AZO - Earnings call transcript Q4 2019

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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. And if you have any objections, please disconnect at this time. This conference call will discuss AutoZone's Fourth 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 A.M. The Time Central at XX:XX XX:XX Eastern A.M. will

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

Brian Campbell

of constitute contained provisions Securities Private of presentation that XXXX. subject forward-looking Act statements Certain this to are the Litigation statements in the Harbor Reform Safe

Form are expect, estimate, statements are should, conditions, will, and that Forward-looking are Risk in Certain current risk and for accounting credit to assessments systems, expected and Part trends, the suppliers, the ended cost these of appropriate. contained energy the new demand, use Item changes Factors XX, more believe intend, could, of XA attacks, our information management Report or cyber cash stock of may, levels, of August historical the year experience feasible and the weather, as train, detail be number impact these regulations, inflation, damages to words based our availability of and light in read activity, war, standards, terrorist subject factors in raw and anticipated without These interruption laws on repurchases, markets, origin we carefully. of including, to and position, ability anticipate, construction the our of These Annual tariffs, limitation, flows, business a believe, this project, future should to of and typically X downgrade XXXX forward-looking and and such material assumptions conditions, made expressions. failure to in including uncertainties information, including developments international growth seek, debt by our in factors historical retain delays, or market of employees, XX-K under product conditions, other section perception prospect qualified of strategy, plan, ratings, be hire, in technology reputation, of consumer similar of statements compromising on or and sustainability, interruptions. future war discussed integrity access of challenges competition, credit prices, financing, confidentiality, risks of available rates, impact recessionary risks impact

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

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

Operator

Rhodes. the I ahead. Please Bill to like now to Mr. over would call turn go

William C. Rhodes

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

about learn you on website I Calls our and see slides and the www.autozone.com them. Earnings clicking release Investor with Regarding If press have the comments along to had our opportunity press quarter's on is the quarter, link. read to hope Conference an release Please our on today results. click Relations available fourth not complementing Quarterly

allows our go passion us numbers this the pledge credit All pledge, extra mission ourselves importantly to organization where we kind we mile the efforts and and/or willingness the vision to we a organizations committed on deliver customers reported have to service our morning, exceptional where goes have delivering for to this are our Most their of thank morning. AutoZoners’ customer to we don't. amazing pledge. deliver want all more I to begin a and To We're to across AutoZoners to statement, dedicated our unique, a AutoZoners.

major this quarter's review results on on business, were will and our with customers cadence, initiatives. the we'll performance and we've morning, our margins, regional omnichannel, on monthly we the the themes and lastly success it sales on This had technology, we'll stated our commercial pleased we and performance, tariffs both QX. we in yes, our retails Overall, got quarter, initiatives; for impact success our about commercial acceleration, first, had inventory [indiscernible] report leveraging specifically continued the with talk

has Our see every no It XX.X% task commercial basis, a XX-week commercial comparison year. on this sales encouraging last quarter tougher year-over-year as QX easy and this two-year were to our against a and grew was build been we year. XX.X% up comps

For XX.X% This growth a on more represented sales week comparable the basis. we versus million quarter $XXX last XX grew roughly year. XX.X% in and

did our growing team job commitment a Our business this great XXXX. to on during

industry hub volume, we sales absolute professional to and than enhancements, three inventory initiatives effectively reputation While the smaller of of convey engagement our increased our been improvements, base, of brand proposition. remain of very strong growth customer peers including on the growth very combination from come our growth This part value development many artfully been than expansions, rate. of the our entire in has and selling Duralast times ever robust a assortment that many in have efforts has years operating growing more our technology for rate hub strengthening mega tremendous store the and organization across teams, our

a the clip we also past. grew per higher sales have store than at in We our

as we stores now Although approximately program increased their our openings a averaging XX% of have program, are has productivity fewer steadily.

coverage, at and with And customers growth rate weekly substantially For years improved a sales program. products, at our mature improved this previous ever the been by versus year service, our our indicating per offerings, $XX,XXX rewarded sales averaged we recognized we grew beyond are and customers. highest quarter, our and productivity have

a being of salesmanship, with and these across hub down grew we business year for solid And commercial business a have efforts their we absolutely can Congratulations the into rewarded for is are continue stores, assortment, growth working. entire focus and XXXX. different commercial the for to to that and on improved improvements the on overall business types product Additionally, we than build intense faster street more on Their our performance quarter up very in our great organization this our all growing the the delivering future. of again indicating foundation customers.

second Regarding a our domestic and by the by definitely quarter generator. substantial generating half segment commercial than impacted sales flow same-store acceleration and of first predictable revenue solid Retail very as story us May a a slower remains positive steady cash more for basis stream mature quarter, DIY in nice a is business, performance the customer followed while clearly the on a two-year it half. of was for slower our but month

across In saw the addition to out West Southwest. underperformance we May's and weaker performance

didn't softer performance we level the this the of quarter. heat-related was Additionally, our quarter particularly our heat, half experience in and certainly first as categories’ same of normal

weakness in strong saw some we Finally, certain markets. Hispanic

to the it very select center. past quantify, is are front issues seen when in While have we certain markets difficult and times immigration objectively in this at

we the available was With us, commercial flat very have while data to this grew our share quarter nicely. DIY

gained year, fiscal we the share. For

far New our in QX about were mature is performance with business Year remain retail the than we our and optimistic business, our commercial beyond. While more and pleased

staffing we place. Our in inventory initiatives and availability have optimism comes from that the

the enhancing to quality and October We help continue will adjustments wage Our constant high and made their experience is talent to retain continue on help focus can Service. touch we enhance service making attract us customer the high last a believe important It to that our play provide highly role maintain and remember business WOW! this vehicles. is vital customers nature Customer to our the the AutoZoners of knowledgeable difference.

unrecorded went call, scale; to because and very detail decreased the historically evident cost our to unit as quarter's SKU LIFO substantial we negative by last of lack Regarding assortments tariffs, This products on into they have scale, low on visibly quite efficiencies. reserve. due we into extensive is introduced inflation experienced at are per SKU our

also that tariffs, a of the departure due because to of small we amount We tariffs. last norm a quarter had from experienced the inflation, noted earlier

new introduced, tariffs have the we pass on costs to been our begun have customers. to As those

been since on many in attempting use on has a customers. inflation resulted these product and quite less This SKu-to-SKU weighted higher costs in in these the costing we but to have manageable. significant to retail costs still increases burdensome average increases can XX% we waves up our implementing and it roll than make quarter, over time, As be of currently last

experienced our not material of result gross changes have in have customers to margins increase. We to continue as a prices our but will our and tariffs,

enhance to shop. Turning in strategy the customer they how continue to to our where, want them by to and shopping experience when, meeting efforts, our omnichannel we invest

these and initiatives autozonepro, to have ALLDATA. We place autozone.com, websites support shopping in-store the our We're systems system and improve mobile, investing patterns. heavily in in to

to ship to see and rapid in traffic pick delivery, in home, buy day website in growth online and up We next growth store. and continue

very customer is a of percentage the small below X%, embracing our of our substantially offerings. how all we While pleased business with representing are

Last delivery to we their receive day. next over at discussed as home U.S. allows as quarter, customers the very our markets in markets order and that of in program next midnight products XX% some day late their

the We and with further that which us with addressed working will and digital didn't diligently of say be are would past enhance we more to customers with allow markets, continue remiss to the with our The bought commercial to grow ample we inroads as shops. in improvements allow have the know opportunities have further which to I online our expand will will our well. customers are once capabilities to as many we us customers, not existing ongoing make business commercial more offering sophisticated be I from if deeper us certain

Loan-A-Tool is next and receive cannot host of coming showing ordering home, to continuing Fix and the help to to sites ship in ship primarily advice, that continue making research sale. with doing While to customers into other store see online are services up Finder be and our simply store, to traffic to trustworthy retail buy we business, duplicated that the and or day, growth increase, to lots customer online of all and pick to online our commercial the prior for have online then home

on have more and customer-facing the the invested focus is AutoZoners, execution believe we our improving our intensify on with we our customer. inventories, We initiatives, improving objective our of interactions. systems Regarding as

parts customers; Drive areas for the on fast products, push and deliveries, of high operating we relentless we what on, changes execute Excellence, annual on quality for well theme our didn't merchandising, in-store XXXX, and XXXX. for and in execution our that some service, a Regarding so matters assortments, in product flawless to on exceptional of focus

this of initiative, non-customer our leadership activities. part As we or teams redundant facing store to reduce challenged have

for work the can we us know next will XXXX. improve in we have focus additional continue While opportunities This effectiveness be identified we levels AutoZoners, tasks, By our to of have service. we year. these our a do to improve much to removing major of

initiatives Regarding XXX XX in stores parts locations Yes, our and of inventory our we hub hubs XXX initiative At -- of store Got expanded assortments. our end hub we of continue expanding the the It hub XXX significantly with We've had the spirit total a network. for stores quarter mega

opened we hubs. incremental an mega year the For XX

sales DIY where mega both the will of hubs XX and that across between seen States. our hubs consistently and have We to XX open United to number or our commercial is the added to grow are mega hubs. expanding announced Last ultimate we target have markets continue hub we quarter

to out. take us have to and a We build it'll this some years few ways go

would locally and not needs Both As available local on designed our focused additional for a inventory the hubs initiatives the meet reminder, coverage and hubs markets customer's immediacy. that to both are enhance network our store making are before. the coverage to and available hub our adding meaning to have in been mega skews ability our

basis we difficult for to provide regardless availability ensure AutoZoners with assortment We parts profitable the the returns exceptional do this extra manage it fulfill advancement, to continue of provide our and mile with for our to shareholders. on Along with for on local remain strong a request. place how and our a opportunities to going focused the provide service importance our organization great we customers, to of improving our work long-term needs customer's

transaction. we position. for and of catalog our initiatives improve our technology We our have the improve and has believe our customers investments to XXXX and efficient electronic investments to an customer in current regard systems to In been frictionless first making future will seamless, ensure competitive sale technology point

and AutoZoners our We growth lead of our will make will sales to more knowledgeable all businesses. across and efficient ultimately more

we expenditures, to these operating in adding further both are customer are improve capital While shopping investments to investments the and to experience. expense committed XXXX

wide in Our XXXX the spent customers acceleration committed margin our expectation will by and is development in to for business to investments in around than XXXX. ongoing the before experience we technology a improving on ever long-term. more mid technology helping We remain

customers been more investing with acceleration, efficiently we to sell us help AutoZoners business commercial and easier. in systems have Regarding conduct

won't XXXX on quarter's most rolled we While be or until last said later. these even initiatives out call of late calendar

Our In DIY summary of year. such committed store broader market our focus relatively prospects macro we our fiscal miles engagement and share increasing our commercial factors DIY gas focusing we today. pleased paying driven our new the on team remain off our strength with growing customers DIFM to prices performance our and believe both We remain in and in is businesses. encouraged largely the for both and the low favor and with existing as on in remain and increasing absolutely and industry are

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

X.X% the increased parts total same our than sales store Northeastern, remaining week better XX.X% auto Atlantic were additional and markets up domestic up excluding Midwestern, Mid our roughly our and we're total representing XX% quarter X%. store of the the For and performed Regionally base in sales, of sales markets.

fiscal and net no our the a stores we XXX new We stores internationally XX domestic programs. for opened new commercial closed For including year year. XXX

XX% new our quarter a commercial our the Currently international program a majority and stores the U.S. of the have opened opened net and new stores business have we vast of During stores commercial XX commercial our XX program. domestic in programs.

an Mexico Mexico. continue for expand During and accomplishment XXX to the team in mark store XX quarter new in the stores surpassing we our in opening Mexico, amazing

on Brazil were to with We finishing our XX. in this return fourth able at capital strong highlight XX.X%. again We quarter XX stores another once and should new invested also as performance quarter opened we finish

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

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

the I to efforts thank to results like Bill AutoZoners we Giles and pass results talk of solid appreciative reinforce our discussion again Before financial for to again how I'd over about are fiscal to XXXX. deliver our

will turn over Bill. to I Now it Bill Giles.

William T. Giles

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

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

of However, total X.X%. excluding sales auto the parts extra week up was

weeks up XX QX store of $X, For at XXX,XXX trailing the Total last $X,XXX,XXX is commercial sales increased total for year. this was average ending XX.X% sales an AutoZone ended, from basis. last approximately week a on represented over on commercial our quarter XX% of XX $XXX million XX.X% increased sales XX but In basis. and grew total year's the QX week a

sales quarterly sales domestic quarter, We commercial in quarter average average program, excited $X,XXX our increase for highest our the per per weekly This the was an year's last for very highlight of and sales from sales our weekly acceleration. in weekly XX.X% program fourth a average $XX,XXX strong are to averaged history.

result. were a For billion, the our stores domestic of sales quarter stores. in now We XX% $X.X commercial program X,XXX have our or great

we can As and have by sales to further mentioned we and share. share we we in gaining with initiatives and Bill feel our earlier commercial encouraged market the committed are place market customers growth remain

impressed and an perform they with I'm well. talented team in opened ending executed inspiring our by culture. stores. We fourth and Mexico visit visit. It's I during how Our quarter stores Mexico our well in stores Whenever have model embraced continued always to particular our our stores the new XXX XX the quarter always

we Brazil XX operate stores. now Regarding

impressive opened in especially off training, at year. XX team efforts AutoZoners. Brazil in This XX the newest a base Our of beginning of stores only XXXX fiscal an on stores developing our and the hiring, tremendous took

Our performance and about optimistic continues improve to this long-term market. of future remain we the

an incurring larger the market we to as yet much success claim cannot we than be Mexico. operating While loss, this are potential annual has

while of size the is So significant. the potential market challenging,

last margin of quarter. basis sold decrease in from of margin XX.X% was fourth attributable sales was mix shift margin to for primarily the of the two quarter. during more commercial primarily goods in from Gross The the points lower business year's XX down quarter gross the

on of see overall rate to through our continue we pace While weighed opportunities is accelerated commercial lower growth margin our costs our sourcing. gross to direct

to While of can we the taking from I with remain increase our committed appropriate from folks we we to make opportunities to shift recent similar here. the to and out to want gross mix rate, buy cost our feel stress to trends see margin should do business encourage commercial. improvements where pressure we

has absolute commercial. auto dollars profit with in and segment gross growing experienced primary in we've driven Our growth our by our pleased always acceleration parts been focus the been total we've

quarter fourth by however the for our termination for we points large XXX pension from quarter. of sales XX.X% SG&A year was plan. lower basis year's of last had expense Last a

higher Excluding numbers charge expenses -- up Operating quarter for from our this operating quarter. but the basis the year our on adjusted this than of were year with beginning last the year's an at line expenses X.X%. up in were expectations last $XXX X.X% million

primarily calls rates for for the front and highlighted year. cost this have The planned operating quarters and fiscal last domestic continuing impacted store specifically IT wage we negatively which investments technology the On few driven conference the on payroll made by this investments quarter we investments our was deleverage expenses.

want wage past be growth we the in milers remind up year. later of similarly the to this as that percentage financial quarter part began QX will as investments dollars the quarter rate a we SG&A For to last

quarter EBIT was million. for the $XXX

up million with $XX.X year was the from extra quarter the for expense Interest main difference XX.X%. QX the was margin ago week. EBIT a Our

versus fiscal QX. the in interest million last range million year in $XX We first quarter the XXXX are $XX planning of

includes last forecasts costs associated million last with bond the our the at above issuance year's was of billion year approximately $X.X or in the Debt of balance had X this we end $XXX past April. Our billion. ending higher outstanding quarter QX

Our in regarding or capital We decrease our rating both finished adjusted investment strategy an quarter any times debt that leverage conditions. strategy. our and based increase X.X while and of at committed allocation repurchases quarter to remain market are on level given EBITDAR we may grade equity debt our element share the opinion and metric metric important management's

XX.XX% points was and our basis stock exercised For options tax from the the rate benefited our quarter. during XXX approximately rate quarter in

our was benefit this XX.X%. rate Excluding

quarter year stock benefits mean fiscal are effectively what cumulative due the to cannot tax on to activity the modeling of the option predict before stock first we XXXX For this exercises. XX.X% assumption to any we reporting credits committed remain Because option we rate.

for over income was up XX.X% the quarter year. last Net $XXX.X million

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

Now pension last adjusting for and the in grew expense per year the the extra year XX%. fourth taken week this of earnings quarter share

and new expenditures openings net to stores quarters upcoming stores remodels or required information expenditures and the operating of quarter existing stores, hub, assets fixed quarter. fourth statement and for for additional up Capital were year. generated flow. cash new versus mega cash the million totaled this on development flow Net reflected investments. last quarter the the million X.X% technology we $XXX on work to Relating of for open $XXX hub Capital expenditures XXX

in $XXX.X quarter fourth last million expense $XXX states stores is in generally and Thomas. line X,XXX. is a this total rates. XX open stores Brazil growth year's the XX Puerto new the Depreciation for and totaled with X,XXX in count recent AutoZone for with and This St. of and in finished this Columbia of Rico quarter versus we quarter quarter stores million. the XXX With Mexico past store

of quarter criteria. leverage quarter. stress $XXX meant buyback any year's repurchased is our not to our ratings stock million had end managed We At and in only has report through we want own AutoZone a firm under quarter metric versus credit fourth authorization and we million as the metric $XXX each we I remaining its Again guide million appropriate one last in times. as The was $XXX trading metric. X.X share

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

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

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

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

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

Now Rhodes. I'll it back to Bill turn

William C. Rhodes

Thank you Bill.

to We since year. XXXX comping report are a fourth X% was our best fiscal fiscal XXXX. store same At solid pleased and year quarter sales our

and must which at Year high off at For take believe continue execute high competitive adhere been execution. we living has the will the and to on we to not to a level have We can our eye a To New cannot consistently pledge. we advantage. focus executing a level

day game we to stay achieved study committed execution. and in to react and the an we on must environment exceptional with our executing plan. out where and While detail will be day external appropriate attention Success

combustion the of vehicle the and reduce XXXX have unnecessary the For clutter of believe making the dominant way our to been experience internal deliverables our remain and Yourself We industry's the to the IT AutoZoners over otherwise will are workloads, vehicle store of the initiatives and customer simplifying in the for choice. many to Do both fundamentals professional and miles and will customer. forecast part engine has strong from remain expected remains better there's driven continued while a get tests we It of year we increase on lot as that remainder our focused customer age the

this to opportunity of to I were what dedication, want in fiscal recognition passion, past impressive reflect deliver very to and sales and and results. in of quarter. to We as commitment experienced In take strong on store retail XXXX. one positive accomplishments Before the I build commercial every our AutoZoners call Both highlight able some they conclude the I XXXX. want delivered same team on

basis sales time record set XX.X total week X.X% all by an XX sales and at Our grew billion. on a

Our aggressively in X.X% highest commercial basis year on XX.X% sales accelerated sales history. improved hourly from in to the it that We AutoZoners and our Research per the Duralast categories to or last confirms week choose store significant we tenured growth and with and XX technicians productivity brand mature into has our "more power our made a growth Duralast types. impressively product program, year in customer this leverage and meaningful investments the performance. parts" expanding continue new of

performance a expanded future of ultimate hubs. of plans the mega more of to our back our doubling hubs than the On to we the XX stellar vision XX mega

XX. Brazil the off We at the of locations in in new opened of base and our only a store of we XXXth XX beginning Mexico year opened

our deliver importantly We business. service continued exceptional flow who XX our we we of leverage our and and we million customers billion XXX.X us to inception count in has Most have cumulative with repurchased share leveraging fiscal a to to pledge our AutoZone in technology, live XX.X accelerate facet in record reduced a culture our million. to cash to billion business. predictable team incremental in have our our rewarded continued strong Leveraging XXXX. unique and $X repurchased every our powerful from Since investments stock now and XXXX very in technological a enhancements

eye we thank to the ultimately AutoZoners, at To take for our this I'd all each We model to hubs pledge, which ALLDATA like commercial, our their most will believe for our line execute Success balanced Service execution. this with and important day support adhere our shareholders. cultural do serve, expands communities thoughtful off our what and dedicated, top around and year. take again to an they detail hubs, international, will customers and and Mexico, recognize online, we our in-store. us of for domestic can cornerstone our team pick digital long be Brazil, a about passionate and grow future. into to always and execution. we opportunities achieved and and we up opportunity AutoZoners talented, level allows retail high of be not it been excited rewards will cannot the every living mega upcoming We're attention to has and must growth for the

Now like to the we would up questions. open for call

Operator

[Operator Instructions].

question first your from line Suisse. Our Seth from Credit is Sigman Seth, is open.

Seth Sigman

the wanted to on morning. guys, for quarter. in the for and question this I just point year. Hey good and progress on congrats the the quarter the follow-up Thanks on taking cadence the

You some that And obviously then talked quarter, was you commercial? an quarter, the Can the the and the here, DIY we that first more then in and challenges in of is quarter clarify thinking in the about quarter. or specific earlier be in also thanks? should run rate that second the to of just later trend improvement of did you see representative the as business we trend think half how about that about

William C. Rhodes

in in are us one, more retail this at the for question, exaggerated Yeah, A thank effects business. development the things; stage they commercial least business at couple our in are you. of fantastic always weather than

So commercial nearly will weather same not will to see that implications, but see them. the extent retail

July know to don't before. what's to store we in we going a in the feel comp of normalized, retail we what very oriented. and more particularly because August We happened a with June we had talking performance spring, had very late was indicative weather soft soft going experience then basis but the we're are much were first May the strong that about our too June what so about and not specifically So, on was really effects, think were other were and ones quarter. or we hope a good year was we QX. they that But of Part more happen and

Seth Sigman

prices general, okay. on how mention this have that the a And seeing how course, it is responding Thank I guys you about helpful? you the waves, talked but sense consumer in Of you. then quarter. raising initially, know of could you started can impact the increase, be give your talk comps did if to in And consumer you prices respond may us had you're about view. have in would that

William T. Giles

in Yes, from average that merchandising good they I think and the kind so these measuring far, consumers, is would seeing of doing of a our organization we're weighted roll say I the a through increases great that cost. job response as

impact necessarily And I haven't days, forward. margin from manage early a significant we way to it so to and that that from so, continue perspective say continue a the from we'll it's going tariffs, but still seen a and would perspective or monitor sales

Seth Sigman

great. Thanks guys. Okay,

William C. Rhodes

Thank you.

Operator

you, And open. Morgan your Simeon next Gutman Gutman is our from Thank Seth. Stanley. is Simeon question from line

Simeon Gutman

morning. good Thanks,

So, on I wanted two related margin. I questions. gross have ask to first

So, recent think margins also that I said be Bill going think should gross improvement. our to you you forward trends, to I make you similar Giles, want mentioned I and think

terms all whole the as So, can you time trend the year? roll or frame in then harder does then of in should reconcile make on that two And to in, we that depends those it that, and QX improvement for the it line that elasticity? or is tariffs that is it extrapolate for show

William T. Giles

question. good Well, that's a

brand. margin. We try me always We're bit. then improve we and we an are there strong to little before, to our for to lower that brand Let further other across to sourcing opportunities we that to mentioned opportunity can continue roll a as gross unpack looking our categories for Duralast to that And us brand have the that improve believe evolve continue incredibly cost. so we Bill recognize always that opportunities that as is

entire out continue say a and accelerate not as extrapolate that's shorter-term year, at double-digit thinking continue apply that but to would going I margin. rate, pressure on I'm we trying more business on commercial a gross to our the Secondly, basis to to

So that's kind XX thinking the of so. this was points or quarter the around way basis it, about and we're impact

pressure focus, margin the primary all to margin we'll growth, we're that's business, the about that on for continue will all our our to and reduce manage EBIT gross dollars put and But to and the we to -- we're absolute commercial hard So, and about growing let as will margin little gross continue look rate. business we'll margin continue opportunities a cost. our grows,

Simeon Gutman

and helpful. that's profit on growth for My I it, maybe. okay, is guess trading follow-up Got SG&A

getting debating growth? fiscal pace over So in you invested a trade pretty Are to lot at and a even makes for on whether profit higher be a And seem XXXX it sense stepped time. you to more little good up spend return. you a you've steady and rate a

William T. Giles

say would been targeted. investments very the that and specific made we've very I that have

investments on we're wage we getting we our have been that adjustments. those appropriate point believe wage this So, believe adjustments from benefit to and were

we forward, have continue taking across recognize mostly is from regulatory will move pressure we As activity wage place to country. that some we that the

technology not So, wages. high we recognize then And in an a wages that smaller it to as still a invested was little bit be maybe will but point, as and it's a we pressure that's investment. of continue when proactively component,

of year And the so, on technology, will in continue and to spent move in even those forward. remarks, specific we highest are was one our as invest we as mentioned and in technology probably areas to last more to invest we we've continue years technology, the expect prepared and Bill

we've areas, yes, able strong we and and those environment the two you're have and in right, we that results. to way in been So continue our through manage sales will been generate are and to earnings that the play are

Simeon Gutman

Okay, you. thank

Operator

question line is your Fadem you from from Zach, is Wells Thank Zach and open. Fargo. our next

Zachary Fadem

good Hey, morning.

component attribute commercial and on mom categories? you makeup could regional to the accounts speak would extent here takes customer around the to new or and independent commercial the in the a growth if pop to the curious of little of various the First programs and maybe you could some comp national more versus about then one would what the quarter, puts and speak categorize on the growth as growth, what you

William C. Rhodes

Yeah, terrific question.

First commercial of we all sure very in that down faster that a all we of which than our you different customer customer across rate want are rest did that commercial growth. up in about segments. the make I is were this business. say had grew prepared mom the excited know the make a the remarks and to street the we the those to business growth And small that at point widespread clear pops and

level. time I said customer an mature in all sales at also was growth Our high

had, different working segments managers engaged initiatives across our initiatives that from very working we managers excited exactly all that just which the store we've that they're it more inventory and different to what came getting which is all markets, the we're hopeful how district tells the on the were hub to in tandem of. we So different were things customer across about board that us

Zachary Fadem

if this any that in up I XX growth the that called differently on confirm SG&A on a that seven And saw to your little week speak about the extra if for what versus Bill think quarter XXXX? on you to and cadence or a about SG&A there's could spending similar halfish you should want you're commentary you we add curious of And the would out in what XXXX? investments more comment we doing XXXX that just it, range investments basis. duration in and on Got

William T. Giles

the business. think the to I occur on regulatory as will think update X.X% more we along is said continue about both did how move last technology business we're the I in our the as thinking much And would I and that's and for the Relative way be pressures. retail year quarter and will through certainly and they to thinking the it about of give will the the would we it what side that and some moving we forward be escalate in about side Yeah, the to invest of I say wages of next to then of to response right we'll year. number it. commercial you investments But continue

place some with to good easier there. provide We an retail on commercial do to in able have recognize investments to we order that better And be our customers commercial through made are the business service customer we and the and over side on big through be opportunities obviously mature couple to like had that we're last systems as then a effort also legacy technology. any on changing And move along we've service company as well our improve of years. there

Zachary Fadem

Got it, the sense. time Appreciate makes guys.

William C. Rhodes

you. thank Alright,

Operator

our Michael, is line from is Thank from next question you Michael your UBS. open. Lasser and

Michael Lasser

been thanks grower mid stock has income double-digit. get questions. lot to buying single-digit morning, Bill taking and AutoZone operating for Good historically enough Rhodes my back a

operating margin growth should the commercial between have Now been guarded [indiscernible] near-term. down faster operating we it has margin, like expectations investments the around your these were and sounds domestic

this still is that growth to algorithm…? type reasonable So expect AutoZone can this achieve of

William C. Rhodes

great another Michael. thanks, Yeah question

If lot of grew that of we'll double-digit had lot streak we repurchase within want things changed EBIT our while since EPS of to things quarters the our changed. you it in of push But time quarters. mid growth. at I time we in reasons a point look if XX hope streak over I XX%. XX where straight remarkable growth A have straight at not grow low we single over another we haven’t still We believe had our the close think had, we program to with digits to But and model. have share the like that's don't to

growth margin we the on going we rate. we company, get have grow overall doubt not focused reasonable profit on As are very operating margins to get rate pressure we gross deployed operating -- the our our on that pressure is dollars grow for on capital model and returns are commercial a growth to what will that at and we're we to a and on good focused margins do EBIT what the without

Michael Lasser

that that both margin, or you're being that exactly when -- business driven you needed alluding up gross commercial were And what it transparency the if to is changed, follow to you your just push have things up alluding a that, about is by change? mean now you mentioned

William C. Rhodes

significant are in change of seen commercial so seen past say that we've we've really to double-digit that's what the that from the of component as future. and single-digit we low our that the certainly the single-digits high grow in would a changes and the business I acceleration mid expect to a that's

perspective little to dollars. is on and but the and market put a your about taking So, question back and from that margin continues pressure we're margin of business that growing share to that growing bit all

in that's is really but so executed where on And so primary that and far our both on we've commercial. focus particularly fronts

Michael Lasser

price quantify being investment look impact but can and respond as impact comp it that been Giles positive you the pushing inflation of as what in clarify more do Bill how aren’t consumer the something is fast tariffs forward to it has has been, as it so industry within fast maybe to inflation can skeptics community, about the was units the as been the your or is and price perhaps has a And and for debate of growing completion the to you point? that increases growing not lot response there's so increases, from with nearly responding you

William T. Giles

sales to a any it inflation a whether the or hard it. of to a inflation little absolutely demand on bit improvement that’s tell. tell I Yeah, not comp perspective, resulted baked there's hard mean is from into component of part our pressure that points store inflation it's

it a is also mind say so was rate. kind is a component keep same are a our the inflation by X.X but I sales the it's definitely that a healthy through of But in dimensional that coming inventory there. overall. relatively store look at two overall driven somewhat return would that So And is of there growth costs slow

that increasing as so retails And through. go we're our we're cost seeing

but edged been faster sword. double benefit was We case a is a bit a return of inventory it wish us. it's particular little for this So, in

measurably going do So will improve to those we we've along costs prices been continue able retail our we order offset to move in to of kind as and forward. that

as So prices it our at as be won't retail increasing all lumpy once.

Michael Lasser

and you luck. Thank good

William T. Giles

Thank you.

Operator

Thank open. Morgan. question JP you and Chris from line Horvers is our is your from next Chris,

Chris Horvers

this think headwind create you as sort and happen or the no July you think guys. a normal would it the end to weather saw impact over you questions of the that commercial business as good about a and and summer tailwinds does could past period? there's could Thanks, the nor about have August given as if the about the so you to the you to sort more And of temperate is day strength of that in that July follow-up classify and warmer sort as period is the fall, here just any think that the really of business? business -- and October headwind at on we like of what Couple that August this September have fall morning

William C. Rhodes

business vehicle parts. start year generally. the it. happens of with than but part fall. in generally are weather in in lot warmer very the on are our a effects rainfall will temperatures fall last excess extreme put that would our The not muted second of that I maybe stress the The temperatures not they're There's

in I the So of major out called a if past. think don't initiative hurricanes outside we as weather

was Florida part get if So what a we hurricane of bigger question be a can your that in did then South Chris. Houston first And in like the we issue. or

Chris Horvers

How would past July? this June, weather classify the July-August, summer, you

William C. Rhodes

business. it think effect a don't had big on our commercial I

QX, and will pretty we our same will stronger started where have to grow has been begin there when into our lap real comps. As the had the be stronger you quarter was and we went consistent. that the how But could coming growth in and QX. really we were asking something went we tailwind, for growth That's or up we question to is the build fourth against or into momentum QX, we last headwind accelerated as and year us in impact QX

Chris Horvers

my that's up. So follow

So commercial comps yet did have impact you accelerate and your moderating June some on stack. did obviously the but May

comp continue to how going comparisons modeling So stacks forward potentially you are accelerate ability sustain to thinking them, about those even accelerate or them? that business harder your against and

William C. Rhodes

that thing go the earlier business in the effects to to are in is and the very call that back the business. I in weather that said I'll one small of retail comparison commercial

business because the the strong in every they but we have about softer business, don't been in June were but give think front in XXXX. were to us guidance commercial business feel very that level that of don't you the period of has we So we have, of soft commercial May the they place. in very about I want the And weren't retail know. feel very We what's good initiatives that good execution we don't and we

worked they far So really well.

Chris Horvers

luck. of best Understood,

William C. Rhodes

Alright, thank you.

Operator

line Bret open. our question is is you your Jordan. next from and Thank Bret,

Bret Jordan

guess tariff might rebating those be seen as one suppliers good how question see we'll got but some pressures side that sort I as far of increases the two who on for and reversal. kind tariff taken have and well you Hey, a of a some anything I you price on of from morning some we've reversed? experience alleviating do as might guys. granted but have the and what exclusions

William T. Giles

to to give as Bret talked answer an a as it's significant we've answer don't necessarily. far lot. that know certainly about honest something that You you don't been I I think know the It hasn't

of lot here number to time spent don't have a We it's so I think material us. a

Bret Jordan

a how north on a balances? of payable. upper can Okay that, on and Obviously take high XXX% accounts your then you getting we're inventory on build the the question that you bound as inventory. What's

William T. Giles

we've in last about As level. maintain time around at to we're number talked think maybe point trying that some this in at the that so several I quarters or year

side Bill the to talk we heard drive we of in that it and And balance. it really commercial a inventory But of helps inventory you benefits to bit and and the mega open as the that continue both and it inventory does retail on the make hubs hubs about so our little business. overall customer investments closer and get

you've X.X what from a and slightly pressure So little [ph]. on the inventory that's inventory down puts over time our bit X.X, go seen X.X, return

And to level. slightly is to really is at to we'll goal our it inventory may level. it of but that that balance able able maintain our around maintain so kind objective to And be that really to payable improve accounts -- around be

Bret Jordan

Right, thank you.

Operator

Markets. RBC Thank is Scot, from question you and Scot our from open. is your line Capital Ciccarelli next

Scot Ciccarelli

trying know Ciccarelli. Scot last you relationships. availability side. to those years the the year lot a I more especially few last you of commercial involved to got also I store made business really over of some the have guys, over product the know changes your much managers Hey in on cultivate

that kind slow that the that point commercial reaching Thanks. the of in time? something store is the rate to now So can involved because of us how that commercial you think and that builds do something growth you that double-digit you that's you're or have operationally help managers become specifically starts front on more anniversary over understand can maintain

William C. Rhodes

for that We making they and the store the what But to commercial important real the with to more and managers they and in They that they're else. managers last in district can we doing they thing When than customers. enhance the they're our ever it. quarter calls how executing calls. do year them managers started Thank is involved get from with today the Scot. believe We customer sales learning their our they're business our beginning learning out store to of are our make nobody can before. sales do fourth service teams you store much are back what's like they're our

service advantages didn't those commercial shortcomings coming they connection where didn't Before were a to our because and didn't direct they were they our have service really know know from. customers where

Now they to sight have direct of that. line

we had significant out a think I of year. benefit that last

quickly to from quickly, the will very business got places on for commercial And I in all some benefit quickly. think their the speed to next commercial not continue we -- that business. comfort different few the with others them they're years got their of as and of up understanding very so

Scot Ciccarelli

pretty it a like. to be sounds should appreciate long there I it, So, thanks. tail

William C. Rhodes

tail done of their was knowledge months a gets on commercial vastly the as I'm it store I level stores the first It or in to is evidence out so me have time and is empirical don't excited. it talking than it. ago. we've that's that think managers XX to said the three the And would what different I'm that has so. But we it

Scot Ciccarelli

Got it, thanks Bill.

William C. Rhodes

you. thank Alright,

Operator

question-and-answer. turn Rhodes. back Thank no the Bill time to Mr. will is I more the you. over for There call

William C. Rhodes

out very Before in moment we call conclude hosting theme our for company's Meeting the new year. National are be our best call Sales a we I recognizing here and will announce our to operating week. week and this take we This performers want Memphis the that

this focus We and we our our our celebrate on meet AutoZoners Memphis, objectives. and of field where This didn't to week past them for successes welcome will hometown year's we is Tennessee. enthusiastically

as the our anything customers we model have granted don't solid business about be understand New and continues alternatives. we for take Year to we're our As excited

marathon on want to is We but that to game this will stress a a continue our I plan and sprint. execute not

As participating continue on and be in to our a on AutoZone company we basics successful. very continue focus will day. for the shareholder focus interest value, Thank on your we're for confident and Have all you to optimizing long-term today's great call. much

Operator

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

disconnect. You now may

AutoZone (AZO) 24 Sep 192019 Q4 Earnings call transcript