AutoZone, Inc.

Greetings and welcome to AutoZone's 2021 fourth 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 Brian Campbell. Thank you. You may begin.

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 non-GAAP to GAAP financial measures can be found in our press release.

Good morning, and thank you for joining us today for AutoZone's 2021 fourth 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 fourth quarter, I hope you've 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. As I have said previously, throughout the pandemic, We could not deliver the kind of results we have without the outstanding 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 continue to enthusiastically meet and embrace the challenge. As we say, they are going the extra mile for our customers, and we owe them a tremendous debt of gratitude. I also want to reiterate our highest priority remains being committed to keeping all of our customers and AutoZoners safe. Thank you, AutoZoners, again. You are remarkable. This morning, we will review our overall same-store sales, DIY versus DIFM trends, sales cadence over the 16 weeks of the quarter, merchandise categories that drove our performance, and any regional discrepancies. We will also share how inflation is affecting our costs and retails and how we think they will impact our business for the remainder of the calendar year. Okay, on to our sales results. Our domestic same-store sales were an impressive 4.3% this quarter, on top of last year's historic 21.8% growth. This time last year, we had no vision, none. of delivering a positive comp this quarter, but our team once again performed at an exceptionally high level. Congratulations again to AutoZoners everywhere. Our growth rates for retail and commercial were both strong, with domestic commercial growth north of 21%. Our commercial business set a record this quarter with $1.2 billion in sales for the quarter, an incredible accomplishment. Additionally, we reached a new milestone in commercial sales, surpassing $3 billion for the year, finishing with over $3.3 billion in annual sales versus $2.7 billion in sales a year ago, an impressive 23% increase. We set new records in annual sales volumes per store, reaching $12,600 for the year, up from $10,600 just last year. We continue to execute well in commercial, and we couldn't be more proud of our team's recent success. I'm also very proud of our organization on our domestic DIY performance. We ran a roughly flat comp this quarter after increasing well over 20% in last year's fourth quarter. While our DIY two-year stack comp decelerated some from the third quarter, we were expecting substantially more deceleration as we got further and further from the last round of stimulus back in March. We were quite pleased with the stability of our two-year stack same-store sales. In commercial on a two-year basis, our sales were very consistent with last year's performance. Sorry, last quarter's performance. Now let's focus on our sales cadence. This quarter stretched from early May to the end of August. The first eight weeks of the quarter, our comp was 3.1%. In the last eight weeks, our comp averaged 5.5%. This strength in the back half of the quarter was attributable to easier comparisons to last year. Given the dynamics of the past 18 months, we, like others who benefited from the lumpiness of the pandemic sales, believe it is more insightful to look at a two year stack comp. For Q4, our two year comp was 26.0%. On a two year basis, our cadence for each four week period of the quarter was 26.8%, 28.2%, 25.5%, and 24.0%. Our two year comp sales trends were remarkably strong and fairly consistent across the quarter. Regarding weather, we experienced a noticeably warmer summer out west than in previous years, which helped our sales. But we experienced a milder summer in the Midwest and Northeast, which drove our sales to underperform the chain there. Overall, weather impacts were neutral on our performance. Regarding the quarter's traffic versus ticket growth, our retail traffic was down roughly 4%, while our retail ticket was up 3%. This was expected as stimulus, stay-at-home orders, and closure of some big-box retail automotive service departments drove outsized traffic last year. Our commercial business saw the vast majority of growth come from transaction growth from new and existing customers. It was encouraging for us to see sales trends remain strong this quarter, and we like the momentum we are seeing in both domestic businesses heading into fiscal year 2022. During the quarter, there were some geographic regions that did better than others, as there always are. Across both our retail and commercial customer bases, we saw the Midwest, Mid-Atlantic, and Northeastern markets underperform, roughly 400 basis points in comp versus the remainder of the country. The data suggests that we have actually gained some share in these markets. However, we believe the milder summer weather was a large contributor to our sales comp results there. And across the country in retail, our share trends remain strong despite the reopening of big box retailers' automotive service departments that were closed this time last year. We have been very pleased that we have retained the roughly 10% market share we gained in our retail sales floor business last year. Our number one priority continues to be the health, safety, and well-being of our customers and auto zoners. On Q2's call, we shared that we would provide every auto zoner with a $100 incentive once they completed their vaccination for COVID-19. That's every auto zoner, 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 PPP efforts. We spent another $2.7 million in the fourth quarter reimbursing our auto zoners for the vaccine. I continue to be inspired by our board and management team's commitment to doing what is right, putting safety first while caring deeply for our auto zoners. We are strongly encouraging our auto zoners to get the vaccine as our culture and values of taking care of one another have been on display for the past 18 months. Now let's move into more specifics on our performance for the quarter. Our same-store sales were up 4.3% versus last year's fourth quarter. Our net income was $786 million, and our EPS was $35.72 a share, 15.5% above last year's fourth quarter. Our domestic retail same-store sales were down slightly for the quarter, while our commercial business remained remarkably strong. commercial total sales grew approximately 21%. We averaged $74 million in weekly sales, which was approximately $14,400 in sales per program per week, which was easily an all-time record for us. The initiatives that we have in place are meaningfully helping our commercial business. 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 outpace the hard part categories with categories like wipers, fluids, and lighting all showing strength. Our hard parts business was in line with our expectations and ran roughly flat with last year. We were especially pleased as last year our hard parts business was very strong, especially in categories like batteries. We believe our hard parts business will continue to strengthen as our customers drive more. Let me also address what we are seeing from inflation and pricing in our space. This quarter, we saw our retail sales impacted positively by about 2% year over year from inflation, while our cost of goods was basically flat. We believe both numbers will be higher in the first quarter as cost increases in many merchandise categories work their way through the system. We can see low single-digit inflation in retails as rising raw material, labor, and transportation costs are impacting us and our suppliers. We have no way to say how long it will last, but our industry has been disciplined about pricing for decades. While we continue to be encouraged with the current sales environment, it is difficult to forecast near-term sales. What I will say is this past quarter sales were better than we expected, and we exited the fiscal year with strong fundamentals in our business. For FY22, our sales performance will be led by the continued strength in our commercial business as we execute on our initiatives. Both DIY and commercial have gained considerable share that we are maintaining, and we believe that we are in an industry that is positioned for solid growth for the long term. We will earn our fair share, and we hope to exceed expectations. 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. As we progress through the year, we will, as always, be transparent about what we are seeing and provide color on our markets and outlook as trends emerge. Now I'll turn the call over to Jameer Jackson. Jameer?