Good day, ladies and gentlemen, and welcome to AutoZone's 2022 Third Quarter Earnings Release Conference Call. At this time, all participants have been placed on a listen-only mode, and we will open up the floor for your 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. Thank you. It is now my pleasure to turn the floor over to your host, Bill Rhodes, Chairman, President and CEO of AutoZone. Sir, the floor is yours. Good morning, and thank you for joining us today for AutoZone's 2022 Third 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 third 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 we begin, we want to continue to stress that our highest priority remains the safety and well-being of our customers and AutoZoners. Everyone across the organization continues to take this responsibility seriously, and I'm very proud of how our team continues to respond to COVID-19 and subsequent variants. While mask mandates have abated, we continue to make sure the environments our AutoZoners are working in and our customers are shopping in are as safe as possible for these times. Since the start of the pandemic, we have consistently recognized our AutoZoners in our stores and distribution centers, especially for giving exceptional service in the face of all the challenges COVID-19 has meant for all of us. This quarter, we will start the same by again thanking our AutoZoners for their dedication to providing exceptional customer service while helping our customers with their automotive needs. This morning, we will 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 will also share how inflation is affecting our costs and retail and how we think they will impact our business for the remainder of the fiscal year. Our domestic same-store sales were a solid 2.6% this quarter, on top of last year's very strong 28.9%. On both a two-year and three-year stacked comp sales basis, our trends accelerated. Our team once again executed at an exceptionally high level and delivered amazing results despite the difficult comparisons. Our growth rates for retail and commercial were both strong, with domestic commercial growth north of 26%. Commercial set a third-quarter record with $1.044 billion in sales, an incredible accomplishment. We generated $216 million more in sales this quarter than in Q3 of just last year. On a trailing four-quarter basis, our commercial sales are just under $4 billion versus $3.1 billion a year ago, up 27%. We also set a record in average weekly sales per store for any quarter at $16,600 versus $13,500 last year. On a two-year basis, our sales accelerated from last quarter. Domestic commercial sales represented 30% of our domestic auto parts sales, another record for us compared to just 24.8% last year. Our commercial sales growth continues to be driven by a host of key initiatives we've been working on for the last several years. Improved satellite store availability, massive improvements in hub and mega hub coverage, the strength of the Duralast brand, better technology to make us easier to do business with, improved delivery times, enhancing our sales force effectiveness, and living consistent with our pledge by being, quote, "priced right," for the value proposition 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. As a reminder, it was last year's Q3 that had the massive stimulus payments that were distributed to consumers in the U.S. We ran a negative 4.5% comp this quarter on top of last year's record positive comps of 24.8%. While our DIY two-year comp decelerated slightly from Q2's two-year DIY comp, perhaps the more relevant comp is the DIY three-year comp, which did accelerate. We were very proud of our DIY results considering we had such a tough comparison to last year. From the data we have available to us, we continue to not only retain the enormous share gains in dollars and units we 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 gives us continued conviction about the sustainability of the massive elevated sales levels we have experienced since the beginning of the pandemic. Now let's focus on the sales cadence. Our quarter spans a 12-week period. Our same-store sales increased materially over the first four weeks up 11.8%. They were down over the middle four weeks by 5.2%. Remember, we were comping against the stimulus payments made during this time last year, and our same-store sales then accelerated over the last four weeks up 3%. All these year-over-year comparisons are really difficult to interpret as so much was going on last year and even the year before. For Q3, our two-year comp was 31.5%, and the four-week periods for the quarter increased 23.4%, 65.4%, and 17% respectively. Our three-year comp was 30.5%, and the four-week periods for the quarter increased 29.7%, 44.7%, and 29.8% respectively. What I want to stress is that our two-year and three-year comp accelerated for the quarter from Q2's two- and three-year comparison. We are encouraged by the sustainability of these enormous sales gains. Regarding weather, in February and March, we experienced normal weather trends across the country. April, however, was a little cooler and a little wetter than normal. Overall, we feel weather did not play a material role in our sales performance. As we look forward to the summer months, we anticipate normal weather patterns. As a reminder, historically, extreme weather, hot or cold, drives parts failure and accelerated maintenance. Regarding the quarter's traffic versus ticket growth, in retail, our traffic was down roughly 8.5%, while our ticket was up 4%. Our transaction count decline was correlated to last year's Q3 meaningful 16% traffic count increase. While we had expected a decline in transactions this quarter, we were pleased to exceed our beginning of the quarter assumptions on transaction count declines. We're also quite pleased with the ongoing growth in unit share we are seeing in our market share data. We're very encouraged by the sales trends we continue to experience in commercial. Most of the sales growth is coming from transaction growth from new and existing customers. I visited our stores and commercial customers extensively this quarter and find it very encouraging to hear the positive comments from our customers and AutoZoners on our comprehensive offerings. The tone of our sales calls has changed meaningfully over the last few years as we continue to implement and execute our commercial acceleration strategy. As we start our final quarter of the fiscal year, we continue to be pleased with the momentum we are seeing in both domestic businesses heading into the summer months. During the quarter, there were some geographic regions that did better than others, as there always are. This quarter, we saw a 54 basis points difference between the Northeast and Midwest compared to the balance of the country, with the Northeast and Midwest performing lower. As the Northeast and Midwest were cooler and wetter in April, their sales were below last year's results. We do not believe there will be lasting effects on sales performance in the Northeast and Midwest due to the slightly cooler April weather. Heading into the fourth quarter, we continue to believe weather will have a minimal effect on summer sales. Now let's move into more specifics on our performance for the quarter. Our same-store sales were up 2.6% versus last year's third quarter. Our net income was $593 million, and our EPS was $29.03 a share, increasing 9.6%. Regarding our merchandise categories in the retail business, our hard parts outperformed our sales floor categories, but there was less than a 1% difference between them. As gas prices jumped recently, our sales results in certain hard part categories performed below our plan. This is unlike the sales floor categories, which were on plan. We've been especially pleased with our growth rates in many of our categories like batteries that have successfully lapped very strong performance last year and easily exceeded our plan assumptions for the quarter. We believe our hard parts business will strengthen as our customers return to driving more. Let me also address inflation and pricing. This quarter, we saw our sales increase by 7.8% from inflation, in line with the cost of goods inflation, which was up similarly at 7.2% on a like-for-like basis. We believe both numbers for the fourth quarter could be slightly higher than this past quarter's increases. As rising raw material pricing, labor, and transportation costs are all impacting us and our suppliers, inflation has been prevalent in the aftermarket space. 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. It is also notable that following periods of higher inflation, our industry has historically not reduced pricing to reflect lower ultimate costs. While we continue to be encouraged with the current sales environment, it remains difficult for us to forecast near to midterm sales. What I have previously said is that the past five quarter sales have all been consistent on both a two-year stacked comp basis and a three-year stacked comp basis. While it's difficult to predict absolute sales levels going forward, we are excited about our growth initiatives, our team's exceptional execution, and the tremendous share gains we have achieved in both sectors. Currently, the macro environment, while uncertain, remains favorable for our industry. Even 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 our fourth quarter, we expect our sales performance to be led by the continued strength in our commercial business as we continue executing on our differentiating initiatives. We will, as always, be transparent about what we are seeing and provide color on our markets and outlook as trends emerge. Before handing the call over to Jamere, I'd like to make sure the listeners know what our key business priorities are for the remainder of the fiscal year and give some color on those. First, we are focusing on our supply chain. We have two initiatives in place to drive improved availability. One is our Expanded Hub and Mega Hub rollouts. We believe intelligently placing more inventory in local markets will lead to our ability to continue to say yes to our customers more frequently, and in turn, continue to drive our sales performance. Secondly, we are expanding our distribution center footprint. We announced opening two new domestic DCs and one additional DC in Mexico. These DCs will allow us to not only reduce drive times to stores and markets serviced by the new DCs, but they, being larger than the previous DCs, will allow us to carry inventory that is slower turning, yet in demand across the country. We previously relied on our vendor community to carry these SKUs and ship them once ordered by our stores. Our DC strategy is focused on carrying more product in our supply chain that was not available previously. These SKUs will smartly expand our stocked inventory across all 50 states. Lastly, we plan on continuing to grow our Mexico business while accelerating growth in Brazil. We are leveraging many of the learnings we have in the U.S. to refine our offerings in Mexico and Brazil. Now I'll turn the call over to Jamere Jackson. Jamere? Thanks, Bill. Good morning, everyone. As Bill mentioned, we had a strong third quarter stacked on top of a remarkable third quarter last year with 2.6% comp growth, a 2% decline in EBIT, and a 9.6% increase in EPS. Our results for the first three quarters of the fiscal year have been incredibly strong as our growth initiatives continue to deliver great results, and the efforts of our AutoZoners in our stores and distribution centers have continued to enable 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 Q3. For the quarter, total sales were just under $3.9 billion, up 5.9%. Total auto parts sales, which includes our domestic Mexico and Brazil stores, were $3.8 billion, up 5.7%. Let me give a little more color on sales and our growth initiatives, starting with our commercial business for the third quarter. Our domestic DIFM sales increased 26% to over $1 billion, and we're up 70.4% on a two-year stacked basis. Sales to our DIFM customers represented 27% of our total company sales and 30% of our domestic auto parts sales. Our weekly sales per program were $16,600, up 23%, as we averaged just over $87 million in total weekly commercial sales. Once again, growth at 26% exceeded our internal expectations and was broad-based as both national and local accounts performed very well for the quarter. Our results for the quarter represented the highest weekly sales volume for any quarter in the history of the chain. I wanna reiterate that our execution on our commercial acceleration initiatives is delivering better than expected results as we grow share by winning new business and increasing our share of wallet with existing customers. We have a commercial program in approximately 86% of our domestic stores, which leverages our DIY infrastructure, and we're building our business with national, regional, and local accounts. This quarter, we opened 43 net new programs, finishing with 5,276 total programs. As I've said since the outset of the year, commercial growth will lead the way in FY22, and our results in the third quarter and year to date reflect this dynamic. We remain confident in our strategy 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 seven quarters. Our core initiatives are accelerating our growth and position us well in the marketplace. Notably, our Mega Hubs strategy is driving strong performance and positioning us for an even brighter future in our commercial and retail businesses. Let me add a little color on our progress here. As we have discussed over the last several quarters, our Mega Hubs strategy has given us tremendous momentum. We now have 67 Mega Hub locations, and we expect to open approximately 11 more over the remainder of the fiscal year. While I mentioned a moment ago the commercial weekly sales per program average was $16,600 per program, the 67 Mega Hubs average significantly higher sales and are growing much faster than the balance of the commercial footprint. As a reminder, our Mega Hubs typically carry over 100,000 SKUs and drive tremendous sales lift inside the store box, as well as serve as an expanded assortment source for other stores. The expansion of coverage and parts availability continues to deliver a meaningful sales lift to both our commercial and DIY business. This quarter, I visited one of our key markets where we're testing greater Mega Hub density, and although it's early innings, I am thrilled with the results. What we're learning is that not only are these assets performing well individually, but the fulfillment capability for the surrounding AutoZone stores gives our customers access to thousands of additional parts and lifts the entire network. This strategy is working. We're doubling down by raising our near-term Mega Hubs target from approximately 110- 200 Mega Hubs, supplemented by our new objective of a total of 300 regular hubs. Yes, we plan to have 500 total locations with significantly higher levels of expanded parts availability, and soon. By leveraging sophisticated analytics, we're expanding our market reach, driving closer proximity to our customers, and improving our product availability and delivery times. Our AutoZoners are excited, our customers are excited, and we're building a meaningful competitive advantage. On the retail side of our business, our domestic retail business was down 4.5%, but up 20.3% on a two-year stack. The business has been remarkably resilient as we have gained and maintained significant market share since the start of the pandemic. As Bill mentioned, we saw traffic down 8.5% from last year's record traffic levels that were fueled by government stimulus. However, we also saw 4% ticket growth as we continue to methodically raise prices in an inflationary environment. Our DIY business has continued to strengthen behind our growth initiatives in a favorable macro environment. On a macro basis, the market is experiencing a growing and aging car park and a challenging new and used car sales market for our customers, which are providing a strong tailwind for our business. Our in-stock positions, while still below historic norms, continue 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. Our AutoZoners who are taking care of our customers give us a key competitive advantage that enables us to thrive in this market environment. We remain confident as the fundamentals of our DIY business remain strong. Macro conditions are favorable for us, and we've had great execution by our teams. 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 three new stores in Mexico to finish with 673 stores and three new stores in Brazil, ending with 58. On a constant currency basis, we saw accelerated sales growth in both countries. In fact, at higher growth rates than we saw overall. We remain committed to our store opening schedules in both markets and expect both countries to be significant contributors to sales and earnings growth in the future. With 12% of our total 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 54 basis points, driven primarily by the accelerated growth in our commercial business, where mix drove margin pressure but increased our total gross profit dollars 4.8%, a welcome trade-off that is a net positive for our business. 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 are continuing to take pricing actions to offset inflation and consistent with prior inflationary cycles, the industry pricing remains rational. Moving to operating expenses. Our expenses were up 9.8% versus last year Q3 as SG&A as a percentage of sales deleveraged 114 basis points. The deleverage was driven by payroll. As last year's historic DIY comp drove significant and more than appropriate leverage on SG&A, where we simply couldn't staff to the accelerated sales growth fast enough. We also continue to invest at an accelerated pace 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 $786 million, down 2.2% versus the prior year's quarter, driven by last year's strong sales performance in DIY. Interest expense for the quarter was $41.9 million, down 7% from Q3 a year ago, although our debt outstanding at the beginning of the quarter was $6.1 billion versus $5.3 billion in Q3 last year. We're planning interest in the $61 million range for the fourth quarter of fiscal 2022 versus $58.1 million in last year's fourth quarter. For the quarter, our tax rate was 20.3% versus 21.4% in last year's third quarter. This quarter's rate benefited 284 basis points from stock options exercised, while last year it benefited 211 basis points. For the fourth quarter of fiscal year 2022, we suggest investors model us at approximately 23.5% before any assumptions on credits due to stock option exercises. Moving to net income and EPS. Net income for the quarter was $593 million, down 0.6% versus last year's third quarter. Our diluted share count of 20.4 million was 9.3% lower than last year's third quarter. The combination of lower net income offset by lower share count drove earnings per share for the quarter to $29.03, up 9.6% over the prior year's third quarter. Now let me talk about our free cash flow for Q3. For the third quarter, we generated $843 million of operating cash flow and spent $161 million in capital expenditures, allowing us to generate $682 million in free cash flow. Year to date, we've generated $1.6 billion in free cash flow, down 13% versus the prior year. The primary reason for the decline in free cash flow versus last year is the timing of merchandise inventories and payments this year versus last year. We expect to continue being an incredibly strong free cash flow generator going forward, and we remain committed to returning meaningful amounts of cash to our shareholders. Regarding our balance sheet, our liquidity position remains very strong, and our leverage ratios remain below our historic norms. Our inventory per store was up 10.7% versus Q3 last year. Total inventory increased 13.9% over the same period last year, driven primarily by inflation and our growth initiatives. Net inventory, defined as merchandise inventories less accounts payable on a per store basis, was -$216,000 versus -$167,000 last year and -$198,000 last quarter. As a result, accounts payable as a percent of gross inventory finished the quarter at 127.9% versus last year's Q3 of 123.9%. Lastly, I'll spend a moment on capital allocation and our share repurchase program. We repurchased $900 million of AutoZone stock in the quarter. At quarter end, we had just under $2.1 billion remaining under our share buyback authorization. The strong earnings, balance sheet, and powerful free cash flow we generated this year has allowed us to buy back over 8% of the shares outstanding since the beginning of the fiscal year. We've 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 that will enable us to invest in the business and return meaningful amounts of cash to shareholders. We finished Q3 at 2.1x EBITDAR, which is below our historical objective of 2.5x EBITDAR. However, we remain committed to this objective, and we expect to return to the 2.5x target when appropriate. To wrap up, we had another very successful quarter. We're 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 continues to work. We're growing our market share and improving our competitive positioning in a disciplined way. I continue to 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. We had very solid results so far in fiscal 2022, and we remain focused on superior execution and customer service. Our culture was built on providing exceptional service, and this is what will continue to define our success well into the future. In looking to the future, it is still very difficult to predict the next 6- 12 months, but our perspective has meaningfully morphed over the last two quarters. On last quarter's call, we discussed how most, if not all, of the growth in sales we experienced since the start of the pandemic was sustainable. We believed our competitive positioning was materially improved, as indicated by our significant retail share gains and rapidly accelerated commercial sales growth. We believed customer behavior may have permanently changed. We continue to believe all this today. If this holds true, it'll be the fourth time in the last 30 years that the economy and society have been through significant shocks, leading to material acceleration in our growth in sales and profits without a corresponding decline back to pre-recessionary or pre-pandemic levels. Our industry is unique, and it has a very long track record of strong performance with high return and cash flow characteristics. As we have now lapped the second anniversary of the pandemic, some of the measurements we have all used recently to measure our performance will become skewed. Remember, at the beginning of the pandemic, our sales dropped radically. Our retail sales rebounded quickly with the April 2020 stimulus, but commercials rebound lagged and took several months. For Q4, in light of the amazing performance in the back half of 2020, the two-year comparison for overall comps won't be comparable. We would encourage you to migrate to studying three-year comps to gauge our fourth quarter performance. That said, soon, we look forward to returning to focusing solely on one-year comparisons. We continue to be bullish on our industry and, in particular, on our own opportunities for 2022. We believe the macro backdrop is in our favor for near and long term. Our customers across the Americas, they wanna get out and drive, and we are here when they need helpful advice. Our team has worked diligently and collaboratively with our suppliers, and together, they've done a very good job dealing with the enormous supply chain challenges that exist for everyone. We continue to believe we are in better in stock than most retailers, and I think our results obviously support that belief. I'd like to share a few other points with you. It has been a rather noisy earnings season for retailers, and I wanna be clear, crystal clear about our business and the environment. First, I believe AutoZone can manage effectively through this inflationary environment. Historically, our industry has been disciplined and rational about passing along cost increases with higher retails, and that is true today. Second, we feel our store staffing levels are appropriate, and we can and we will manage expenses appropriately for either stronger or weaker sales environments. Our business and our industry has been remarkably resilient and frankly, robust. For the remainder of fiscal 2022, we are focused on further growing share, but as always, doing so on a very profitable basis. Last quarter, we announced we would begin construction on three new distribution centers to fuel continued growth, two in the U.S. and one in Mexico. Expected to open in fiscal 2024, these new distribution centers represent a meaningful acceleration in our historic investments in DCs, as during the pandemic, we've learned we need to have more excess capacity. Secondly, we are targeting to open 11 more new domestic Mega Hubs in the U.S. in this quarter, Q4. These Mega Hubs will enhance our availability and support growth in both our retail and commercial businesses. As we have mentioned many times before, our Mega Hub strategy is at the core of materially improving our inventory availability, and our results show that they are working. For the fiscal year, we continue to expect to open more than 200 new stores throughout the Americas, with notable acceleration in our Brazil business. Our fourth quarter will be a busy one from a store development standpoint. These capacity expansion investments reflect our bullishness on our industry and our own growth prospects. We are being disciplined, yet we are being aggressive. Lastly, I wanna reiterate how proud I am of our AutoZoners across the stores and distribution centers, in particular, 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 3-5 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. Certainly. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. Please limit yourself to no more than two questions. We also ask, while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Your first question for today is coming from Bret Jordan with Jefferies. Bret, your line is live. Morning, guys. Morning, Bret. Morning, Bret. On the Mega Hubs, could you talk maybe about the geographic reach? You noted that the DIFM is accelerating in their markets. I mean, how far can they support smaller stores geographically? Well, they're frankly, Bret, supporting smaller and smaller radius of geography today than they did before because we are getting so many of them. When we first built them, it was not uncommon for them to be supporting stores that were two, three, maybe even four hundred miles away. A lot of times that would be on an overnight basis. The real crux of it is how do we get the stores that are in, call it 30 or 40 miles away from the Mega Hub, and how can we get them serviced three times a day? That's when we really perform well. The biggest part of the Mega Hub performance is the Mega Hub itself. The four walls of the Mega Hubs are just continuing. Every time we look at them, and every time we open some and open more, they continue to outperform our expectations. One of the remarkable things is they're not cannibalizing close-in stores like we thought they would. You know, as we talked on the last call, remember when we first launched the Mega Hubs, we said we would have 25-40. We're now in the 60s, and we're headed to 200. That just goes to show you the power of these Mega Hubs. Great. One quick follow-up. You noted some impact on hard parts, maybe correlated to higher fuel prices, year to date. Are you seeing any trade down, whether it be in the do it for me or the DIY space, you know, given what's going on in inflationary to the consumer? Sure. Yeah, we're hearing a lot of questions about what's going on with the low-end consumer. Are people trading down? Our hard parts business, I don't wanna overstate that. I mean, I think I said it was off about 1% during that. It is very difficult right now to get clarity on the comparisons. Let's remember, you know, some people are talking about weather. We're saying we don't think weather was a meaningful impact on our business. What was meaningful was we went up against stimulus from March of last year that lasted for 4-6 weeks. That is really the story. It's hard to say the low-end consumer, sure, their purchases are down versus last year. Of course they are. They had a massive amount of stimulus in their pocket. I think it'll be interesting to see what happens over the fourth quarter. Are we watching what happens with the low-end consumer? Absolutely. I also wanna remind you, the comment that I made at the end, if you think about over the last 30 years, there's been four significant shocks to the economy. In all four of those shocks, our performance and our industry's performance has made a meaningful step up during those shocks, recessions and pandemics, that our business has gone up, and it's never stepped back down. Great. Thank you. Yeah, thank you, Bret. Your next question for today is coming from Christopher Horvers with J.P. Morgan. Christopher, your line is live. Thank you. A few questions on the gross margin front. As you look ahead, there's some headwinds that seem to be emerging on the fuel side. How do you think about, you know, pricing in, you know, fuel cost pressures in terms of product pricing? Then, you know, your success in commercial obviously has some expense on gross margin rates. Given those two factors, would you think that, you know, gross margin continues to see the type of year-over-year headwinds that you saw in the current quarter and the past couple quarters? Yeah, on the first part of your question, I mean, there's no question we're seeing cost inflation in certain categories. We're also seeing higher transportation costs. We're seeing higher fuel costs. However, as we reiterated on the call, the industry pricing is rational, and we're actually pricing to recover all of those inflationary impacts just as we've done in the past. So, you know, you've seen us move retail prices up as inflation has moved up mid-single digits. Our pricing has moved. I think our entire industry has done that. As I've said before, you know, inflation has been a little bit of our friend in terms of what we see in terms of retail pricing. Now, as it relates to our commercial business, we wanna be crystal clear. You know, our goal is to create a faster growing business with higher margin dollars. This is a much more sustainable way for us to grow our cash and ultimately shareholder value. Our domestic commercial business grew 26%. It's a mixed headwind. We expect our domestic commercial business to continue to outgrow our DIY business, and that's a trade-off that we welcome. We'll continue to run a very disciplined playbook on margin expansion opportunities across all of our business, which includes, you know, things that we're doing from a cost standpoint, raising our prices, and managing our expenses accordingly. We like the fact that we've got a commercial business with very strong operating margins that is accretive to the overall business. Understood. That's great. My other question is somewhat technical. As you think about the fuel impact of the trucks and the cars going from the store to the shops and the mechanics, you know, where does that show up in your P&L? Is that an SG&A item? How do you think about your, you know, the ability to maybe price that in or offset that impact? Because, you know, clearly diesel and gas accelerated over the quarter, and that impact should be bigger as you look forward. Yeah. If you look at diesel in particular, it's up, you know, probably 50% versus a year ago. That does show up in our SG&A expenses. So as we're running the cost playbook and we're running our pricing playbook, we have to take all those things into account. As I said before, when we look at our business in total and looking at all of the inflationary impacts, you know, we're pricing our retails accordingly to make sure that we, you know, maintain our margin structure going forward. Yeah, just for clarity, there's pressure in both gross margin and SG&A. The majority of the diesel is in our warehouse and distribution costs, which is in gross profit. We have one of the largest light duty fleets in our commercial and field management folks, and so there's a lot of pressure in SG&A as well. Right. The idea is you're gonna manage pricing to help offset that, the light duty expense pressure in SG&A? That's right. Both of them, both the light duty and the heavy duty. Got it. Thanks very much. Best of luck. Thanks, Chris. Your next question for today is coming from Simeon Gutman with Morgan Stanley. Good morning, everyone. My first question is on some of the margin and growth comments Jamere just made. Given the success you have in DIFM, are you making trade-offs between how much quicker you can grow and the margin dilution? Meaning, can you grow even quicker at maybe a bigger detriment to margin? Are you seeing less detriment to margin as this expansion is happening in commercial? You know, I'll say it crystal clear. No, we are not constraining our growth based upon the margin characteristics of the DIFM business. We said it for a million years. DIFM today operates at lower gross margins and lower operating margins. It operates in operating margins the way we look at it on generally an incremental basis in the mid-teens. We will grow that business as fast as humanly possible. You know, if we could add another $4 billion in sales and the corresponding operating income that comes with that tomorrow, with the limited amount of incremental capital that we have to deploy, we would do it tomorrow. We were very focused on operating profit dollars. You know, as we look forward, I would just encourage you all to look at our business from a gross margin point of view. How are we doing in DIY, and how are we doing in commercial? Our goals will be to marginally increase those gross margins over time. If we do that and that puts and the commercial business grows at 26% and it puts pressure on the overall gross margin, so be it. Fair enough. Bill, I was intrigued by some of the comments you made about some permanent changes to the industry. Were you underscoring how resilient the business is, or are you also thinking that maybe the business or the industry can grow at a faster rate than it has historically? Yeah, I don't know that I would say it can grow at a faster rate, the industry itself. I clearly think that we can, and maybe some of our close in competitors can grow faster in the commercial business because that is still so fragmented. The bigger part of my point is this is the most remarkably resilient business I've ever seen, and I don't understand why when we have a recession, our business goes up, and we come out of it, and our business never goes down. It seems to flatline and then grow from there. It's amazing to me. Okay, thanks. Good luck. Yep. Thank you, Simeon. Your next question for today is coming from Michael Lasser with UBS. Good morning. Thanks a lot for taking my question. Bill Rhodes, on the topic of recessionary environments and the impact that it has on the auto aftermarket, is one of the drivers during those periods that people shift away from buying new cars and are more interested and need to maintain their existing cars? The dynamic this time around could be influenced by the fact that new cars and lightly used car sales have been depressed because of supply constraints, so the industry might not see as much of a countercyclical boost as it's seen in the past. Yeah. I think all that makes perfect sense, Michael. I wish we had empirical evidence that could tell us that's exactly what's happened. I will tell you, if you asked me a year ago if we were gonna retain the kind of sales gains that we had grown over the first two years of the pandemic, I would have said I doubt it. There's also been other pressures that have happened. Clearly, the lack of new cars and the elevation of pricing, the radical elevation of pricing of used cars has our customers' view on how long they're gonna have that vehicle changing to much longer than it normally is. When that happens, they seem to take better care of their cars. I think we also didn't envision the inflation impact that we're seeing. Clearly, I talked about some significant traffic declines, 8.5% in the retail business. That was up against 16% traffic growth last year. I'll take a two-year comp of 7.5% traffic all day long. Inflation and the ability to pass that inflation on has helped us. That's another key element of this industry, is the inelasticity of demand in this sector of retail is probably unparalleled. As this inflation has come through, it's helped us get through that period of time as well. My follow-up question is, you've clearly gained market share if we compare your results to a variety of indicators, that's pretty obvious. Your messaging is that it's as a result of many different factors, one of which does seem to be that you've made some price investments initially on the DIY side, more recently on the DIFM side. One of your competitors has been vocal about making similar price investments on the, especially on the DIFM side. At this point, do you feel the need to make further price investments either on the DIY side or on the commercial side in an effort to either maintain or grow all the share that you've gained in the last couple of years? Thanks. The short answer is absolutely no. The longer answer is we made very marginal price investments on the retail business. We've far lapped those probably six months or so ago. They were very targeted to specific, highly visible commodity related items, and we're focused on our comparisons versus last. That's in the past. About this time last year, in fact, we have now annualized it, we completed rolling out the pricing changes that we made in our commercial business. Again, I wanna be crystal clear. The growth that we saw in commercial over the last couple of years is not a result of pricing investments alone. They are an element. There's many other elements, the Mega Hubs and hubs, the Duralast brand. We've rolled out. We've had the single largest technology investment in the company's history focused on commercial and commercial deliveries. Our delivery times are dropping. We've done a lot of different things, and we lowered our pricings to make sure that we were focused on pricing versus a different competitive set. All that together has worked really, really well. At this point in time, we do not have any additional pricing actions being tested nor being considered. We believe we're very happy with our prices today in retail and commercial, except that we need to pass inflation costs along as they come in. We will be very focused on trying to keep the same kinds of competitive positioning, but we need to pass on the inflation as it comes through us in costs. Thank you very much, and good luck. Yep. Thank you, Michael. Your next question for today is coming from Mike Baker with D.A. Davidson. Okay. Thanks, guys. Yeah, I don't know if you can answer this, but just curious, why do you think weather didn't have an impact on your business? It had an impact on all your competitors' businesses and many other seasonal businesses. Why would your business be different, particularly as you over-index to DIY, which I think is probably a little bit more weather sensitive than the commercial business? It's a very fair question. You know, the information we had was it was, as I said, slightly cooler and slightly wetter. The real discussion for this quarter was not weather, it was stimulus. I don't know how you ferret out a half a point or a 1-point change in weather dynamics when you're talking about two-year comps of 30% that were driven by stimulus. We're trying to focus on the major elements and make sure we communicate to you what we think are the real drivers and the frankly, the drivers that'll help you understand our long-term trends. The weather was marginally different, and I can't ferret it out in a 30% two-year comp. Okay. That's fair enough. One other follow-up. You did say hard parts were down. You said only 100 basis points, so you didn't want to make too big a deal of it. You did say you thought it was because of gas prices. Are you implying there, again, we don't want to make a big deal of it, but do you think people are just driving less on the higher gas prices? You said that should get better. Does it get better only when gas prices come back down? Should we be concerned about, you know, miles driven?[crosstalk] I think you've had two elements that happened to miles driven. We're still rebounding from the pandemic decrease of miles driven. Now you've got the gas prices implications. What we've seen historically in the past, Mike, is when gas prices hit $4 a gallon, you can see a direct correlation with those prices and a decline in miles driven. What we said historically is we've seen people when it gets to those elevated levels, they change their behavior. They change where they live, they change where they work. Obviously, with remote work and those kind of things, there could be different nuances this time. A lot of people are saying, yeah, but $4 a gallon back then would be the equivalent of five whatever today. That may be true. I don't know if that's the case or not. This has happened in pretty short order, and I think we need to watch what happens to miles driven over time. As we think about it will be a short-term phenomenon, just like it has been in the past. Our focus isn't about next quarter or even the quarter after that. Our focus, as I said, is how do we think about driving this business to drive long-term cash flow at really high return rates and think out 3-5 years. Gas prices will come and go, and it doesn't really impact how we manage the business day-to-day. Fair enough. Appreciate the call. Thank you. Yep, thank you. Your next question for today is coming from Scot Ciccarelli with Truist Securities. Good morning, guys. You've mentioned obviously the Mega Hubs, you know, quite a few times and the positive impact that you see on your sales. Is there a way to potentially quantify the sales lift that you experience in a market when you open a Mega Hub? Yeah. A couple things stand out to us. As we said, as we've tested greater density, we're seeing two dynamics. One is the business plan that we build usually justifies the Mega Hub based on what happens inside the four walls. We're seeing those sales be largely incremental, as Bill mentioned. We're not seeing the cannibalization. What we've tested is as we put more Mega Hubs into the market and jam more parts in the market, those satellite stores are benefiting tremendously because they're leveraging the inventory and the availability from those Mega Hubs, and they're seeing an overall lift as well. We haven't talked specifically about what the quantification is, but I can tell you that it's significant, and it is what's given us confidence to take our target from 110- 200. Quite honestly, we'll likely go beyond that as we continue to test and learn more in the future. Jamere, as the Mega Hubs kinda mature, do they follow a new store maturity type curve? They do. One of the things that we're experiencing right now, and particularly with the growth in our commercial business, is that the ramp for the Mega Hubs has been faster than what we've seen in the past. That is because as we have put those additional parts into the marketplace while we are doing all the work that Bill mentioned on our commercial acceleration initiatives, those Mega Hubs are ramping up faster than we ever anticipated. Very helpful. Thank you. Your next question for today is coming from Daniel Imbro with Stephens. Yeah, good morning, guys, and congrats on the quarter. Thank you. Bill, I wanted to ask a higher level question on the Do It For Me side. Obviously, you've been gaining share, but when you're not winning the business from an operational standpoint, is there a consistent area of feedback you hear from customers where you need to improve? Any consistent learnings that you're seeing as to where you can still improve to gain more share when you're not winning that business? Yeah, it's a really great question. I mentioned it in the call, and I've been out in the field a whole lot in the last three months. The tone of the conversations with our commercial customers, be that national accounts at the senior leader level or in our commercial shops, has just changed. The tenor of the conversations have changed. It's a question of how can I give you more business versus the age-old things of it was about availability, it was about the Duralast brand. The Duralast brand conversation has turned from a significant negative to a positive. Now with our availability, it has meaningfully changed. I'm not really hearing that. You know, we're we always can get better on delivery times, and if anybody wants to tell you why they're not giving you business, that's a very easy one. Well, now we have actual data that says, "You're right. We are delivering to you too slow. Your average deliveries are 31 minutes and 37 seconds, and we apologize for that. We're gonna work to get that better." We've got new tools at our disposal. We've got much better inventory assortments. The Duralast brand is amazing. The tenor of those conversations is really radically different than they were just three or four years ago. Got it. That's helpful. Then Jamere, maybe a more financial question. I know you just talked about the maturity curve of the new Mega Hubs and DCs. With three DCs coming online and 11 Mega Hubs, I guess in the near term, what kind of SG&A pressure should we expect? I would assume there's inherent deleverage just from pre-opening costs and then as they ramp. Kind of what kind of headwind should we anticipate that puts on the SG&A line over the coming quarters? I mean, it'll clearly be some pressure on SG&A, but what I'll say is that, you know, we've been very disciplined about managing our SG&A expenses. Quite frankly, when we have to make these kind of investments, number one, they have great paybacks associated with them. Number two, you know, we look for bill payers elsewhere in the P&L to be able to go do that. What we've done over time and what we'll continue to do is we invest in a very disciplined way in growth. We're not afraid to delever SG&A if we need to support that growth, because in the long term, it's the right thing for our business. We have a plan over time to manage SG&A in line with our sales growth. In the short term, you may see us spike it up from time to time to support the investments and growth. You know, we've done that, you know, not only with the capacity investments that you talked about. We've done it with our IT expenses over time, and we'll continue to do that going forward. Got it. Thanks so much. Best of luck, guys. Thank you. Your next question is coming from Elizabeth Suzuki with Bank of America. Great. Thank you for taking my question. Regarding the comment you made about gross margin and you know, just the hyperfocus on you know, mix and how that impacts your overall gross margin, how can we think about tracking improvements in margin in each of your categories? Like, where will we see that show up in metrics? Yeah. I think two things you'll see. Number one, we'll continue to have mix pressure associated with our commercial business going forward, and we'll be very transparent about what we see there. All the playbook that we've historically run on managing gross margin, taking pricing actions in categories, driving down costs in certain categories, all of those tactics will still be at play. You'll see us over time, you know, make positive improvements in gross margin. It's just that, you know, we're starting off in an environment where our commercial business is growing significantly faster than DIY, and that's gonna be a margin pressure that we welcome because of the nature of the business and the fact that it's growing our overall gross profit dollars. We'll be very transparent about it as we move forward, and it's a trade-off that we welcome. Yep, that makes sense. I mean, is there a rule of thumb that we should think about as the differential in gross margin between commercial and retail in general? No, it will depend on how fast the commercial business actually grows. You know, if you look at the differential this quarter, it was significant, which actually drove, you know, gross margin deleverage this quarter. What I would say that if you were on a apples-to-apples basis in terms of growth rate, we would have actually seen gross margin, you know, be positive this quarter. You got the mix headwind there. It's a welcome trade-off, and we're delivering. Great. Thank you. Thank you. Your next question for today is coming from Zachary Fadem with Wells Fargo. Hey, good morning. With the elevated used vehicle pricing and lack of new cars available, just curious how you think that's impacted your addressable market and to what extent scrap rates have declined out there with your customers. As we inevitably go back to an environment where new cars come back on or used vehicle prices start to come back down, to what extent do you think that would be a headwind for the industry? Well, I think you've got a dynamic here where clearly the macro environment associated with used cars has a significant impact on what you're seeing in the car park. The dynamic associated with new cars is similar. I mean, if you look at the data on used cars, they're up 23% year-over-year, up 50% pre-pandemic. If you look at what's happening with dealer lots right now, they're probably carrying about a third of the inventory that they were pre-pandemic. It is a significant driver. What you're seeing, though, is that the car park is actually aging. People are hanging on to the vehicles longer. In fact, the data that came out this morning shows that it's now ticked up to 12.2 years, the average age of a vehicle on the road. Those things are all producing a tailwind for us. I think what we are focused on, you know, as a business is one, managing our business associated with the vehicles that are in operations, making sure that we have the assortment to go deal with that. As you know, there are changes in the car park, there are changes in technology, there are changes in consumer behavior. We just manage our business accordingly. We've done that historically over time, and it's been a good outcome for us. With the step up in Mega Hubs density, is it fair to assume that double-digit commercial growth remains the norm for your business through fiscal 2023? Do you view the opportunity ahead more about getting denser with existing customers or expanding your reach to newer customers that maybe you haven't been able to serve at this point? We'll continue to see our commercial business have very strong growth. You know, the initiatives that we've talked about, whether it's the things that we're doing with assortment, the things that we've done with technology, the things that we've done with pricing, all of those things are driving significant growth in our commercial business, and we expect that trend to continue for us. Thanks for the time. Great. Thank you. Before we conclude the call, I wanna take a moment to reiterate. We believe our industry is in a strong position and our business model is solid. We are excited about our growth prospects for the year, but we will take nothing for granted as we understand our customers have alternatives. We have exciting plans that should help us succeed for the future, but I want to stress that this is a marathon and not a sprint. As we continue to focus on the basics and strive to optimize shareholder value for the remainder of FY22, we are confident AutoZone can continue to be successful. Lastly, as we celebrate Memorial Day next Monday, we should remember all of our country's heroes, both past and present. We owe these Americans a tremendous debt of gratitude. Thank you for participating in today's call. Have a great day. Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.