AZO - Earnings call transcript Q2 2018

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Operator

Good morning, and welcome to the AutoZone Conference Call.

Your lines have been placed on listen-only until the question-and-answer session of the conference. Please be advised today's call is being recorded.

If you have any objections, you may disconnect at this time. This conference call will discuss AutoZone's second quarter earnings release. Chairman, on CEO, quarter. the company's a be the presentation short highlights Rhodes, President will and making Bill of the conference Time. promptly or end call AM The Time Central at XX:XX XX:XX Eastern AM will

listen Before Mr. company following the Rhodes regarding statements. to that forward-looking has statement the requested begins, you

Unverified Participant

are in statements. statements contained forward-looking Certain this presentation

in Annual Certain and the carefully. read XXXX, section Report in are factors qualified levels, XX, or cyber on contained the suppliers. retain weather, our war, These will, the and project, and positioned, by strategy subject Forward-looking hire statements credit laws as prospect to of in the of such access XX-K availability to and assessments of and ended to including estimate, Part discussed risk other Factors attacks words ability management be market uncertainties recessionary costs August on material believe, of feasible integrity risks raw anticipate, believe of available are our to the and activity, financing, similar developments experience number Form of information, detail expect, of the debt prices, expressions. statements should and risks in are of typically and including compromising use under should, based consumer assumptions confidentiality, intend, Risk conditions, forward-looking product competition, terrorist factors the construction a and plan, limitation, we trends, these security inflation, historical in changes including, of delays, conditions, conditions, appropriate. light and impact employees, expected regulations, more war made X or Item perception year these future XA that of the without These energy demand, be for current

Factors the not described may performance forward-looking and from business. in and developments statements affect adversely decisions events statements Forward-looking materially guarantees above business and by could differ and our contemplated of Risk future results; and actual those such are

by new applicable update forward-looking or information, the speak results. only of differ of materially anticipated statements to undertake Forward-looking statements may we as a any law, Except results required whether result from as future events no as Actual otherwise. obligation date made. publicly

William C. Rhodes

joining quarter Good call. thank With for and AutoZone's Giles, XXXX Chief for and Bill morning, us Brian Vice Relations today Campbell, are Treasurer, you President, today President and conference Vice Financial second Tax. me Executive Officer; Investor and

Regarding website, is the I to If and the to second for learn their across led www.autozoneinc.com. quarter, press company our bottom thank for about read solid quarter. deliver results. I release all efforts available that begin opportunity quarter's on To this this an the release line results us AutoZoners press the you've and hope to morning, had our top not, want

the our couple moderate that we've last the discussed business. have years, impacted negatively of For winters

and immediate the this was In sales As results there more cold that certainly blower results are And like, scrapers, experienced. short multiple cold our we to, batteries, cetera. severe, wipers, sales in highlight motors and from antifreeze, et ice in improved. like snow wet winter winter deicers, performance again, extreme of categories it's immediate implications term, and the in and the important

are some more context and impact to our more of conditions categories balance due remedy conditions they adjustments and favorable from these fiscal to categories. believe this But provide on like have to numbers for lasting of these we In charges we efforts details in continue give benefit chassis we their visibility year. increased release, unusual adjustments significance, could regarding stock-option them to related that optimistic our I should the that adjustments. business morning's some We're the these tax press very a will warranted us. impairment Additionally, ongoing and accounting units. for the to similar GAAP impacts under-car of for include introduced and investors. two brakes, to reform, thought be These

with begin were Let's the impairments. businesses. and our IMC These both taken charges on AutoAnything

press not million. take going forward we the we This core determined in our stated begin strategic of normal along $XXX sale charge of we it priorities our were businesses net appropriate tax these conclusion was to to a to us impairment process, with release, and As led do, process. testing proceeded to the a

to for an driving announced importance, Now, our better AutoAnything little morning, purchased as this products, their who our This enhance an XXXX. on core exiting objective accessory business, to performance of model, our retailer Kingswood decided business. to and better online-only in that our while has efforts the acquired those separate with on have and omni-channel AutoAnything, has we the like focus be these we've that import import increased emerged focusing and spent AutoZone.com. understand I'd and distributor teams parts AutoAnything businesses. business. AutoZone.com. wholesale was AutoZone.com acquired of learned and agreement Capital time, has of the understanding in a on our XXXX, from focus distinct background AutoZone our from winter would We two and run but leverage other, and environment AutoZone.com leveraging fall market. was rationale IMC, WD was the and and the provide learnings AutoAnything strategic on sells in over acquired each to internet-only always been Both the

to grew Our intention and count we was XX branch footprint, substantially XX. from to their their expand

been have quickly has we increasingly this basis. grow it a As challenging to on profitable business, grown

commercial attention, a more This morning, valuable investments determined on that than As our this time, growing substantially centered market. our an commercial on Parts Authority announced with them focusing marketplace business the business. to high-end narrow agreement strategic perspective more we core rather on and import would be for acquire we the progressed, has focus have our

to enterprises customer all investments better first they suited employees the get will different of optimize this they believe these put in been necessary leaving do. to will attention ownership and model. AutoAnything thank like their be have They I'd and a have the to business where everything We Before time, always subject, structure, of both of the AutoZoners terrific IMC. and

Next, we in in This based exercise fluctuations standard adopted fiscal new option expense beginning significant share the new on standard stock stock XXXX. and of count patterns. option tax can diluted accounting cause the

this an is and to model earnings. difficult As over inherently to forecast, virtually to to last elected difference as impossible GAAP the show have year we the adjustment

stock quarter accounting, This years by second new quarter, standard our both increased the adjusting option a EPS $X.XX share. for the

rate were in of liabilities some a that tax in repatriation generated reduced subsidiaries. due let's revaluation which to rate. the the to $XXX benefit approximately new QX The benefits of million: of related change one-time corporate a tax tax the and of tax to requires the Tax to Now, adjust the two and tax to charge one-time events Reform. the net us turn ongoing and foreign tax on accumulated recognize There deferred one-time were charges implementation laws our earnings

Our ongoing federal a blended new tax old tax quarter. approximately in rate million federal and second our of rate the rate reduced reflecting $XX to rate XX% was of expense the XX%, blend federal of by lowered the XX%. This

both the tax QX rate start be fiscal year, For rate to effective XXXX, we for be global expect our XX% of the approximately to ongoing the around XXXX, in XX.X%. expect global we our August our and balance QX. Beginning tax of

will basis. $XXX on rate net We benefit income by annual an lower in XXXX over million expect fiscal this

As the the these to we are in proactively business we to consider enterprise, exploring invest the long-term. of enhancement an in this for profitability effort of some opportunities our proceeds improve

and We basis our with emphasis. DIY competitive. service we enhanced investments but expediting points Many are our in our plans, we operating planned for experiencing not of and wage estimate to wages have as increasing quarters, And margin currently once our have XX to future exploring the ensuring investments impact on an forwards primary points commercial, several technology are finalized fully investments market annualized yet implemented. an our benefits improve the omni-channel levels last pressure Importantly, we by investments. to XX has mentioned been in are basis pull of we've basis focus on been and these both

to While we will these really begin the investments over expect some months. next to XX investments in XX QX, materialize

The Now, the Midwestern specifically markets. remainder and our of for sales. stronger much results were the business than results Northeastern market and

began sales the improved store you As improved as harsh conditions than materially winter comp of the more markets storms. end the December. our basis our near weather-sensitive result expect, by points would of markets, weather-sensitive a XXX those In as

As noted above, certain categories experienced improved sales. substantially

also categories, other other categories, underperformed. Net-net, markets the However, challenged to sales Coast West same-store X.X%. our improved maintenance like like were and

when sales middle strongest the of the first winter Our in the arrived. were storms quarter major

get later to continue cold additional we in don't the benefit business. the winter, spells As

weather time, matters business of said periods weather periods for of out. effects long years, this As time. we even have over Over short themselves in

underlying see the the retail commercial and from the lead vehicle of continued us industry for reiterate driving Aside for feel population should in future. we we constructive to the our habits growth demographics both customers' remain weather, to and positive and

our initiatives, with hub SKUs stores pickup markets to see Mega level, from hubs. mega XXX,XXX our stores a to approximately nice sales with surrounding Regarding continue continuing and provide capabilities. we and at the inventory internal delivery unique improving specifically availability stores other the market in and hub are

plan any mega As dictated open not quarter, this our we hubs. did additional

have end we XX by year. fiscal on However, locations track to opened the the continue of

in were Ocala, year-over-year headed delivery quarter marked ongoing, and second finishing have the leverage activity and team to XXXX. quarter of construction increases where was in quite we remain and was Florida, our in a encouraged begin the remained with cost the and over leveraged in month, our fuel team Illinois. major remainder now. while continue expansion chain chain center mindful we're inventory able labor of on carrier and Even as direction a we Danville, supply Our fiscal staging supply lines, be Ocala past our to shortages cost, while distribution next shipping we busy will business' are cost warehouse cost. deliver several our Danville's our expansion new of sequential across this they this This

sales quarter. performance for our results commercial sales Additionally, QX. commercial business in we increased in X.X% saw solid Total the

slower rate these quarter's and encouraging this QX this Mondays fell Sunday at last year. Christmas were on grew Year's results year X.X%, considering both New While than versus

we in the quarter. basis impacted points. We customers on closed selling XXX so days two than more that holidays, estimate commercial by growth commercial Our lost typically it are

on coming business year-over-year the with encouraged enhancing new faster our or these performance by inventory older at from better of getting than lot work our the running is fewer efforts. to plan. of to we programs. in vital our sales time to growth We market. existing program credit is our openings, executing overall their commercial relationships game more grow customers industry believe in position our continue for customers to We are With availability model. here our our and add cultivate, goes take and simply our are that store efforts I'll ongoing a AutoZoners Commercial is

to online our in we experience shopping customer in omni-channel to our to efforts, strategy enhance continue Turning an the world. invest

growth see to in-store in sales and continue traffic, website mobile, traffic, up We drives while particularly in store. ship-to-home buy online, pick it

to at omni-channel tools, they faster than availability with customers customers, ship-to-home our our store also with website marketing increase key become Buy AutoZoners also inventory to commercial one drive capabilities and up and of business. the to digital the pick electronically. our availability growth our working We're rates interaction enhance the as them. immediate has trustworthy continue remain store their This our in-store Our advice value level. in us the to website convenience importance and the further of provide first our is of highlights further much leverage online, objective much,

We desires. strategy fits ensure our to with their best business conduct in continue to we and omni-channel our will customers invest the in manner needs that can

talented to On impacts on cost the two have the years. employees pressures the importantly, – calls in to current highlighted environment. much retail continue historical the evidenced forces Those we a I've going exist substantially compete as few all The unemployment very And norms. more over are by low as are from market front, regulatory we that next to legislation than conference wages. wages accelerated our more passed changes are continue for the in and the last experiencing areas first the on quarters' increase their pressure

have time. to innovations efforts are cost new this pressure area and some structure, will believe continue. continued we particular manage of But those period extended We constantly for to our working diligently find will better

work our parts customers If Our management business the inelastic great to We out, and to aid we opportunities get this improving wear our team for aging needs. delivering to to predictability driven strong an saying car now it continually managing driven remain this many our for provide long-term committed lives. ability operate shareholder Because break or get for fix great and an to the value. on in their AutoZoners, need customers in our demand. to ultimately by, committed service population, on their yes of based with customers remains in and to industry cases, miles to our

Now, the little on more quarter. let detail a me provide

the domestic up For our and same-store quarter, sales sales our increased X.X%. X.X% were

business During XX new the in net commercial quarter, stores in we've Year-to-date, new eight U.S., in commercial net and the programs. XX two our opened opened XX in opened programs Brazil. we stores Mexico the new U.S. and XX and stores

of about our approximately roughly domestic in and have XXX new locations, new Mexico in net new Brazil, programs. to We stores we XX program. XXX total expect XXX of approximately stores, commercial a open a commercial domestic XX U.S. expect and XX% open to Currently, for

update availability like to an inventory initiatives. our I'd provide Now, on

reminder, a the adding before. solely stocked delivery levels local our SKUs the are to additional while been is would not for coverage SKUs network of in-stock on hubs on are meaning have in multiple available focused adding stores, in that that locally frequency the the As our focused improving mega markets,

determined related completed volumes, to delivery. and sense, more of deliveries make frequent certain our testing volumes have at economic frequency lower that We at multiple don't. they We've

not We our did these the and a have our on our that XX% stores, strategy frequency cost approximately stone our center will per solid a They XX% implement. times current work. will unturned determining we impact thank structure. will the frequencies next that deliveries the changes left sales, receive ultimately to and completed, more the all congratulate of several distribution new I of commercial Implementing week. distribution months. this team be important optimal devised will want in XX% of delivery meaningful now no sales representing or nearly over and three volume of Once implementing

Now, our on let's hubs. focus mega

hub reminder, They a approximately basis. a SKUs, twice As super-sized times today. a day multiple AutoZone XXX,XXX surrounding on unique carry both hub other to what coverage overnight and provide stores or these XX,XXX stores an to carries store stores

Our hubs far mega commercial. retail expectations for mega to X,XXX in Currently, thus same-day more we times of these our of it this X,XXX or continue with today, expand majority over we exceed service an but and their receive on sales mega inventory. multiple will open receive per our about stores them hub as overnight receive and basis have hubs, service both day. results to many stores two-thirds our A access will

constraint expect we to The up mega the operate We and which continue ultimately these to to estate. XX of real open with hubs. availability location can speed on is

XX,XXX in AutoZone an hub and X,XXX under developing square While square mega XX,XXX feet location is feet or areas feet, retail average Identifying locations more. these square is just is prime a time. takes and to it challenging

local place with profitable investments assortment, cost feel provide provide our ensure we service this it incremental are improving our continue we to work, market a these and Along there AutoZoners customers, increase our share. organization will to manage we strong better to our While do to availability parts continue to advancement a great customer experience shareholders. for with rollouts, with basis and opportunities and to provide exceptional returns a on provide long-term for these for

to request. the share importance service how We mile accelerated share fact the to months. needs quarter in will we customers' be gains us available we to the continue data last stress extra intact, have of over With over to difficult our fulfill regardless to commitments and have the according of several going our the to gainers the our continued

operating into for Yes, execution we've XXXX. it. priorities commercial our the got that XXXX key regarding people leveraging IT. review year great we me let leveraging The ongoing over profitably of yes, and our business, theme are great we've carried from providing it got Now, the our highlights service, Internet, growing

will AutoZoners, enhanced remain and quarter retail theme. our supporting regarding got great we've of on committed voice great the We the past savvy, the investments we to training tech us. to our this we as the desire focusing sales to AutoZoners a On have to touches and aggressive increasing go-forward these have basis. believe realize differentiate much providing the ways it technology all interact were that have become proposition front on us with customers more We store theme, initiatives mobile share store-level under help a with availability yes, people they service with we're and

performance Our our businesses. We current in capital, and strong quarter also future to lead technology invested were highlight investments at able our to on return finish sales XX.X%. as another across all growth second we of will should

the it We best pleased of in as is of hardlines this continue metric, one to be with all retailing.

focus continues of incremental that that maintain be in It stewardship we capital capital our of to and in our to is cost excess well invest provides However, our business this important an ensure the deploy our has capital. return, dollar is we investors' we primary always reinforce regarding acceptable capital. diligence as been every that capital to we

to Bill and to Before continue Giles their and I like to discussion desires. our pass efforts about to our results, over for exceed to talk I'd the financial AutoZoners wants, meet customers' thank needs

bullish exceptional business XXXX the we of by potential have remainder a sales team. great are We an operated because on

Now, Bill. it to I'll turn over

William T. Giles

start and to take specifically Good me a moments international and morning, this retail, Bill. talk morning, thanks, few everyone, commercial let results. about more To our

increased For the Mexico quarter, and XX branches X.X%. retail our auto and stores commercial businesses, includes parts domestic our sales and Brazil which total our IMC

opened stores, XX X.X% quarter, and commercial stores. grew of AutoZone our net XXX We XX XX% the XX% stores have or represented store supported million new sales domestic our per total were increased second the ended, hub We sales by in now last Over last weeks of and XXX of or $XX commercial commercial our our old domestic $X,XXX,XXX. program opened year's X,XXX year. For programs are in sales years in X versus programs Total quarter trailing our total QX. younger. XX over programs also

For all of XXX new open programs. approximately fiscal XXXX, we expect to

While profit. our grow in we with implement continue to we existing to strategies commercial, new and are continuing commercial sales tests

by the and initiatives we sales place encouraged are feel further in We grow and market share. have can we

stores Mexico's to fiscal with stores stores We relative second expect we a ended three and rate perform the quarter was and during foreign by opened We eight. opened dollar. XXXX challenged the the continued year-to-date Mexico XXXX. XXXX new new peso to XX weakening exchange and XXX approximately to stores, business Our open quarter, well. U.S. in throughout

While have rates XXXX's one down year volatility mean means volatility U.S. what favorable, potentially last extremely earnings. the we currency exchange of significant. Moves versus the come and quarter next to will is greater X% be be to than have to of the dollar the watchful from

opened Brazil, now total stores new we have stores Regarding two and XX open.

are plans fiscal over eight the to year. Our add of more remainder the locations

performance optimism market. our to gives has this this While running than improve much be economies about of and With continues to an loss, future larger the Mexico. with potential market still more long-term operating scales, us the of

worth XX XX.X% up was was So, higher while to basis points of the cost The gross margin quarter. increase Gross attributable distribution sales, is margins. year's for patience. quarter in challenging, merchandise lower it our margin and from second last

XXXX, primary for be quarter focus the margin optimistic business. remains XX.X% continue on for SG&A was we of dollars the While rate sales. our gross in to profit our of growing absolute remainder gross fiscal

by percentage the second a impairment before EBIT due $XXX XX sales charge, the deleveraged higher than in deleverage advertising the for last Operating about incentive on of quarter million as higher points. quarter. higher and impairment were year, was excluding primarily charges basis costs. Now, to occupancy compensation, SG&A expenses

compared Interest ago. Excluding year was for quarter in X.X%. $XX QX the $XX expense up million impairment million with the charges, a EBIT was

billion. Debt fiscal planning versus the $X $XXX We of of end year. of $XX.X expense million of and XXXX size are the of $XX last to completed approximately million expense the third approximately in million outstanding the at last was due quarter at tenure bonds April The the X.XX% higher interest coupon. quarter is

debt level EBITDAR. finished X.X the times Our adjusted at quarter metric

based metric both conditions, our any debt important we in that share strategy. While decrease remain management's and may leverage to an strategy, allocation equity market and our increase rating or opinion element we committed investment of our on regarding repurchases given capital quarter, and are grade

last provision XX.X%. For tax the tax quarter, to Reform year's QX Tax one-time the benefit items versus of was our rate a due

already main by this four has components Bill taxes in As impacted mentioned our QX. morning, were

in first predict accounting This stock model of from on on individuals a about quarter, encourage $XX standard benefit been tax effect impossible The to assuming count gains change us and compares as when the QX it folks million. year one This we report million. has for have option received expensing tax past our rate for a employees handling in increases Because expense requires exercise will now. the the diluted income recognize expense lowered it also no to to new stock share a credit on $XX to us benefit last This us year's stock calculation. options, by options The option P&L. is tax we rates. to impact the both

our impairment tax Secondly, was taken. on $XX in impacted of by was a million the benefit quarter. This the rate benefit charge the

from also had our the benefit deferred new, federal We tax and revaluation the rate. tax liability from go-forward lower of a

accumulated XX.X% I for and up On these simply forward. tax and versus QX for year. tax approximately earnings we of to going repatriation pushes expect basis, XX% to GAAP we To and rate XXXX try tax will $XXX our on foreign approximate in rate pulls, we one-time net QX expense expect parse Lastly, was the income global the and incurred be say QX quarter million, QX, all global tax XX% subsidiaries. a for of the last a fiscal our through

X% was XX% million of quarter. XX.X year's these second for per from year's share quarter. second down the to combination over $XX.XX, share earnings prior diluted drove Our factors up quarter The last of count the

this impairment second up operating year flow assets for quarter. cash million increased quarter, for excluding adjustments, the including we accounting generated the Relating and charges, our of fixed to at cash of Now, $XXX the last the would've were numbers, X.X% flow. Net to million expenditures the on statement previously-mentioned Tax expenditures Reform our domestic hug X.X% impact both reflected EPS and year's the the for store for this openings, on existing expenditures quarter investments the DCs new additional stores and and Capital versus year. hub upcoming to and quarters, required information in open remodels quarter. stores Capital development or of investments. last stores, totaled technology $XXX work mega new stock-option

the Columbia, new the we in opened, of With X,XXX. stores quarter and states, of stores stores past a X,XXX XX District this Rico, XXX count finished Puerto with XX AutoZone Brazil in store for in total Mexico and

and also manage had in AutoZone buyback report of open through the our of any credit only Depreciation stress, expense of quarter-end. XX the We million stock in at quarter-end, versus at appropriate we authorization This each we $XX.X under with We one growth second has $XX.X totaled had we Again, generally metric leverage million its quarter ratings is second year's $XXX IMC want share At quarter meant repurchased metric. remaining rating rates. million. a branches firm end I and metric for QX. the recent X.X criteria. guide times last as to own The line quarter. $XXX quarter our is not was million as

share view attractive program strategy. repurchase capital We continue to our an deployment as

Inventory location merchandised per $XXX,XXX in levels you increased $XXX,XXX company's on the versus like versus was last per total payable, last defined a inventory year. basis. negative store on a to inventory $XX,XXX location same our and year a per I'd update X.X% less period quarter. a Net on The and last inventory, basis as Next, accounts over and negative quarter. inventories year last negative a $XX,XXX last $XX,XXX $XXX,XXX was

quarter percent payable at gross result, As inventory of accounts a finished a XXX.X%. the as

disciplined previously continued, Finally, resulted capital mentioned, on return capital our of the invested management approach quarters for XX.X%. Bill four as in trailing

generate We continue exceed investments have our to of capital. believe significantly will will we make cost returns that that and

Rhodes. I'll to Now, turn Bill back it

William C. Rhodes

Thank you, Bill.

initiatives, understand are for gaining encouraged of internal are with on we execute year favorable and we we our the we the the must the sales plan. continue macro our by traction environment game While remainder to

do Last We second the the are year, a optimistic the refunds tax looking of we tremendously by this to of expected consecutive tax core third see the therefore, and last winter. strong half year, season the a delay impacted these is and impact core attractive were mild to in year. negatively because at to on our be markets. our not income as back quarter. We're we and year's focus refund on in expect businesses similar intensify income fiscal businesses impact excited Timing of we material

We growing international will continue our expansion domestic efforts, locations roughly annually. XXX and

We to growth. to rate commercial growing accelerated at business our an focus continue market will on the

our be consistently omni-channel committed to We will in accelerate our a execution. will aftermarket. exceptional We an level, in to and efforts, detail as at day take and automotive To cannot living use we will the tool we our Success the day achieved have attention and and to stay shops leverage on ALLDATA must plan. We out game the will adhere not our eye off high executing to premier execute execution. with pledge.

exceed way must Our with they their customers have choices and in we to us. shop choose expectations whatever

the retail segment strongest continue operate beyond. and we of one prospects growth for be to industry's excited about to fortunate are our in and XXXX We

our we today's to money This more have even both want, continually do is We vehicles. into the most repairing their but be important and to implement DIY this save expect. expect customers cultural expect future. and an look replace faceless that advice knowledgeable of their will while service on provide to experience our Customers advice don't more that in-store our differentiates transaction. service. commercial expect they it It As other to and care enhancements taking consumers will ever been with are always websites trustworthy from customers more has online information is cornerstone any the we of on long from It us focus truly the vehicles, providing value-add advice us. committed experience come the to aspect

how In the Our the of we conditions initiatives market EPS end, charge each and last our has growth over and we measure that XX performance. delivering been drive performance be This continue key ourselves. investing are long-term our is ensure and strong formula future. to will the optimize ROIC remains extremely in regardless our successful years excited about and quarter every we to

Now, we'd questions. open the like to for call up

Operator

Thank you.

begin session. will question-and-answer We a now

Alan BTIG. Our coming of from first question is Rifkin

now Your line is open.

William C. Rhodes

Good morning, Alan.

Alan Rifkin

Hello?

William C. Rhodes

Hey, Alan. Hello?

Operator

please. moment One

William C. Rhodes

Then, – I'm move sorry. to the we can

William C. Rhodes

Operator, please? the we call, can take next

Operator

Rifkin, again, Once is line you. Thank your open. Alan now

Alan Rifkin

you Can hear Thank you. me?

William C. Rhodes

Yeah, we can.

that, what Alan. about sure happened. I'm Sorry not

Alan Rifkin

I'm Rhodes. very Bill, a sorry couple Bill you, questions for also. that about of

that that can sign recall the you you you So why in I is do your the have the and more AutoAnything confident business? make couldn't you do disposition AutoAnything growing you're first to that I time And yet disposing a And then please. now business? approach think taking asset. follow-up, remain a targeted of work, an Is a IMC of AutoZone.com

William C. Rhodes

That's question, Alan. a great

on all, first of XXXX business, other back divested the business. is appreciate of are really what the away a profitability In strength I'll each just very, business, and in very experience we core us makes our than business, second you businesses cases, we these TruckPro our the or basis. thing further in from the We a that First XXXX. are this did step we maybe sell time core business it it's a you dynamics into get long-term half the of different if of core these recall, as tell

understood really bought that to business. what AutoAnything, important on that the at long-term like business grow we its could it understand Specifically learn. we time, and to but that to it it, see we this is our Online-only emerging retail we be of if and and implications would also XXXX, them felt understood was it was to

those of As you can see they're profitable. both businesses, not terribly from

the become net more we that operating loss. have we've a area them fact, our strengths stores. business, that In need leverage at have people both And both online-only the learned more and we to AutoZone.com, confident we the the of of we about our knowledgeable were in particularly

a as IMC, thanks really And business, well for go do let's And to our so wonderful say operations, our We job feel down want on retail and double AutoZoners did people both decision the AutoZone.com commercial. been AutoAnything to just good about great us, again has core with decisions. the and markets. as and those and tougher we

Alan Rifkin

Tax from a I the reasonable what Okay. may. a investments? the be be will earmarked? if into what much. proportion in so do return these to expect time to Thank And you Thank And And you, savings a particular, reinvested of What be you expect areas, Reform business? would Bill. follow-up,

William C. Rhodes

again. you, prepared again. in Alan. our I've Great Thank questions, and to I said it want this emphasize remarks,

made on decisions that. final passed. we Reform board Tax since the a was meeting not haven't have had And frankly, We

We're that going long evaluate be and to what We're we the we You for wages prepared Tax not the term. are in quick our in is going Reform of out been know to that we're wages I us methodical decisions year to remarks decisions. last what the do. the implication right or at We've wages. on talking think intensifying. pressure over those on go make And very mentioned increased pressures about looking so. one are

the raising You've heard like. talk retailers other wages and and businesses minimum other their about

wages. that sure making are very market competitive focused on we our we with So are

them Our asset, it it's are people imperative our pay and and people important have we appropriately. that is that we imperative best the most

be big I that will part a of what on. So we think focus

the off, As to in. on what, depend pay this for them. these quarter. prepared in I've for you don't They'll know execute those in come remarks, we're as feathered do said when overtime come they all be look investments going it's in when prepared to

Alan Rifkin

you. Thank Okay.

for the Q&A. on sorry And my end with mix-up the

William C. Rhodes

what sure Alan. not I'm happened,

Alan Rifkin

I too.

William C. Rhodes

Thank you.

Alan Rifkin

you. Thank Thank gentlemen. you,

Operator

our is And next coming from Goldman Fassler Alan. you, Thank of Matt question Sachs.

now open. line Your is

Matthew J. Fassler

to good and guys, much, you so hear Thanks Can much. so you. me? Thanks morning

William C. Rhodes

Yeah. Thanks, Matt.

Matthew J. Fassler

Beautiful.

sales all, of to I a growth. talk the want of rate about First bit

You perfect against color in of had years strength quarter, storm the Obviously the two coming off you a where during the gave kind we're about middle. you. the us cadence some

basis? comp think fiscal the not you been all about be are third of like optimistic things similar had in it new this factors neutral of there. kind quarter those rest good guys, this Any rate, than would but go-forward rate past? like other should of state how Is those where based picture the and it's than about on years year – bad just Just on years rather the the X% seem been about here seems You your to we run the a in a think quarter, Is run rate many weather the run thinking in or lower that car one where it's the past? in sense park in where you bigger of guys reversing. business way a more insights great

William C. Rhodes

And intentional same-store to were been was Back the Sure. I there of five-year probably the growth our a changed industry lot but conference you made anxiety to Matt, be was fundamentals of time a would period back say not disrupted call time. this September, that September, in if remember long I last new, market, our that this very in is if a you point X.X%. year to had average say over in and sales go going

So five X.X%. we pleased year, comp changed the the don't we the years. in think I this ended I'm X.X% significantly pretty industry or the with year, this last fundamentals quarter, have had last that quarter. at over

were If up last got only weather against quarter and because Thanksgiving you recall, year between we we was be of going we to knew a Christmas. the beginning kind tough the of

in we the When a of weather challenged and performed period absolutely little hit, wonderfully. So did cold time. sales were that our first

It the a later to pop get That big first was got sales we As in when was not the you – softened. us get cold sales it as rainy, our and snap. you surprise. the and cold gets quarter,

last half conditions to as at sure not I should money think make anticipate one reinforce our and that are about the get last lost continued help You two-year year, What we continued QX. the our and the in shocks we you years like, in The salt, We look is the some comp tax two of have about and the maintenance go want cold thing and that into the talked did of conditions, this when brakes year and QX thing for about like struts, QX failure concerned optimistic spells. the favorable. we chassis is been and year. businesses we don't were don't year, potholes we you the back other people that, and challenged. so One pretty get and forget, I batteries road be of QX, and the for pick balance that for up back when

So business. that was fundamental a the shift in

Matthew J. Fassler

quick then you. one Got And follow-up.

you a about you the If you two could operating And does loss annual – can so in the associated $X do quarters guys million your you're without AutoAnything so that and we publish years, with essentially businesses do What you or filings mix? out the with plan look share the that parameters model can divesting. as that talked like we accurately upcoming on an basis? of to that

William T. Giles

combined probably you Yeah, And transparent go point, to just that you be very, digit and very not honest they're Matt. overall. but but loss, But they're they're forward profitable, that's good annualized to and be as in. break we guys guys an want a that show businesses with you, so, we'll basis EBIT model on low-double and it can single-digit, we out small

Matthew J. Fassler

then money in how much at all? it finally, get these And did Is you transactions? meaningful

William T. Giles

move did undisclosed two to different on We're ownership our it's these units. put with we because focus we them under excited about feel look, core, about what on core. and But back our an No, pretty number. we're pretty glad good and

Matthew J. Fassler

you, guys. Thank

William C. Rhodes

Matt. Thanks,

Operator

is question Horvers And you. of our JPMorgan. Thank coming from Christopher next

line is now Your open.

Christopher Horvers

Good Thanks. morning.

year? good we factors, bad think compared third the in bad little in as would here there acceleration and hand, thread something then, about of how unique why more guys look so you talked bit is guys, quarter, tick-up two five a easier we you good But shouldn't third Matt's have light good on the then here, than in those real about And see – some do you than the had to more the a and modest guys dip quarter average you a last years. up and past from Following more over X%? guys know there, X% I guys, with

William C. Rhodes

Great question, Chris.

the remember challenge. thought quarter, really didn't with we also year, On do was happens of year, don't the that so we tax quarter of year get money I third want in money the the this part know. tax get last to that we that third you last we'd What

we'll until most the a Friday. time in the That of didn't significant see the marketplace, time. start arriving amount was so over For it last part, tax money arrived first

to give As we're far a basis? put number What as years think five about it. this a quarter guidance. And are future, second the similar as we've on been go-forward but very talking I optimistic and forecast in know, we're we X.X%. on about Those the want the clear, you half, at happens I of X.X% numbers. don't pretty don't

Christopher Horvers

the some X% think, within X%. weeks around, provided weeks, December last up the then, three context sorry, quarter, then year, last X% and And was think, and of was before before you Yeah. January, January down down helpful was three the last quarter, I I – the

in you those? of So incremental terms how it could against provide sort compare some color of we

William T. Giles

to Yeah. almost I extent. a quarter bell it of as would curve think on the some

You're was was of strong weather quarter, performance When a of was really right. part more the heart the hit of little that we last that bit that quarter some weather of When early business related. the strong business we year, a the challenging. anniversaried hit given at lot the and

of we as the we're was softer, of we money now We bit of the country, positioned throughout little tax type the into QX. Bill as we a said, prepared in had quarter, pretty well end but but good tail And will think that of pretty mentioned start lot the and a as we know chilly head arriving. the wet, feel hit Bill As remarks, we QX. we be, don't as head what that impact to into is the weather

Christopher Horvers

guys. Great. of luck. Thanks, Best

William C. Rhodes

you. Thank

Operator

Stanley. is Thank you. next from Gutman of coming Morgan And our question Simeon

Your line open. now is

Simeon Ari Gutman

investment nicely. give was income, quarter. lot of if morning. don't mid-single Guys, commentary and guidance. reinvestment. from operating is And potential the about heard rate, fine a line right wanted I realize this ask I item is It digits you which Good Rhodes grew question my the that and to I Thanks. on Bill run

are I the if has comps do quarters, reinvesting want if letting are the understand number through? that flow changed, so eclipse X% meaning And faster next you to in couple you that or around philosophy

William C. Rhodes

we as places in dollar the the our don't this I portion that will Tax them anything's our and with pressure amounts an be months benefit continue where we philosophy the are et to our through opportunity to that the put But ultimately changed front take may as cetera. model a what extent that. to we operating have go and think it'll timing. those about to remains to reinvestments, some and XX to on the business think XX invest But excluding in get intact to able respond a Reform talked take wages model be When more exception from mentioned, I of those we of the and some marketplace think operating Act I back large overall. best that will as evaluate take of relative that, be, of in out general. so the to EPS in that. want dollars Reform we'll drive we'll in Tax But We to making

Simeon Ari Gutman

connected relate to current yet with bigger regard or car are with larger anything jobs regard part anything where to damage? to the this six as that starting far argument part then to come And And it, of whole as seeing yet is sort then, to Okay. to vehicles you under-car sales environment, seven-year-old through? bigger repairs

William C. Rhodes

one gets the are been under-car on the items, up. and and at hasn't breaks into Not aren't. range, yet, XX-degree, we conducive on people first finally that and we see the work the But really weather when maintenance with weather come we to happened. not get the can their time items outside seeing it has when start the and it I'll Yeah. XX-degree the usually vehicles

surprised of it optimistic materialize quite over not that that time. any it will seen materialize by stretch we're we imagination and So yet, we're haven't

to seven-year-old time. if to of don't performance. haven't as was Yeah, big driver minor that six we was deal of of we one it us, called significant our that a – I made headwind, a think you've over was out out never On but the part, it a it a it listened car

significant either. year don't this I driver a be it'll think So

Simeon Ari Gutman

Good Bill. Thanks, Okay. luck.

William C. Rhodes

Thank Simeon. Yeah. you,

Operator

next Capital Thank RBC Scot you. coming of And our from question Ciccarelli Markets. is

is line Your now open.

Scot Ciccarelli

It's Scot questions. Ciccarelli. Two

low-double-digit when First, clarification a today? comments loss, Number disposed on businesses. the the in two, you us for of the was looking businesses on your high-single-digit in Number number or for Bill, that annualized aggregate? tell one. can business millions you two the said AutoZone.com size an

William T. Giles

said, an don't eyeballs annualized because site. like that the And, so you disclose we'll is from volume what's will on to really us guys get an EBIT was perspective. AutoZone.com as Yeah. We it. be important the able It we really I move we forward the that disclose that see number to to

pickup of of well. which our amount store. fastest sales growth weekly transfers Certainly get not clearly we of really growing much of into a traffic in on basis, So the significant a significant to business, online, believe our we buy inside channel which itself do that but we store continues is have

fall back really move we going have how in we where that our with that's and that to this we believe So really that's to omni-channel that really the strategy, concept we're core forward. assets investing the is

Scot Ciccarelli

store slightly the much how up the sent AutoZone.com maybe your orders, in differently, phrasing question to has picked people's of versus homes? So

William T. Giles

I in online probably would store. is XX% what through up the picked comes say of

Scot Ciccarelli

right. guys. All it. Thanks, Got

William T. Giles

Sure.

William C. Rhodes

you, Scot. Thank

Operator

Thank you. is of Oppenheimer. question Brian our coming And Nagel from next

Your line is open. now

Brian Nagel

morning. Hi. Good

William C. Rhodes

Good morning.

William T. Giles

Good morning.

Brian Nagel

shifts consumer the taxes, respect off, buying seeing are I so personal about on guess the First sales your We to backdrop. has evidence been side, improving? talked in yet just core overall weather far. question of of With some a the power you lot with a particularly or picture the health bigger that

William C. Rhodes

is the Every us. time. for of We haven't quarter volatile the very second clearly a most seen third year of time volatile the that period is yet. the beginning quarter, This of year, single

is it, Tax able work work a are can an to it year, pick can what look every if do on be be to And change continuing pretty their at some customers? mean to those also some would be our does two-week check over in it on dollar you up Reform meaningful and done the amount. amount challenging. actually nuances meaningful We've but be on basis to the a So dollar pretty small.

your you But going able picking business. to out. check, are get to how And be really in see refund. when wondering our we so don't to can that? easy a know to every tax $XX $XX see that in up absolutely two It's to that how kind we're We ferret it weeks we're see of going if you're I

Brian Nagel

potential And I helpful. I guess then aggressively some source buying stock with respect tax the of savings, a been the back question of AutoZone's to so reinvestments that's have been its That's investment. second key time. for corporate

think this, the for or... in you lack similarly, and As a of of windfall money prioritized is that, buyback about to how coming still better allocate term,

William C. Rhodes

Yes.

Brian Nagel

Okay.

William C. Rhodes

of them invest structure that we very today an our important part assets all Absolutely, But perform one, our been, optimum the buyback the number level. structure. make have along is at still has to a in capital

Secondly, assets. new in invest

United programs, think Brazil, on. new new Mexico, So commercial the in stores and and States, on

with the flow. excess of not Thirdly, we change, changed. will has repurchase that That cash shares balance not

should decisions in we an at rate, that's are of called what I out looking We accelerated we at this there want this areas final invest on reiterate are and to morning. But that we any made some have again not that at point time.

Brian Nagel

much. very you Thank

William C. Rhodes

Thank Brian. you, right. All

Operator

Thank Brian. you, from coming is of Citi Kate our next question And McShane Research.

open. Your line is now

Kate McShane

for my question. morning. taking Hello. Good Thanks

William C. Rhodes

morning. Good

Kate McShane

I And over Given the costs, missed And you should less costs amount stores how often the that for be? to? those sure the your can deliveries lower impact on you ultimate through it, you're the therefore, walk what can deliveries volume should be some dimensionalize alleviating but I'm reached for stores of time? of how delivering of can to you if the level not of us conclusion conclusion your stores,

William C. Rhodes

Yeah.

the is what order determining that's up think lift incremental the getting It's and and that stores really cost, stores those kind delivery. think they an what there. wind the of that about volume I can the the bifurcated chain and overall on in support way looking track so to in we're of would we get frequent – decision, you're at to economic it right determined more how

that has As been. where we relatively with what we will are it actually we versus be costs doing today, realign think consistent the

pulls, relatively So there'll the and consistent. some but pushes be be cost would

Kate McShane

you. Thank

William C. Rhodes

you. Thank

Operator

question our of And you. MN from is Retail. next Thank coming Melich Greg

now is line Your open.

Gregory Scott Melich

parts tax on Hi. strategy. second imported questions, Thanks, cuts one understanding had numbers and the I the is then and reinvestments of guys. the two on

cuts, first XX% right of bps savings, way this the then... bps of which to sure XX I it's expect thinking we of margin and that. Am imply investment not about XX% should $XXX got but tax to So that I'm right; would a reinvestment of million sort I the XX about on

William C. Rhodes

Yes.

Gregory Scott Melich

of on top ...would CapEx that? be Okay.

William T. Giles

that's own invested think in done Yes, money strategy, the back CapEx majority and past. with as we'll would the Tax go million-plus the that be ballpark-ish, the separate and Reform that $XXX continue its of will in still right, se, to we've about the be what But less business. majority and shareholders, than that's will and per in back

Gregory Scott Melich

Got everything it to from SG&A? you XX like that sounds basis points, XX it. it's basis And basically said, points

William T. Giles

will second be. or and probably back period gross up be be stepping we we're of so is now. that worthy a necessarily or chain giving over you would us don't longer likely show to it and of as time. – to as what going thinking exactly SG&A margin to the large for extent, Yes, Bill what months, of it in a it is see saying a I it's But in just or haven't of over idea investing to time to just XX that margin, how be We're supply it will going an about number determinations XX spent. made said,

Gregory Scott Melich

but this And it? about that to think by next that that be starts should way build it the in Got year, range year. fiscal fair Would of third fiscal it. to quarter a

William T. Giles

Yes.

Gregory Scott Melich

of about are about parts. was divestiture terms the in guys car or a how with market? And vendors or are addressing it. IMC, of imported Got That there Is of you counts, how the you thinking area, part thinking that SKU that? a growing change

William C. Rhodes

Terrific question, Greg.

about think, we we brand, we business, when first the over do that. you bought and the all, and the primarily and First to small incredibly IMC, time, our import of of continue have that we changed. customers core deeper overlap will deeper But through recall, coverage, had, in gotten I in we if have, talked hasn't Duralast that

we how to shift So I go major don't market. see in any

constantly and on of but import think there, enhancing in we satellite as of coverage all of well. and been the about stores particular those at a there's just parts. When lot core hubs hubs, think mega our that there's lot in have it I us a AutoZone you

continue at. selling major I but doing is where to import be market, So a on market, is shift. think import the which What we'll focus IMC high-end to good really not won't we is

think Mercedes And not focused market BMWs So particular. a about the of that part and in that's we're just on.

Gregory Scott Melich

luck, a it. Thanks Got Good lot. guys.

William C. Rhodes

right. you, Greg. Thank All

Operator

coming And from our Steve Forbes question Guggenheim you. is Thank next Securities. of

Your now line is open.

Steven Forbes

morning. Good

William C. Rhodes

Good morning.

Steven Forbes

follow-up on frequency the here Maybe multiple of initiatives. a delivery

do remaining of percentage delivery can those through still just have of the you And on stores place know of working reducing kind mentioned, I week XX% said of what color on it for going frequency cohort? three the give then of So times type to deliveries a any on timing week a you but transpire the the of any for the here, this XX% And plan color timing? today number are here? is, has that basis average you would on on you're store per of be be that amount helpful. net-to-net to expand kind base that you to us right, perspective on in some change that receiving

William C. Rhodes

the will months. next be so going place rewrite But say delivery we it to the time through decision last It's a bit little this I'd us to in schedules Monday, working take as in. over still is of fresh. We're several timing. We get made a

and So been three the and be stores year volume like week, We've one high year, not significant. half stores is net testing change the a last time low for in a times the at at a volume week particular. going to

benefit stores it's week implemented. going impact to We're getting delivery cost have week to is be have stores think are delivery. neutral week and delivery a going not high-volume it marginal We're one significant. to a to time volume a that go once time So will that a today three delivery. time have We change back net getting going a three week will once get that to are the a sales lower

Steven Forbes

right? If just like And then a a that step it would I that within international. quick, there right, guess, footage for square total and looks regarding And here you. from? with up in Thank what footage, really growth concentrated was it be it's I'm that doing follow-up a Is appears modeling this quarter. the then question

William T. Giles

would an pretty annualized than Yes. basis Steve, we It's probably I more should and say on with anything else, timing be that prior consistent year.

would a probably all there's quarters. So in between about. bit That's think juggling of little I

Steven Forbes

you. Thank

William T. Giles

you. Thank

Operator

to the now will Rhodes. over Thank you. back call we Bill And turn

William C. Rhodes

Great, thank you.

to to continues I'd our be like Before the we conclude for just year. a about model moment reiterate solid. growth call, We're prospects the take that our to business excited

granted We take we will as alternatives. anything have understand customers not for our

to that marathon continue year. to But We this our fiscal game I execute and a this is want sprint. succeed not stress plans a to

very the successful. on to value, optimizing are long-term we shareholder focus and we call. confident We AutoZone today's As basics you thank to continue will focus on for continue participating be in

Operator

that your And concludes Thank conference. today's for you participation.

You may now disconnect.

AutoZone (AZO) 27 Feb 182018 Q2 Earnings call transcript