AutoZone, Inc. Q1 FY2026 earnings call

• Emphasize putting customers first, with AutoZoners across stores and supply chain delivering wow customer service. - Address sales results, new store openings, domestic and international results, traffic and ticket growth, and regional disparities. - Mentioned total sales growth, EPS impact from LIFO charge, same-store sales growth details for domestic and international. - Talked about investing capital in opening new stores, improving product assortments and supply chain efficiency, with $1.6 billion invested in CapEx this year and similar expected next year.

Total sales grew 8.2% for the quarter, while earnings per share decreased 4.6%. Excluding the noncash $98 million LIFO charge, EPS would have been up 8.9%. Total same-store sales grew 4.7% on a constant currency basis, with domestic same-store sales growth of 4.8%. Domestic DIY same-store sales grew 1.5%, while domestic commercial sales grew 14.5%. International same-store sales were up 3.7% on a constant currency basis, and unadjusted international comp was up 11.2%. We opened 39 net domestic stores and 14 international stores. Domestic has 6,666 stores, Mexico has 895, Brazil has 147, and international total is 1,044 stores.

• Expect to continue accelerating store openings, with Q2预计全球开设65 - 70家店, full year预计开设350 - 360家店. - Anticipate SG&A growth similar to first quarter in Q2. - Expect LIFO to reduce EBIT by approximately $60 million in Q2, impact gross margin rate by ~140 basis points and EPS by ~$2.7 a share.

• Foreign exchange rates could impact operating profit and EPS. - Weather changes and macro environment in Mexico could affect international sales. - Inflation and tariffs could impact gross margin and EPS.

Q: Could you talk about the maturation schedule of the new stores now that it's become a more significant item, as far as the ramp and then incremental investment that's required?

A: Yeah. Thanks for your question, Bret. So, you know, typically, our new stores mature on about a four to five-year time frame, if you will. And, you know, we've seen this historically over time. And it's fairly predictable. Our teams do a great job of getting those assets into the market, and then building our business around them. You know, regarding SG and A, we had about two points of the growth in our SG and A that was related to new stores and the acceleration of our commercial programs. And you'll see this ramp you know, continue as we, peak at the 500 stores globally that we're expecting in in FY '28. You know, what has us excited is, you know, in in addition to the new satellite stores that we're building, we're also you know, building out our Mega Hub footprint, which, as we mentioned, is gonna grow to 300 mega hubs. We've got about a 100 of those in the pipeline today. And we feel very good about our execution there. So as we look at, you know, the way our our operating margins will progress know, between now and then, you'll see this roughly two points of of incremental SG and A associated with this, with this ramp, if you will. And then you'll see that sort of lop off, and and we'll return to the kind of operating margins that we that we have in the past. As it relates to investments, you know, obviously, we've been investing in distribution centers. We had a couple of new distribution centers that we put in over the last couple of years or so. Those have come online, and we're getting the productivity out of them. We're also investing in distribution centers in Mexico and and Brazil, and all of this will underpin the growth. So that two points of SG and A that I that I talked about you know, includes all the investments that we need to make you know, across the business.

Q: On DIY, given the sequential slowdown, you said weather was a headwind in the middle four weeks. Can you help us parse out how much of that was additionally attributable to any government shutdown noise or like any sort of observable deterioration in the underlying trend or demand?

A: Yeah. I I wouldn't say that the demand as necessarily deteriorated. As we mentioned, kind of that weather segment in the middle of the we broke the quarter down into to twelve-week quarter down into four-week segments. The middle section of that segment year over year, you had some changes in weather in more of the northern markets, and you had the impact from the hurricane that benefited us last year that did not reoccur this year. So it was really a wobble in the middle four-week segment. Not related to the customer, per se, more related to the impacts from last year. Both positive weather event due to hurricanes and a cold snap that happened, last year as opposed to something that really deteriorated in this year. And that middle four-week segment, as we mentioned, was was down significantly compared to the first four-week segment and the third four-week segment.

Q: On our first question, we wanted to ask whether the consumer is showing any signs of elasticity to higher prices or whether you're seeing any signs of trade down?

A: Yeah. We, we kinda figured this question was probably coming. At the end of the day, I I would kinda characterize it as the the lower end consumer has been under pressure for frankly, quite some time. I'd say more than two years. And what I would say is they've been relatively stable. So there hasn't been, you know, a significant wobble in the in that lower end consumer. The higher end consumer, we think, is still doing okay. And we we think that's been relatively stable, over the last couple of quarters. We don't have a lot of categories where you would see trade down. We have some, you know, good, better, best opportunities in batteries and brakes and wiper blades, things of that nature. But the vast majority of our inventory is generally one part that fits a particular vehicle, and there's not a whole lot of you know, upsell opportunities. Based on, you know, good, better, best opportunities. So we don't see a lot of trade down. There's a little bit, but it's really not been that meaningful.

Q: LIFO charges were less than expected this quarter and now you've lowered your expectation of the headwind for the next three quarters by around 25%. Just want to know if this is from just greater tariff reductions or maybe more focused mitigation efforts. And then, like, could that taper, like, the upper end of your same SKU expectations? Like, for inflation throughout the year?

A: Yeah. So two things on on LIFO. Number one, we have not seen as much, cost impact as we had originally anticipated. I think know, we've talked very openly about the fact that we're running you know, a tried and true playbook One is to the extent that there's an opportunity to negotiate lower cost with vendors, and protect the customer, we've been doing that. There's an opportunity for us to diversify sources, to and maintain the sales, we're doing that. And then the third leg of stool, obviously, has been the raised, retails. So we haven't you know, in running that playbook, we haven't seen as much inflation as we would have anticipated. Think the second dynamic is, you saw the announcements where the IEPA tariffs on China moved from 20% down to 10%. And so that does lower our expectation going forward. But, you know, what we're what we're seeing, and you heard Phil talk about this little bit earlier, is we're still expecting to see higher costs associated with tariffs as we move through. And that is going to have some impact on, on ticket average and and and have some impact on comps going forward. It's just that, you know, what we had anticipated originally. We're seeing better performance from a cost standpoint. And lower, I e, tariffs, from the rollback that was announced in November.