AUTOZONE INC Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Fiscal 2024 total sales grew 5.9% with EPS up 13%, excluding the 53rd week, sales were up 3.8% and EPS up 10.4%. Fourth quarter total sales up 9% and EPS up 11%, with domestic same-store sales +0.2%, international +9.9%.
• Domestic DIY comp sales down ~1% due to discretionary categories, but market share gained. Domestic commercial sales accelerated, with 4.5% growth on 16-week basis. International business opened 49 stores, with same-store sales strong in local currencies but impacted by currency headwinds.
• Gross margin for Q4 was 52.5%, down 21 basis points primarily due to LIFO comparison. SG&A expenses up 10.4% vs Q4 2023, but disciplined in investment for growth initiatives.
• FY '25 plans include ramping store openings, especially hubs and mega-hubs, with DCs expected online in 2025. International business aims to accelerate store openings to ~200 per year by 2028.

Segment Performance

• Domestic: Total sales growth for fiscal 2024 was 5.9%, with fourth quarter sales up 9% and EPS up 11%. Domestic same-store sales grew 0.2%, with DIY comp sales down about 1% due to discretionary merchandise categories, while domestic commercial sales accelerated sequentially, finishing up 4.5% vs Q4 2023 on a 16-week basis.
• International: Opened 49 new stores in Mexico and Brazil, ending with 921 international stores. Same-store sales were just under 10% on a constant-currency basis, but faced a nearly 500 points of currency headwind, resulting in reported growth of ~5%. Revenue contribution from international business is part of the total, but specific percentage wasn't detailed in the exact breakdown provided.

Guidance

• For FY '25: Anticipate like-for-like SKU retail inflation in low-single-digits. Expect first quarter DIY and commercial sales trends to modestly improve, with better performance in Q2 and Q3. FX headwinds could impact FY '25 results, with potential $265 million impact to revenues and $3.64 a share impact to EPS if current spot rates hold for the full year. Plan to reaccelerate hub and mega-hub openings, with ~200 per year targeted by 2028.

Risks

• Foreign Currency: Strong US dollar had a meaningful impact on reported sales, operating profit, and EPS this quarter, with a nearly 500 points of currency headwind affecting international growth. Potential FX headwinds in FY '25 could impact results.
• Inflation: LIFO comparisons and inflation trends impact gross margins. The lack of average ticket growth is tied to past hyperinflation from pandemic supply chain issues, and future inflation depends on cost dynamics.
• Execution: Ensuring proper staffing, process functioning, and meeting new store opening goals and timelines are ongoing challenges.

Question and Answer Q: Simeon Gutman asked about accelerating commercial sales growth, timing, and gross margin.

A: Phil Daniele said sequential improvement expected, with strategies like improving store assortments and customer service. Jamere Jackson noted merchandising margin improvements and watching industry pricing.

Q: Bret Jordan inquired about hurdles to reaccelerating hub growth and commercial business cadence.

A: Jamere Jackson said pipeline and capabilities rebuilt, excited about hub/mega-hub plans. Phil Daniele discussed commercial business cadence and segments like up-and-down the street, national accounts, and new/used car related segments.

Q: Chris Horvers asked about DIY and commercial market growth, margin follow-ups.

A: Phil Daniele and Jamere Jackson discussed DIY challenges from discretionary categories and commercial growth strategies. On margins, 53rd week impact was accounting nuance, and FX impact on international margins was discussed.

Q: Steven Forbes followed up on commercial business weekly sales per program and margin impacts.

A: Phil Daniele and Jamere Jackson talked about commercial sales growth, hub/mega-hub importance, and LIFO/FX impacts on EBIT.

Q: Robbie Ohmes asked about inflation return and consumer comparison.

A: Phil Daniele and Jamere Jackson discussed historical inflation trends, tariff impacts, and consumer dynamics with break-fix business resilience.

Q: Michael Lasser inquired about EPS growth algorithm and margin structure.

A: Jamere Jackson and Phil Daniele stated long-term algo unchanged, near-term impacts from LIFO/FX, and disciplined SG&A management.

Q: Michael Baker asked about pricing impact and SG&A growth.

A: Phil Daniele and Jamere Jackson said pricing not primary driver of ticket inflation, and disciplined SG&A investment for growth.

Q: Zach Fadem asked about car park tailwinds and SG&A growth.

A: Jamere Jackson and Phil Daniele discussed car park as a tailwind due to longer vehicle lifespan, and disciplined SG&A investment balancing growth initiatives and efficiency.