AutoZone, Inc.

Good day, everyone, and welcome to AutoZone's 2026 Fourth Quarter Earnings Release Conference Call. At this time, all participants are placed on a listen-only mode. At this time, the company would like to provide its forward-looking statement.

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. 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 discussion of important risks and uncertainties that could cause actual results to differ materially from expectations. Forward-looking statements speak only as 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 morning, and thank you for joining us today for AutoZone's 2026 fourth quarter conference call. With me today are Jamere Jackson, Chief Financial Officer, and Brian Campbell, Vice President, Treasurer and Investor Relations. Regarding the fourth 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 at www.AutoZone.com under the Investor Relations link. Please click on the quarterly earnings conference call to see them. To start out this morning, I want to thank our more than 130,000 AutoZoners across the company for continuing their relentless commitment to delivering on our pledge to always put customers first. The operating theme for FY2026 was Driving the Future Together, and we delivered on that theme this year as we grew our total store count, opening the most stores ever in a single year, improved on our assortment and in-stock positions and continue to invest in systems to deliver even better customer service. Our customer service levels and execution have improved this past year and this quarter we continue to gain market share in a challenging macro environment. As an outline for this morning's call, first, We'll discuss our domestic DIY and commercial sales results and provide color on the cadence of our sales over the 16-week quarter, including traffic, ticket, and inflation trends. We will also provide an outlook and perspective on FY27 sales. Second, we will discuss our international sales results and the progress we are making on our new store build-out. Third, we will talk about our store openings both domestically and internationally and provide perspective on store economics and the impact on return on invested capital over the next several years. Lastly, we'll conclude with an additional commentary on how we see FY27 playing out. So let me start by unpacking our Q4 results. We delivered total sales growth of plus 5.6%. While we grew slower than Q3's rate, we felt we gained momentum as the quarter moved along and we like our sales growth potential heading into the new year. Our earnings per share increased 15.1%. Similar to prior quarters, our gross margin operating profit and EPS were negatively impacted by a non-cash LIFO charge of $15 million. As a reminder, during last year's Q4, we recognized an $80 million LIFO charge. In addition, We saw a $96 million or $4.43 share benefit from the refunds of IEPA tariffs. Finally, we opened 175 new stores this quarter. For the year, we opened 374 new stores versus 304 stores last year. This year's total of 374 stores is the most ever in a fiscal year. We also hit some major milestones. We celebrated our 1,000th store in Mexico, and we opened our 8,000th store in August in our home state of Tennessee. We also held our grand opening for our relocated Monterey, Mexico distribution center, which is almost two times the size of the previous distribution center, and we broke ground on our new Leon, Mexico, D.C., which will come online in late FY28 to support our international expansion. Let me touch on some same store sales highlights for the quarter. Total company same store sales grew plus 1.5% on a constant currency basis, with domestic same store sales growth of plus 1.6%. Our domestic DIY same store sales declined 0.6%, while our domestic commercial sales grew plus 8.6% versus last year's Q4. We saw our sales bottom in June and then begin to improve as the quarter moved along. We exited the quarter with good momentum and we are optimistic about our sales trajectory for the new fiscal year. International same store sales were up 1.3% on a constant currency basis and our unadjusted international comp was plus 10.7% as exchange rates positively impacted our comps by over 900 basis points. Next, let me address our total domestic same store sales results in a little more detail. Domestic same store sales averaged around plus 1.4% over the first three months and then accelerated in August to plus 2.1%. Our domestic retail comps were negative 0.6 for the quarter and ran negative for the first three months before running essentially flat in August. We began the quarter with milder than usual temperatures across the southeast and the south central markets along with lower foot traffic. The impact of higher inflation Thank you for watching.