Before we begin, please note that today's call includes forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance. Please refer to this morning's press release and the company's most recent annual report on Form 10-K and other filings with the Securities and Exchange Commission for a discussion of important risks and uncertainties that could cause actual results to differ materially from expectations. Forward-looking statements speak only as of the date made and the company undertakes no obligation to update such statements. Today's call will also include certain non-GAAP measures. A reconciliation of GAAP to non-GAAP financial measures can be found in our press release.

Good day, everyone, and welcome to AutoZone's 2024 Fourth Quarter Earnings Release Conference Call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Phil Daniele, CEO of AutoZone. Sir, the floor is yours.

Thank you. Good morning, and thank you for joining us today for AutoZone's 2024 fourth quarter conference call. With me today are Jamere Jackson, Chief Financial Officer; and Brian Campbell, Vice President, Treasurer, Investor Relations, and Tax. Regarding the fourth quarter, I hope you had an opportunity to read our press release and learn about our quarter's results. If not, the press release, along with slides complementing our comments today, are available on our website at www.autozone.com under the Investor Relations link. Please click on the Quarterly Earnings Conference Call to see them. As we begin this morning, I want to thank our more than 120,000 AutoZoners for their contributions during fiscal 2024 that resulted in our solid performance. As the first line of our pledge states, they continue putting our customers first, which resulted in total sales growth of 5.9% for the fiscal year, while earnings per share increased 13%. As a reminder, this fiscal year had an extra week of results. Therefore, excluding the 53rd week, our sales were up 3.8%, while our EPS was up 10.4%. In the fourth quarter, with our continued focus on what we call Wow! Customer Service, our total sales were up 9%, while EPS was up 11%. On a 16-week basis, our Q4 sales were up 2.6%, while our EPS was up 3.5%. We also delivered 1.3% total company same-store sales, with domestic same-store sales growth of 0.2%, and international same-store sales up 9.9%. Our domestic commercial sales accelerated sequentially, finishing up 4.5% compared to last year's Q4 of 3.9%. This is on a 16-week versus 16-week basis, while we were up 10.9% on a 17-week versus 16-week basis. Although our international business continued to grow about 10% in local currencies, we faced nearly a 500 basis point currency headwind, and our reported growth rate is approximately 5%. The weaker US dollar has been a tailwind for our results since we began reporting international comps last year in our fourth quarter earnings report. The stronger dollar had a significant effect on our reported sales, operating profit, and EPS this quarter. Jamere will update the potential impact of foreign currency on fiscal year 2025 later in the call. While there will always be tailwinds and headwinds in the quarter's results, what has been consistent is that we could not have achieved both this quarter's and this year's success without exceptional efforts across the entire organization. Now, let me dive into our sales results. First off, our domestic DIY results were very similar to last quarter. Q4's DIY comp sales were down about 1%. The headwind from our discretionary merchandise categories drove the bulk of this decline, similar to last quarter. For our fourth quarter, discretionary category sales made up approximately 18% of our mix and were down roughly 5% year-over-year, again similar to our results in previous quarters this fiscal year. We have seen this trend throughout the entire fiscal year, and we believe these categories will continue to be pressured until the consumer gains some economic relief and consumer confidence improves. Concerning our inflation impact on the DIY comp, we saw both average ticket and like-for-like SKU inflation up approximately 1% for the quarter. While still low compared to historical norms, this growth is a positive trend for us, as we would expect inflation in our average ticket to be about 3% over time. We anticipate average ticket growth will return to historical industry growth rates as we move further away from the hyperinflation of the last couple of years. We also noted a 2% decline in DIY transaction count. While the overall sales growth rate for the DIY industry appears to be down over the last quarter, it was encouraging to see our market share growth in DIY. We believe we have a best-in-class offering, and this gives us confidence that when our consumers revert to their historical shopping habits, we will benefit from that upswing. Secondly, I will address our regional DIY performance. Simply put, it was consistent across the country, with each of our 10 reporting census regions delivering around a 1% negative comp. Third, I will discuss weather and its perceived impact on our DIY business. We clearly experienced hot weather across the U.S. this past summer, and in those markets where the weather was hot, our sales increased accordingly. However, in most of the country, the weather pattern was similar to the previous year, resulting in no significant impact on our performance. Next, I will touch on our U.S. commercial business. Although we reported this morning that our commercial sales were up 10.9% for the quarter, on a 16-week comparable basis to last year, our sales were up 4.5%. We were pleased to see our U.S. commercial sales growth, which marked another quarter of sequential increases to year-over-year DIFM sales. There was very little variation in commercial sales across regions, as the entire country was basically running at the overall growth rate of 4.5% on a 16-week basis. While we are encouraged by our progress, we still have significant opportunities ahead to grow market share, with improved satellite store inventory availability, better hub and mega-hub coverage, the strength of our Duralast brand, and effective execution on our initiatives to enhance delivery speed and customer service. We are confident about our future. This quarter, inflation on a like-for-like SKU basis was essentially flat, which resulted in flat pricing and average ticket for commercial. We have observed pricing remain relatively stable as inflation has subsided for goods in our sector. We expect to see a slight increase in inflation next year, assuming that like-for-like SKU retail inflation will be in the low-single-digits in fiscal year 2025. Over the year, we opened eight hubs and 11 mega-hubs, which is roughly half of what we did in fiscal year 2023. We are excited about the ability to ramp up the opening of these important assets in fiscal year 2025, though openings will be somewhat second-half heavy. Hubs and mega-hubs contribute to comp results that outpace the rest of the chain, and we will continue to aggressively implement these assets. For the first quarter of fiscal year 2025, we expect both DIY and commercial sales trends to slightly improve. We anticipate better sales performance in the second and third quarters. As always, we will be transparent about our observations and provide insights on our markets and outlook as trends evolve. Before turning the call over to Jamere, I would like to discuss our international business. We were busy opening stores this quarter, with 49 new stores opened between Mexico and Brazil, bringing our total to 921 international stores. As noted in our press release, our same-store sales were just under 10%. We remain dedicated to expanding the number of stores in both Mexico and Brazil, currently having 13% of our total store base outside the U.S., and we expect that number to grow. By 2028, we plan to accelerate our openings, targeting around 200 international openings per year. We continue to leverage our U.S. store learnings and apply them to our international operations, and we are very optimistic about our future abroad. In summary, we have continued to invest in enhancing end-market inventory assortments to drive future traffic growth and sales, improving our IT systems and supply chain. In fiscal year 2025, we will continue to ramp up our store openings, particularly our hubs and mega-hubs, and drive efficiencies from our new distribution centers expected to come online in 2025. At AutoZone, we are committed to investing in our growth initiatives. In fiscal year 2024, we invested more than $1 billion in capital expenditures and remain focused on our strategic growth priorities. In fiscal year 2025, you can expect more of the same, with investments in accelerating store growth, especially hubs and mega-hubs, placing inventory closer to our customers, distribution centers to enhance efficiency and reduce supply chain costs, and IT systems to improve customer service and enhance our AutoZoners' ability to assist our customers. We believe our industry is strong and that we have the opportunity to increase market share both domestically and internationally. Now, I will turn the call over to Jamere Jackson.

Thanks, Phil, and good morning, everyone. Before I unpack our results, I want to remind you that each year, our fiscal year ends on the last Saturday in August. Based on the way the calendar fell this year, we had an extra week in our fiscal year and the fourth quarter is based on 17 weeks versus 16 weeks. For comparison, our same-store sales comps are based on a 16-week basis, while our total sales, EBIT, and EPS results will be discussed on a 17-week basis. As Phil has previously discussed, we reported 9% total company sales growth. On a 16-week basis, total company sales were up 2.6%. Our domestic same-store sales grew 0.2% and our international comp was up 9.9% on a constant-currency basis. Total company EBIT grew 6.1% and our EPS grew 11%. I also want to point out that we had a headwind from foreign exchange rates in this quarter. We had a 500-basis-points drag on international sales that resulted in a $32 million headwind to sales, an $8 million headwind to EBIT, and $0.32 a share drag on EPS versus the prior year. We continue to deliver solid results despite the economic backdrop, and the efforts of our AutoZoners in our stores and distribution centers have enabled us to grow our business and our earnings in a meaningful way. Let me take a few moments to elaborate on the specifics in our P&L for Q4. For the quarter, total sales were just over $6.2 billion and, as I just mentioned, was up 9%. For the year, our total sales were $18.5 billion, up 5.9% versus last fiscal year. Let me give a little color on our sales and our growth initiatives. Starting with our domestic commercial business, for the fourth quarter, our domestic DIFM sales increased 10.9% to $1.7 billion. On a 16-week basis, our domestic commercial business grew 4.5%. For FY '24, our commercial sales were $4.9 billion, up 6.2% versus last year. In the quarter, sales to our domestic DIFM customers represented 31% of our domestic auto parts sales and 27% of our total company sales. Our average weekly sales per program were $16,700 flat to last year as we lap new programs that we opened that are not at maturity. Our commercial acceleration initiatives are continuing to deliver good results as we grow share by winning new business and increasing our share of wallet with existing customers. We now have our commercial program in approximately 92% of our domestic stores, which leverages our DIY infrastructure, and we're building our business with national, regional and local accounts. This quarter, we opened 55 net new programs, finishing with 5,898 total programs. Importantly, we have a lot of runway in front of us and we will aggressively pursue growth in commercial, which represents a tremendous growth opportunity for our company. To support our commercial growth, we now have 109 mega-hub locations. While I mentioned a moment ago, our commercial weekly sales per program average was $16,700 per program, the 109 mega-hubs averaged significantly higher sales and are growing much faster than the balance of the commercial business in Q4. As a reminder, our mega-hubs typically carry over 100,000 SKUs and drive tremendous lift inside the store box as well as serve as an expanded fulfillment source for other stores. The expansion of coverage and parts availability continues to deliver a meaningful sales lift to both our commercial and DIY business. These assets are performing well individually and the fulfillment capability for the surrounding AutoZone stores is giving our customers access to thousands of additional parts and lifting the entire network. We have an objective to have well north of 200 mega-hubs at full buildout. Our customers are excited by our commercial offering as we deploy more parts in the local markets closer to the customer while improving our service levels. On the domestic retail side of our business, our DIY comp was down 1.1% for the quarter. For all of FY '24, our DIY comp was down 0.6%. Despite the industry softness, we continue to gain share in DIY and we are well-positioned when the industry reaccelerates. As Phil mentioned, we saw traffic down 2% along with 1% ticket growth. And as we move forward, we would expect to see slightly declining transaction counts, offset by low- to mid-single-digit ticket growth, in-line with the long-term historical trends for the business, driven by changes in technology and the durability of new parts. Our DIY business has continued to gain share behind our growth initiatives. Importantly, the market is experiencing a growing and aging car park and a challenging new and used car sales market for our customers, which continues to provide a tailwind for our business. These dynamics, ticket growth, growth initiatives, and macro car park tailwinds, we believe will continue to drive a resilient DIY business environment for FY '25. Now, I'll say a few words regarding our international business. We continue to be pleased with the progress we're making in our international markets. During the quarter, we opened 31 new stores in Mexico to finish with 794 stores, and 18 new stores in Brazil, ending with 127. Our same-store sales grew 9.9% on a constant-currency basis and 4.9% when taken into account foreign exchange rates. We remain committed to international, and given our success in these markets, we will accelerate the store opening pace going forward. We're bullish on international being an attractive and meaningful contributor to AutoZone's future sales and operating profit growth. Now, let me spend a few minutes on the rest of the P&L and gross margins. For the quarter, our gross margin was 52.5%, down 21 basis points, driven primarily by an unfavorable LIFO comparison to last year. Excluding LIFO from both years, we had a 32-basis-point improvement in gross margin, driven by continued improvement in merchandising margins. For Q4 last year, we had a $30 million LIFO credit, while this year, we did not have any credits. We previously said that we thought we would have approximately $10 million of LIFO credits in the quarter, which would have equated to 16 basis points of higher gross margins or $0.45 a share. At year-end, we had $19 million in cumulative LIFO charges yet to be reversed through our P&L. At the moment, we are not anticipating any charges or credits to our P&L for Q1 of FY '25, as inflation has not materially impacted our LIFO inventory accounting results. I will remind you that in last year's first quarter, we booked a $2 million LIFO credit. And as a reminder, once we credit back the $19 million through the P&L, we will not take any more credits and we will begin to rebuild an unrecorded LIFO reserve. Moving to operating expenses. Our expenses were up 10.4% versus last year's Q4 as SG&A as a percentage of sales deleveraged 37 basis points. On a 16-week basis, our SG&A was up 4.6%. The growth in SG&A has been purposeful, as we continue to invest at an accelerated pace in IT and payroll to underpin our growth initiatives. These investments will pay dividends and customer experience, speed and productivity. We're committed to being disciplined on SG&A growth as we move forward, and we will manage expenses in-line with sales growth over time. Moving to the rest of the P&L. EBIT for the quarter was $1.3 billion, up 6.1% versus the prior year. EBIT for FY '24 was just under $3.8 billion, up 9.1% versus the prior year, driven by top-line growth and gross margin improvement. Interest expense for the quarter was $153.2 million, up 41% from Q4 a year ago, as our debt outstanding at the end of the quarter was $9 billion versus $7.7 billion at Q4-end last year. We're planning interest in the $108 million range for the first quarter of FY '25 versus $91.4 million in this past year's first quarter. Higher debt levels and borrowing rates across the curve are driving this increase. For the quarter, our tax rate was 21.1%, and down from last year's fourth quarter of 22.4%. This quarter's rate benefited 80 basis points from stock options exercised, while last year had benefited 22 basis points. For the first quarter of FY '25, we suggest investors model us at approximately 23.4% before any assumption on credits due to stock option exercises. Moving to net income and EPS. Net income for the quarter was $902 million, up 4.3% versus last year. Our diluted share count of 17.5 million was 6% lower than last year's fourth quarter. The combination of higher net income and lower share count drove earnings per share for the quarter to $51.58, up 11% for the quarter. For FY '24, net income was $2.7 billion, up 5.3%, and earnings per share was $149.55, up 13%. Now, let me talk about our free cash flow. For the fourth quarter, we generated $723 million in free cash flow, and for the year, we generated $1.9 billion in free cash. We expect to continue being an incredibly strong cash flow generator going forward and we remain committed to returning meaningful amounts of cash to our shareholders. Regarding our balance sheet, our liquidity position remains very strong and our leverage ratio finished at 2.5 times EBITDAR. Our inventory per store was up 3.7% versus Q4 last year, while total inventory increased 6.8% over the same period last year, driven by new store growth. Net inventory, defined as merchandise inventories less accounts payable on a per-store basis, was a negative $163,000 versus negative $201,000 last year and negative $168,000 last quarter. As a result, accounts payable as a percent of gross inventory finished the quarter at 119.5% versus last year's Q4 of 124.9%. Lastly, I'll spend a moment on capital allocation and our share repurchase program. We repurchased $711 million of AutoZone stock in the quarter, and at quarter-end, we had just under $2.2 billion remaining under our share buyback authorization. The strong earnings balance sheet and powerful free cash we generated this year have allowed us to buy back 6% of the shares outstanding since the beginning of the fiscal year. We have bought back over 100% of the then outstanding shares of stock since our buyback inception in 1998 while investing in our existing assets and growing our business. We remain committed to this disciplined capital allocation approach that will enable us to invest in the business and return meaningful amounts of cash to shareholders. To wrap up, we remain committed to driving long-term shareholder value by investing in our growth initiatives, driving robust earnings and cash, and returning excess cash to our shareholders. Our strategy continues to work. We're growing our market share domestically and internationally, and improving our competitive positioning in a disciplined way. As we look forward to FY '25, we're bullish on our growth prospects behind a resilient DIY business, a fast-growing international business, and a domestic commercial business that is continuing to grow share. I continue to have tremendous confidence in our ability to drive significant and ongoing value for our shareholders behind a strong industry, a winning strategy and an exceptional team of AutoZoners. Before handing the call back to Phil, I want to remind you that we report revenue comps on a constant-currency basis to reflect our operating performance. We generally don't take on transactional risk, so our results reflect the translation impact for reporting purposes. As I mentioned earlier in the quarter, foreign currency resulted in a headwind on revenue and EPS. If yesterday's spot rates held constant for Q1 FY '25, then we expect an approximate $55 million drag on revenue, a $16 million drag on EBIT, and a $0.63 a share drag on EPS. And if rates remained at the current spot rates for the full fiscal year 2025, we would expect an approximate $265 million impact to revenues, a $90 million impact to EBIT, and a $3.64 a share impact to full year EPS. And now, I'll turn it back to Phil.

Thank you, Jamere. We're proud of our AutoZoners across the globe and the results our team delivered this past quarter. In FY '24, we focused on improving execution and driving Wow! Customer Service. We made meaningful progress and are well-positioned to grow sales across our domestic and international store bases with both our retail and our commercial customers. Our gross margins are solid, and our operating expense is appropriate for future growth. We continue to put our capital to work where we'll have the biggest impact on sales. Our stores, distribution centers and leveraging technology to build a superior customer service experience where we are able to say 'yes' to our customers' needs. The top focus areas for fiscal 2025 will remain growing share in our domestic commercial business and continuing our momentum in our international markets. We believe we have a solid plan in place for growth over the next 12 months. We know our focus on parts availability, flawless execution and what we call Wow! Customer Service will lead to sales growth and gains in market share. We're excited to start 2025. This time of year, we also enjoy reflecting on the past. Our team achieved some impressive milestones this past fiscal year: $18.5 billion in sales, headed toward the $20 billion milestone; commercial sales are about to eclipse $5 billion, it wasn't that long ago we just crossed across $2 billion, that was only 2017; average weekly sales domestically of $47,000 a week, equating to just under $2.5 million per store annually; our Mexico and our ALLDATA teams both broke multiple records, and Brazil has now more than 100 stores and is growing; we bought back $3.2 billion in AutoZone stock, marking $37 billion in buybacks since the start of our program back in '98. As we start our new fiscal year, I'd like to take a moment and discuss our operating theme for this New Year, 'Great People, Great Service.' I am asked frequently what differentiates AutoZone from others. My answer always goes back to the same point over and over again, our AutoZoners and AutoZone's amazing culture. Our AutoZoners have built this culture. This year, we will focus on our AutoZoners like never before. We are determined to improve upon an already existing culture of service. Next week will mark the start of our National Sales Meeting here in Memphis. Just over 3,000 AutoZoners will be in Memphis to learn about our parts and products, celebrate this past year's accomplishments, as well as allowing our leadership to celebrate and recognize the best-performing store and distribution center AutoZoners. We cannot wait to have everyone here. But we can't rest on our laurels and we aren't without our challenges, that's for sure. We must make sure that every store is staffed right every hour of every day. Our processes need to function properly, always, and we have to meet our new store opening goals and timelines. Simply put, we have to remain the execution machine that we have always been. Fiscal 2025's top priorities will continue to be based on improving execution, and we will continue to invest in our following strategic projects: reaccelerate our new hub and mega-hub openings; effectively and efficiently open our new distribution centers and optimize our direct import facility; ramp-up our domestic and international store growth; as discussed, our international teams posted same-store sales comps on a constant-currency basis of 10.2%, continuing several years of very strong growth; and most importantly, reaccelerate our domestic commercial sales growth and continue to gain market share on DIY. Also this morning, I'd like to remind everyone that Ken Jaycox joined AutoZone this past quarter as our Senior Vice President, Commercial. Ken is a strong addition for us, having served most recently at U.S. Steel where he served as their Senior Vice President and Commercial Chief Officer. He has extensive experience in the B2B space and has developed and led world-class sales teams. He is a great cultural fit, and we are fortunate to have Ken join us. We are excited about what we can accomplish, and our AutoZoners are committed to delivering even better results. We believe in our potential for future growth. We believe in AutoZone's best days lie ahead of us. Now, we'd like to open up the call for questions.

Certainly, at this time we will be conducting a question-and-answer session. Your first question is from Simeon Gutman from Morgan Stanley. Your line is live.

Good morning. Hey, Phil, you mentioned accelerating commercial sales growth. You made a hire recently, and we talked about hubs on the call, and I think you're tweaking inventory. Can you talk about timing? What should investors expect? What do you expect out of the organization? When could we see commercial sales move to that next level?

Yeah, it's a great question. Thanks, Simeon. I think we will sequentially improve from here. Again, like we've talked about on the last couple of calls, I think it's a progressive improvement. I don't think it's going to be a snapback. If you look at the environment out there, the consumer is still pressured, and we think that's showing up on both DIY and the commercial side of the business, but we like our strategies that we have in place as far as exactly what you said, incrementally improving the store side assortments at the satellite stores, opening up these hubs and mega-hubs, and adding inventory closer to the customers. And then, we're also working on ways to streamline customer service, specifically improving speed to customer on those harder-to-find parts. So, we like our strategy, and we think we'll continue to build from here.

I have a follow-up question about gross margin. What is the current status, and what is the potential for improvement? Given that discretionary spending is down and commercial is up, I’m curious about the source of strength in your margins and how sustainable it is moving forward.

Yeah, I think, we got a couple of things working in our favor. One, our merchants are doing a fantastic job driving merchandising margin improvements and negotiating with our supply base, and that team has done a tremendous job for us. So, I think, as we move forward, we'll continue to drive merch margin improvements. We have a little bit of a drag early on because we're adding a couple of DCs associated with the supply chain efforts that we have, but net-net, we think that the merchandising margin improvements will continue to power us moving forward. The one area that we're watching very closely is what's happening in the industry from a pricing standpoint, as Phil alluded to and I alluded to as well, that we're not seeing the average ticket growth. That's largely a function of what we're seeing on the inflation side. As we get some additional inflation that starts to make its way into the industry, we're looking forward to having an opportunity to push retails a little bit harder. So, a very disciplined approach, very strong merchandising margins, and we're looking forward to a pretty good outlook for FY '25.

Thank you. Good luck.

Thank you.

Thank you. Your next question is coming from Bret Jordan from Jefferies. Your line is live.

Hey, good morning, guys.

Good morning, Bret.

Could you talk about what, if any, are the hurdles to reaccelerating the hub growth now that the three major players are all using a hub strategy? Is it a real estate access issue, or is it just sort of timing of your internal development team?

Phil always smiles when we get this question, because I own store development inside of our organization. We feel very good about what we've done, essentially what we've done over the last year or so is rebuilding our pipeline and our capabilities. Obviously, and we've talked about it here on the call, we struggled a little bit as we got through the pandemic. Everything was generally delayed during that timeframe, but the reality is that there were things that we needed to improve from an operational standpoint to really improve that pipeline. We're pretty excited about where we are on hubs and mega-hubs. We still have our plan to open 200-plus mega-hubs versus our original estimate of 110. We'll build 20-plus in FY '25 and I'm really excited about the fact that we have about 70 mega-hubs in the pipeline today, most of which are under construction. So, I feel good about the team, what we've executed on, et cetera. These are big 30,000-square-foot boxes and tough to find locations, but we've reorganized our team and doubled down on our efforts to get those boxes into the marketplace. I'm excited about what they'll contribute to our future growth prospects.

Okay. Then a follow-up on the commercial business. I mean, can you talk about the cadence through the quarter and then any dispersion between national account business versus the up-and-down the street business?

Yes. When discussing the cadence throughout the quarter, both regionally and over time, they were quite similar. The start of the quarter was somewhat slower, but June was strong, partly due to the early onset of hot weather this year. In July and August, the weather was comparable to last year, so there weren't significant changes in performance during those months. Where it was hot, all categories performed well, which was expected. Overall, we had a good summer, but it was not notably different from last year. That's our perspective on the quarter. What was the second part of your question?

Are you noticing any changes in the competitive landscape for independent accounts versus local businesses?

On national accounts, we consider the up-and-down the street customer, national accounts, and some specific verticals. The up-and-down the street customer has shown great resilience and has been one of our fastest-growing segments. We've seen improvement in national accounts from one quarter to the next, largely because many national accounts are closely linked to tire sales, which have also improved. We're noticing an increase in tire replacements, even though these customers might be experiencing reduced traffic. However, tires are no longer the significant drag they used to be. Conversely, the segment related to new cars, used cars, or buyer payer lots has not performed well. When cars change hands, there typically is a rise in maintenance activities. For used cars, customers often refurbish them by replacing tires, brakes, suspension parts, and doing general maintenance. As new customers obtain their new cars, they are likely to personalize them further. This segment, where we have a strong presence, has struggled. We believe that as the economy improves and we see an increase in used car transactions and new car sales, these two segments will also show improvement.

Great. Thank you.

Thank you. Your next question is coming from Chris Horvers from JPMorgan. Your line is live.

Thanks, and good morning. Can you discuss the growth prospects for the domestic DIY and commercial markets? You noted gains in the DIY segment, but there was a decline of 1. What are your thoughts on how those markets performed during the quarter and how we should view the improvements leading into fiscal year 2025?

Great question. Thank you. So, on DIY, as we said, the biggest pressure point has really been in the discretionary part categories of the business. So, think of that accessories, truck towing performance, things of that nature. That business has been pretty tough for us for at least a year. And when you look at the share gains, that sort of area is where we've seen the most challenging performance. In our maintenance categories and our failure categories on the DIY side of the business, they have been pretty resilient, but it's those headwinds from the discretionary categories that have been tough. And we frankly don't know that that's going to change too much until that our pressured consumer starts to get some economic relief and, frankly, when their confidence starts to improve a bit. On the commercial side, we believe we're still one of the fastest-growing in the industry, a little bit of a tougher comp scenario, but we believe we're growing share and we like our strategies of deploying inventory through the hub and the mega-hub assortments. And we have several strategies that are focused on improving customer service in commercial, and we're seeing really good results from those.

To elaborate on that, we think the DIY market has experienced a decline in low single digits due to the factors Phil mentioned and the lack of significant retail inflation. Ticket growth is slower than historical rates, causing some pressure. A mix of consumer sentiment and the absence of retail inflation is impacting the business. However, we are optimistic about our ongoing execution and the high level of service we provide to customers. As the market picks up, we will be well-positioned. On the commercial side, it seems to have been flat or slightly declining for a few quarters, and this quarter appears to follow that trend. Nonetheless, we are excited about the acceleration in our commercial sales growth. As we move ahead, the implementation of our strategies, including expanding hubs and mega-hubs, is promising for our future.

Got it. And then, a couple of quick margin follow-ups. First on the gross margin. It looks like that 53rd week, the gross margin was maybe 80 basis points lower. So, is there something to read into that? You talked about being positive on gross margin over the year, but some DC pressures. So, is that just accounting nuance or something that we should think about in terms of cadence? And then secondly, on the potential FX headwind, the international implied operating margin for the year is materially higher than the quarter, so what you experience in the fourth quarter. So, is that the 53rd week impact, or is there something going on there?

The additional week can create some noise in how allocations are handled, so I wouldn’t put too much emphasis on it. For the entire company, we recorded approximately $365 million in sales and around $87 million in EBIT related to that extra week when compared on a like-for-like basis. The impacts on margins and SG&A can appear skewed due to the way allocations are managed in the quarter. Regarding our international business and its margins moving forward, it continues to perform strongly. Our operations in Mexico have essentially doubled in revenue over the last three fiscal years. Consequently, fluctuations in foreign exchange rates will affect us. The teams are performing well, and we aim to provide clear insights on anticipated FX changes and their future margin effects.

Got it. Thank you.

Thank you.

Thank you. Your next question is coming from Steven Forbes from Guggenheim Securities. Your line is live.

Good morning, Phil, Jamere.

Good morning, Steven.

Maybe just a follow-up to start on the commercial business. Maybe if we just focus on sort of weekly sales per commercial program. If we adjust for the extra week contribution, it looks like your sales were sort of down mid-single-digits year-over-year. Any way to help contextualize sort of what's driving that and/or, right, any sort of initial thoughts on how your initiatives on speed of delivery, right, customer service you may help inflect that, right, as we look out over the coming quarters here and potentially get it back to growing?

If you compare the 16-week periods, our sales increased by 4.5% compared to last year. This marks three consecutive quarters of growth in our commercial sales. We are continuously focused on improving our product assortments. Our merchants have done an excellent job enhancing both the in-store assortments and the assortments in our hub and mega-hub locations within each market. Our goal is to utilize the available inventory in a market—be it in a hub or satellite—and deliver that inventory quickly to the customer at the shop level. We prioritize the speed of delivery, aiming to get inventory from anywhere it may be to the shop as efficiently as possible to improve customer service. As we look at our hubs and mega-hubs, we can offer a wider variety of products, and we are committed to getting those products to customers faster. Over the past couple of years, we have implemented a significant amount of technology, and we continue to use this technology to enhance customer service for our AutoZoners, enabling them to assist customers better and get inventory to them promptly. We're seeing positive results from this strategy, which relies on having both hubs and mega-hubs deployed. This is why establishing more hubs with inventory assets close to customers is crucial for our success. We would like to move faster and plan to reaccelerate our hub and mega-hub expansions later this year. We have a strong pipeline and are optimistic about our future. We have identified the locations for more than 200 mega-hubs; it's now just a matter of negotiation and opening those sites.

I appreciate the color. And then, just a quick follow-up for Jamere. I appreciate the quantification of FX, assuming all things constant, the release, obviously, quantified the EBIT contribution of the extra week. You also called out LIFO. If we add these up, right, we have sort of a mid-single-digit headwind to EBIT growth next year. Is that the right way to frame up sort of the non-controllable headwinds to EBIT growth, or anything else you want to add as we think about sort of cleansing the models here?

Yeah, there's really two pieces. One is, we had about $40 million of LIFO credits that roll through the P&L this year, that become headwinds next year. Now depending on what happens from an inflation standpoint, we've got about $19 million of credits still to come before we go back to an unrecorded balance. So, you could offset maybe half of that $40 million benefit that you had this year on the LIFO side. So that should help you from a modeling standpoint. And then, from an FX standpoint, we try to be transparent about where the spot rates are. We're certainly not making a prediction on where FX is going to land. There are lots of things that will impact that, certainly, things that happened in the U.S. economy, things that happened in the international economies, and some of the political dynamics. So, what we wanted to do is just be really transparent about where the spot rates currently are and what the impact could potentially be on our P&L. We'll update you as we move through the year. It's been pretty volatile. You've seen a pretty significant spike probably to the tune of 20% or 25% in a very short period of time. And again, as I said, given the size of international and our P&L and the profitability of that business, it does have an impact. So, we'll be transparent and share with you exactly what we see as it rolls its way through the P&L.

Thank you.

Thank you.

Thank you. Your next question is coming from Robbie Ohmes from Bank of America. Your line is live.

Hey, good morning. Thanks for taking my question. I was hoping, could you guys talk a little bit more about seeing inflation return and what the drivers to that normally are or what they could be. And maybe as part of that, remind us how historically tariffs and port strikes and things like that impact inflation for you guys?

Let me take a step back and discuss the historical growth rates compared to what we're experiencing today regarding ticket averages. Recently, growth has been relatively low, around 1% due to retail inflation and muted ticket average inflation across both segments of the business, which reflects a decline from historical rates. Historically, over the past two to three decades, the industry has typically seen an average ticket inflation of 3% to 5% and a transaction decline of 1% to 3%, often influenced by parts inflation and enhancements in product quality. We anticipate that, in the near future, we will return to our historical growth rates for these metrics. The factors driving inflation and increasing ticket averages include the shift towards higher technology parts and the inflation of product costs. Over the past year, we haven’t seen significant increases in product costs. This is largely due to the aftermath of supply chain constraints during the pandemic, which led to substantial inflation that was passed onto consumers, resulting in hyperinflation. We are now moving past that period, and we expect inflation to stabilize and return to normal levels by 2025. Regarding tariffs, they have varied over the years. If tariffs are implemented, we will transfer those costs to consumers and typically adapt our prices in anticipation of tariff changes. Historically, we've seen some improvement in gross margins as the cost of goods adjusts, but it eventually stabilizes. The industry has consistently maintained rational pricing, and we believe the same dynamics will continue.

Thanks. And just a quick follow-up since you brought up the last 20 to 30 years. When over the last 20 to 30 years has the consumer been like this? You guys are talking about on the DIY side a challenged consumer. What happened last time the consumer was like this?

I’m not sure, but that's an excellent question. The lower-end consumer has faced significant pressure for about the last 20 months or longer, though this has varied over different recession periods. Have we experienced the same level of inflation we saw in the past three years? No, not at least in my experience. Generally, during more challenging economic times, people tend to postpone maintenance and discretionary purchases early on. As time goes on, however, they start taking care of their vehicles because they understand that a small investment now can prevent a larger repair down the line. We anticipate fluctuations over time, but we believe our execution and the improvements we’re making are the right approach for us and will prove successful in the long run.

Just a little more on the consumer. I mean, a couple of things really stand out to us. One is, if you look at the economy just in general, I've said this for a while that you've had this sort of this two-speed world where the middle- and upper-income consumers have strong balance sheets and are continuing to spend as normal, and the lower-end is feeling the pinch, particularly in the discretionary categories. The beauty of our business is that the lion's share of our business is relatively inelastic, it's break-fix, it's essential maintenance. Consumers need their vehicles for mobility. So, we tend to power our way through those. What encourages us about the consumer is that even in this environment, you've got unemployment at 4.2%, you've got wage growth at 4%, so wage growth is finally keeping up or outpacing inflation. So, we feel pretty good that as consumer sentiment improves, moving forward, that you'll see some return of normalcy in terms of spending and our business will benefit from that. But the good news again is the lion's share of our business, that break-fix, essential maintenance, is pretty resilient really through all cycles.

Really helpful. Thank you.

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

Good morning. Thank you so much for taking my question. So, the market has grown accustomed to AutoZone growing its earnings by a double-digit clip with mid-single-digit operating income growth and the rest coming from share repurchases. It seems like your message today is that algorithm might prove elusive for the next few quarters as the headwind to our international business comes into play from FX and some of the other unique factors like LIFO. So, when is it realistic that AutoZone can get back to this double-digit EPS growth algorithm? And is it really incumbent on an acceleration in pricing that's going to both help the top-line as well as the margins moving through 2025?

Thank you for your question, Michael. First, I want to clarify that our long-term growth algorithm remains unchanged. We believe this business will continue to grow consistently and steadily over time. There is potential for margin expansion that will generate substantial free cash flow, allowing us to repurchase shares and engage in shareholder-friendly actions. In the short term, factors you mentioned, such as LIFO and some foreign exchange pressures, may affect our quarterly results, but the long-term growth algorithm is intact. We are encouraged that as the macro environment improves, our growth initiatives will accelerate our top-line, which is crucial for the success of the growth algorithm moving forward. While we are optimistic about our business fundamentals and execution, the challenging consumer environment and soft DIY market may make it hard to achieve the expected quarterly growth. Overall, we're confident in our situation, but in the short term, we may experience some impacts on our top-line and other business drivers.

Yeah. Just to reiterate, I mean, there definitely will be pressure on the given quarter, but the Mexico business and the international business is an incredible business and growing. We like the profitability of that market and we like our strategies both on the international markets and our opportunities that we still have here in the U.S. So, we're happy with our strategies. Don't like the FX pressure, but we can't. That's not one we can deal with at the moment.

My follow-up question is, the margin structure of AutoZone has evolved a bit over the years. It's now more incumbent upon the gross margin expansion to drive stable to flat overall operating margins and offset some growth in SG&A. So, if AutoZone is running into obstacles to grow its gross margin, should the market expect that it can manage its SG&A to moderate that to keep its overall operating margin flattish moving forward?

Yeah. I think two things associated with that. One is we are continuing to run the gross margin play with intensity inside the company. And as I mentioned a little bit earlier, our merchandising teams are doing a fantastic job of finding a way to give us expanding margins even in an environment where we haven't had an opportunity to raise retails as fast, which is a pretty significant achievement for the company. I've also said that in the middle of the P&L that to the extent that the top-lines or the gross margins don't materialize that we have the muscle and we'll make the decisions that are necessary to make sure that we're protecting our operating margins in total and that includes the things that we do on the SG&A line. What we've been able to do over the last couple of years is invest in a very disciplined way in things that are positioning us very, very well for the future in SG&A. So things like IT, payroll to improve service, the payroll that's necessary to support some of these growth initiatives, and those things are all going to pay benefits for us. So, I think the message here is no change to the algo. No outlook that suggests that operating margins are going to be on the decline here. We'll work our way through these. And as we see the top-line return and as we continue to work gross margins and work the middle of the P&L, the operating margin profile of the company is protected.

Thank you very much.

Thanks, Michael.

Thank you. Your next question is coming from Michael Baker from D.A. Davidson. Your line is live.

Okay. Thanks guys. Two quick ones. You've alluded a little bit to pricing, competitive pricing. Can you just tell us, we know one of your competitors has been investing in price. Is that impacting the average ticket at all?

We've heard that our competitor is investing in pricing, but we continuously monitor our own pricing and haven't noticed any significant changes. On the commercial side, most of the market share is held by our wholesalers, and that’s where we concentrate our pricing strategies. There's been no substantial shift in that area. If you're asking whether this pricing pressure is affecting the average ticket growth, the answer is no. The factors driving average ticket growth and retail inflation primarily come from costs. As those costs rise, we will pass them on to consumers, which results in some retail average ticket inflation. So, that isn’t the main reason for the lack of average ticket inflation; it’s connected to the hyperinflation we've experienced due to the supply chain issues stemming from the pandemic.

Certainly. I mentioned before, especially during the pandemic, that ticket inflation has been somewhat beneficial for retail. This is due to the industry's disciplined and rational approach to pricing. When you consider pricing changes in a break-fix business like ours, downward pressures on pricing are rarely seen. The industry operates rationally today and has maintained this rationality for decades.

Exactly.

Sure. One follow-up question, which has two parts. You mentioned that you expect first quarter comparisons to improve. Can you explain why that is? Is it based on current trends? Also, you mentioned accelerating store growth. Can you provide some numbers on that? How many total stores should we expect to see by 2025? Thank you.

We expect to have over 20 mega-hubs, primarily in the latter part of the year, likely after Christmas. We hope to reaccelerate those, although it would have been better to see them come earlier in the year. The first quarter is expected to mirror the last quarter, as consumers are still facing similar pressures from the summer. Consumer confidence appears stable at this time, although we would like to see it improve; however, we don't anticipate any significant drivers for that until around December, post-election. Therefore, we expect the first quarter to be fairly consistent, with improvements anticipated later in the year as we return to normal growth in average ticket sales. We'd like to see a robust winter season.

And just in terms of...

I thought you said you expect first quarter to modestly improve, so...

Yeah, modestly improve from a DAP perspective. That's correct.

Yeah. Okay. Thank you.

Thank you. And our last question this morning is coming from Zach Fadem from Wells Fargo. Your line is live.

Hey, good morning, and thanks for squeezing me in. So, Jamere, you mentioned the car park as a tailwind, but since we're entering a period where new cars from 2018, 2019 are starting to come off warranty and new car sales lagged during the pandemic, just curious why you wouldn't view this as an air pocket or a headwind for the industry. Any thoughts on why that wouldn't be the case?

Yeah. I think simply put, the cars are lasting longer and they're staying on the road. So, even though the SAAR has come down, you're not seeing cars go to the boneyard. So, as a result of that, the car park has continued to tick up. And you can see that from the data that's out there. I mean, the average age of a vehicle on the road has ticked up to 12.6 years and what all the data suggests based on what we know today is that it's likely going to be one or two ticks higher next year. And that's a combination of what consumer behavior is, but it's also the factor of what's happening with technology. The cars just simply last longer and you're seeing them stay in the car park much longer, which means the average household is fractionally going up a little bit more in terms of the number of vehicles that they have.

I believe that there was a similar situation during the financial crisis of 2007 to 2009, when new car sales dropped below 10 million annually. However, we haven't witnessed a decline in sales similar to that recently, so I don't foresee it becoming a problem. Moreover, we appreciate that the average age of cars on the road has risen to over 12 years, and American consumers are driving more. These factors create positive trends for us, which we are pleased about.

Got it. That makes sense. So, maybe fewer newer cars entering the addressable market, but also fewer scraps. So that makes sense. So, just separately, when you look at your SG&A growth on a per-store basis, it was about 1% normalized, a step down from about 3% in Q4. And when you think about managing your business for 2025, could you talk about why this low-single-digit range is the right level for you, particularly in light of the investments that you're making in commercial and also in light of some of the peers stepping up to mid-single-digit to drive share gains?

I mean, what we've said about SG&A is that we'll continue to invest in a disciplined way to support our growth initiatives. And so, to the extent that there are opportunities for us to invest in things like store payroll, the work that we're continuing to do in IT to improve the customer experience and improve our AutoZoners experience, we're going to invest into that all day long. But we also very responsibly in terms of how we manage that SG&A as we move forward. So, it's a balanced approach. We're not hesitating to invest in growth initiatives. We haven't pulled back on any investment in growth initiatives, but we are disciplined about how we manage it when the top-line is a little bit softer.

Appreciate the time.

Thank you. Appreciate the question.

Thank you. That concludes our Q&A session. I will now hand the conference back to Phil Daniele, CEO of AutoZone, for closing remarks. Please go ahead.

Thank you, everyone, for the questions today. Before we conclude the call, I'd like to take a moment to reiterate, we believe our industry is in a strong position and our business model is solid. We were excited about our growth prospects for the year, but we will take nothing for granted, as we understand our customers have alternatives. We have exciting plans that should help us succeed into the future, but I want to stress that this is a marathon and not a sprint. As we continue to focus on flawless execution and Wow! Customer Service and strive to optimize shareholder value for the future, we are confident AutoZone will be successful. Thank you for participating in today's call.

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