Good day, ladies and gentlemen, and Welcome to AutoZone's 2022 Q1 earnings release conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be opened for questions and comments after the presentation. Before we begin, the company would like to read some forward-looking statements. 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. It is now my pleasure to turn the floor over to your host, Bill Rhodes, Chairman, President, and Chief Executive Officer. Sir, the floor is yours. Good morning, and Thank you for joining us today for AutoZone's 2022 first quarter conference call. With me today are Jamere Jackson, Executive Vice President, Chief Financial Officer, and Brian Campbell, Vice President, Treasurer, Investor Relations, and Tax. Regarding the first 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. As we begin, we wanna continue to stress that our highest priority remains the safety and well-being of our customers and AutoZoners. Everyone across the organization takes this responsibility very, very seriously, and I am very proud of how our team has responded. Since the start of the pandemic, we have reiterated consistently that we could not deliver the kind of results we have without the exceptional efforts 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 go the extra mile and surprise and delight our customers by providing wow customer service, regardless of the myriad of challenges that are thrown their way. As part of saying thank you to our AutoZoners, this past quarter, the company committed $9 million to the AutoZoner Assistance Fund. The Assistance Fund is an independent nonprofit whose primary mission is to provide assistance to AutoZoners who find themselves in a very difficult place. We are very fortunate to be able to help our AutoZoners in this way. To me, it's yet another example of our organization living consistent with our values. We can't thank our team of roughly 105,000 AutoZoners enough for all they do for our customers, each other, our communities, and ultimately, our shareholders. This morning, we'll review our overall same-store sales, DIY versus DIFM trends, our sales cadence over the 12 weeks of the quarter, merchandise categories that drove our performance, and any regional discrepancies. We'll also share how inflation is affecting our costs and retails and how we think they will impact our business for the remainder of the fiscal year. Okay, on to our sales results. Our domestic same-store sales were an impressive 13.6% this quarter, on top of last year's very strong 12.3%. Our team once again executed at an extraordinarily high level and delivered amazing results. Congratulations again to AutoZoners everywhere. Our growth rates for retail and commercial were both strong, with domestic commercial growth impressively north of 29%. Commercial set a first quarter record with $900 million in sales. I was reflecting on that this morning and remembering back to the day that we cracked $1 billion in commercial sales for a full year, and now we've delivered $900 million in sales in one quarter, an incredible accomplishment. On a trailing four-quarter basis, we had over $3.5 billion in annual commercial sales versus $2.8 billion a year ago, up 27%. We also set a record in average weekly sales per store for any quarter, reaching over $14,400 versus $11,500 just last year. On a two-year basis, our sales accelerated from last quarter, exceeding 40%. Many people want to understand what is driving our tremendous sales growth in commercial. In short, it is not one thing, and I wanna repeat that. It is not one thing. It's a host, a whole host of key initiatives we've been working on for several years. Those initiatives include improved satellite store availability, massive improvements in Hub and Mega Hub coverage and access, the continuing strength of the Duralast brand, leveraging technology to make us easier to do business with, and amplifying our execution strength to improve delivery times, enhancing our sales force effectiveness, and engaging our store operations team deeper in the business. Ensuring that we live consistent with our pledge by being priced right for the value proposition that we deliver. We continue to execute very well in commercial, and we are extremely proud of our team and their performance. We're also very proud of our organization's performance in domestic DIY. We ran a 9% comp this quarter on top of last year's 12.7. Wow. While our DIY two-year stack comp decelerated slightly from our fourth quarter, it's remarkable to reflect on a more than 20% two-year comp in this sector of our business. From the data we have available to us, we continue to not only retain the enormous 10% share gains we've built during the initial stages of the pandemic, but modestly build on those gains. Our performance, considering the amount of time from the last stimulus and the ending of the enhanced unemployment benefits, has substantially exceeded our expectations and raises our expectations on how sustainable these sales gains may be long term. Now let's focus on our sales cadence. Same-store sales increased sequentially from September through November. However, this acceleration could be deceiving as last year's comp weakened as the quarter progressed. Given the dynamics of the past 20 months, we, like others who benefited from the pandemic, believe it is more instructive to look at two-year stacked comps. On this basis, the monthly results were almost identical and very, very stable. For Q1, our two-year comp was 25.8%, and the four-week periods of the quarter increased by 26.3%, 26.0%, and 25.3% respectively. Regarding weather, we experienced warmer than usual weather in the Northeastern United States, while the remainder of the country experienced normal trends. Overall, we feel weather did not play a material role in our sales results for the quarter. As we look forward to the winter months, we are encouraged to see forecasts estimating a slightly colder than usual winter. Historically, extreme weather, be that hot or cold, helps drive parts failure. Regarding this quarter's traffic versus ticket growth in retail, our traffic was up 1%, while our ticket was up 7.5%. This low single-digit transaction count growth continues to be a meaningful acceleration from pre-pandemic levels, although it decelerated versus last year, as expected, due to the elimination of stimulus, the elimination of enhanced unemployment, stay-at-home orders, and the closure of some big box retail automotive service departments last year. In our commercial business, we saw most of the sales growth come from transaction growth from new and existing customers. It was encouraging for us to see sales trends remain strong, and we continue to be pleased with the momentum we are seeing in both domestic businesses heading into the winter months. During the quarter, there were some geographic regions that did better than others, as there always are. While last quarter we saw a roughly 400 basis point gap in comp performance between the Northeast and Midwestern markets versus the remainder of the country, we did not see that gap this quarter. In fact, the Northeast and Midwestern markets slightly outperformed. The market share data suggests that we continue to gain share in most markets across the country. Now let's move into more specifics on performance for the quarter. Our same-store sales were up 13.6% versus last year's first quarter. Our net income was $555 million, and our EPS was $25.69 a share, increasing an impressive 38.1%. Regarding our merchandise categories in the retail business, our sales floor and hard parts categories grew at a similar rate this quarter. As Americans get back to driving more, we've seen maintenance and failure-related categories perform well. We've been especially pleased with our growth rates in select failure-related businesses, like batteries, that have successfully lapped very strong performance last year. 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. This quarter, we saw our sales impacted positively by about 4% year-over-year from inflation, while our cost of goods was up about 2% on a like-for-like basis. We believe both numbers will be higher in the second quarter as cost increases in many key merchandise categories continue to work their way through the system. We could see mid-single digit inflation in retail as rising raw material pricing, labor, and transportation costs are all impacting us and our suppliers. We have no way to say how long this will last, but our industry has been disciplined about pricing for decades, and we expect that to continue. While we continue to be encouraged with the current sales environment, it remains difficult to forecast near- to mid-term sales. What I will say is that the past three quarters' sales have all been consistent on a two-year stacked comp basis, and both our DIY and commercial businesses have been remarkably resilient. While it's difficult to predict absolute sales levels, we are excited about our growth initiatives. Our execution and the tremendous share gains we have achieved in both sectors and are maintaining and/or continuing to grow those gains. Currently, the macro environment, while more uncertain than normal, is certainly favorable for our industry. If these near-term trends fade, we believe that we are in an industry that is positioned for solid growth over the long term. For FY 2022, our sales performance will be led by the continued strength in our commercial business as we continue executing on our differentiating initiatives. As we progress through the year, we will, as always, be transparent about what we are seeing and provide color on our markets and outlooks as trends emerge. Now I'd like to turn the call over to Jamere Jackson. Jamere? Thanks, Bill, and good morning, everyone. As Bill mentioned, we had a strong second quarter. Our growth initiatives continue to deliver strong results, and the efforts of our AutoZoners in our stores and distribution centers have enabled us to take advantage of robust market conditions. To start this morning, let me take a few minutes to elaborate on the specifics in our P&L for Q1. For the quarter, total auto parts sales, which includes our domestic Mexico and Brazil stores, were $3.6 billion, up 16.2%. Let me give a little more color on sales and our growth initiatives. Starting with our commercial business for the first quarter, our domestic DIFM sales increased 29.4% to $900 million, and we're up 41% on a two-year stack basis. Sales to our DIFM customers represented 25% of our total sales, and our weekly sales per program were $14,400, up 25% as we averaged $75 million in total weekly commercial sales. Once again, our growth was broad-based as national and local accounts both grew over 25% in the quarter. Our execution of our commercial acceleration initiatives is delivering exceptional results as we focus on building a faster-growing business. The disciplined investments we are making are helping us grow share, and we're making tremendous progress in growing our business in this highly fragmented portion of the market. We now have a commercial program in approximately 86% of our domestic stores, and we're focused on building our business with national, regional, and local accounts. This quarter, we opened 32 net new programs, finishing with 5,211 total programs. We continue to leverage our DIY infrastructure and increase our share of wallet with existing customers. As I said on last quarter's call, in fiscal year 2022, commercial growth will lead the way, and our first quarter results reflect this dynamic. Our growth strategies continue to work as we continue to grow share. We are confident in our strategies and execution and believe we will continue gaining share. Delivering quality parts, particularly with our Duralast brand, improved assortments, competitive pricing, and providing exceptional service has enabled us to drive double-digit sales growth for the past six quarters. Our core initiatives are accelerating our growth and position us well in the marketplace. Notably, our Mega Hub strategy is driving strong performance and positioning us for an even brighter future in our commercial and retail businesses. Let me add a little more color on our progress. As I mentioned last quarter, our Mega Hub strategy has given us tremendous momentum, and we're doubling down. We now have 62 Mega Hub locations, and we expect to open approximately 16 more over the remainder of the fiscal year. As a reminder, our Mega Hubs typically carry roughly 100,000 SKUs and drive tremendous sales lift inside the store box, as well as serve as a fulfillment source for other stores. The expansion of coverage and parts availability continues to deliver meaningful sales lift to both our commercial and DIY businesses, and we are testing greater density of Mega Hubs to drive even stronger sales results. By leveraging sophisticated predictive analytics and machine learning, we are expanding our market reach, driving closer proximity to our customers, and improving our product availability and delivery times. These assets continue to outperform our expectation, and we would expect to open significantly more than the 110 locations we have previously targeted. In commercial, we are building a meaningful competitive advantage, and we continue to have confidence in our ability to create a faster-growing business. On the retail side of our business, our domestic retail business was up 9% and up 21.4% on a two-year stack. The business has been remarkably resilient as we have gained and maintained over three points of market share since the start of the pandemic. As Bill mentioned, we saw an increase in traffic versus the prior year as our initiatives are continuing to drive tremendous sales and share growth, along with a relentless focus on execution by our AutoZoners in our stores and distribution centers. These initiatives include improving the customer shopping experience, expanding assortment, leveraging our Hub and Mega Hub network, and maintaining competitive pricing. These dynamics, along with favorable macro trends and miles driven, a growing car park, and a challenging new and used car sales market for our customers, have continued to fuel sales momentum in DIY. The execution of our AutoZoners who are taking care of our customers gives us a key competitive advantage. I'm also very pleased with the competitive position of our DIY business and our outlook going forward. Our in-stock positions, while still below where we would like for them to be, are continuing to improve as our supply chain and merchandising teams have made great progress in a challenging supply chain environment. We've been able to navigate supply and logistics constraints and have product available to meet our customers' needs. DIY has been a strong contributor to the growth of our company, and while comps are difficult because of our strong past performance, the fundamentals of our business remain strong. Now I'll say a few words regarding our international business. We continue to be pleased with the progress we're making in Mexico and Brazil. During the quarter, we opened two new stores in Mexico to finish with 666 stores and one new store in Brazil to finish with 53. On a constant currency basis, we saw accelerated sales growth in both countries. We remain committed to our store opening schedules in both markets and expect both to be significant contributors to sales and earnings growth in the future. With approximately 10% of our store base now outside the U.S., and our commitment to continued expansion in a disciplined way, international growth will be an attractive and meaningful contributor to AutoZone's future growth. Now let me spend a few minutes on the P&L and gross margins. For the quarter, our gross margin was down 65 basis points, driven primarily by the accelerated growth in our commercial business, where the shift in mix, coupled with the investments in our initiatives, drove margin pressure but increased our gross profit dollars by 14.9%. I mentioned on last quarter's call that we expected to have our gross margin down in a similar range this quarter as we saw in the fourth quarter of last fiscal year, where we were down 82 basis points. However, the team has been focused on driving margin improvements primarily through pricing actions that offset inflation to drive a better than expected outcome. As Bill mentioned earlier in the call, we're continuing to see cost inflation in certain product categories, along with rising transportation and distribution center costs. We're continuing to take pricing actions to offset inflation and consistent with prior inflationary cycles, the industry pricing remains rational. We would expect our margins in the second quarter to be down in a similar range as the first quarter. All of the actions we are taking have resulted in us growing our DIY and DIFM businesses at a significantly faster rate than the overall market, and we're committed to capturing our fair share while improving our competitive positioning in a disciplined way. We are laser-focused on taking care of our existing customers, driving new customers to AutoZone, and over time, growing absolute gross profit dollars at a faster than historic rate. Moving to operating expenses. Our expenses were up 10.4% versus last year's Q1 and SG&A as a percentage of sales leveraged 171 basis points. The leverage was driven primarily by our strong sales results. While our SG&A dollar growth rate has been higher than historical averages, we've been focused on maintaining high levels of customer service during a period of accelerated growth and taking care of our AutoZoners during these extraordinary high sales growth times. We're also investing in IT to underpin our growth initiatives, and these investments will pay dividends in user experience, speed, and productivity. We will continue to be disciplined on SG&A growth as we move forward and manage expenses in line with sales growth over time. Moving to the rest of the P&L, EBIT for the quarter was $754 million, up 22.6% versus the prior year's quarter, driven by strong top-line growth. Interest expense for the quarter was $43.3 million, down 6.3% from Q1 a year ago as our debt outstanding at the end of the quarter was just under $5.3 billion versus just over $5.5 billion last year. We're planning interest in the $45 million range for the second quarter of fiscal 2022 versus $46 million in last year's second quarter. For the quarter, our tax rate was 21.9% versus 22.2% in last year's first quarter. This quarter's rate benefited 159 basis points from stock options exercised, while last year it benefited 134 basis points. For the second quarter of FY 2022, we suggest investors model us at approximately 23.6% before any assumption on credits due to stock option exercises. Moving to net income and EPS. Net income for the quarter was $555 million, up 25.5% versus last year's first quarter. Our diluted share count of 21.6 million was lower by 9.1% from last year's first quarter. The combination of higher earnings and lower share count drove earnings per share for the quarter to $25.69, up 38.1% over the prior year's first quarter. Now let me talk about our cash flow. For the first quarter, we generated approximately $800 million of operating cash flow. Our operating cash flow results continue to benefit from the strong sales and earnings previously discussed. You should expect us to be an incredibly strong cash flow generator going forward, and we remain committed to returning meaningful amounts of cash to our shareholders. Regarding our balance sheet, we now have nearly $1 billion in cash on the balance sheet, and our liquidity position remains strong. We're also managing our inventory well as our inventory per store was up 0.1% versus Q1 last year. Total inventory increased 3% over the same period last year driven by new stores. Net inventory, defined as merchandise inventories less accounts payable on a per store basis, was a - $207,000 versus - $99,000 last year and - $203,000 last quarter. As a result, accounts payable as a percent of gross inventory finished the quarter at 129.4% versus last year's Q1 of 114.1%. Lastly, I'll spend a moment on capital allocation and our share repurchase program. We repurchased $900 million of AutoZone stock in the quarter. As of the end of the fiscal quarter, we had approximately 20.7 million shares outstanding. At quarter end, we had just over $1 billion remaining under our share buyback authorization and just under $700 million of excess cash. The powerful free cash we generated this quarter allowed us to buy back approximately 2.5% of the shares outstanding at the beginning of the quarter. We bought back over 90% of the shares outstanding of our stock since our buyback inception in 1998 while investing in our existing assets and growing our business. We remain committed to this disciplined capital allocation approach, where we expect to maintain our long-term leverage target in the 2.5x area and generate powerful free cash flows that will enable us to invest in the business and return meaningful amounts of cash to shareholders. To wrap up, we had another very strong quarter highlighted by strong comp sales, which drove a 25.5% increase in net income and a 38.1% increase in EPS. We are driving long-term shareholder value by investing in our growth initiatives, driving robust earnings and cash, and returning excess cash to our shareholders. Our strategy is working, and I have tremendous confidence in our ability to drive significant and ongoing value for our shareholders. Now I'll turn it back to Bill. Thank you, Jamere. FY 2022 is off to a stellar start, and we continue to be focused on superior customer service and flawless execution. That and our culture is what defines us. From July 4, 1979, when our first store opened in Forest City, Arkansas, customer service has been paramount to our success. At the end of the day, it is why customers come back to us, whether they are a seasoned professional or a new DIYer. They trust us. They trust us to help them with their needs. We continue to be bullish on our industry and in particular, on our own opportunities for the new year. We believe the macro backdrop is in our favor for the foreseeable future. Our customers across the Americas wanna get out, get out, and drive, and we'll be there when they need helpful advice. Our team has worked diligently and collaboratively with our suppliers, and together they have done a very good job dealing with the enormous supply chain challenges that exist for all retailers. While we are not where we'd like to be on our store in-stock levels, we believe we are better than most retailers, and I think our results support that belief. For the remainder of fiscal 2022, we are launching some very exciting initiatives. We are focused on further growing share, but as always, doing so on a very profitable basis. We will be announcing significant expansions to our supply chain to fuel the growth of our domestic and Mexico businesses. We are also targeting to open 16 more new domestic Mega Hubs in the U.S. that will enhance our availability and support growth in our retail and commercial businesses. We will also be leveraging our Hub and Mega Hub strategy further in Mexico. For the fiscal year, we will open more than 200 new stores throughout the Americas, with notable acceleration in our Brazil business. These capacity expansion investments reflect our bullishness on our industry and our growth prospects. We are being disciplined, yet aggressive. Before we move to open up the call for questions, I wanna take a moment to give special thanks to Mark Finestone, our Executive Vice President, Strategy and Innovation, Customer Satisfaction, on his upcoming retirement in early calendar 2022. Our company, our customers, our leadership team, and in particular our AutoZoners, have greatly benefited from Mark's 19 years of remarkable service. Mark spent the majority of his years with AutoZone leading our merchandising team and has played a critical role leading our supply chain and marketing teams in recent years. He leaves our organization much, much better than he found it, and leaves us well-positioned for accelerated growth. We thank Mark for his amazing service and leadership with the company, and we wish he and his wife, Cindy, well in their well-deserved retirement. I also wanna reiterate how proud I am of our team across the board for their commitment to servicing our customers and doing so in a very safe manner. First and foremost, our focus will be on keeping our AutoZoners and customers safe while providing our customers with their automotive needs. Secondly, we must continuously challenge ourselves during these extraordinary times to position our company for even greater future success. We know that investors will ultimately measure us by what our future cash flows look like three to five years from now, and we very much welcome that challenge. I continue to be bullish on our industry and in particular, on AutoZone. Now we'd like to open up the call for questions. Thank you. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star one on your phone at this time. If you wish to leave the queue, you may press star two. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Additionally, in the interest of time, we do ask that you limit yourself to two questions at a time. Please hold a moment while we poll for questions. Our first question today is coming from Bret Jordan at Jefferies. Your line is live. You may begin. Hey, good morning, guys. Good morning, Bret. Good morning. Hey, on the commercial comp, it really seems like the Mega Hubs are a tailwind. Do you have any color as to how the comps are for stores that are serviced by a Super Hub versus those that are not, and maybe the benefit we might get as you roll out more Mega Hubs? Yeah, Bret, it's really hard to tease that out, and I spent considerable time in our prepared remarks talking about. I think a lot of people think that this success that we're seeing in commercial is either driven by the Mega Hubs or driven by pricing, and frankly, that's not what we believe. We talked about it about four years ago that we were launching a new strategic plan or developing a new strategic plan for our commercial business, and it has a whole host of elements. Mega Hubs is a critical part of it. Don't forget, we also refreshed the assortments in every single AutoZone store in the United States and put those assortments commercial leaning forward. The Mega Hubs are helping us a tremendous amount, but so is the Duralast brand, so is our sales floor, so is our engagement of our store managers and district managers. We see the Mega Hubs in and of themselves perform exceptionally well. They continue to exceed our expectations. As we've said, we're gonna go to 100-110. I think we've also said that Jamere and I and the senior leadership team believe once we're finished, we'll be closer to 200 Mega Hubs than we will be 100 Mega Hubs. That's a vision at this point in time, not a plan. Okay. My follow-up, I guess you talked about share gain and that your in-stocks were better than most. Do you have any feeling for where you're retaining your share, I guess, against smaller WDs? Is it against the big box or sort of your major aftermarket peers? Do you have a feeling sort of buckets of where your share gain came from and where you're holding it best? Yeah, I think it's a tale of two stories, right? On the DIY side of the business, clearly there were some significant share gains that happened in the depths of the pandemic and the stay-at-home orders, where we did pick up a lot of share from mass retailers. We anticipated that we would have a pretty good headwind starting in last August, but that simply hasn't manifested itself. I think what's happened is customers that were coming to us before experienced us during the midst of this crisis and really enjoyed their experience. Our team did a great job. I think it's still coming from those more mass-oriented in the retail side of the business. On the commercial side of the business, we believe it's likely coming from the smaller players. You mentioned WDs. I think over time, what happened was a lot of people, when the sales went down in our industry by about 25% overnight, a lot of people in our industry pulled back considerably. Some people furloughed people, they laid off people. You know, took their order, inventory orders down significantly. We certainly took some actions. We never furloughed one person. We never terminated one person because of the pandemic. In fact, we gave them two extra weeks of vacation we called emergency time off. When all of a sudden the business rebounded very quickly, we were in a terrific place. I think that gave us trial in the commercial business with a lot of folks that we might not have gotten trial as quick as we did otherwise. When we were there for those customers, I think that they appreciated the whole host of offerings that we had, and we've continued to grow since then. I mean, to be up 40% on a two-year basis is really astounding and to be up 29% in this quarter alone, I'm just couldn't be more pleased with what our team has done. We believe this is just the beginning. We've talked about the importance of the commercial business for a long time, and we're still the fourth in market share, and that's not where we wanna be. I'm excited about what's in front of us. Great. Thank you. Thank you, Bret. Thank you. Our next question today is coming from Simeon Gutman at Morgan Stanley. Your line is live. You may begin. Good morning, everyone. Not sure if Mark's in the room, but congratulations to him. My first question, Bill, is on the demand environment. There was a lot of buzz, a positive buzz at AAPEX this year, probably more than it's ever been. I'm curious if you share the optimism. Is there anything unique about this moment, whether it's used cars, why the demand environment could be above average for the foreseeable future? Yeah. Thank you for your shout-out to Mark, Simeon. He's been just a tremendous partner to all of us for all these years. I think about the AutoZone that Mark inherited versus the AutoZone that he leaves to the rest of us, and it's a very different place, and he played an enormous role in that, as did so many others. Thank you for that. You know, I share your thoughts, Simeon. At AAPEX, there was a different vibe than probably we've ever seen before. I was kinda hoping everybody would be down and out because I knew how our sales were performing. I hope we were doing very different than everyone else. I think it's just a great reminder of the strength of this industry. If you think about this industry over a very long period of time, I just celebrated my 27th anniversary with AutoZone, seen a lot of different cycles. One of the things that has happened, the strongest performing periods in our last 30 years have been 1993, 1994, 2001, 2002, 2009, 2010, and 2011. That is before the pandemic. The pandemic has blown away those performance. In each one of those environments, you've seen AutoZone's performance, maybe more than the industry, but the industry also make a step function change up. Significant growth in the midst of a recession. What has been remarkable is in each of those times, you've never seen the industry or our sales take a step back down, not even partially back down towards it. It's as if we reached a new plateau and we just stayed there until we built again. I think my expectation with the pandemic and the amount of sales that we saw, particularly in the retail business, from the depths of the stay-at-home orders and all those things, was we would see somewhat a reversion to the mean. Here we sit today. It's December. The last stimulus happened March 15th. The enhanced unemployment ended at the end of August, first of September. We would have thought we would have seen some deceleration, which we have not seen. Our business. On both sides of the business, a 9% comp in DIY is remarkable. We'll be interested to see how long it holds at this level. I wish we had a crystal ball and could tell you, but I know that this organization is focused on how do we optimize our performance in the midst of whatever sales environment we have? How do we make sure we're taking care of customers? How do we make sure that we're keeping AutoZoners and customers safe? How do we make the P&L work and maximize our performance? I think we've done a really good job of that, and I'm very proud of the organization so far. Okay, thanks for that. Then my follow-up, I'm not sure if it's for you or Jamere. On the gross margin side, if commercial comps and DIY comps end up growing at a similar amount, and I realize that may not happen, but if they do, what happens to gross margin? You know, we're trying to isolate, I guess the mix shift and maybe the, you know, how much investment is happening in the business. Yeah. You know, if you think about gross margins, you know, first of all, I'll say this, we've been seeing cost inflation in certain categories and higher transportation costs. However, you know, the industry pricing has been rational, and we're pricing to recover inflationary impacts as we've done in the past. As Bill mentioned, you know, from a retail pricing standpoint, we're, you know, we've raised retails in the sort of mid-single digit range. The industry's been disciplined and rational, and quite frankly, inflation's been our friend in terms of retail pricing. I will remind you, as you highlighted here, is that, you know, our commercial business will be a mix drag. Right now, we're significantly outpacing DIY growth on the commercial side of the business. That's been a margin drag. In fact, all of the margin drag in this quarter can be attributed to that, acceleration that we have in our commercial business. Going forward, it will be a drag on the business and but that will be good for us as a business because we'll see our gross profit dollars grow and which is exactly what we're shooting for. We like where we are. We're gonna continue to lean into the strategy. We'll see a little bit of a drag from a margin standpoint, from commercial mix, but, net-net, it'll be good for our business in total. Thanks, everyone. Happy holidays. Yeah, you too, Simeon. Thank you. Thank you. Our next question today is coming from Michael Lasser at UBS. Your line is live. You may begin. Good morning. Thanks a lot for taking my question. Bill, you mentioned at this point in the cycle, the perception was that the DIY business was gonna be comping negative. As you pointed out, it comped up 9% in the quarter, with a little less than half of it likely coming from price increases. Why has it not slowed otherwise? The perception early in the pandemic was that the marginal or incremental customer was that more affluent consumer who was working from home, had more time on their hands, was doing some work on their car as a result. Is that still the incremental customer or has it evolved given some of the underlying dynamics like fewer new car sales, stimulus or other factors? Yeah. Fantastic question, Michael. I wish I could tell you with certainty it was built by X, Y, and Z. Let me just share some of our thoughts, but our thoughts are evolving, and we don't have clear insights into the strength of it, which we're tickled to death to have, but we can't explain every element of it. Clearly, an element right now is increased inflation. Our traffic count is positive, slightly positive in the retail business. Normally, because of changes in technology and the improvement of quality of parts, we've typically had, you know, 3.5% deceleration in transaction count. Despite the enormous customer count growth we had last year, we're still growing customers and growing them much faster than we have, let's say, on average over the last 10 years. We also have an inflation benefit that's, call it 4% or so on top of that. That is a significant element. What we believe was the biggest thing that happened to us in the pandemic was we had a lot of what I call our financially fragile customers, those lower socioeconomic customers that had two things that they don't typically have. They had time because many of them were furloughed, and they had money because they were living off of stimulus and significant enhanced unemployment. We anticipated, as those two things ended in March 15th of 2021 and early September of 2021 on enhanced unemployment, that we would see it slow down. I think there are some other dynamics that are happening. You mentioned new and used car sales. One of the things that we believe has happened in the recessions over the years is people change their perspective on how long they're gonna keep their car, and so they focus on how they maintain it right versus thinking they're gonna get a new car in six months, so don't worry about it. I think this environment of new car shortages and used car prices being up. I think the last time I saw it, something like 38%. I think people, in particular, our more challenged economically customers are thinking, "I'm gonna have this car for a long time. I better take care of it." I think that also all levels of consumer appear to still be very, very healthy financially versus historical norms. As we've seen for years, any period where there's a tax refund or something, we see a big spike in our business. Stimulus, we saw big spikes in our business. I think the fact that they still have more discretionary income than normal bodes well for our business. It's showing up in our results and likely stays with us for some period of time. How long? Your guess is as good as mine. Well, my guess isn't that good, so I'm sure yours is a little bit better. My follow-up. Mine hasn't been very good either. My follow-up question is on one of the key debates on your investment case right now is what does the algorithm look like moving forward? Historically, AutoZone's algorithm has been modest new store growth, 2%-4% comp, stable margins and healthy share purchases to deliver double-digit EPS growth. Jamere made the point that you're building a faster growing business. Does the algorithm change moving forward, especially if commercial sustains its recent increases and puts pressure on your gross margin? Would you be willing to accept a formula over the long run where you have a slightly higher same-store sales growth, even if that meant about the same gross profit dollar growth that you've had historically because it comes with gross margin pressure over the longer run? I think Jamere mentioned that COGS inflation was 2%, price increases were 4%, so you saw gross margin benefit this quarter from that spread. Doesn't that reverse in the quarters ahead? Thank you. You asked three very complex questions. I think the answers are yes, and yes. Let me start, and then I'll let Jamere talk about it as well. Yes, we've had a long-term algorithm that says, you know, how do we grow store count in the 2%-3%? How do we grow EBIT growth in the 3%-5% in normal times and maybe faster in these recessionary environments? How do we leverage our consistent and predictable free cash flow to do share repurchases that push us in and around double-digit EPS growth for a sustained period of time? You know, you remember, Michael, we had, I think, 41 consecutive quarters of double-digit EPS growth. So that's still long-term, generally the model that we believe. However, we've had the most incredible six straight quarters we've ever seen. There could be a deceleration to get us to whatever the new normal is. I would have thought we would have experienced that by now. I feel better about our sustainability of holding onto these significant sales growths over a longer period of time at different levels than I would have thought six and 12 months ago. We may have a slowdown at some point, but I don't believe once we get to whatever the new normal is, that the algorithm changes any. You ask, would we be willing to grow the commercial business at a faster rate at the expense of gross and operating margin percentages, and I would say an emphatic yes. We are focused on how do we grow gross profit dollars and operating profit dollars at an accelerated rate while we make sure we get great returns. I think any organization that's running roughly a 40% ROIC, we've proven that we know how to leverage our capital structure. Jamere, anything that you would say differently, or do you wanna address his last point? No, I think a couple things stand out to me, and Bill answered your question, I think, you know, very clearly. Our goal has always been to grow our gross profit dollars. We have the luxury of having, you know, in this environment, a faster growing business with higher margin dollars overall, and I would argue this is a more sustainable way to grow cash and ultimately shareholder value. What doesn't change in the algorithm is the most important part of the algorithm, which is this is a business that is going to generate a tremendous amount of cash that enables us to grow our business and return a significant amount of cash to shareholders over time. As we've gone through this period, and we see an opportunity to accelerate the growth in our commercial business by creating a faster growing business overall, it's ultimately meaning that we're a more profitable company on a dollar basis, and that's gonna lead to more cash, and we're gonna grow the business and return a significant chunk of that to shareholders. Long term, you know, what I've been saying is that while the geography changes a little bit, the algorithm, you know, at the bottom line, doesn't change. This is a business that generates a ton of cash, and has tremendous firepower to grow and return cash to shareholders. Anything to add about the timing between price increases and cost increases? Yeah. So, you know, from the standpoint of price increases and cost increases, you know, we've been very disciplined about making sure that when we see cost increases coming, we've taken retail pricing. Sometimes we will take those in anticipation of those cost increases. There's usually a catch up over time, but what I will say to you is that this is a pretty dynamic market and that there are always pricing opportunities and cost increases that are coming our way. Our teams have done a tremendous job of managing this mix such that, you know, we've historically found ways to have margin accretion when we go through this environment. The most important part of that is that this is an industry that has been disciplined and rational, and we expect this to continue. We don't expect, you know, ultimately for the cost increases to be a margin drag over the business. We've done a fantastic job of managing that dynamic in the past, and we'll continue to do so in the future. Thank you very much. Best of luck to Mark, and have a good holiday season. Thanks. Thank you. Our next question today is coming from Zachary Fadem at Wells Fargo. Your line is live. You may begin. Hey, good morning, guys. First I wanna follow up on Michael's last question. If you look at your business over the last three to four years, your commercial mix has shifted from roughly 20% of your sales mix to now closer to 25%, while your EBIT margins have expanded by about 100 basis points during this time. The question is, as your business continues to evolve and you start to think about 30% or 35% commercial mix, how does this impact your EBIT margins? To what extent should we view the 19%-20% level as sustainable with or without the change in mix? Well, I think a couple dynamics are associated with that, number one, you know, the commercial business naturally will be a margin drag for us just based on the nature of the business. You've got to remember, we have a large DIY business that we are continuing to drive efficiencies and margin expansion in that DIY business over time, such that there isn't a cliff associated with margins over time. What you can expect from us is that we'll continue to push to drive margin expansion in our business overall. Commercial will be a drag, but we'll continue to work on things from a productivity standpoint. Naturally, you may see some of that impact our EBIT margins. From a EBIT, you know, total EBIT dollar standpoint, we'll be in pretty good shape, and it'll be a great story. Again, I always come back to this notion that, from an earnings standpoint, from a cash standpoint, the most important part of this algorithm is that we're going to have tremendous firepower to grow the business and return a bunch of cash to shareholders. Let me jump in on that too, Zach. I think when you look at what's happened over the last three or four years to margins, you need to make sure that we don't lose sight of what happened to our DIY business over the last two years. Our same store sales in DIY are up 20% on a two-year basis. We are getting a ton of leverage because of that outsized sales growth. Our hope and my hope is that we maintain all of it or certainly a significant amount of it. That's yet to be seen. That changed the economics of the operating margin in the DIY business. Our focus, whether it's 19% or 20%, is to make sure that we're growing operating profit dollars at a good return. Sometimes our margin, our operating margin might go down because, you know, I've said for many times, if we could double our commercial business at a substantially lower operating margin tomorrow, we would do it because it doesn't require a lot of capital, and it would grow our operating profit dollars tremendously. Got it. That's helpful. On the DIY side, obviously a lot of noise out there on the state of the lower income consumer as we move further and further away from stimulus. Considering the uptick in gas prices, food CPI, and just overall broad-based inflation, including your business, could you talk about what you're seeing out there as it doesn't seem to be impacting your business at all? Curious how you think about the disconnect there. Yeah. If I first start with, you have to remember that our business is generally an inelastic business, except for some reason, whenever the low-end consumer has excess cash, we see a significant pop in our business. I'll go back to what I said earlier. We historically haven't seen it revert back to the norms. If you look at our business in the quarter, our retail business, our transaction count was meaningfully better than it normally would be. We're also seeing that we grew share by 10% during the depths of the crisis, and we are continuing to modestly grow share on top of that. I would have anticipated we would give some of that back. We're not. And then you layer in the fact that there is this inflation, and that's probably accelerating our growth by about 4%. We don't think that there's a lot of elasticity in that, inflation at this point in time. The bigger question is the one that you're bringing up. If we continue to see significant inflation across the market, does that put more and more pressure on particularly the low-end consumer? Ultimately, do we see a deceleration as a result of that? I think that's a logical thesis, but we've had a lot of logical thesis during this pandemic that haven't come to fruition. Yeah. I would just add that, you know, that piece of the thesis, if you will, we're a long way from that being the case. You know, if you just look at the things that Bill talked about, three things. One, share growth, inflation being our friend, and this favorable macro environment. That's what gives us a lot of confidence here in the near term about our business. We're continuing to perform very well in this environment against that backdrop. Thanks so much, guys. Happy holidays. Congrats to Mark. Yeah. Thank you very much, Zach. Happy holidays to you, too. Thank you. Our next question today is coming from Christopher Horvers at J.P. Morgan. Your line is live. You may begin. Thanks. Good morning, guys. Bill, you talked a lot about consistency on a monthly basis, on a quarterly basis, on a two-year stack basis. But also historically, you've talked a lot about, you know, the impact of the business on, you know, shifting tax refund timing in different periods. If you held the stock into this next quarter, obviously that's a really impressive number, but you will also run into the stimulus payments from January. I guess, what are your thoughts there? Do you think you saw a lift last year on the DIY side of the business? And do you think that, you know, that would cause that two-year stack to break? It's a great question, Chris, and I'm very happy that Jamere has not allowed us to reverse our long-term history of not giving guidance. I don't know the answer to it, right? Yes, we'll be going up against the stimulus payment around the first of the year. Yes, we're gonna be something we've talked about a lot historically, is we'll be going up against a pretty significant weather event towards the end of our quarter and beginning of the next quarter. You know, for us, we're gonna maximize our performance and optimize our performance in whatever sales environment we have. We don't have to change. If we thought we were gonna be +2% or down 2% on a historical basis, we don't have to change how we operate. If we lap that stimulus and we have a little bit of a headwind for four weeks, so be it. We're running this business for the long term. As I said in the prepared remarks, the valuation that needs to be placed on this company depends on how our investors, and particularly our long-term investors, feel our cash flow is gonna be three to five years from now, and that's the lens that we're looking at. If we go through a tough quarter because our business is up 25% from pre-pandemic, so be it. We need to make sure that we're making the investments today that allow us to continue to have this amazing cash flow generation, for the long term. Got it. Makes sense. In terms of the, you know, the investments that you're making this year, can you give us some expectations in terms of CapEx? Will the investment cycle or investment program for this year create pressure in OpEx, like in terms of what one might say, you know, an appropriate relationship between, say, you know, top line growth versus SG&A dollar growth might, how that could be impacted? Yeah. I mean, we're able to do this within the framework of our long-term financial model, if you will. We will have some accelerated CapEx this year to build out the initiatives that Bill talked about. If you look at sort of where we are in terms of our cash generating capability, the amount of free cash flow that we'll generate this year, it certainly won't impact anything that we're doing from a capital allocation or our ability to return cash to shareholders. This is sort of a multi-year investment cycle, if you will. You know, we've talked about the capacity investments that we're making in the supply chain. Now I've talked about things that we need to do from an IT standpoint. We've talked about the growth that we're gonna do in our store base, and we're able to do that within the framework of, you know, our financial model, if you will, without making material changes to the P&L. Got it. Thanks very much. Yep. Thank you. Our next question today is coming from Brian Nagel at Oppenheimer. Your line is live. You may begin. Hi, good morning. Congrats on another really incredible quarter. Nicely done. Thanks, Brian. Thanks, Brian. The first question I have, I think it goes to the comments you were making, Jamere, in the prepared remarks. With regard to supply chain, you know, it sounds like, you know, what you're saying, AutoZone continues to manage the challenges quite well. The question I have is, as you look at the challenges out there, are you starting to see some of these bottlenecks, so to say, subsiding? You know, is there a path towards, and obviously, it's gonna take some time, the supply chain for you improving significantly? It's a great question, Brian. I think the answer is yes, but it's ever-changing. I wanna stop for just a second and really say thank you to our supply chain team and our merchants. You talk about collaboration. These folks have been working unbelievably hard now for 20 months trying to figure out how we deal with this enormous surge in volume. Round numbers, you know, our business is up 25% or more since the pre-pandemic level. Our supply chain, our manufacturers and their supply chains, nobody built for 25% excess capacity that would last for 20 months. Our teams have done a really good job of managing through it. That said, we have challenges. Our in-stock levels are not where we want them to be. They haven't been the whole time, and they'll go down a little bit and they'll come up a little bit, but we're, you know, generally 3% or 4% below the in-stock levels that we want on a weekly basis. To your point, are we seeing things change that give us optimism about the future? The answer is yes, but as soon as we do, we see another part of the supply chain that is more challenged. You know, in a lot of respects, we're playing a little bit of whack-a-mole. In the beginning, it was particular categories, sandpaper. Now it's tools and brake rotors. We also, back in the summertime, we couldn't get capacity to get enough container loads from Shanghai to the U.S. Now it's can we get them through the ports in the U.S.? Our team's been really creative about getting the ships, but now also finding different ports across the country to go to. We are seeing it get better, but we are nowhere out of the woods on seeing that, you know, next month we're gonna be back into it. We're about to face Chinese New Year, which is always a difficult time in any supply chain, so it'll be interesting to see how we manage through that. You know, my hope is late spring, early summer, we get back to some semblance of normality. Every time we thought, okay, this one is easing, there's been another part of the supply chain that has shown challenges. No, that's very helpful, Bill. Thank you. The second question I have, I guess kind of more strategic in nature as well. You know, we talk about just the sales growth and, you know, the sales growth has been phenomenal. You look at the, you know, the stack comps have been extraordinarily resilient here, even as the economy's moved away from the pandemic from stimulus, the benefits of stimulus. The question I have is, as you think about the business, you know, to the extent that you start seeing signals that maybe this is even the sales growth is even more sustainable than you initially thought. Is there a point at which you would start to invest more aggressively or back into the business? Are there even places you would wanna put more money, more investment to work in the business or say, to reinvest those sales gains? I think we already have, Brian. You know, I talked in my prepared remarks, we're gonna make the most significant investments that we've seen in our supply chain, because we've seen this surge in volume. Now I don't wanna spook everybody. Our CapEx is gonna be, you know, up $150 million kinda range over last year. But we'll have an elevated level in our supply chain for a couple of years. As we've talked about as a team, think over the long term, we've optimized our supply chain to the third decimal point. When you've been through a surge in volume like we've experienced over the last 20 months, that was probably a little penny-wise and pound-foolish. We're gonna be a little bit more aggressive with our supply chain investments. We've clearly made a ton of investments in our commercial business over the last four years, from inventory assortments to Mega Hubs and Hubs, to investments in the Duralast brand, to investments in price, investments in technology. The single largest technology investment we've ever made as a company is what underpins this commercial strategy. We're beginning to see benefits from it, but we've got a ton of benefits left in front of us on the commercial side of the business. I think we've been making investments at an accelerated rate. When you have the kind of profitability characteristics that we have today, we're looking at, are there other places that we can invest? I also wanna say one place that we've invested very aggressively that I don't think others have done it nearly at the same level, is we've invested in our people. We've invested in our people and accelerated wage rates. We've invested in our people and our culture through things like emergency time off. You know, the last time I tallied up what we'd invested from emergency time off, vaccine incentives, and those kinds of things, we were, you know, in the $135 million range. We announced again today that we added $9 million to our AutoZoner Assistance Fund. We believe in times like this, if we're gonna have values that we state, it's imperative that we live consistent with those values, and I think we've walked that walk very clearly during the pandemic. Very helpful. Congratulations again to all. Thank you. All right. Thank you. Appreciate it, Brian. Before we conclude the call, I just wanna take a moment to reiterate that we believe our industry is strong and our business model is solid. We'll take nothing for granted as we understand our customers have alternatives to shopping with us. We will continue to focus on the basics as we strive to optimize shareholder value for the remainder of fiscal 2022. Lastly, we wanna wish everyone a happy, healthy, and safe holiday season and a very prosperous new year. Thank you for your time today, and thank you for your interest in AutoZone. Take care. Thank you, ladies and gentlemen, this does conclude today's event. We thank you for your participation. Have a wonderful day.