The operator welcomes listeners to AutoZone's Fourth Quarter 2023 Fiscal Earnings Release Conference Call and provides instructions for the call. A company representative reminds listeners of the Safe Harbor statements and mentions the use of non-GAAP measures. The CEO, CFO, and Vice President of the company are present for the call and direct listeners to the company's website for more information on the quarter's results.

The company thanks its employees for their hard work during fiscal year 2023, which resulted in a 7.4% sales growth and a 12.9% increase in earnings per share. The company's sales per store have exceeded pre-pandemic levels and have driven significant growth in operating profit. The company is now reporting same store sales for domestic, international, and total company, as well as international same store sales on an actual and constant currency basis. This change reflects the increasing importance of international markets and the company's investment in them. The company will continue to provide this information for at least five quarters to improve transparency.

The company's domestic same store sales were 1.7% this quarter, with retail and commercial sales performing as expected. However, there was a decline in commercial sales in the second half of the fiscal year, which was attributed to mild weather conditions. There was a significant performance gap between Northeast/Midwestern markets and the rest of the country, possibly due to lack of winter weather. The company has made changes to improve execution and has completed a strategic review of the commercial business, with plans for new enhancements in the future.

The company has made significant improvements in their information technology and has opened many more commercial programs, reaching 90% domestic penetration for the first time. They are encouraged by the strong performance of these new openings and will continue to operate in both favorable and unfavorable environments. The company's strategy also includes global new store growth, continued growth with hubs and mega hubs, reconfiguring their supply chain, and focusing on technology improvements. The speaker then introduces Phil Daniele to provide more details on the quarter's results.

In the fourth quarter, the company saw a 1.7% increase in overall same store sales, with a 3.9% growth in domestic commercial sales. The company attributes this growth to their key initiatives, such as improved satellite store availability and enhanced sales force effectiveness. They have also opened 156 new commercial programs and now have commercial in over 90% of their domestic stores. The company sees potential for continued commercial sales growth in the future. They also mention the impact of inflation on their costs and retails and how it may affect their business in the upcoming fiscal year.

The company is proud of their performance in domestic DIY, with a positive comp of 1.4% this quarter and 1.8% for the year. Despite the impact of the pandemic, they have retained the majority of their market share and are confident in their sustainability for the next fiscal year. Sales cadence was flat at the beginning of the quarter but increased to 3.4% in the last eight weeks, with hot weather helping to partially overcome a mild winter. Traffic was down 0.8% but improved over the course of the quarter, while average ticket growth was the weakest since FY 2000 due to lapping higher inflation from the previous year.

In this paragraph, the speaker discusses the current commercial trends in their business, noting a deceleration in ticket growth due to the decrease in hyperinflation. They also mention a trade down and lower car count among commercial customers due to economic pressure. In order to continue growing, the company plans to increase their share of wallet with customers. The Northeast and Midwest regions performed lower due to a mild winter, resulting in less weather-sensitive hard part sales. The speaker also mentions that there was low single-digit inflation in pricing, resulting in a 2% increase in ticket average.

The company expects inflation to be similar to the previous quarter and maintains a disciplined approach to pricing. They anticipate strong sales in the DIY and commercial sectors for the first quarter of 2024. The company is focused on improving availability through supply chain initiatives and plans to continue growing its international businesses. Jamere Jackson then takes over the call and discusses the company's solid fourth quarter performance.

In the fourth quarter, the company saw a 6.4% increase in total sales, with domestic sales growing by 1.7% and international sales growing by 14.9%. The company also saw an increase in earnings before interest and taxes (EBIT) by 10.8% and earnings per share (EPS) by 14.7%. For the entire fiscal year, the company's sales grew by 7.4% and EPS grew by 12.9%. The company attributes its strong results to the efforts of its employees and its growth initiatives, such as opening new programs and focusing on the commercial market. The company's domestic commercial sales grew by 3.9% in the fourth quarter and represented 26% of total sales. The company's average weekly sales per program was impacted by the late opening of new programs, but the company is confident in their growth potential. The company's commercial acceleration initiatives have been successful in increasing market share and winning new business.

AutoZone has seen significant growth in their commercial program and domestic stores, with commercial sales up 8.7% in FY23 and 156 new programs opened in the quarter. The company plans to continue this growth and become a faster growing business. They have also opened 13 new mega hub locations, which have higher sales and are growing faster than the rest of the commercial footprint. The expansion of coverage and parts availability has led to a sales lift for both commercial and DIY business. AutoZone aims to reach 200 mega hubs and 300 regular hubs in the near future. On the DIY side, comp sales were up 1.4% in the quarter and 1.8% for FY23.

Despite some challenges, the business has remained resilient and has seen positive growth in sales. The DIY business has been particularly successful due to growth initiatives and favorable market conditions. The company's international business, which accounts for 12% of total stores, has also seen growth and will continue to expand in Mexico and Brazil.

AutoZone has revised their strategy and plans to open 200 stores annually in certain markets, which will contribute to their future growth. Their gross margin improved due to a non-cash LIFO credit and they expect this trend to continue in the future. Operating expenses increased due to investments in IT and payroll, but they are committed to managing expenses in line with sales growth. EBIT for the quarter and fiscal year also saw positive growth.

In the fourth quarter, the company's interest expense increased by 70% due to higher debt levels and borrowing rates. The tax rate for the quarter was 22.4%, and net income and earnings per share both increased compared to the same period last year. The company generated $701 million in free cash flow for the quarter and remains committed to returning cash to shareholders. The company's liquidity position and leverage ratios are strong, and inventory per store decreased while total inventory increased due to new store growth.

The paragraph discusses the net inventory and accounts payable on a per store basis, as well as the company's capital allocation and share repurchase program. The company has repurchased $1 billion of stock in the quarter and has remaining authorization to buy back more. They are committed to a disciplined capital allocation approach and plan to return to their leverage target in the future. The company is focused on driving long term shareholder value through growth initiatives and improving their competitive position. They are optimistic about their growth prospects for the next fiscal year.

AutoZone CEO Bill Rhodes discusses the company's operating theme for the new fiscal year, "live the pledge," which emphasizes the importance of the company's culture and its commitment to helping customers and optimizing vehicle performance. He also mentions the company's strong financial performance and its focus on executing ongoing projects.

In FY24, the company will focus on improving their supply chain and expanding their global presence by opening 500 new stores in the next five years. This is a change in strategy due to increased profitability and growth in commercial sales. The company will remain disciplined and continue to prioritize high returns and strong cash flow.

The company is focused on growing its domestic commercial business in the next year and has achieved impressive milestones in sales and store count. They have also bought back a significant amount of stock and grown their EBIT by 61% in four years. However, they recognize the need to exit pandemic mode and focus on flawless execution to take care of their customers. A leadership transition plan was announced on June 26.

AutoZone has announced a leadership transition plan, with the current CEO stepping down in January but remaining as Executive Chairman. The company has been planning this transition for three years and has identified a successor, Phil Danielle, who has been with the company for 30 years. The company's finance and store development teams will also have new leaders, and the current CEO will continue to be involved for the foreseeable future. The company values its culture and prioritizes its employees, as seen in the recent promotion of Bill Hackney, a 38-year AutoZoner.

AutoZone has announced the retirement of three long-term leaders and praised their contributions to the company. The culture at AutoZone is important and has led to the success of the organization. The company's current leaders, Bill Rhodes and Philip Daniele, believe that AutoZone's best days are still ahead. During the question-and-answer session, a question was asked about market share gain and pricing in the commercial space, to which the leaders responded that while there has been market share gain, it is not in line with their aspirations and pricing remains rational.

The speaker is addressing a question about the company's commercial growth and explains that they are not satisfied with it. He mentions that last year they had outsized growth due to being aggressive with key categories and merchandise. However, as they begin to lap that growth, it becomes a challenge. They also mention challenges in the Midwest and Northeast with under cart categories. When asked about international growth, the speaker explains that they have been in Mexico for 25 years and are still seeing significant growth, but they do not have great data to determine growth rates in the DIY and DIFM segments.

The company is still under-penetrated in certain categories and is working to grow in those areas. Brazil is a promising market, but the company is still losing money there and needs to improve. The goal is still to achieve double digit growth in the commercial sector, but there have been challenges in the past quarter. The company sees potential for improvement and is working towards reaching their goal.

The speaker is asked about the company's commercial business and how they plan to accelerate its growth. The speaker responds by acknowledging that their execution in the commercial arena has not been up to par, but they have been working on improving it. They have opened more hubs, strengthened store assortments, and leveraged technology enhancements. The speaker also mentions that execution is an ongoing process and they will continue to improve. The next question asks for more details on the execution shortfalls and how they are being addressed.

The speaker discusses the challenges faced during the pandemic, including struggles with in-stock levels, staffing, and store execution. They mention their primary objectives of keeping employees and customers safe, as well as maintaining stock levels. They acknowledge that there is room for improvement in execution and are working towards flawless execution every day. They also mention that inflation has been high but is expected to moderate in the coming fiscal year.

The company has not seen any negative effects on consumer spending due to inflation and has been resilient in the DIY sector. They plan to continue expanding their stores in both urban and rural areas, despite higher construction costs and interest rates. They believe this will provide a good return on investment in the long term, as shown by their high ROIC. They will be accelerating their store growth to reach 500 stores per year, which equates to 3-3.5% organic growth.

During a conference call, AutoZone executives discussed their long term capital allocation framework and the company's performance in Mexico and Brazil. They stated that their leverage target of 2.5 times EBITDAR gives them financial flexibility to invest in growth and return cash to shareholders. They also mentioned that while Brazil is currently losing money, Mexico is showing strong profitability and returns. When asked about the recent 7% growth in the commercial side, they clarified that it was not a comp and that they hope to continue improving, but it may not be a straight line.

The company's weather performance in the first quarter was impacted by cool and wet conditions, but as the weather got hotter, bigger ticket categories like air conditioning saw an increase in sales. The company expects the hot summer to continue to benefit sales in the beginning of Q4. Looking ahead to FY24, the company forecasts a consistent DIY business and improving growth in the commercial business. They also expect to see a return of LIFO benefits in the P&L.

The speaker discusses the company's upcoming financial projections, stating that they expect to see growth in sales and expenses. They also mention their investments in IT and international expansion. The speaker then addresses concerns about deferred maintenance and weak car counts in the industry, stating that they have been hearing about these issues since February and are monitoring them closely. They also mention the potential for increased sales opportunities in the tire business.

The company is experiencing a softer environment in the commercial business due to economic challenges. This has led to trade down from DIFM to DIY. The company's focus is on long-term growth and improving competitiveness. Store development has been a challenge, but the pipeline for future openings is strong.

The speaker, Philip Daniele, discusses the company's commitment to reaching their goal of 200 mega hubs and the importance of this for both the commercial and DIY businesses. He also mentions that they have not seen as much growth in certain segments, such as the used car market and tire services, but they are working to improve in these areas.

The speaker discusses the effects of deferred maintenance on the repair cycle and the pressure points the company has faced in recent months. The analyst asks if the company is losing market share in these areas, to which the speaker responds that they may have lost some share but it is likely due to competitors improving their in-stock position. The company expects to continue facing these challenges for the next six months but believes they have passed the peak.

The speaker thanks the person for their time and clarifies that there is not one main execution challenge in the commercial segment. They explain that during the pandemic, the company had to make decisions on the fly, resulting in lost disciplines. The speaker emphasizes the need to improve execution by focusing on details like scheduling and stock levels. They also mention technological enhancements coming in the first quarter to improve execution in the commercial business.

The speaker believes that their industry is in a strong position and their business model is solid. They are excited about their growth prospects for the year but understand that their customers have alternatives. They have plans to succeed in the future but stress that it will take time and effort. They are confident that their company will continue to be successful and thank participants for joining the call.

This summary was generated with AI and may contain some inaccuracies.