market share gains and gives us confidence as we move into FY27. As a reminder, in FY26, we opened 39 Mega Hubs and 11 net regular hubs. Now let me take a moment to discuss our international business.

Speaker #3: Our sales initiatives are driving growth with the smaller, up-and-down-the-street customers, where we have the majority of our sales but also have a tremendous market share opportunity.

Speaker #3: We see our megahub and inventory initiatives as ways to accelerate our growth with these under-penetrated up-and-down-the-street customers. Thus far, our initiatives are delivering market share gains and give us confidence as we move into FY 2027.

Speaker #3: As a reminder, in FY 2026, we opened up 39 megahubs and 11 net regular hubs. Now, let me take a moment to discuss our international business.

Speaker #3: This past quarter, we celebrated the opening of our 1,000th store in Mexico and finished the quarter with 1,001 locations. In Brazil, we now have 167 stores, bringing our total international store count to 1,168.

Phil B. Daniele III: This past quarter, we celebrated the opening of our 1,000th store in Mexico and finished the quarter with 1,001 locations. In Brazil, we now have 167 stores, bringing our total international store count to 1,168. Our international same-store sales grew +1.3% on a constant currency basis as we faced continued softness in the macro environment, specifically in Mexico. Importantly, we saw an uptick in sales in the last four weeks of the quarter, which gives us confidence that sales may inflect upward in Q1. We are expecting same-store sales to be slightly stronger on a constant currency basis as we expect to report low single-digit growth in Q1. As the economy is starting to improve, we expect our international sales to re-accelerate as we continue to invest in customer service, inventory, new stores, and our supply chain.

Phil Daniele: This past quarter, we celebrated the opening of our 1,000th store in Mexico and finished the quarter with 1,001 locations. In Brazil, we now have 167 stores, bringing our total international store count to 1,168. Our international same-store sales grew +1.3% on a constant currency basis as we faced continued softness in the macro environment, specifically in Mexico. Importantly, we saw an uptick in sales in the last four weeks of the quarter, which gives us confidence that sales may inflect upward in Q1. We are expecting same-store sales to be slightly stronger on a constant currency basis as we expect to report low single-digit growth in Q1. As the economy is starting to improve, we expect our international sales to re-accelerate as we continue to invest in customer service, inventory, new stores, and our supply chain.

Speaker #3: Our international same-store sales grew 1.3% on a constant currency basis, as we faced continued softness in the macro environment, specifically in Mexico. Importantly, we saw an uptick in sales in the last four weeks of the quarter, which gives us confidence that sales may inflect upward in Q1.

Speaker #3: We are expecting same-store sales to be slightly stronger on a constant currency basis, as we expect to report low single-digit growth in Q1. As the economy is starting to improve, we expect our international sales to re-accelerate as we continue to invest in customer service, inventory, new stores, and our supply chain.

Speaker #3: Today, approximately 15% of our total store base is outside of the U.S., and we expect this number to grow as we continue with our international store build-out.

Phil B. Daniele III: Today, approximately 15% of our total store base is outside of the US. We expect this number to grow as we continue our international store build-out. We have confidence in our international markets, and the returns on invested capital are strong. We have a relatively young store base that we expect to drive strong sales and EBIT results as they continue to mature. In summary, we have continued to invest capital in driving sales growth. We also continue to invest in refining product assortments in stores and driving efficiency in our supply chain, which we believe positions us well for future growth. We are committed to investing both CapEx and operating expense to capitalize on these opportunities. This year, we invested approximately $1.5 billion in CapEx to drive our strategic growth priorities and expect to invest a similar amount in FY27.

Phil Daniele: Today, approximately 15% of our total store base is outside of the US. We expect this number to grow as we continue our international store build-out. We have confidence in our international markets, and the returns on invested capital are strong. We have a relatively young store base that we expect to drive strong sales and EBIT results as they continue to mature. In summary, we have continued to invest capital in driving sales growth. We also continue to invest in refining product assortments in stores and driving efficiency in our supply chain, which we believe positions us well for future growth. We are committed to investing both CapEx and operating expense to capitalize on these opportunities. This year, we invested approximately $1.5 billion in CapEx to drive our strategic growth priorities and expect to invest a similar amount in FY27.

Speaker #3: We have confidence in our international markets and the returns on invested capital are strong. We have a relatively young store base that we expect to drive strong sales and EBIT results, as they continue to mature.

Speaker #3: In summary, we have continued to invest capital in driving sales growth. We also continue to invest in refining product assortments in stores and driving efficiency in our supply chain, which we believe positions us well for future growth.

Speaker #3: We are committed to investing both CapEx and operating expense to capitalize on these opportunities. This year, we invested approximately $1.5 billion in CapEx to drive our strategic growth priorities and expect to invest a similar amount in FY 2027.

Speaker #3: The majority of our investments are in accelerated store growth, including hubs and megahubs. These investments place more inventory closer to our customers and will continue to reduce the time it takes us to serve both our DIY and professional customers.

Phil B. Daniele III: The majority of our investments are in accelerated store growth, including hubs and Mega Hubs. These investments place more inventory closer to our customers and will continue to reduce the time it takes us to serve both our DIY and professional customers. The early performance of our accelerated store investments are better than our original forecast, which will allow us to achieve our EBIT goals sooner. We are laser-focused on generating the returns that you expect from AutoZone. To give additional color on our new store performance, we assume that first-year sales for our average store format is roughly $1.7 million, that ramps to roughly $2.7 million by year six. Historically, on average, new store sales grow double digit in the second year and roughly 5% for each of the next four years.

Phil Daniele: The majority of our investments are in accelerated store growth, including hubs and Mega Hubs. These investments place more inventory closer to our customers and will continue to reduce the time it takes us to serve both our DIY and professional customers. The early performance of our accelerated store investments are better than our original forecast, which will allow us to achieve our EBIT goals sooner. We are laser-focused on generating the returns that you expect from AutoZone. To give additional color on our new store performance, we assume that first-year sales for our average store format is roughly $1.7 million, that ramps to roughly $2.7 million by year six. Historically, on average, new store sales grow double digit in the second year and roughly 5% for each of the next four years.

Speaker #3: The early performance of our accelerated store investments is better than our original forecast, which will allow us to achieve our EBIT goals sooner. We are laser-focused on generating the returns that you expect from AutoZone.

Speaker #3: To give additional color on our new store performance, we assume the first-year sales for our average store format is roughly $1.7 million, and that ramps to roughly $2.7 million by year six.

Speaker #3: Historically, on average, new store sales grow double-digit in the second year, and roughly 5% for each of the next four years. With an average of investment of around $2.9 million, per store, we assume that return on invested capital is roughly zero in the first year.

Phil B. Daniele III: With an average investment of around $2.9 million per store, we assume that return on invested capital is roughly zero in the first year. By the end of the fourth year, we expect to achieve approximately 15% ROIC. By the end of the sixth year, we expect ROIC of over 20%, which should continue to improve well after that. Importantly, the growth in store productivity is heavily skewed to commercial sales, which typically more than doubles over that six-year time horizon. The majority of this growth comes from up-and-down-the-street customers who demand availability and speedy delivery. While we plan to again invest around $1.65 billion in CapEx in FY27, we are committed to managing our investment to achieve strong results in invested capital over time. While in the near term, our returns on capital have been pressured as we have accelerated our store growth.

Phil Daniele: With an average investment of around $2.9 million per store, we assume that return on invested capital is roughly zero in the first year. By the end of the fourth year, we expect to achieve approximately 15% ROIC. By the end of the sixth year, we expect ROIC of over 20%, which should continue to improve well after that. Importantly, the growth in store productivity is heavily skewed to commercial sales, which typically more than doubles over that six-year time horizon. The majority of this growth comes from up-and-down-the-street customers who demand availability and speedy delivery. While we plan to again invest around $1.65 billion in CapEx in FY27, we are committed to managing our investment to achieve strong results in invested capital over time. While in the near term, our returns on capital have been pressured as we have accelerated our store growth.

Speaker #3: By the end of the fourth year, we expect to achieve approximately 15% ROIC. And by the end of the sixth year, we expect ROIC of over 20%, which should continue to improve well after that.

Speaker #3: Importantly, the growth in store productivity is heavily skewed to commercial sales, which typically more than doubles over that six-year time horizon. The majority of this growth comes from up-and-down-the-street customers who demand availability, and speedy delivery.

Speaker #3: While we plan to again invest spend around $1.65 billion in CapEx in FY 2027, we are committed to managing our investment to achieve strong results in invested capital over time.

Speaker #3: While in the near term, our returns on capital have been pressured as we have accelerated our store growth, we will hold our ROIC in the mid-30s area and remain committed to driving higher ROIC over time as new stores continue to mature.

Phil B. Daniele III: We will hold our ROIC in the mid-30s area and remain committed to driving higher ROIC over time as new stores continue to mature. Now I will turn the call over to Jamere Jackson.

Phil Daniele: We will hold our ROIC in the mid-30s area and remain committed to driving higher ROIC over time as new stores continue to mature. Now I will turn the call over to Jamere Jackson.

Speaker #3: Now, I will turn the call over to Jamere Jackson.

Speaker #2: Thanks, Phil. Good morning, everyone. Our operating results remain strong for the quarter, and we're highlighted by solid top-line revenue. Total sales were $6.6 billion and up 5.6% versus Q4 of last year.

Jamere Jackson: Thanks, Phil, and good morning, everyone. Our operating results remained strong for the quarter and were highlighted by solid top-line revenue. Total sales were $6.6 billion and up 5.6% versus Q4 of last year. Our domestic same-store sales grew 1.6%, and our international comp was up 1.3% on a constant currency basis. Total company EBIT was up 10.1%, and our EPS was up 15.1%. Our results included a $96 million tariff refund and a $15 million LIFO charge this quarter. Excluding the $15 million LIFO charge in this year's quarter and the $80 million LIFO charge in last year's quarter, EBIT grew 4.4%, and our EPS grew 8.5%. Foreign exchange rates impacted our results for the quarter.

Speaker #2: Our domestic same-store sales grew 1.6%, and our international comp was up 1.3% on a constant currency basis. Total company EBIT was up 10.1%, and our EPS was up 15.1%.

Speaker #2: Our results included a $96 million tariff refund and a $15 million LIFO charge this quarter. Excluding the $15 million LIFO charge in this year's quarter and the $80 million LIFO charge in last year's quarter, EBIT grew 4.4%, and our EPS grew 8.5%.

Speaker #2: Foreign exchange rates impacted our results for the quarter. From Mexico, the peso strengthened almost 9% versus the U.S. dollar, resulting in a $70 million tailwind in sales, a $21 million tailwind in EBIT, and an $0.87 per share benefit to EPS versus the prior year.

Jamere Jackson: From Mexico, the peso strengthened almost 9% versus the US dollar, resulting in a $70 million tailwind in sales, a $21 million tailwind to EBIT, and an $0.87 a share benefit to EPS versus the prior year. For FY26, total sales were $20.3 billion, up 7.4%, and EPS was $152.55, up 5.3%. Next, let me take a few moments to elaborate on the specifics in our P&L for the quarter. First, I'll give a little more color on sales and our growth initiatives. Starting with our domestic commercial business for the quarter, our domestic DIFM sales were $1.9 billion, up just under 9%. For the quarter, our domestic commercial sales represented 34% of our domestic auto parts sales and 29% of our total company sales. Our average weekly sales per program were $18,700, up 2.7% versus last year. This quarter, we opened 87 net new programs.

Speaker #2: For fiscal year 2026, total sales were $20.3 billion, up 7.4%, and EPS was $152.55, up 5.3%. Next, let me take a few moments to elaborate on the specifics in our P&L for the quarter.

Speaker #2: First, I'll give a little more color on sales and our growth initiatives. Starting with our domestic commercial business for the quarter, our domestic DIFM sales were $1.9 billion, up just under 9%.

Speaker #2: For the quarter, our domestic commercial sales represented 34% of our domestic auto parts sales, and 29% of our total company sales. Our average weekly sales per program were $18,700 up 2.7% versus last year.

Speaker #2: This quarter, we opened 87 net new programs. We finished with 6,443 total programs, and we have our commercial program in 94% of our domestic stores.

Jamere Jackson: We finished with 6,443 total programs. We have our commercial program in 94% of our domestic stores. For the year, we opened 345 domestic commercial programs. Mega Hub stores remain a key component of our current and future commercial growth. We opened 16 Mega Hubs in the quarter, 39 for the year, and now have 172 Mega Hub stores. We expect to open over 40 Mega Hubs in FY27. As a reminder, our Mega Hubs typically carry over 100,000 SKUs and drive a tremendous sales lift inside the store box and serve as an expanded assortment source for other stores. The expansion of coverage and parts availability continues to deliver a meaningful sales lift to both our commercial and DIY business. These larger stores give our customers access to thousands of additional parts across the market.

Speaker #2: For the year, we opened 345 domestic commercial programs. Megahub stores remain a key component of our current and future commercial growth. We opened 16 megahubs in the quarter, 39 for the year, and now have 172 megahub stores.

Speaker #2: We expect to open over 40 megahubs in fiscal year 2027. As a reminder, our megahubs typically carry over 100,000 SKUs and drive a tremendous sales lift inside the store box and serve as an expanded assortment source for other stores.

Speaker #2: The expansion of coverage in parts availability continues to deliver a meaningful sales lift to both our Commercial and DIY businesses. These larger stores give our customers access to thousands of additional parts across the market.

Speaker #2: While I mentioned a moment ago that our average commercial weekly sales per program grew 2.7%, the 172 MegaHubs continue to drive growth at an even faster clip.

Jamere Jackson: While I mentioned a moment ago that our average commercial weekly sales per program grew 2.7%, the 172 Mega Hubs continue to drive growth at an even faster clip. Let me provide one other piece of perspective on the importance of Mega Hubs. There are approximately 2,000 commercial programs that are linked to a Mega Hub network. These programs sell 16% more annually than the balance of the commercial programs in the chain. Given these dynamics, we continue to target having approximately 300 Mega Hubs over the next three years. Our customers are excited by our commercial offering as we deploy more stores in local markets closer to the customer while improving our service levels. On the domestic retail side of our business, our DIY comp was down 60 basis points for the quarter.

Speaker #2: Let me provide one other piece of perspective on the importance of megahubs. There are approximately 2,000 commercial programs that are linked to a megahub network.

Speaker #2: These programs sell 16% more annually than the balance of the commercial programs in the chain. Given these dynamics, we continue to target having approximately 300 Megahubs over the next three years.

Speaker #2: Our customers are excited by our commercial offering as we deploy more stores and local markets closer to the customer while improving our service levels.

Speaker #2: On the domestic retail side of our business, our DIY comp was down 60 basis points for the quarter. From the third-party data available to us, our DIY share has remained ahead of industry growth rates, which is indicative of the overall market softness.

Jamere Jackson: From the third-party data available to us, our DIY share has remained ahead of industry growth rates, which is indicative of the overall market softness. The DIY market is experiencing a growing and aging car park and a challenging new and used car sales market, which typically provides a tailwind for our business. However, transactions are soft as the customer experiences high inflation in our industry and elsewhere. We see evidence of deferrals and trade down in DIY, particularly with the most financially challenged DIY customers. This is not a new phenomenon for our industry, and we expect it to recover over time. Now, I'll say a few words regarding our international business. During the quarter, we opened 68 new stores in Mexico to finish with 1,001 stores and 10 new stores in Brazil, ending with 167.

Speaker #2: The DIY market is experiencing a growing and aging car park, and a challenging new and used car sales market, which typically provides a tailwind for our business.

Speaker #2: However, transactions are soft as the customer experiences high inflation in our industry and elsewhere. We see evidence of deferrals and trade-down in DIY, particularly with the most financially challenged DIY customers.

Speaker #2: This is not a new phenomenon for our industry, and we expect it to recover over time. Now, I'll say a few words regarding our international business.

Speaker #2: During the quarter, we opened 68 new stores in Mexico to finish with 1,001 stores, and 10 new stores in Brazil, ending with 167. Our same-store sales grew 1.3% on a constant currency basis and 10.7% on an unadjusted basis.

Jamere Jackson: Our same-store sales grew 1.3% on a constant currency basis and 10.7% on an unadjusted basis. While sales growth has slowed over the last few quarters in Mexico due to slower economic growth in the country, we have continued to manage our P&L appropriately in this environment. We are also continuing to grow share and are well-positioned when the economy improves. We remain committed to investing in international expansion, and as we accelerate the store opening pace, we are pleased with our results versus our forecast in these markets. As we look ahead, we are bullish on international being an attractive and meaningful contributor to AutoZone's future sales, operating profit, and ROIC. Now let me spend a few minutes on the rest of the P&L and gross margins. For the quarter, our gross margin was 53.3%, up 182 basis points versus last year.

Speaker #2: While sales growth has slowed over the last few quarters in Mexico due to slower economic growth in the country, we have continued to manage our P&L appropriately in this environment.

Speaker #2: We're also continuing to grow share and are well-positioned when the economy improves. We remain committed to investing in international expansion, and as we accelerate the store opening pace, we're pleased with our results versus our forecasts in these markets.

Speaker #2: As we look ahead, we're bullish on International being an attractive and meaningful contributor to AutoZone's future sales, operating profit, and ROIC. Now, let me spend a few minutes on the rest of the P&L and gross margins for the quarter.

Speaker #2: Our gross margin was 53.3%, up 182 basis points versus last year. This quarter, we had a $15 million LIFO charge versus an $80 million LIFO charge for Q4 last year.

Jamere Jackson: This quarter, we had a $15 million LIFO charge versus an $80 million LIFO charge for Q4 last year. Excluding the LIFO comparison, we were up 76 basis points versus last year as we benefited $96 million from tariff reimbursements we received this past quarter. Given the lumpiness of gross margins this year, excluding LIFO, you should expect gross margins to be flat to up 25 basis points on a GAAP basis in FY27. With respect to LIFO assumptions for Q1, we are anticipating a $40 million charge and expect approximately $15 million in charges for quarters 2, 3, and 4. In total, we are modeling $85 million to $90 million in LIFO charges for FY27. As a reminder, we recognize $192 million in LIFO charges for all of fiscal 2026. Moving on to operating expenses.

Speaker #2: Excluding the LIFO comparison, we were up 76 basis points versus last year, as we benefited from $96 million in tariff reimbursements we received this past quarter.

Speaker #2: Now, given the lumpiness of gross margins this year, excluding LIFO, you should expect gross margins to be flat to up 25 basis points on a GAAP basis in FY2027.

Speaker #2: With respect to LIFO assumptions for Q1, we're anticipating a $40 million charge and expect approximately $15 million in charges for quarters Q2, Q3, and Q4.

Speaker #2: In total, we're modeling $85 to $90 million in LIFO charges for fiscal year 2027. As a reminder, we recognized $192 million in LIFO charges for all of fiscal 2026.

Speaker #2: Moving on to operating expenses, our expenses were up 8.9% versus Q4 last year, as SG&A as a percentage of sales deleveraged 101 basis points.

Jamere Jackson: Our expenses were up 8.9% versus Q4 last year as SG&A as a percentage of sales deleveraged 101 basis points. On a per store basis, our SG&A was up 4% compared to last quarter's 3% increase. The deleverage was driven primarily by our growth initiatives. We expect SG&A per store and total growth to be in a similar range in the first quarter of FY27, which is up roughly 4% on a per store basis or 8.5% to 9% on a total growth basis. Similarly, we expect SG&A per store to grow roughly 3% for FY27 or approximately 8% on a total growth basis. For Q1 FY27, we expect to open approximately 65 stores globally versus 53 in Q1 last year. For the full year, we expect to open approximately 400 stores versus the 374 new stores opened in FY26.

Speaker #2: On a per-store basis, our SG&A was up 4% compared to last quarter's 3% increase. The deleverage was driven primarily by our growth initiatives. We expect SG&A per store and total growth to be in a similar range in the first quarter of FY2027, which is up roughly 4% on a per-store basis, or 8.5% to 9% on a total growth basis.

Speaker #2: Similarly, we expect SG&A per store to grow roughly 3% for FY2027, or approximately 8% on a total growth basis. For Q1 FY2027, we expect to open approximately 65 stores globally versus 53 in Q1 last year.

Speaker #2: And for the full year, we expect to open approximately 400 stores versus a 374 new stores open in FY 2026. Moving to the rest of the P&L, EBIT for the quarter was 1.3 billion dollars, up 10.1% versus the prior year, adjusting for LIFO charges in both years.

Jamere Jackson: Moving to the rest of the P&L, EBIT for the quarter was $1.3 billion, up 10.1% versus the prior year. Adjusting for LIFO charges in both years, our EBIT would have been up 4.4% versus the prior year. Interest expense for the quarter was $149 million, flat with a year ago, as our debt outstanding at the end of the quarter was up approximately $280 million. We are planning interest of $114 million for the first quarter of FY27 versus $106 million in Q1 last year. For the quarter, our tax rate was 20.3%, roughly flat versus a year ago. Excluding the benefit from stock option exercises, our ETR for the quarter was 20.8% versus 21.7% last year. This quarter, the rate benefited approximately $7 million from stock options exercised versus a $16 million benefit last year for Q4. For Q1, we suggest investors model us at approximately 22.7% all in.

Speaker #2: Our EBIT would have been up 4.4% versus the prior year. Interest expense for the quarter was 149 million dollars, flat with a year ago, as our debt outstanding at the end of the quarter was up approximately 280 million dollars.

Speaker #2: We're planning interest of 114 million dollars for the first quarter of FY 2027 versus 106 million dollars in Q1 last year. For the quarter, our tax rate was 20.3%, roughly flat versus a year ago.

Speaker #2: Excluding the benefit from stock option exercises, our ETR for the quarter was 20.8% versus 21.7% last year. This quarter, the rate benefited approximately $7 million from stock option exercises versus a $16 million benefit last year for Q4.

Speaker #2: For Q1, we suggest investors model us at approximately 22.7% all-in. Now, moving to net income and EPS. Net income for the quarter was 932 million dollars, up 11.3% versus last year.

Jamere Jackson: Now moving to net income and EPS. Net income for the quarter was $932 million, up 11.3% versus last year. Our diluted share count of 16.6 million was 3.3% lower than last year's fourth quarter. The combination of higher net income and lower share count drove earnings per share for the quarter to $56.05, up 15.1% versus last year's Q4. As a reminder, LIFO drove our EPS down $0.69 a share, and tariff refunds added $4.43 a share. Now let me talk about our free cash flow. For the fourth quarter, we generated $684 million in free cash flow versus $511 million in Q4 last year. For FY26, we generated approximately $1.8 billion in free cash, roughly flat versus a year ago, despite $169 million increase in CapEx.

Speaker #2: Our diluted share count of 16.6 million was 3.3% lower than last year's fourth quarter. The combination of higher net income and lower share count drove earnings per share for the quarter to 56 dollars and 5 cents, up 15.1% versus last year's Q4.

Speaker #2: As a reminder, LIFO drove our EPS down 69 cents a share and tariff refunds added $4.43 a share. Now, let me talk about our free cash flow.

Speaker #2: For the fourth quarter, we generated $684 million in free cash flow versus $511 million in Q4 last year. For FY 2026, we generated approximately $1.8 billion in free cash flow, roughly flat versus a year ago, despite a $169 million increase in capex.

Speaker #2: We expect to continue being an incredibly strong cash flow generator in fiscal 2027, and we are planning for higher free cash flow that will fund growth and robust returns to shareholders in the form of share buybacks.

Jamere Jackson: We expect to continue being an incredibly strong cash flow generator in fiscal 2027 and are planning higher free cash flow that will fund growth and robust returns to the shareholder in the form of share buybacks. Regarding our balance sheet, our liquidity position remains very strong and our leverage ratio finished at 2.5x EBITDA. Our inventory per store was up 5% versus Q4 last year, while total inventory increased 10% over the same period last year, driven by new stores, additional inventory investment to support our growth initiatives, and inflation. Net inventory, defined as merchandise inventories less accounts payable on a per store basis, was -$107,000 versus -$131,000 last year and -$107,000 last quarter. As a result, accounts payable as a percentage of inventory finished a quarter at 111.1% versus last year's Q4 of 114.2%.

Speaker #2: Regarding our balance sheet, our liquidity position remains very strong and our leverage ratio finished at 2.5 times EBITDA. Our inventory per store was up 5% versus Q4 last year, while total inventory increased 10% over the same period last year, driven by new stores, additional inventory investment to support our growth initiatives, and inflation.

Speaker #2: Net inventory, defined as merchandise inventories less accounts payable on a per-store basis, was negative $107,000 versus negative $131,000 last year, and negative $107,000 last quarter.

Speaker #2: As a result, accounts payable as a percentage of inventory finished the quarter at 111.1% versus last year's Q4 of 114.2%. Lastly, I'll spend a moment on capital allocation and our share repurchase program.

Jamere Jackson: Lastly, I'll spend a moment on capital allocation and our share repurchase program. We repurchased $697 million of AutoZone stock in the quarter and $2 billion for the fiscal year. At quarter end, we had $1.6 billion remaining under our share buyback authorization. Our strong earnings balance sheet and powerful free cash generation allow us to return a significant amount of cash to our shareholders through our buyback program. We have bought back over 100% of the then outstanding shares of stock since our buyback inception in 1998 while investing in our existing assets and growing our business. 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 our shareholders.

Speaker #2: We repurchased 697 million dollars of AUTOZONE stock in the quarter and $2 billion dollars for the fiscal year. And at quarter end, we had 1.6 billion dollars remaining under our share buyback authorization.

Speaker #2: Our strong earnings balance sheet and powerful free cash generation allow us to return a significant amount of cash to our shareholders through our buyback program.

Speaker #2: We have bought back over 100% of the then-outstanding shares of stock since our buyback inception in 1998, while investing in our existing assets and growing our business.

Speaker #2: 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 our shareholders.

Speaker #2: So, to wrap up, we remain committed to driving long-term shareholder value by investing in our growth initiatives, driving robust earnings in cash, and returning excess cash to our shareholders.

Jamere Jackson: 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 strategies continue to work as we remain focused on gaining market share and improving our competitive positioning in a disciplined way. As we look forward to the beginning of our new fiscal year, we're bullish on our growth prospects behind a resilient DIY business, a solid international business, and a domestic commercial business that is growing share in a meaningful way. We continue to have tremendous confidence in our ability to drive significant and ongoing value for our shareholders. Before turning 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.

Speaker #2: Our strategies continue to work as we remain focused on gaining market share and improving our competitive positioning in a disciplined way. As we look forward to the beginning of our new fiscal year, we're bullish on our growth prospects behind a resilient DIY business, a solid international business, and a domestic commercial business that is growing share in a meaningful way.

Speaker #2: We continue to have tremendous confidence in our ability to drive significant and ongoing value for our shareholders. Before turning 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.

Speaker #2: We generally don't take on transactional risks, so our results primarily reflect the translation impact for reporting purposes. As mentioned earlier, foreign currency resulted in a tailwind to revenue and EPS this quarter.

Jamere Jackson: We generally don't take on transactional risks, so our results primarily reflect the translation impact for reporting purposes. As mentioned earlier, foreign currency resulted in a tailwind to revenue and EPS this quarter. If yesterday's spot rates held for Q1, then we expect an approximate $45 million benefit to revenue, a $14 million benefit to EBIT, and a $0.60 a share benefit to EPS. As a reminder, in Q1, we expect LIFO to reduce EBIT by approximately $40 million, impact our gross margin rate negatively by approximately 80 basis points, and our EPS by approximately $1.85 a share. Now I'll turn it back to Phil.

Speaker #2: If yesterday's spot rates held for Q1, then we expect an approximate $45 million benefit to revenue, a $14 million benefit to EBIT, and a $0.60 per share benefit to EPS.

Speaker #2: And as a reminder, in Q1, we expect LIFO to reduce EBIT by approximately 40 million dollars, impact our gross margin rate negatively by approximately 80 basis points, and our EPS by approximately a dollar and 85 cents a share.

Speaker #2: And now, I'll turn it back to Phil.

Speaker #3: Thank you, Jamir. We are excited to start off FY 2027, and we have a lot to accomplish. We remain committed to outstanding customer service, flawless execution, and appropriately spending our capital to drive growth and efficiency.

Phil B. Daniele III: Thank you, Jamere. We are excited to start off FY27, and we have a lot to accomplish. We remain committed to outstanding customer service, flawless execution, and appropriately spending our capital to drive growth and efficiency. We believe we are well-positioned to grow both our domestic DIY and commercial sales. We also expect our international same-store sales on a constant currency basis will improve in fiscal year 2027. We believe our gross margins will be strong, and we expect our operating expense to grow in line with accelerated store opening assumptions. This time of year, we always enjoy reflecting on the past 12 months' highlights. Our teams achieved several milestones this past year. Our sales totaled $20.3 billion, an all-time high, and the first time we have exceeded the $20 billion mark. Domestic commercial sales were just under $5.8 billion and grew just under 11% for the year.

Phil Daniele: Thank you, Jamere. We are excited to start off FY27, and we have a lot to accomplish. We remain committed to outstanding customer service, flawless execution, and appropriately spending our capital to drive growth and efficiency. We believe we are well-positioned to grow both our domestic DIY and commercial sales. We also expect our international same-store sales on a constant currency basis will improve in fiscal year 2027. We believe our gross margins will be strong, and we expect our operating expense to grow in line with accelerated store opening assumptions. This time of year, we always enjoy reflecting on the past 12 months' highlights. Our teams achieved several milestones this past year. Our sales totaled $20.3 billion, an all-time high, and the first time we have exceeded the $20 billion mark. Domestic commercial sales were just under $5.8 billion and grew just under 11% for the year.

Speaker #3: We believe we are well positioned to grow both our domestic DIY and commercial sales. We also expect our international same-store sales, on a constant currency basis, will improve in fiscal year 2027.

Speaker #3: We believe our gross margins will be strong, and we expect our operating expenses to grow in line with accelerated store opening assumptions. This time of year, we always enjoy reflecting on the past 12 months' highlights.

Speaker #3: Our teams achieved several milestones this past year. Our sales totaled 20.3 billion dollars, an all-time high, and the first time we've exceeded the 20 billion dollar mark.

Speaker #3: Domestic commercial sales were just under $5.8 billion and grew just under 11% for the year. Average weekly sales domestically were $50,000, equating to $2.6 million per store annually.

Phil B. Daniele III: Average weekly sales domestically of $50,000, equating to $2.6 million per store annually. We opened an amazing 374 stores this past year, the most ever. We have over 8,000 total stores and 1,000 stores in Mexico. Our operating cash flow was over $3.3 billion for the year, second only to FY27 at the height of the pandemic and should increase again in FY27. We opened our new expanded Monterrey, Mexico distribution center and broke ground on another planned DC in Mexico. This expanded Mexico supply chain will allow us to serve our customers better, reduce supply chain costs, and better support our international store growth. I would also like to update you on our longer-term strategic growth initiatives where we are investing both CapEx and SG&A and expect to produce a faster-growing and more profitable AutoZone over time.

Phil Daniele: Average weekly sales domestically of $50,000, equating to $2.6 million per store annually. We opened an amazing 374 stores this past year, the most ever. We have over 8,000 total stores and 1,000 stores in Mexico. Our operating cash flow was over $3.3 billion for the year, second only to FY27 at the height of the pandemic and should increase again in FY27. We opened our new expanded Monterrey, Mexico distribution center and broke ground on another planned DC in Mexico. This expanded Mexico supply chain will allow us to serve our customers better, reduce supply chain costs, and better support our international store growth. I would also like to update you on our longer-term strategic growth initiatives where we are investing both CapEx and SG&A and expect to produce a faster-growing and more profitable AutoZone over time.

Speaker #3: We opened an amazing 374 stores this past year, the most ever. We have over 8,000 total stores and 1,000 stores in Mexico. Our operating cash flow was over $3.3 billion for the year, second only to FY 2027 at the height of the pandemic, and should increase again in FY 2027.

Speaker #3: We opened our new expanded Monterey Mexico distribution center and broke ground on another planned DC in Mexico. This expanded Mexico supply chain will allow us to serve our customers better, reduce supply chain costs, and better support our also like to update you on our longer-term strategic growth initiatives, where we are investing both capex and SG&A, and expect to produce a faster-growing and more profitable AUTOZONE over time.

Speaker #3: Specifically, our investments in our supply chain, accelerated new store openings, execution and improved customer service, and leveraging technology. Many of these initiatives are in various stages of maturity, but all of them are in the later stages of implementation, are on track, or ahead of our plan.

Phil B. Daniele III: Specifically, our investments in our supply chain, accelerated new store openings, execution and improved customer service, and leveraging technology. Many of these initiatives are in various stages of maturity, but all of them are in the later stages of implementation, are on track, or ahead of our plan. Supply chain investments that started in earnest in 2020 are now in the final stages of completion. We have completed the vast majority of the technology upgrades needed to accommodate a much more dynamic and global supply chain. Our US DC expansion is complete with two new US distribution centers and two direct import facilities. Our new Brazil DC is complete and already reducing our supply chain costs in country. Our new Mexico DC in Monterrey is now more than two times the size and fully operational.

Phil Daniele: Specifically, our investments in our supply chain, accelerated new store openings, execution and improved customer service, and leveraging technology. Many of these initiatives are in various stages of maturity, but all of them are in the later stages of implementation, are on track, or ahead of our plan. Supply chain investments that started in earnest in 2020 are now in the final stages of completion. We have completed the vast majority of the technology upgrades needed to accommodate a much more dynamic and global supply chain. Our US DC expansion is complete with two new US distribution centers and two direct import facilities. Our new Brazil DC is complete and already reducing our supply chain costs in country. Our new Mexico DC in Monterrey is now more than two times the size and fully operational.

Speaker #3: Supply chain investments that started in earnest in 2020 are now in the final stages of completion. We have completed the vast majority of the technology upgrades needed to accommodate a much more dynamic and global supply chain.

Speaker #3: Our US DC expansion is complete, with two new US distribution centers and two direct import facilities. Our new Brazil DC is complete and already reducing our supply chain costs in-country.

Speaker #3: Our new Mexico DC in Monterrey is now more than twice the size and fully operational. In August, we broke ground on our third Mexico DC, which will allow us to service our customers and stores more efficiently as we grow our store count in-country.

Phil B. Daniele III: In August, we broke ground on our third Mexico DC that will allow us to service our customers and stores more efficiently as we grow our store count in country. Let me talk about flawless execution and improved customer service investments that we've made over the last 18 months. We have been focused on our store-level execution, customer service, and reducing delivery times to our professional customers. While we will always invest in customer service and execution, these investments will moderate. We are already beginning to see these investments pay off. Leveraging technology. Again, a longer-term initiative, but we are in the final stages of these investments. We have made investments in scalable, resilient platforms that are now predominantly cloud-based and ready to be leveraged to improve what we call wow customer service, enable us to leverage new technologies, and improve efficiency.

Phil Daniele: In August, we broke ground on our third Mexico DC that will allow us to service our customers and stores more efficiently as we grow our store count in country. Let me talk about flawless execution and improved customer service investments that we've made over the last 18 months. We have been focused on our store-level execution, customer service, and reducing delivery times to our professional customers. While we will always invest in customer service and execution, these investments will moderate. We are already beginning to see these investments pay off. Leveraging technology. Again, a longer-term initiative, but we are in the final stages of these investments. We have made investments in scalable, resilient platforms that are now predominantly cloud-based and ready to be leveraged to improve what we call wow customer service, enable us to leverage new technologies, and improve efficiency.

Speaker #3: Let me talk about flawless execution and improved customer service investments that we've made over the last 18 months. We have been focused on our store-level execution, customer service, and reducing delivery times to our professional customers.

Speaker #3: While we will always invest in customer service and execution, these investments will moderate. We are already beginning to see these investments pay off, leveraging technology.

Speaker #3: Again, a longer-term initiatives. But we are in the final stages of these investments. We have made investments in scalable, resilient platforms that are now predominantly cloud-based and ready to be leveraged to improve what we call wow customer service.

Speaker #3: Enable us to leverage new technologies and improve efficiency. New store acceleration from roughly 200 stores annually to this year over 400. We are nearing the long-term goals as stated earlier of around 430 stores annually.

Phil B. Daniele III: New store acceleration from roughly 200 stores annually to this year, over 400. We are nearing the long-term goals, as stated earlier, of around 430 stores annually. We are excited about the performance of our new stores. These stores are slightly ahead of our expected sales and EBIT performance. We are also more than halfway to our goal of around 300 Mega Hubs and more hub locations. As mentioned earlier, these expanded assortments in these hubs are a key element needed to continue to accelerate growth and market share gains in both our DIY and more specifically, with our professional customers. Although the growth in new stores will continue through FY28, the year-over-year ramp will moderate as we near our long-term goals. As a reminder, our stores are our highest and best returning assets, and we are happy with these accelerated openings.

Phil Daniele: New store acceleration from roughly 200 stores annually to this year, over 400. We are nearing the long-term goals, as stated earlier, of around 430 stores annually. We are excited about the performance of our new stores. These stores are slightly ahead of our expected sales and EBIT performance. We are also more than halfway to our goal of around 300 Mega Hubs and more hub locations. As mentioned earlier, these expanded assortments in these hubs are a key element needed to continue to accelerate growth and market share gains in both our DIY and more specifically, with our professional customers. Although the growth in new stores will continue through FY28, the year-over-year ramp will moderate as we near our long-term goals. As a reminder, our stores are our highest and best returning assets, and we are happy with these accelerated openings.

Speaker #3: We are excited about the performance of our new stores. These stores are slightly ahead of our expected sales and EBIT performance. We are also more than halfway to our goal of around 300 megahubs and more hub locations.

Speaker #3: As mentioned earlier, these expanded assortments in these hubs are a key element needed to continue to accelerate growth and market share gains in both our DIY and more specifically with our professional customers.

Speaker #3: Although the growth in new stores will continue through FY 2028, the year-over-year ramp will moderate as we near our long-term goals. As a reminder, our stores are our highest and best returning assets, and we are happy with these accelerated openings.

Speaker #3: Finally, I want to wrap up my comments by providing you with how we see sales playing out for FY2027. We expect our domestic same-store sales to be flat to up low single digits, driven by an expectation of approximately 4% ticket growth.

Phil B. Daniele III: Finally, I want to wrap up my comments by providing you with how we see sales playing out for FY27. We expect our domestic same-store sales to be flat to up low single digits, driven by an expectation of approximately 4% ticket growth. We see our total domestic commercial sales growing high single to low double digits. As with retail, we expect ticket average to grow in the roughly 4% range, and we expect to continue to grow market share fueled by our growth initiatives. In international, we expect low to mid-single-digit comps on a constant currency basis. We saw trends improving in the latter half of Q4, and we expect continued improvement in FY27.

Phil Daniele: Finally, I want to wrap up my comments by providing you with how we see sales playing out for FY27. We expect our domestic same-store sales to be flat to up low single digits, driven by an expectation of approximately 4% ticket growth. We see our total domestic commercial sales growing high single to low double digits. As with retail, we expect ticket average to grow in the roughly 4% range, and we expect to continue to grow market share fueled by our growth initiatives. In international, we expect low to mid-single-digit comps on a constant currency basis. We saw trends improving in the latter half of Q4, and we expect continued improvement in FY27.

Speaker #3: We see our total domestic commercial sales growing in the high single to low double digits. As with retail, we expect ticket average to grow in the roughly 4% range, and we expect to continue growing market share, fueled by our growth initiatives.

Speaker #3: In International, we expect low to mid-single digit comps on a constant currency basis. We saw trends improving later in the latter half of Q4, and we expect continued improvement in FY 2027.

Speaker #3: And as we are planning to open approximately 400 new stores in FY 2027, we have decided to reduce the FY 2028 target from roughly 500 stores to 430, as we do not expect to open as many international stores.

Phil B. Daniele III: As we are planning to open approximately 400 new stores in FY27, we have decided to reduce the FY28 target from roughly 500 stores to 430, as we do not expect to open as many international stores. Specifically, we will slow the pace of our Brazil expansion to concentrate on the US and Mexico in the near term. The top focus for fiscal 2027 will remain growing market share in our domestic commercial business and re-accelerating our international growth. We have remained laser-focused on customer service, flawless execution, and gaining market share in every market in which we operate. We believe we can continue to gain market share compared to the overall industry, and we are confident in our ability to achieve our goals. We have great leadership in place, and we feel we are executing at our highest level in many years.

Phil Daniele: As we are planning to open approximately 400 new stores in FY27, we have decided to reduce the FY28 target from roughly 500 stores to 430, as we do not expect to open as many international stores. Specifically, we will slow the pace of our Brazil expansion to concentrate on the US and Mexico in the near term. The top focus for fiscal 2027 will remain growing market share in our domestic commercial business and re-accelerating our international growth. We have remained laser-focused on customer service, flawless execution, and gaining market share in every market in which we operate. We believe we can continue to gain market share compared to the overall industry, and we are confident in our ability to achieve our goals. We have great leadership in place, and we feel we are executing at our highest level in many years.

Speaker #3: Specifically, we will slow the pace of our Brazil expansion to concentrate on the US and Mexico in the near term. The top focus for fiscal 2027 will remain growing market share in our domestic commercial business and re-accelerating our international growth.

Speaker #3: We have remained laser focused on customer service, flawless execution, and gaining market share in every market in which we operate. We believe we can continue to gain market share compared to the overall industry, and we are confident in our ability to achieve our goals.

Speaker #3: We have great leadership in place, and we feel we are executing at our highest level in many years. We are excited about what we can accomplish this year.

Phil B. Daniele III: We are excited about what we can accomplish for this year. AutoZoners everywhere are prepared to deliver on our commitments of growing together. We believe AutoZone's best days are ahead of us. Now we would like to open up the call for questions.

Phil Daniele: We are excited about what we can accomplish for this year. AutoZoners everywhere are prepared to deliver on our commitments of growing together. We believe AutoZone's best days are ahead of us. Now we would like to open up the call for questions.

Speaker #3: AutoZoners everywhere are prepared to deliver on our commitments of growing together. We believe AutoZone's best days are ahead of us. Now, we would like to open up the call for questions.

Speaker #1: Certainly. Everyone, at this time we will be conducting a question-and-answer session. If you have any questions or comments, please press star 1 on your phone at this time.

Operator: Certainly. Everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press *1 on your phone at this time. We do ask that while posing your question, please pick up your handset if you are listening on speakerphone to provide optimum sound quality. We do ask that participants please ask one question and one follow-up, then reenter the queue. Once again, if you have any questions or comments, please press *1 on your phone. Please hold while we poll for questions. Your first question is coming from Bret Jordan from Jefferies. Your line is live.

Speaker #1: We do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. We do ask that participants please ask one question and one follow-up, then re-enter the queue.

Speaker #1: And once again, if you have any questions or comments, please press star one on your phone. Please hold while I pull for questions. Your first question is coming from Brett Jordan from Jefferies.

Speaker #1: Your line is live.

Speaker #2: Hey, good morning, guys.

Bret Jordan: Hey, good morning, guys.

Speaker #3: Good morning.

Bret Jordan: Good morning.

Phil Daniele: Good morning.

Speaker #4: Good morning, Brett.

Phil B. Daniele III: Morning, Bret.

Jamere Jackson: Morning, Bret.

Speaker #2: On the IEPA contribution, is most of the refund in the fourth quarter? Obviously, your direct import refunds come to you, but do you have suppliers who are going to be trickling out rebates to you as we get into 2027?

Bret Jordan: On the IEPA contribution, is most of the refund in Q4? Obviously, your direct import refunds come to you, but do you have suppliers who are going to be trickling out rebates to you as we get into 2027?

Speaker #4: Yeah, most of that refund was in the fourth quarter as we talked about. We had a little over $100 million that were in IEPA tariffs.

Jamere Jackson: Yeah, most of that refund was in Q4, as we talked about. We had a little over $100 million that were in

Jamere Jackson: Yeah, most of that refund was in Q4, as we talked about. We had a little over $100 million that were in IEPA tariffs, we got most of that in Q4, and that is basically on the inventory that we have sold. We expect the remainder of that to sort of trickle out over FY27.

Jamere Jackson: IEPA tariffs, we got most of that in Q4, and that is basically on the inventory that we have sold. We expect the remainder of that to sort of trickle out over FY27.

Speaker #4: We got most of that in the fourth quarter and that is basically on the inventory that we have sold. We expect the remainder of that to sort of trickle out over FY 2027.

Speaker #2: Okay. And then question on same SKU inflation. I think you called out 5% in Q1, but you called out a 4% ticket contribution for fiscal 2027.

Bret Jordan: Okay. A question on same-SKU inflation. I think you called out 5% in Q1, but you called out a 4% ticket contribution for fiscal 2027. Could you sort of talk about how you see the cadence of same-SKU inflation as we sort of roll over that peak tariff impact in late calendar 2025?

Speaker #2: Could you sort of talk about how you see the cadence of same SKU inflation as we sort of roll over the peak tariff impact in late calendar 2025?

Speaker #4: Yeah, we think the first quarter will be in a similar zip code as the fourth quarter of this year—probably closer to 5—and then we expect it to moderate over time.

Jamere Jackson: Yeah. We think the Q1 will be in the similar zip code as the Q4 of this year, probably closer to 5%, and then we expect it to moderate over time, and we expect to average around 4%. What I will say is that it's a pretty volatile environment. In the near term, there's certainly pressure on categories like oil that are driving higher inflation. As we move through, we expect to see more normalized inflation across the business. I think the most important point to that is that this industry is pretty disciplined and rational, and as we see the ticket inflation go up, we'll raise retails accordingly.

Speaker #4: And we expect the average around 4%. What I will say is that it's a pretty volatile environment. In the near term, there's certainly pressure on categories like oil that are driving higher inflation.

Speaker #4: And as we move through, we expect to see sort of more normalized inflation across the business. And I think the most important point to that is that this industry is pretty disciplined and rational and as we see the ticket inflation go up, we'll raise retails accordingly.

Speaker #2: Great. Appreciate it. Thank you.

Bret Jordan: Great. Appreciate it. Thank you.

Speaker #4: Yep.

Speaker #2: Thanks, Brett.

Jamere Jackson: Thanks, Brad.

Speaker #1: Thank you. Your next question is coming from Simeon Guttmann from Morgan Stanley. Your line is live.

Operator: Thank you. Your next question's coming from Simeon Gutman from Morgan Stanley. Your line is live.

Speaker #5: Hey, good morning, guys. So I guess, Phil, some of the math or I think Jamir, when you gave the guidance on I think it was Phil's guidance on retail and commercial, I guess if you just do the weighted sum products, you'd get somewhere between a 2 at the low end of comp guide to something like a 4 or 5.

Simeon Gutman: Hey, good morning, guys. I guess, Phil, some of the math, or I think Jamere, when you gave the guidance on I think it was Phil's guidance on retail and commercial. I guess if you just do the weighted sum products, you would get somewhere between a 2 at the low end of comp guide to something like a 4 or a 5. I know you are not guiding, but you are giving us a framework. Is that fair? Then looking at your market share gains, are you satisfied with them? How do you look at them for your prior fiscal year? Thanks.

Speaker #5: And I know you're not guiding, but you're giving us a framework. Is that fair? And then, looking at your market share gains, are you satisfied with them?

Speaker #5: How do you look at them for your prior fiscal year? Thanks.

Speaker #4: Yeah, so you're in the right zip code on the comps when you sort of do the math on the sum of the parts, if you will.

Jamere Jackson: Yeah. So, you are in the right zip code on the comps when you sort of do the math on the sum of the parts, if you will. I think the important thing for us is we are calling what we see today based on that ticket inflation being elevated and some of the trends that we are seeing in our business. On the DIY side, clearly, the transactions have been a little bit softer, but as we roll over some of that elevated inflation, we would expect those transaction trends to improve a little bit. Then we have got a tremendous amount of momentum in commercial that we expect to continue as we move forward.

Speaker #4: I think the important thing for us is we're calling what we see today based on that ticket inflation being elevated and some of the trends that we're seeing in our business.

Speaker #4: On the DIY side, clearly the transactions have been a little bit softer, but as we roll over some of that elevated inflation, we would expect those transaction trends to improve a little bit.

Speaker #4: And then we've got a tremendous amount of momentum in commercial that we expect to continue as we move forward.

Speaker #2: Yeah, I would kind of think about market share. You asked, are we satisfied? Well, the answer is no. We're never satisfied with market share growth.

Phil B. Daniele III: Yeah. I would kind of think about market share. You asked, are we satisfied? Well, the answer is no. We are never satisfied with market share growth. But we believe in this environment on both the DIY side, we are continuing to gain market share. That lower-end consumer is definitely pressured and probably will continue to be pressured for some time. On the commercial side, we have said for a while, we think we should be able to, it will not always be smooth, but grow essentially 2x the market's growth. We think we are doing that, and we think that the things that we have spent time investing on and working on all give us the opportunity to continue to gain share in both DIY and commercial domestically, and gain share in the international markets as well. So we feel good about our prospects of gaining share.

Phil Daniele: Yeah. I would kind of think about market share. You asked, are we satisfied? Well, the answer is no. We are never satisfied with market share growth. But we believe in this environment on both the DIY side, we are continuing to gain market share. That lower-end consumer is definitely pressured and probably will continue to be pressured for some time. On the commercial side, we have said for a while, we think we should be able to, it will not always be smooth, but grow essentially 2x the market's growth. We think we are doing that, and we think that the things that we have spent time investing on and working on all give us the opportunity to continue to gain share in both DIY and commercial domestically, and gain share in the international markets as well. So we feel good about our prospects of gaining share.

Speaker #2: But we believe in this environment on both the DIY side, we are continuing to gain market share. That lower-end consumer is definitely pressured and probably will continue to be pressured for some time.

Speaker #2: And on the commercial side, we've said for a while we think we should be able to— it won't always be smooth — but grow essentially two times the market growth.

Speaker #2: And we think we're doing that. And we think that the things that we've spent time investing on and working on all give us the opportunity to continue to gain share in both DIY and commercial domestically and gain share in the international markets as well.

Speaker #2: So we feel good about our prospects of gaining share.

Speaker #5: And a quick follow-up is that we've had a couple of years of—I don't know if it's a noisy P&L—but some of the pieces were more volatile than what we're typically used to.

Simeon Gutman: Quick follow-up is that we have had a couple of years of, I do not know if it is a noisy P&L, but some of the pieces were more volatile than what we are typically used to, and you have gone through an investment phase. Phil, you went out of your way just now to talk about some pieces getting passed, whether it is supply chain investments, some technology investments. Does this fiscal year, are we settling into something more normal? I am not sure we will ever be normal given the backdrop of fuel, et cetera. But does it feel like those investments fade and you can get back into some of the prior rhythm of comp growth, steady EBIT growth, and then steady EPS growth?

Speaker #5: And you've gone through an investment phase and Phil, you went out of your way just now to talk about some pieces getting past, whether it's supply chain investments, some technology investments.

Speaker #5: Does this year, does this fiscal year, are we settling into something more normal? And I'm not sure we'll ever be normal given the backdrop of fuel, et cetera, but does it feel like those investments fade and you can get back into that some of the prior rhythm of comp growth, steady EBIT growth, and then steady EPS growth?

Speaker #2: Yeah, I'll talk a little bit about some of the investments and initiatives. We said, even this next year, our capex will be slightly higher than this year in '26, versus '27.

Phil B. Daniele III: Yeah. I will talk a little bit about some of the investments and initiatives. We said even this next year, our CapEx will be slightly higher than this year in 2026 versus 2027. But most of that will be driven by new stores. Some of the other investments that have elevated CapEx over the last couple of years, like I talked about with distribution centers in the US, Mexico, IT investments, a lot of those will begin to wane. As I said, most of them are well over halfway through those types of investments. Many of them are in the implementation and optimization stage, so those will start to moderate. We still will continue to open slightly more stores year over year, but again, we are in the latter innings of virtually all of those investments, if that makes sense. They will not be the continuing part of the investment.

Phil Daniele: Yeah. I will talk a little bit about some of the investments and initiatives. We said even this next year, our CapEx will be slightly higher than this year in 2026 versus 2027. But most of that will be driven by new stores. Some of the other investments that have elevated CapEx over the last couple of years, like I talked about with distribution centers in the US, Mexico, IT investments, a lot of those will begin to wane. As I said, most of them are well over halfway through those types of investments. Many of them are in the implementation and optimization stage, so those will start to moderate. We still will continue to open slightly more stores year over year, but again, we are in the latter innings of virtually all of those investments, if that makes sense. They will not be the continuing part of the investment.

Speaker #2: But most of that will be driven by new stores. Some of the other investments that have elevated capex over the last couple of years, like I talked about with distribution centers in the US, Mexico, IT investments, a lot of those will begin to wane as I said, most of them are well over halfway through those types of investments.

Speaker #2: Many of them are in the implementation and optimization stage. So those will start to moderate. We still will continue to open slightly more stores year over year, but again, we're in the latter innings of virtually all of those investments.

Speaker #2: If that makes sense. They won't be the continuing part of the investment. It will be more new store acceleration as we continue to get closer to that 430 per store globally.

Phil B. Daniele III: It will be more new store acceleration as we continue to get closer to that 430 per store globally.

Phil Daniele: It will be more new store acceleration as we continue to get closer to that 430 per store globally.

Speaker #4: Yeah, and I would just add from a P&L standpoint, it indeed has been a bit noisy when you think about the things that have impacted us.

Jamere Jackson: Yeah, and I would just add.

Simeon Gutman: Yeah

Simeon Gutman: From a P&L standpoint, it indeed has been a bit noisy when you think about the things that have impacted us. Tariffs were one, and then we had tariff refunds. We have had significant hyperinflation that drove LIFO. So one of the things we wanted to do, and you heard Phil do it earlier and a little bit in some of my comments, is give a little bit of an outlook on what we see on kind of a normalized basis, so that you have got a base set of assumptions from which to model and plan the business. And we will continue to operate the business with excellence as we move forward, and we expect this to be less noisy as we move forward.

Speaker #4: Tariffs were one, and then we had tariff refunds. We've had significant hyperinflation that drove LIFO, so one of the things we wanted to do, and you heard Phil do it earlier and a little bit in some of my comments, is give a little bit of an outlook on what we see on kind of a normalized basis so that you've got a base set of assumptions from which to model and plan the business.

Speaker #4: And we'll continue to operate the business with excellence as we move forward. We expect this to be less noisy as we move forward.

Speaker #5: Thanks, guys. Good luck.

Simeon Gutman: Thanks, guys. Good luck.

Speaker #2: Thank you.

Phil B. Daniele III: Thank you.

Phil Daniele: Thank you.

Speaker #1: Thank you. Your next question is coming from Christopher Horvos from JP Morgan. Your line is live.

Operator: Thank you. Your next question is coming from Christopher Horvers from JP Morgan. Your line is live.

Operator: Thank you. Your next question is coming from Christopher Horvers from JPMorgan. Your line is live.

Speaker #6: Thanks, and good morning. I just want to follow up on the first quarter guidance to make sure we get this right. So, flat DIY, and it seems like you're implying a six-handle do-it-for-me on a comp basis.

Christopher Horvers: Thanks, and good morning. I just want to follow up on the Q1 guidance to make sure we get this right. So flat DIY, and it seems like you are implying a 6 handle DIFM on a comp basis. I know you talked about this 8 and change expected to continue, but that is a total gross number. So that puts to right around 2%, is that right? I guess, how much conservativism are you baking in? Weather happens, weather was a headwind earlier, but it has helped in later in August and into September. So, if you think about the past month, are you trending better than that? That 2% does not sort of bake in the continuance of weather benefits.

Speaker #6: I know you talked about this eight and change expected to continue, but that's a total growth number. So that puts you right around 2%.

Speaker #6: Is that right? And then, I guess, how much conservatism are you baking in? Whether it happens or not, whether it was a headwind earlier but it's helped later in August and into September.

Speaker #6: So are you trending? If you think about the past month, are you trending better than that? And that 2% doesn't sort of bake in the continuance of whether benefits?

Speaker #4: Yeah, I'd say two things. One is, what Phil laid out was sort of our guidance for the year and what our expectations are. I think the thing that we also talked about is the way we exited the quarter.

Jamere Jackson: Yeah, I'd say two things. One is, what Phil laid out was our guidance for the year and what our expectations are. I think the thing that we also talked about is the way we exited the quarter, which was a rebound and a little bit of a snapback from where we started the quarter. So, we like the momentum that we have going into Q1 on DIY and certainly commercial exit and well north of 9% is something that we would expect to continue. We're executing very well in that regard. So those are kind of the two big pieces on the domestic comp side. Then I think on the international side, we did see some rebound in the back half of the quarter in Mexico.

Speaker #4: Which was a rebound and a little bit of a snapback from where we started the quarter. So we like the momentum that we have going into the first quarter.

Speaker #4: On DIY, and certainly commercial, exit well north of 9% is something that we would expect to continue. We're executing very, very well in that regard.

Speaker #4: So those are kind of the two big pieces on the domestic comp side. And then I think on the international side, we did see some rebound in the back half of the quarter in Mexico.

Speaker #4: And the team is continued to execute well through a very difficult macro environment. And we expect to start the climb out from the environment that we've seen over the last few years or so.

Jamere Jackson: The team has continued to execute well through a very difficult macro environment, and we expect to start the climb out from the environment that we've seen over the last few years or so. So those are kind of the key elements of how we're thinking about the quarter. But more importantly, what Phil talked about is, as we look at the business and look at all the things that are happening, most of this is predicated on inflation, and we feel pretty good about the ranges and the outlook that he gave.

Speaker #4: So those are kind of the key elements of how we're thinking about the quarter. But more importantly, what Phil talked about is, as we look at the business and look at all the things that are happening—and most of this is predicated on inflation—we feel pretty good about the ranges and the outlook that he gave.

Speaker #2: Yeah, so I would just add that the weather in the latter part of the quarter certainly got to more normal summer temperatures, and it looks like we're going to have a normal, if not good, winter.

Phil B. Daniele III: Yeah, I would just add, the weather, in the latter part of the quarter certainly got to a more normal summer temperatures. It looks like we're going to have a normal, if not good winter. The extremes in weather drive our business, both hot and cold are good for us. We can't predict that weather in the wintertime, but by all indications, it's going to be a normal to tougher winter, and we expect to be able to operate well in both of those environments.

Phil Daniele: Yeah, I would just add, the weather, in the latter part of the quarter certainly got to a more normal summer temperatures. It looks like we're going to have a normal, if not good winter. The extremes in weather drive our business, both hot and cold are good for us. We can't predict that weather in the wintertime, but by all indications, it's going to be a normal to tougher winter, and we expect to be able to operate well in both of those environments.

Speaker #2: And the extremes in weather drive our business—both hot and cold are good for us. And we can't predict that weather in the wintertime, but by all indications, it's going to be a normal to tougher winter.

Speaker #2: And we expect to be able to operate well in both of those environments.

Speaker #6: And then, following up on the model, as you look out even beyond 2027, it's about five and a half percent unit growth. As you think about the SG&A leverage point, is the model that you're building predicated on 4% comps to drive SG&A leverage?

Christopher Horvers: Following up on the model. As you look out, even beyond 2027, it's about 5.5% unit growth. As you think about the SG&A leverage point, is the model that you're building predicated on 4% comps to drive SG&A leverage, understanding that you have these upfront investments, supply chain and technology and people and process, but at the same time, you're going to have these more immature stores that are burdened by labor and rent and so forth. So is the model being built as you look forward on a 4% leverage point on the domestic comp side?

Speaker #6: Understanding that you have these upfront investments supply chain and technology and people and process, but at the same time, you're going to have sort of these more immature stores that are burdened by labor and rent and so forth.

Speaker #6: So, is the model being built as you look forward on a 4% leverage point on the domestic comp side?

Speaker #4: Yeah, I wouldn't say that it's built on a 4% leverage point. I mean, clearly the way that we think about it is that we have the ability to grow SG&A in line with sales.

Jamere Jackson: I wouldn't say that it's built on a 4% leverage point. Clearly, the way that we think about it is that we have the ability to grow SG&A in line with sales. In environments where those sales are a little bit lower, then we have the ability to go into the P&L and manage the SG&A downward. We've had that muscle, and we've done it over time. In years where the sales have been accelerated, we've seen pretty good leverage on the SG&A line. In some cases, it gave us the ability to go invest. So, I think about it the same way that we have historically, which is, we have the ability to grow SG&A in line with sales and manage the leverage and deleverage based on what we're seeing in the near term.

Speaker #4: And an environment where those sales are a little bit lower than we have the ability to go into the P&L and manage the SG&A downward.

Speaker #4: And we've had that muscle and we've done it over time. In years where the sales have been accelerated, we've seen pretty good leverage on the SG&A line.

Speaker #4: And in some cases, it gave us the ability to go invest. So I think about it the same way that we have historically, which is: we have the ability to grow SG&A in line with sales.

Speaker #4: And manage the leverage and deleverage based on what we're seeing in the near term.

Speaker #6: Understood. Thanks very much.

Christopher Horvers: Understood. Thanks very much.

Speaker #2: Thank you.

Phil B. Daniele III: Thank you.

Phil Daniele: Thank you.

Speaker #1: Thank you. Your next question is coming from Steven Zacone from Citi. Your line is live.

Operator: Thank you. Your next question's coming from Steven Zaccone from Citi. Your line is live.

Speaker #7: Good morning. Thank you very much for taking my question. I wanted to follow up on the DIY side. I was curious if you could give a little bit more of an assessment of what you're seeing?

Steven Zaccone: Hey, good morning. Thanks very much for taking my question. I wanted to follow up on the DIY side. I was curious if you could just give a little bit more of an assessment of what you're seeing. You talked about softer transactions. I think there's so many moving pieces with the consumer at the moment. Have you seen some of that activity, whether it's trade down or deferral, kind of get worse? How should we think about DIY from a quarterly cadence over the course of FY27? That'd also be helpful.

Speaker #7: You talked about software transactions. I think there's so many moving pieces at the consumer at the moment. Have you seen some of that activity, whether it's trade down or deferral, kind of get worse?

Speaker #7: How should we think about DIY from a quarterly cadence over the course of FY '27? That also would be helpful.

Speaker #2: Yeah, we try to give as much color as we could around what we saw from a transactions and sales perspective over the four-month timeframe that comprises our fourth quarter.

Phil B. Daniele III: Yeah. We tried to give as much color as we could around what we saw from a transactions and sales perspective over the four-month timeframe that comprises our Q4. The beginning of the quarter was slower, particularly in the hotter weather categories, but the exit rate in the latter half of Q4, and particularly in August, got better. We expect those trends to kind of continue. What we've historically seen over long periods of time is, after you have a spout of higher traffic declines, they rebound over time, which is what we believe we're seeing today. The 5% decline or north of that in transactions is not typical in this industry, and we would expect those to moderate back into a more normal traffic rate. So we saw that improving coming out of the quarter.

Phil Daniele: Yeah. We tried to give as much color as we could around what we saw from a transactions and sales perspective over the four-month timeframe that comprises our Q4. The beginning of the quarter was slower, particularly in the hotter weather categories, but the exit rate in the latter half of Q4, and particularly in August, got better. We expect those trends to kind of continue. What we've historically seen over long periods of time is, after you have a spout of higher traffic declines, they rebound over time, which is what we believe we're seeing today. The 5% decline or north of that in transactions is not typical in this industry, and we would expect those to moderate back into a more normal traffic rate. So we saw that improving coming out of the quarter.

Speaker #2: Again, the beginning of the quarter was slower, particularly in the hotter weather categories. But the exit rate in the latter half of Q4, and particularly in August, got better.

Speaker #2: And we expect those trends to kind of continue. What we've historically seen over long periods of time is after you have a spout of higher traffic declines, they rebound over time, which is what we believe we're seeing today.

Speaker #2: The 5% decline, or north of that, in transactions is not typical in this industry. And we would expect those to moderate back into a more normal traffic rate.

Speaker #2: So we saw that improving coming out of the quarter. We like the exit rate on DIY and we think that momentum will kind of continue.

Phil B. Daniele III: We like the exit rate on DIY, and we think that momentum will kind of continue.

Phil Daniele: We like the exit rate on DIY, and we think that momentum will kind of continue.

Speaker #4: Yeah, the only thing I'll add is that the DIY customer certainly is facing some pretty significant inflation, particularly around fuel prices. And if you just look at our ticket over a two-year basis, it's up about 9%.

Jamere Jackson: Yeah. The only thing I'll add is that the DIY customer certainly is facing some pretty significant inflation, particularly around fuel prices. If you just look at our ticket over a two-year basis, it's up about 9%. So that consumer has felt a lot of inflation over the last two years. We think the transaction environment, to Phil's point, will improve when this inflation moderates to something more normal and consumer sentiment gets better. The last thing that I'll say is that the tailwinds driving the industry are there. You've got higher rates, you've got more expensive new and used vehicles that continue to drive the average age of vehicles higher, and that simply is going to mean that customers are going to keep their older cars longer and the repair frequency will likely increase in 2027. That's the basis for our outlook there.

Speaker #4: So that consumer has felt a lot of inflation over the last two years. And we think the transaction environment to Phil's point will improve when this inflation moderates to something more normal and consumer sentiment gets bigger or gets better.

Speaker #4: And the last thing I'll say is that the tailwinds driving the industry are there. I mean, you've got higher rates; you've got more expensive new and used vehicles that continue to drive the average age of vehicles higher.

Speaker #4: And that simply is going to mean that customers are going to keep their older cars longer and the repair frequency will likely increase in 2027.

Speaker #4: And that's the basis for our outlook there.

Phil B. Daniele III: The one last thing that I think is important for the tailwinds is, even though gas prices and oil prices have been higher, we have not necessarily seen a tail off in the miles driven yet, which I think is ultimately an additional good tailwind for us in this space.

Phil Daniele: The one last thing that I think is important for the tailwinds is, even though gas prices and oil prices have been higher, we have not necessarily seen a tail off in the miles driven yet, which I think is ultimately an additional good tailwind for us in this space.

Speaker #2: The one last thing that I think is important for the tailwinds is even though gas prices and oil prices have been higher, we haven't necessarily seen a tail off in the miles driven yet.

Speaker #2: Which I think is ultimately an additional good tailwind for us in this space.

Speaker #6: Okay, that's very helpful. Thanks. My follow-up is just trying to understand the impact of higher freight, right? Is this an expectation that, as inflation trends higher, freight will continue to increase?

Steven Zaccone: Okay, that is very helpful. Thanks. The follow-up I had is just understanding the impact of higher freight. Is this an expectation that same-SKU inflation just trends higher? I heard your commentary to a prior question. But is the view of higher freight rippling through the supply chain, this just gets passed on in terms of higher same-SKU inflation to the end customer?

Speaker #6: I heard your commentary to a prior question, but is the view that higher freight is rippling through the supply chain? This just gets passed on in terms of higher inflation to the end customer.

Phil B. Daniele III: Yeah. Obviously, higher gas prices are going to flow through freight and transportation logistics, both domestically and internationally. We expect that that will continue. I do not think it will be anywhere near like it was in the back half of the pandemic where we had the supply chain crisis. I do not think it would be anywhere near that number. But our supply chain teams and our merchants do a great job of negotiating our transportation costs, and we expect to be able to manage that well. But there is no doubt that it will continue to be inflationary, not just in our space, but I think it will be inflationary everywhere.

Phil Daniele: Yeah. Obviously, higher gas prices are going to flow through freight and transportation logistics, both domestically and internationally. We expect that that will continue. I do not think it will be anywhere near like it was in the back half of the pandemic where we had the supply chain crisis. I do not think it would be anywhere near that number. But our supply chain teams and our merchants do a great job of negotiating our transportation costs, and we expect to be able to manage that well. But there is no doubt that it will continue to be inflationary, not just in our space, but I think it will be inflationary everywhere.

Speaker #2: Yeah, obviously higher gas prices are going to flow through freight and transportation logistics, both domestically and internationally. We expect that will continue. I don't think it'll be anywhere near what it was in the back half of the pandemic, where we had the supply chain crisis.

Speaker #2: I don't think it would be anywhere near that number. But our supply chain teams and our merchants do a great job negotiating our transportation costs, and we expect to be able to manage that well.

Speaker #2: But there's no doubt that it will continue to be inflationary, not just in our space, but I think it'll be inflationary everywhere.

Speaker #6: Okay, thanks for the detail. That's a lot.

Steven Zaccone: Okay. Thanks for the detail. That is all.

Speaker #4: Thanks.

Jamere Jackson: Thanks.

Speaker #1: Thank you. Your next question is coming from Michael Lasser from UBS. Your line is live.

Operator: Thank you. Your next question is coming from Michael Lasser from UBS. Your line is live.

Speaker #5: Good morning. Thank you so much for taking my question. How would you quantify the return on the investments that you have seen over the last couple of years?

Michael Lasser: Good morning. Thank you so much for taking my question. How would you quantify the return on the investments that you have seen over the last couple of years? Those have come in the form of accelerated CapEx, accelerated SG&A. As outsiders, what we see is the comps are moderating. You have a player in the industry that is driving same-store sales growth well ahead of AutoZone, so it is hard for us to dimension the return that you are generating on these investments that you have been making.

Speaker #5: Those have come in the form of accelerated capex, accelerated SG&A. As outsiders, what we see is the comps are moderating. You've got a player in the industry that's driving same-store sales growth well ahead of AutoZone.

Speaker #5: So it's hard for us to dimension the return that you're generating on these investments that you've been making.

Speaker #2: Yeah, that's my thank you for the question. I appreciate that. Part of the reason I try to give a little more commentary on kind of the investments that we have made with supply chain, operations, new stores, etc.

Phil B. Daniele III: Well, Michael, thank you for the question. I appreciate that. Part of the reason I tried to give a little more commentary on the investments that we have made with supply chain operations, new stores, et cetera, and we are happy with those investments. While I would agree with you that our comps have maybe not been as high as we would have liked, we do feel that we are operating as well as we have. We like the performance of our new stores. We ultimately had to do some work in our supply chain to make sure we were able to service our base stores that we had and do that well and efficiently, and we needed to expand our supply chain to make sure that we could accommodate what we believe is the right strategy in new store growth.

Phil Daniele: Well, Michael, thank you for the question. I appreciate that. Part of the reason I tried to give a little more commentary on the investments that we have made with supply chain operations, new stores, et cetera, and we are happy with those investments. While I would agree with you that our comps have maybe not been as high as we would have liked, we do feel that we are operating as well as we have. We like the performance of our new stores. We ultimately had to do some work in our supply chain to make sure we were able to service our base stores that we had and do that well and efficiently, and we needed to expand our supply chain to make sure that we could accommodate what we believe is the right strategy in new store growth.

Speaker #2: And we're happy with those investments. Well, I agree with you that our comps have maybe not been as high as we would have liked.

Speaker #2: We do feel that we're operating in as well as we have. We like to performance of our new stores. We ultimately had to do some work in our supply chains to make sure we were able to service our base stores that we had and do that well and efficiently.

Speaker #2: And we needed to expand our supply chain to make sure that we could accommodate what we believe is the right strategy in new store growth.

Speaker #2: Again, that's why we tried to give you some metrics on what how we see those new stores performing. It definitely puts some return on invested capital pressure on us in the short term as those stores begin to mature.

Phil B. Daniele III: Again, that is why we tried to give you some metrics on how we see those new stores performing. It definitely puts some return on invested capital pressure on us in the short term as those stores begin to mature. But we like how they are maturing, and they are slightly ahead of the plan we originally forecasted. We think all of that over time works into a better, faster-growing business that is going to produce higher returns over the long term.

Phil Daniele: Again, that is why we tried to give you some metrics on how we see those new stores performing. It definitely puts some return on invested capital pressure on us in the short term as those stores begin to mature. But we like how they are maturing, and they are slightly ahead of the plan we originally forecasted. We think all of that over time works into a better, faster-growing business that is going to produce higher returns over the long term.

Speaker #2: But we like how they're maturing and they're slightly ahead of the plan we originally forecasted, which so we think all of that over time works into a better faster growing business that's going to produce higher returns over the long term.

Speaker #5: Understood. Thank you for that, Phil. My follow-up question is on the visibility that you have into your comps. Over the next few quarters, you're basically calling for an acceleration in your same-store sales growth as the year progresses.

Michael Lasser: Understood. Thank you for that, Phil. My follow-up question is on the visibility that you have into your comps over the next few quarters. You are basically calling for an acceleration in your same-store sales growth as the year progresses. It sounds like there will be less like for like inflation that is going to moderate slightly. The heart of the assumption is that transactions improve from here. A, is that right? B, if your comps do not fall into, let us call it a 3% to 4% range, is there enough flexibility for you to manage the P&L to still arrive at the earnings number that you are implicitly guiding for FY27? Thank you so much.

Speaker #5: It sounds like there'll be less like for like inflation that's going to moderate slightly. And the harder the assumption is that transactions improve from here.

Speaker #5: So A, is that right? And B, if your comps do not fall in a, let's call it a three to four percent range, is there enough flexibility for you to manage the P&L to still arrive at the earnings number that you're implicitly guiding for for fiscal 27?

Speaker #5: Thank you so much.

Speaker #2: Yes, I think that's right, Michael. Like we said, we still believe we're going to see accelerated inflation on same SKU inflation as well as ticket.

Phil B. Daniele III: Yes, I think that is right, Michael. Like we said, we still believe we are going to see an accelerated inflation on same-SKU inflation as well as ticket. What we believe is the 5% plus decline in transactions, particularly on DIY, will kind of start to moderate back to a normal trend of, historically, over long periods of time, it has been down 1% or 1% to 3% in transactions, and you have gotten average ticket growth that has been higher than that. We expect that to continue, and it is similar to what we saw in the latter half of Q4. We think that inflation rate for the year is going to be roughly 4%, maybe slightly higher on both DIY and commercial, which kind of gets you to those slightly improved comps from where we were in Q4.

Phil Daniele: Yes, I think that is right, Michael. Like we said, we still believe we are going to see an accelerated inflation on same-SKU inflation as well as ticket. What we believe is the 5% plus decline in transactions, particularly on DIY, will kind of start to moderate back to a normal trend of, historically, over long periods of time, it has been down 1% or 1% to 3% in transactions, and you have gotten average ticket growth that has been higher than that. We expect that to continue, and it is similar to what we saw in the latter half of Q4. We think that inflation rate for the year is going to be roughly 4%, maybe slightly higher on both DIY and commercial, which kind of gets you to those slightly improved comps from where we were in Q4.

Speaker #2: What we believe is the five plus percent decline in transactions, particularly on DIY, will kind of start to moderate back to a normal trend of in the historically over long periods of time, it's been down 1% or 1 to 3% in transactions.

Speaker #2: And you've seen average ticket growth that's been higher than that. We expect that to continue, and it's similar to what we saw in the latter half of Q4.

Speaker #2: And we think that inflation rate for the year is going to be roughly 4%, maybe slightly higher on both DIY and commercial, which kind of gets you to those slightly improved comps from where we were in Q4.

Speaker #5: Thank you very much. Good luck.

Michael Lasser: Thank you very much, and good luck.

Speaker #2: Thank you, Mike.

Phil B. Daniele III: Thank you, Michael.

Phil Daniele: Thank you, Michael.

Speaker #4: Thanks, Michael.

Jamere Jackson: Thanks, Michael.

Speaker #1: Thank you. Our next question comes from Steve Forbes with Guggenheim. Your line is live.

Operator: Thank you. Our next question comes from Steven Forbes from Guggenheim. Your line is live.

Speaker #4: Good morning, Phil, Jamir.

Steven Forbes: Good morning, Phil, Jamere.

Speaker #2: Good morning.

Phil B. Daniele III: Morning.

Phil Daniele: Morning.

Speaker #4: I wanted to maybe dive into the ROI profile that you spoke to in terms of the store maturation curve. So specifically, you mentioned commercial sales double over the six-year period.

Steven Forbes: I wanted to maybe dive into the ROI profile that you spoke to in terms of the store maturation curve. Specifically, you mentioned commercial sales double over the 6-year period. Curious how much variability there is in the commercial growth profile between the years, year 2 versus year 6. Is there faster growth in the outer years? Can you speak to what the implicit growth rate is in the up and down the street part of the business versus the national account part of the business within that guide?

Speaker #4: I'm curious about how much variability there is in the commercial growth profile between the years—right, year two versus year six. Is there faster growth in the outer years?

Speaker #4: And then can you speak to what the implicit growth rate is in the up and down, the street part of the business versus the national account part of the business within that guide?

Speaker #2: Yeah, so two pieces. One is, we do see our commercial growth having a big bump of acceleration in the first one to two years of the program.

Jamere Jackson: Yeah. So two pieces. One is we do see our commercial growth having a big bump of acceleration in the first one to two years of the program, and that drives a lot of the returns on invested capital goodness that we see as we move through years two through six. The majority of that comes from the up and down the street customer. We continue to see fairly significant share gains in that portion of the business. I want to be clear, we like the up and down the street customer. We spend a lot of time growing that portion of the business, but we have share opportunities with both national accounts and up and down the street customers.

Speaker #2: And that drives a lot of the returns on invested capital goodness that we see as we move through years two through six. The majority of that comes from the up and down the street customer.

Speaker #2: And we continue to see fairly significant share gains in that portion of the business. I want to be clear. I mean, we like the up and down the street customer.

Speaker #2: We spend a lot of time growing that portion of the business, but we have share opportunities with both national accounts and up and down the street customers.

Speaker #2: I mean, the metric that I like to continue to trot out in front of folks is that we're a five to six share in what's approaching a $100 billion business, if you will.

Jamere Jackson: The metric that I like to continue to trot out in front of folks is that we're a 5% to 6% share in what's approaching a $100 billion business, if you will. So there are share opportunities for us in both segments of the business. We've clearly been driving our UDS business, but we think there's share opportunities for us to move up the call list and have a bigger play with both sets of customers.

Speaker #2: So there are share opportunities for us in both segments of the business. And we clearly been driving our UDS business, but we think their share opportunities for us to move up the call list and have a bigger play with both sets of customers.

Speaker #3: The other thing that I think helps with that, and we've talked about it, is that we've got 172 mega hubs and hundreds of hubs around the country.

Phil B. Daniele III: The other thing that I think helps with that, and we've talked about it. We've got 172 Mega Hubs and hundreds of hubs around the country. We continue to build that out, and you asked about variability per store. When we drop a Mega Hub in a market that gets our proximity of those parts to a position where we can accelerate the speed of delivery to the shop or the DIY customer, that drives sales, like we talked about. Jamere Jackson gave some specifics of what it looks like when a store is in a delivery radius for a hub and/or a Mega Hub, and it does improve them. That's why we're so focused on driving the store counts in both those hubs and Mega Hub stores.

Phil Daniele: The other thing that I think helps with that, and we've talked about it. We've got 172 Mega Hubs and hundreds of hubs around the country. We continue to build that out, and you asked about variability per store. When we drop a Mega Hub in a market that gets our proximity of those parts to a position where we can accelerate the speed of delivery to the shop or the DIY customer, that drives sales, like we talked about. Jamere Jackson gave some specifics of what it looks like when a store is in a delivery radius for a hub and/or a Mega Hub, and it does improve them. That's why we're so focused on driving the store counts in both those hubs and Mega Hub stores.

Speaker #3: We continue to build that out. And you asked about variability per store. When we drop a mega hub in a market, that gets our proximity of those parts to a position where we can accelerate the speed of delivery to the shop or the DIY customer. That drives sales.

Speaker #3: Like we talked about, Jamere gave some specifics of what it looks like when a store is in a delivery radius for a hub and/or mega hub.

Speaker #3: And it does improve them. That's why we're so focused on driving the store accounts in both those hubs and Mega Hub stores.

Speaker #4: Thanks for that. And then just a quick follow-up, just a confirmation here for the gross margin outlook for fiscal 2027. The 0 to 25 basis points of FIFO gross margin expansion, that's I guess that's inclusive of the baseline benefit that you've captured with tariff refunds, right?

Steven Forbes: Thanks for that. Then just a quick follow-up, just a confirmation here for the gross margin outlook for FY27. The 0 to 25 basis points of FIFO gross margin expansion, I guess that's inclusive of the baseline benefit that you've captured with tariff refunds, right? There's no expectation for a cycling to drag on the FIFO gross margin profile.

Speaker #4: There's no expectation for a cycle to drag on the FIFO gross margin profile.

Speaker #2: That's right. So what we gave you when we talked about gross margins is we gave you the LIFO assumptions for this year. We gave you the LIFO assumptions for last year.

Jamere Jackson: That is right. So what we gave you when we talked about gross margins is we gave you the LIFO assumptions for this year. We gave you the LIFO assumptions for last year. Obviously, we had $190 million plus last year. We have $85 million to $90 million this year. So if you are just looking at it on a GAAP basis, we should be flat to up 20. As it relates to tariffs specifically, while the tariff refunds may appear to be a windfall, the reality is that the refund environment was deflationary, and the industry likely would have raised prices faster if both retailers and suppliers had not received cost relief from those refunds. We are expected to lap those tariff benefits and not have that be a call-out.

Speaker #2: Obviously, we had 190 plus million last year. We've got 85 to 90 this year. So we're just looking at it on a gap basis.

Speaker #2: We should be flat to up 20. And then as it relates to tariffs specifically, while the tariff refunds may appear to be a windfall, the reality is that the refund environment was deflationary and the industry likely would have raised prices faster if both retailers and suppliers hadn't received cost relief from those refunds.

Speaker #2: So we're expecting to lap those tariff benefits and not have that be a callout. Obviously, the way that they came in will make the margin profile a little lumpy.

Jamere Jackson: Obviously, the way that they came in will make the margin profile a little lumpy, which is why we talked about where we are on an annualized basis. We feel pretty good about all the work that we are doing, both in our supply chain and in our merchandising organization to drive gross margin improvement in total.

Speaker #2: Which is why we talked about where we are on an annualized basis. But we feel pretty good about all the work that we're doing, both in our supply chain and in our merchandising organization, to drive gross margin improvement in total.

Speaker #4: Thank you both.

Steven Forbes: Thank you both.

Phil B. Daniele III: Yep, thank you.

Phil Daniele: Yep,

Speaker #3: Thank you.

Phil Daniele: thank you.

Speaker #1: Thank you. Our next question is coming from Seth Sigman from Barclays. Your line is live.

Operator: Thank you. Our next question is coming from Seth Sigman from Barclays. Your line is live.

Speaker #5: Hey, good morning, everyone. A couple of things I wanted to follow up on. One is on the economics of the mega hubs. So, it sounds like programs using the hubs have sales 16% higher than the base business.

Seth Sigman: Hey, good morning, everyone. A couple of things I wanted to follow up there on. One is on the economics of the Mega Hubs. So sounds like programs using the hubs have sales 16% higher than the base business. How has that trended over time? Given that you do have a lot of newer Mega Hubs because you have accelerated growth over the last year, is there reason to believe that the lift and the contribution that you are getting from these should actually accelerate in terms of the impact it could have on comps over the next 12 to 18 months?

Speaker #5: How is that trended over time? And just given that you do have a lot of newer mega hubs because you've accelerated growth over the last year, is there reason to believe that the lift in the contribution that you're getting from these should actually accelerate in terms of the impact it could have on comps over the next 12 to 18 months?

Speaker #2: Well, it's been fairly consistent over time. As we look at mega hubs and one of the reasons that we moved our targets from 75 to 110 and ultimately to 300 is that when we attach a mega hub to a satellite network, we see an acceleration.

Jamere Jackson: Well, it has been fairly consistent over time as we look at Mega Hubs, and one of the reasons that we moved our targets from 75 to 110 and ultimately to 300 is that when we attach a Mega Hub to a satellite network, we see an acceleration. It is a dynamic that we continue to see. When you jam more parts in the local market closer to the customer, then to Phil's point, it drives sales. As our commercial business continues to mature over time and we continue to grow our market share and grow our presence, as we expand that Mega Hub network and attach it to more stores, we expect that profile to be as good or better on a go-forward basis.

Speaker #2: And it's a dynamic that we continue to see. When you jam more parts in the local market closer to the customer, then, to Phil's point, it drives sales.

Speaker #2: As our commercial business continues to mature over time and we continue to grow our market share and grow our presence, as we expand that mega hub network and attach it to more stores, we expect that profile to be as good or better on a go-forward basis.

Speaker #2: So that drives a lot of our confidence about our business as we move closer to the 300 mega hubs totals. And it also drives a lot of the confidence in our business to continue to grow market share, particularly in commercial.

Jamere Jackson: That drives a lot of our confidence about our business as we move closer to the 300 Mega Hubs totals, and it also drives a lot of the confidence in our business to continue to grow market share, particularly in commercial.

Speaker #3: And we continue in those hubs and mega hubs to figure out ways to get those parts faster to our customers and our stores.

Phil B. Daniele III: And we continue in those hubs and Mega Hubs to figure out ways to get those parts faster to our customers and our stores by leveraging technology. We know where our drivers are, we know where the parts are. We know how to fastest get those parts to those customers in the shops that are waiting to turn their bay, and ultimately help a DIY customer that may be broken down in our parking lot or broken down at their house. We will continue to iterate on our operations and make better and smarter decisions on how we deploy this inventory and how quickly we can get it to our customers. We are working on that continuously, so I suspect that will continue to improve.

Phil Daniele: And we continue in those hubs and Mega Hubs to figure out ways to get those parts faster to our customers and our stores by leveraging technology. We know where our drivers are, we know where the parts are. We know how to fastest get those parts to those customers in the shops that are waiting to turn their bay, and ultimately help a DIY customer that may be broken down in our parking lot or broken down at their house. We will continue to iterate on our operations and make better and smarter decisions on how we deploy this inventory and how quickly we can get it to our customers. We are working on that continuously, so I suspect that will continue to improve.

Speaker #3: By leveraging technology, I mean we know where our drivers are, we know where the parts are, and we know how to most efficiently get those parts to the customers in the shops that are waiting to turn their bay.

Speaker #3: And ultimately help a DIY customer that maybe broken down in our parking lot or broken down at their house. So we'll continue to iterate on our operations and make better and smarter decisions on how we deploy this inventory and how quickly we can get it to our customers.

Speaker #4: We're working on that continuously, so I suspect that'll continue to improve.

Speaker #5: Okay, great. And then my follow-up is around inflation and the elasticity that we're thinking about here. When you look at the incremental inflation—where it's coming from now and what you're thinking about for 2027—is there any reason to believe that the elasticity is going to be different?

Seth Sigman: Okay, great. My follow-up is around inflation and the elasticity that we are thinking about here. When you look at the incremental inflation, where it is coming from now and what you are thinking about for 2027, is there any reason to believe that the elasticity is going to be different, maybe more favorable than what you saw last year based on the categories that it is targeting?

Speaker #5: Maybe more favorable than what you saw last year, based on the categories that it's targeting?

Speaker #2: Well, I think two things about inflation. One, we think it’s going to be a little bit more favorable from an elasticity than transaction standpoint, just because if you think about what’s happened—is our consumers had to deal with tariffs on top of sort of a normalized inflation, if you will.

Jamere Jackson: Well, I think two things about inflation. One, we think it is going to be a little bit more favorable from an elasticity and a transaction standpoint, just because if you think about what has happened is our consumers had to deal with tariffs on top of sort of a normalized inflation, if you will. We get to lap over that beginning in Q4 of this year. As I mentioned a little bit earlier, if you just look at ticket averages for us, they are up 9% on a two-year stack basis. We expect that to normalize as we move forward. Then I think very broadly speaking, as we think about inflation, again, I come back to this industry is very disciplined and very rational when it comes to dealing with inflation and how we price our products to our customers.

Speaker #2: We get to lap over that beginning in the fourth quarter of this year. So, as I mentioned a little bit earlier, if you just look at ticket averages for us, they're up 9% on a two-year stack basis.

Speaker #2: We expect that to normalize as we move forward. And then I think very broadly speaking, as we think about inflation, again, I come back to this industry is very disciplined and very rational when it comes to dealing with inflation and how we price our products to our customers.

Speaker #2: And we'll continue to expect that going forward and that'll mean that our business will be in pretty good shape as we move forward.

Jamere Jackson: We will continue to expect that going forward, and that will mean that our business will be in pretty good shape as we move forward.

Speaker #3: Yeah, I think as you talk about elasticities too, large chunks of our business are really inelastic. It's failure related. And if a starter goes out or your battery goes out, you don't have a whole lot of choice, but you have to replace it.

Phil B. Daniele III: And I think as you talk about elasticities too, large chunks of our business are really inelastic. It is failure related. If a starter goes out or your battery goes out, you do not have a whole lot of choice, but you have to replace it. Some elements of our business are more discretionary and have more elasticities, particularly in the categories like floor mats and seat covers. Those are not necessary to drive your car. Maintenance, people will tend to push them a little bit as they get under pressure from an inflationary perspective. But over time, you have to replace those parts. You cannot continue to defer the maintenance on the product, on the car. If you do, you end up with a failure.

Phil Daniele: And I think as you talk about elasticities too, large chunks of our business are really inelastic. It is failure related. If a starter goes out or your battery goes out, you do not have a whole lot of choice, but you have to replace it. Some elements of our business are more discretionary and have more elasticities, particularly in the categories like floor mats and seat covers. Those are not necessary to drive your car. Maintenance, people will tend to push them a little bit as they get under pressure from an inflationary perspective. But over time, you have to replace those parts. You cannot continue to defer the maintenance on the product, on the car. If you do, you end up with a failure.

Speaker #3: Some elements of our business are more discretionary and have more elasticity, particularly in categories like floor mats and seat covers. Those are not necessary to drive your car.

Speaker #3: Maintenance, people will tend to push them a little bit. As they get under pressure from an inflationary perspective, but over time, you have to replace those parts.

Speaker #3: You can't continue to defer the maintenance on the product—on the car. If you do, you end up with a failure—tie rod end, maybe wobbly, but if it fails, now you've got to replace ball joints and other parts of the car, which are a much more expensive failure repair.

Phil B. Daniele III: Tie rod end may be wobbly, but if it fails, now you have got to replace ball joints and other parts of the car, which are a much more expensive failure repair. So customers generally understand that over time, and you have got to go do the maintenance on a vehicle or you are going to have a bigger problem. So discretionary can be pushed, which we have seen. But the other categories historically have always rebounded and been positive for us in inflationary environments.

Phil Daniele: Tie rod end may be wobbly, but if it fails, now you have got to replace ball joints and other parts of the car, which are a much more expensive failure repair. So customers generally understand that over time, and you have got to go do the maintenance on a vehicle or you are going to have a bigger problem. So discretionary can be pushed, which we have seen. But the other categories historically have always rebounded and been positive for us in inflationary environments.

Speaker #3: So customers generally understand that over time, and you've got to go do the maintenance on a vehicle or you're going to have a bigger problem.

Speaker #3: So discretionary can be pushed. Which we've seen. But the other categories over historically have always rebounded. And been positive for us. In inflationary environments.

Speaker #5: Okay, thank you both.

Seth Sigman: Okay. Thank you both.

Speaker #1: Thank you. Your next question is coming from Scott Ciccarelli from Truist. Your line is live.

Operator: Thank you. Your next question is coming from Scot Ciccarelli from Truist. Your line is live.

Speaker #4: Good morning, guys. Thanks for the time. How are you thinking about or modeling the higher comp contribution that you should get from the new store acceleration, which I guess started about a year ago?

Scot Ciccarelli: Good morning, guys. Thanks for the time. How are you thinking about or modeling the higher comp contribution that you should get from the new store acceleration, which I guess started about a year ago? Can we assume you are building a growing lift as the year progresses, as more stores roll into the comp base?

Speaker #4: And are you building — can we assume you're building, like, a growing lift as the year progresses, as more stores roll into the comp base?

Speaker #2: Yeah, I mean, as you might expect, the newer stores have higher comps in the near term. It does have some impact on our comps going forward.

Jamere Jackson: Yeah. As you might expect, the newer stores have higher comps in the near terms. It does have some impact on our comps going forward. You also remember that if you take domestically, for example, we added 236 stores on a base of 6,500 or 6,600 stores. While it does have some impact, it does not move the needle as much as you might think, which the underlying view then is that we expect our mature stores and our mature store profile to continue to make progress as well. While new stores are certainly a contributor here, we are expecting to make some progress across our entire business.

Speaker #2: But you also remember that if you take domestically, for example, we added 236 stores on a base of 6,500 or 6,600 stores. So, while it does have some impact, it doesn't move the needle as much as you might think.

Speaker #2: The underlying view, then, is that we expect our mature stores and our mature store profile to continue to make progress as well. So while new stores are certainly a contributor here, we're expecting to make some progress across our entire business.

Speaker #4: Got it, understood. And then, just to clarify something you guys mentioned earlier: Have you made any changes to your domestic store opening plans for '28?

Scot Ciccarelli: Got it. Understood. Just to clarify something you guys mentioned earlier, have you made any changes to your domestic store opening plans for 2028, or was the whole change on Brazil?

Speaker #4: Or was the whole change on Brazil?

Speaker #3: Yeah, we still think we'll get to roughly 300 stores in the U.S. We'll be in that range of 120 or so in Mexico, and roughly 20 or so in Brazil.

Phil B. Daniele III: Yeah. We still think we will get to roughly that 300 stores in the US. We will be in that range of 120 or so in Mexico and roughly 20 or so in Brazil. We will continue those to get to that roughly 430 net new stores on an annual basis. Again, like I said, we really think the opportunity is to continue to double down on our performance in Mexico and the US. We will continue to work on Brazil. We like the market, but there are things that we need to go do down there. We think it is a great market for us, but we need to focus today on our domestic and Mexico business.

Phil Daniele: Yeah. We still think we will get to roughly that 300 stores in the US. We will be in that range of 120 or so in Mexico and roughly 20 or so in Brazil. We will continue those to get to that roughly 430 net new stores on an annual basis. Again, like I said, we really think the opportunity is to continue to double down on our performance in Mexico and the US. We will continue to work on Brazil. We like the market, but there are things that we need to go do down there. We think it is a great market for us, but we need to focus today on our domestic and Mexico business.

Speaker #3: We'll continue those to get to that roughly 430 net new stores on an annual basis. And again, like I said, we really think the opportunity is to continue to double down on our performance in Mexico and the US.

Speaker #3: We'll continue to work on Brazil. We like the market, but there are things that we need to do down there. We think it's a great market for us, but we need to focus today on our domestic and Mexico business.

Speaker #4: Got it. Thanks, guys.

Scot Ciccarelli: Got it. Thanks, guys.

Speaker #2: Thanks.

Jamere Jackson: Thanks.

Speaker #3: Okay. Thank you. For those questions. But before we conclude the call, I'd like to take a moment to reiterate that we have an incredible business and a strong and resilient industry.

Phil B. Daniele III: Thank you for those questions. Before we conclude the call, I would like to take a moment to reiterate that we have an incredible business in a strong and resilient industry. We are excited about our growth prospects for the new fiscal year, but we will take nothing for granted as we understand that our customers have alternatives. We have exciting plans that will help us succeed in the future, but I want to stress that this is a marathon and not a sprint. As we remain focused on delivering flawless execution and striving to optimize shareholder value for the future, we are confident that AutoZone will be successful. Thank you for participating in today's call.

Phil Daniele: Thank you for those questions. Before we conclude the call, I would like to take a moment to reiterate that we have an incredible business in a strong and resilient industry. We are excited about our growth prospects for the new fiscal year, but we will take nothing for granted as we understand that our customers have alternatives. We have exciting plans that will help us succeed in the future, but I want to stress that this is a marathon and not a sprint. As we remain focused on delivering flawless execution and striving to optimize shareholder value for the future, we are confident that AutoZone will be successful. Thank you for participating in today's call.

Speaker #3: We are excited about our growth prospects for the new fiscal year, but we will take nothing for granted as we understand that our customers have alternatives.

Speaker #3: We have exciting plans that will help us succeed in the future, but I want to stress that this is a marathon, not a sprint.

Speaker #3: As we remain focused on delivering flawless execution and striving to optimize shareholder value for the future, we are confident that AutoZone will be successful.

Speaker #3: Thank you for participating in today's call.

Operator: Thank you. Everyone, this concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.