AutoZone, Inc.

Certain statements contained in this presentation constitute forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements typically use words such as believe, anticipate, should, intend, plan, will, expect, estimate, project, position, strategy, seek, may, could, and similar expressions. These are based on assumptions and assessments made by the company's management in light of experience and perception of historical trends, current conditions, expected future developments, and other factors that the company believes to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including without limitation product demand, energy prices, weather, competition, credit market conditions, cash flows, access to available and feasible financing, future stock repurchases, the impact of recessionary conditions, consumer debt levels, changes in laws or regulations, risks associated with self-insurance, war and the prospect of war, including terrorist activity, the impact of public health issues such as the ongoing global pandemic, of a novel strain of the coronavirus, COVID-19, inflation, the ability to hire, train, and retain qualified employees, construction delays, the compromising of confidentiality, availability or integrity of information, including cyber attacks, historic growth rates, sustainability, downgrade of the company's credit ratings, damage to the company's reputation, challenges in international markets, failure or interruption of the company's information technology systems, origin and raw material costs of suppliers, disruption of the company's supply chain due to public health pandemics, or otherwise, impact of tariffs, anticipated impact of new accounting standards, and business interruptions. Certain of these risks and uncertainties are described in more detail in the risk factors section contained in item 1A under part one of the company's annual report on Form 10-K for the fiscal year ended August 29, 2020. These risk factors should be read carefully. Forward-looking statements are not guarantees of future performance and actual results, development, and business decisions may differ from those contemplated by such forward-looking statements and events described above and in the risk factors. could materially and adversely affect the company's business. However, it should be understood that it is not possible to identify or predict all such risks and other factors that could affect these forward-looking statements. Forward-looking statements speak only as of the date made. Except as required by applicable law, the company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

Greetings, and welcome to AutoZone's 2021 Third Quarter Earnings Release Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Bill Rhodes, Chief Executive Officer. Thank you. You may begin.

Good morning, and thank you for joining us today for AutoZone's 2021 third quarter conference call. With me today are Jameer Jackson, Executive Vice President, Chief Financial Officer, and Brian Campbell, Vice President, Treasurer, Investor Relations, and Tax. Regarding the third quarter, I hope you had an opportunity to read our press release and learn about the quarter's results. If not, the press release, along with slides complementing our comments today, are available on our website, www.autozone.com, under the Investor Relations link. Please click on quarterly earnings conference calls to see them. I am excited and honored to share with you the exceptionally strong performance our team of 100,000 AutoZoners delivered this quarter. As I've said previously, throughout this pandemic, we could not deliver the kind of results we have without the continued exceptional performance of our entire team, especially our store and supply chain AutoZoners. As our sales volumes have remained at historic all-time highs, our AutoZoners have met this demand head-on with enthusiasm for going the extra mile for our customers. While we have asked a lot of our AutoZoners over the last year, they have taken on the challenge and continue to inspire and impress us all. I also want to reiterate our top priority remains being committed to keeping all of our customers and AutoZoners safe. Thank you, AutoZoners, again. Now to our sales results. Our overall same-store sales were up 28.9% this quarter. Our growth rates for retail and commercial were both strong, with commercials growth north of 40%. This is almost double the comp growth rate of our DIY business, an incredible accomplishment for both businesses, but especially for commercial. We achieved our highest weekly commercial sales of all time. We averaged nearly $70 million a week in commercial sales. This is incredible considering we averaged $48 million for Q3 of last year. For the trailing four quarters, we have sold domestically $3.1 billion to commercial customers. We are doing some really exciting things in commercial, and we couldn't be more proud of our team's recent successes. Now let's focus on sales cadence. This quarter stretched from mid-February to the first week of May. In the first four weeks, our sales comp was approximately 11.6%. This was lower than the trend we were experiencing at the end of our second quarter. We believe the cause of our sales slowing were the winter storms experienced across the central and southeastern states. Sales picked up for the next four weeks from mid-March to mid-April, concurrent with the arrival of additional stimulus payments. The final four weeks happened to coincide perfectly with the stimulus payments from last year. It was over these four weeks last year when our sales ramped materially. This year, over those four weeks, we averaged a 14% comp, with the last two weeks coming down to the mid-single-digit range. We continue to maintain solid growth rates post-stimulus. For Q3, our two-year comp was 27.9%. On a two-year stack basis, the first four weeks were up 17.9%. The next four weeks were up an impressive 49.9%. And the last four weeks were still up 26.7%. It was encouraging for us to see sales inflect upward this quarter, with both traffic and ticket moving higher. Our traffic growth was roughly double the ticket growth rate as the reintroduction of federal stimulus payments and the execution of our growth initiatives drove a material increase in traffic. During the quarter, there were certainly some geographic regions that did better than others, as there always are. Across both our retail and commercial customer bases, we saw the majority of the country perform consistently well. Normally, we talk about the Midwest and Northeastern markets underperforming the others. No, not this quarter. These markets were in line with the rest of the country for both DIY and DIFM. And we believe the winter weather we experienced in February bodes well for our future sales opportunities this summer and into the fall. And I could not be more proud to say that based on the retail sales data we have for our industry, we continue to enjoy share gains. The share data we have available for the first eight weeks of this quarter shows we are growing at a roughly 10% higher rate than the remainder of the industry. While we are thrilled to have those share gains, our charge remains to maintain them heading into the summer and fall months. Our number one priority continues to be the health, safety, and well-being of our customers and auto zoners. On last quarter's call, we shared that we would provide every single AutoZoner with a $100 incentive once they completed their vaccination for COVID-19. That's every AutoZoner, including part-timers. This was the logical next step in our efforts to provide a safe working and shopping environment as we have with our ongoing PPE efforts. We spent about $1 million during the quarter incentivizing our AutoZoners to get that vaccine. I continue to be inspired by our board and management teams' commitment to doing what is right, and that is putting safety first. Our culture and our values of taking care of one another have been in full force and effect over the last year during this pandemic. While we continue to be encouraged with the current sales environment, we are cautious about predicting future trends. The latest round of stimulus payments certainly accelerated our sales And sales remained at elevated levels through the end of the quarter. However, we can't fully predict what all the different pushes and pulls on macro trends mean for us. However, we remain bullish on the industry's ability to grow this year, and we believe we are well positioned to gain additional share beyond what we already have. I'm sure many of you would like to know how we are thinking about the sales for the fourth quarter of fiscal 21. I'll remind you that typically in recessionary environments, our business is remarkably resilient. However, nothing about this global pandemic is typical. Beyond our primary objective to ensure the safety of our customers and auto zoners, our focus is on providing our auto zoners with the resources they need to provide our customers with an exceptional shopping experience. We are optimistic about the sales environment heading into the fourth fiscal quarter, but we will obviously have the most difficult comparison in our history, as last year's fourth quarter benefited from the April 2020 stimulus package and enhanced unemployment benefits through July, and we generated an astonishing 21.8% same-store sales growth last year in Q4. While we understand you would like more clarity on our expectations for this Q4, This remains a very challenging environment to predict, especially in DIY, as many evolving macro factors meaningfully impact our results. Now let's move into more specifics on performance for the quarter. Our same-store sales were up 28.9% versus last year's third quarter. Our net income was $596 million, and our EPS was $26.48 a share, 84% above last year's third quarter. Our same-store sales growth this quarter was a record for any quarter since we became a publicly traded company back in 1991. Both our retail and commercial businesses showed strength in the quarter, with DIY same-store sales up approximately 25% and commercial total sales growth of approximately 44%. For commercial, we averaged $70 million in weekly sales which was approximately $13,500 in sales per program per week. These commercial sales numbers easily set all-time records for us. The initiatives we have in place are helping drive our commercial sales. I'll remind you that this is a highly fragmented $75 billion market. And we believe our product and service offerings provide us a tremendous opportunity to significantly grow sales and market share over time. Next, I'll talk about trends across our merchandise categories, particularly in the retail business. Our sales floor categories continue to be strong, with categories like tools, antifreeze, small repair, and floor mats showing strength. But our hard parts business definitely picked up. and our hard parts business comped in line with our sales floor for the quarter. This now represents our second quarter in a row where we saw our hard parts business grow in line with sales floor items. We believe this strengthening of our hard parts business is due to the significant winter weather we experienced, additional stimulus, and the pickup in miles driven the nation is beginning to see as people return to a new normal. Business remained very strong in many merchandise categories, such as accessories and batteries, notably brakes and rotors, while still slightly below our average growth had a meaningful rebound this quarter due to the winter weather. As we expect, our sales growth from the pandemic-related surge will moderate over time. We believe the investments we have made in both our retail and commercial businesses position us to deliver outsized share gains relative to the overall industry. In addition, we continue to believe our products and services will be in high demand during more difficult economic times, and this resiliency gives us significant confidence about our future prospects. Now, I will turn the call over to Jameer Jackson. Jameer?