Greetings. Welcome to AutoZone's 2023 Q2 earnings release conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. 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 obligations to update such statements. Today's call will also include certain non-GAAP measures. Your reconciliation of non-GAAP to GAAP financial measures can be found in our press release. I will now turn the conference call over to your host, Bill Rhodes, Chairman, President, and Chief Executive Officer. Sir, you may begin. Good morning. Thank you for joining us today for AutoZone's 2023 second quarter conference call. With me today are Jamere Jackson, Executive Vice President and Chief Financial Officer, and Brian Campbell, Vice President, Treasurer, Investor Relations, and Tax. Regarding the first 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'd like to thank and congratulate our AutoZoners across the company for their commitment to delivering exceptional customer service. For the second quarter, our team delivered total sales growth of 9.5% versus 8.6% in the first quarter, in line with our expectations. We were pleased with this performance as we were up against 15.8% total sales growth in last year's second quarter. We could not have achieved these results without phenomenal contributions from across the organization. Once again, our AutoZoners' efforts generated double-digit domestic commercial growth and single-digit domestic retail same-store sales growth. As we move further and further away from the societal impacts experienced as a result of the pandemic, we are very pleased with our team's ability to not only retain the tremendous growth we experienced over the last three years, but continue to grow on top of those phenomenal levels. Our team is relentlessly focused on getting back to normal, or as I call it, quote-unquote, exiting pandemic mode. We must get back to our well-known and highly regarded flawless execution. In all candor, we still aren't there yet. We also have to reignite our innovation engine. We have some very good initiatives in development in both retail and commercial, and we have some significant improvements underway in our supply chain as we modernize and expand it for the next decade of growth and beyond. We are halfway through our fiscal year, and we are pleased with our performance so far. More encouraging, we feel good about the balance of the year and know our AutoZoners are keenly focused on delivering great service and terrific performance. This morning, we will review our second quarter same-store sales, DIY versus DIFM trends, our sales cadence over the 12-week quarter, merchandise categories that drove our performance, and some regional call-outs. We will also share how inflation is affecting our cost and retails and how we think inflation will impact our business for the remainder of our fiscal year. Let's now move into more specifics on our performance. Domestic same-store sales were up 5.3%. Our net income was $477 million, and our EPS was $24.64 a share, increasing 10.5%. Our domestic same-store sales comp was on top of last year's 13.8% and in line with last quarter's 5.6% comp. On a two-year basis, we delivered a 19.1% comp. Get this, on a three-year basis, a 34.3% stacked comp. Our team once again delivered amazing results despite the comparison to the last couple of years being the hardest quarterly compare for the entire fiscal year. Now let me spend a few moments on growth, our growth dynamics in the quarter. Our growth rates for retail and commercial are both strong, with domestic retail sales up nearly 5% and domestic commercial growth north of 13%. We continue to set commercial quarterly records with $955 million in sales. Another impressive quarter as we generated $111 million more in sales than in Q2 last year. On a trailing four-quarter basis, we delivered just under $4.5 billion in annual commercial sales, up an amazing 19% over last year. We also set another Q2 record for average weekly sales per store at $14,500 versus $13,500 last year. Domestic commercial sales represented 30% of our domestic auto parts sales versus 28% this time last year. It was encouraging to see our transaction trends improving from last quarter. Our retail transactions meaningfully improved and were down just 2.2% for the quarter, while our commercial transactions were up mid-single digits and improving. Our average ticket in both retail and commercial experienced solid mid-single-digit growth. Ticket growth decelerated from Q1 as we began to lap the acceleration in inflation we experienced this time last year. We're beginning to see signs of product cost and freight inflation slowing, and we expect to see these begin to return to historical norms over time. We are continuing to experience substantially higher wage inflation than historically in the mid-single digit range, more than double our historical experience. While the staffing environment is substantially improved versus this time last year, we don't envision wage inflation abating soon as there continues to be regulatory and market pressures. While we have to manage through these external forces, our focus continues to be on driving profitable market share growth, particularly in units and transactions. Our growth initiatives are doing just that and include new store unit growth, improved satellite store availability, hub and Mega Hub openings, improvements in coverage, leveraging the strength of the Duralast brand, enhanced technology to make us easier to do business with and more efficient, reducing delivery times, enhancing our sales force effectiveness, and living consistent with our pledge by being priced right for the value proposition we deliver. Our goal remains over time to become the industry leader in both DIY and commercial. Our strategy, execution, and market momentum give us confidence as we move forward. Digging deeper into our domestic DIY business this past quarter, we delivered a positive 2.7% comp on top of last year's 8.4%. Our DIY results were similar to last quarter's results on a one-year and two-year basis and accelerated on a three-year basis. As previously said, our ticket growth was up 5% versus last year, we're pleased with our transaction count trends improving as we reported transactions down just 2%. These results are very strong considering the difficult comparison to last year. From the data we have available, we continued to retain the majority of the dollar share gains we built during the pandemic, we continue to grow unit share, a critical measurement of our success. Our performance gives us continued conviction about the sustainability of our sales growth for the remainder of the year. We've shared forever, our second quarter is always the most volatile sales quarter due to the holidays, their timing shifts, and more importantly, weather, specifically extreme temperatures, which all can have a tremendous impact on our weekly sales. This quarter was no different, with softer sales at the beginning of the quarter when the weather was mild and wet, followed by a large spike around Christmas with the very cold temperatures the country experienced. We exited the quarter with normalized growth rates. We do believe we had enough harsh winter weather that we won't be talking about the lingering effects of a mild wet winter weather or mild winter for the next several months. Our attention has now turned to tax rebate season, which historically drives enormous demand in our category. Regarding our retail merchandise categories, our sales floor outperformed hard parts with approximately a 1.5% difference between them. Our relative outperformance in sales floor categories is attributable to the discretionary categories improvement. Gas prices naturally have come down and consumer has shown surprising resiliency, our discretionary categories performed better. The discretionary categories represented approximately 18% of our DIY sales in the quarter. We were encouraged to see our battery, oil, and wiper categories perform well and successfully lap very strong performance last year. These categories have exceeded our expectations all year. Our friction category for both DIY and commercial performed below our expectations for much of the quarter. It bounced back late, and we are encouraged by our recent trends. We believe both our sales floor and hard parts businesses will continue to do well this spring as we expect miles driven to continue improving while our growth initiatives continue delivering solid results. Let me also address pricing. In Q2, we experienced high single-digit pricing inflation in line with cost of goods. We believe both numbers will decrease in the current quarter as we begin to lap the onset of high inflation last year. To be clear, we do not believe inflation is going away, especially wage inflation, but expect it to slow a bit as the economy slows. I want to highlight that our industry has been disciplined about pricing for decades, and we expect that to continue. Most of the parts and products we sell in this industry have low price elasticity because purchases are driven by failure or routine maintenance. Historically, as costs have increased, the industry has increased pricing commensurately to maintain margin rates, increasing margin dollars. It is also notable that following periods of higher inflation, our industry has historically not meaningfully reduced pricing to reflect lower costs. Over the last three years, we've encouraged investors to keep a keen focus on our two and three-year comparisons. As we return to normal, we believe our year-over-year comparisons will be more and more relevant. While it's difficult to predict sales, we are excited about our growth initiatives, our teams improving execution, and the tremendous share gains we have achieved in both sectors. For our third quarter of 2023, we expect our sales performance to be led by the continued strength in our commercial business as we execute on our differentiating initiatives combined with a resilient DIY business. We will, as always, be transparent about what we are seeing and provide color on our markets and performance as trends emerge. Before handing the call to Jamere, I'd like to give a brief update on our supply chain initiatives. I'll start with our in-stock position. I spent several quarters talking about how we were not back to where we were pre-pandemic. I'm pleased to report we are continuing to improve and are very close to our targets. Our merchandising and supply chain teams have worked diligently and creatively to get our levels back up, and we've made enormous progress. There are still a few categories where we are not where we want to be. We have line of sight to putting this behind us. This has taken a lot of effort by our vendor community, and I'd like to publicly thank them for their tremendous efforts as well. Second, our supply chain initiatives that are in flight to drive improved availability are on track. One we've often highlighted is our expanded hub and Mega Hub rollouts. We know intelligently placing more inventory in local markets closer to the customer will lead to our ability to continue to say yes to our customers more frequently and in turn, drive sales. Additionally, we previously announced the development of two new domestic distribution centers and additional capacity in Mexico. All three efforts are under construction and are expected to be completed by early fiscal 2025. These distribution centers will allow us to not only reduce drive times to stores, but also increase our capacity. With the tremendous sales growth we've experienced since 2020, the additional capacity will enable us to carry more slower turning inventory that is not yet in high demand. I'm also excited that we opened a facility on the West Coast recently to handle direct import product on a timelier and more effective and efficient basis. This new West Coast facility is already paying dividends by allowing products ordered abroad to be distributed to our other DCs to reduce safety stock and drive productivity. Our supply chain strategy is focused on carrying more products closer to the customer, and we believe it has been a significant contributor to our recent sales success, especially in commercial. Simply put, every time we intelligently add inventory to our network, our sales grow. Lastly, we plan on continuing to grow our business in Mexico and Brazil. At almost 800 stores combined across the two markets, these businesses had impressive performance again this quarter. They should continue to be key contributors to sales and profit growth for decades to come. We are leveraging many of the learnings we have in the U.S. to refine our offerings in Mexico and Brazil. In Brazil, in particular, we are targeting to expand our store footprint significantly and aggressively over the next five years. We are very excited about our growth prospects internationally. We are dedicated to growing our business in a disciplined and profitable manner well into the future. We know with our AutoZoners leading the charge, we will continue to be very successful. Now I'll turn the call over to Jamere Jackson. Jamere? Thanks, Bill, and good morning, everyone. As Bill mentioned, we had a strong second quarter stacked on top of exceptionally strong comps from last year. This quarter, we delivered 5.3% domestic comp growth, a 6.9% increase in EBIT, and a 10.5% increase in EPS. To start this morning, let me take a few moments to elaborate on the specifics in our P&L for Q2. For the quarter, total sales were just under $3.7 billion, up 9.5%, reflecting continued strength in our industry and solid execution of our growth initiatives. Let me give a little more color on those growth initiatives. Starting with our commercial business for the second quarter, our domestic DIFM sales increased just over 13% to $955 million, and were up just over 45% on a two-year stack basis. Sales to our domestic DIFM customers represented 30% of our domestic auto part sales. Our weekly sales per program were $14,500, up 7.4%, and our growth was broad-based as both national and local accounts performed well for the quarter. Our results for the quarter set another record for the highest second quarter weekly sales volume in the history of the chain. I wanna reiterate that our execution on our commercial acceleration initiatives continues to deliver exceptionally strong 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 88% of our domestic stores, which leverages our DIY infrastructure. We're building our business with national, regional, and local accounts. This quarter, we opened 41 net new programs, finishing with 5,500 total programs. As expected, commercial growth is leading the way in FY 2023. We continue to deliver on our goal of becoming a faster-growing business. Our strategy and execution continue to drive share gains and position us well in the marketplace. We've delivered double-digit sales growth for the past 10 quarters. In addition, we are increasing the penetration of our market-leading ALLDATA shop management diagnostic and repair software suite to new and existing commercial customers, which gives us yet another key competitive advantage. As I've noted on past calls, our Mega Hub strategy is driving strong performance and positioning us for an even brighter future in our commercial and retail businesses. Once again, I'll add some color on our progress. As we've discussed over the last several quarters, our Mega Hub strategy has given us tremendous momentum. We now have 81 Mega Hub locations with one new one open in Q2. While I mentioned a moment ago, the commercial weekly sales per program average was $14,500, the 81 Mega Hubs averaged significantly higher sales than the balance of the commercial footprint and grew significantly faster than our overall commercial business in Q2. As a reminder, our Mega Hubs typically carry 80,000 to 100,000 SKUs and more in certain cases 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. These assets are not only performing well individually, but the fulfillment capability for the surrounding AutoZone stores is giving our customers access to thousands of additional parts and lifting the entire network. This strategy is working. We're targeting 25 new Mega Hubs for FY 2023, and we remain committed to our objective to reach 200 Mega Hubs, supplemented by 300 regular hubs. We continue to leverage sophisticated data analytics to expand our market reach, placing more parts closer to our customers and improving our delivery times. We will build on our strong momentum over the remainder of the fiscal year. Our domestic retail comp was up 2.7% in Q2. This business has been remarkably resilient as growth rates remain solid, and we've managed to continue to deliver positive comp growth despite underlying market headwinds. As Bill mentioned, we saw traffic down 2.2% from last year's levels. However, they improved sequentially from Q1, where traffic was down 4%. We also saw 5% ticket growth as we continue to raise prices in an inflationary environment. Our DIY businesses continue to strengthen competitively behind our growth initiatives. In addition, on a macro basis, the market is still experiencing a growing and aging car park and a still challenging new and used car sales market for our customers. These dynamics, pricing, growth initiatives, and macro car park tailwinds have driven a positive comp despite tough comparisons from last year's stimulus injection and consumer discretionary spending pressure from overall inflation in the economy. We are forecasting a resilient DIY business for the remainder of FY 2023. I'll say a few words regarding our international businesses. We continue to be pleased with the progress we're making in Mexico and Brazil. During the quarter, we opened one new store in Mexico to finish with 707 stores and five new stores in Brazil, ending with 81. On a constant currency basis, we meaningfully accelerate our sales growth in both countries at higher growth rates than we saw in the overall business. 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 11% of our total store base currently outside the U.S. and a commitment to continued expansion in a disciplined way, international growth will be an attractive and meaningful contributor to AutoZone's future growth. We are bullish on international growth, and as Bill mentioned earlier, we're adding distribution center capacity in Mexico to improve our competitive positioning in the market. Now let me spend a few minutes on the rest of the P&L and gross margins. For the quarter, our gross margin was down 69 basis points and included a 27 basis point headwind stemming from a non-cash $10 million LIFO charge. The difference for the quarter, a decline of 42 basis points in gross margin, was driven by supply chain costs and our faster-growing, lower gross margin commercial business. With this quarter's LIFO charge, we have taken our LIFO credit balance to $106 million. As I mentioned last quarter, hyperinflation and freight costs is the primary driver for the charges. Both the first and second quarter actuals are below the outlook we gave at the start of each quarter as freight costs have continued to abate over the past few months, and we expect this trend to continue. As such, we anticipate having minimal, if any, LIFO charges during the third quarter. As spot rates have come down, we have renegotiated some of our long-term contracts, and the lower costs are reflected in our outlook. We expect freight costs to continue to abate. We expect to see these quarterly charges start to reverse during FY 2024 and quite possibly as early as Q4. We plan to take P&L gains only to the extent of the charges we've taken thus far. After we've taken P&L gains that fully reverse the charges we've incurred, we expect to rebuild our unrecorded LIFO reserve balance as we've done historically. Moving to operating expenses. Our expenses were up 8.8% versus last year's Q2 as SG&A levered 24 basis points versus last year. Our operating expense growth has been purposeful as we continue to invest at an accelerated pace in IT and payroll to underpin our growth initiatives. These investments are expected to pay dividends in customer experience, speed, and productivity. We're committed to being disciplined on SG&A growth as we move forward, and we will manage expenses in line with sales growth over time. Moving to the rest of the P&L, EBIT for the quarter was $670 million, up 6.9% versus the prior year's quarter. Excluding the $10 million LIFO charge, EBIT would have been up 8.5% over last year. Interest expense for the quarter was $65.6 million, up 54.5% from Q2 a year ago, as our debt outstanding at the end of the quarter was $7 billion versus $5.8 billion at Q2 end last year. We're planning interest in the $72 million range for the third quarter of FY 2023 versus $42 million in last year's third quarter. Higher debt levels and expected continuing higher borrowing costs are driving this increase. For the quarter, our tax rate was 21.2% and above last year's second quarter rate of 19.3%. This quarter's rate benefited 222 basis points from stock options exercised, while last year's benefit was 401 basis points. For the third quarter of FY 2023, we suggest investors model us at approximately 23.4% before any assumption on credits due to stock option exercises. Moving to net income and EPS. Net income from the quarter was $476.5 million, up 1% versus last year's second quarter. Our diluted share count of 19.3 million was 8.6% lower than last year's second quarter. The combination of higher net income and lower share count drove earnings per share for the quarter to $24.64, up 10.5% versus a year ago. Excluding the LIFO charge, our net income would have increased 2.6% and our EPS growth would have increased 12.3%. Let me talk about our free cash flow for Q2. For the second quarter, we generated $210 million in free cash flow versus $260 million a year ago. Year-to-date, we've generated $900 million versus $930 million a year ago. We expect 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, our liquidity position remains very strong and our leverage ratios remain below our historic norms. Our inventory per store was up 10.7% versus Q2 last year, and total inventory increased 13.9% over the same period, driven primarily by inflation, our growth initiatives, and in-stock recoveries. Net inventory, defined as merchandise inventories less accounts payable on a per store basis, was a negative $227,000 versus negative $198,000 last year and negative $249,000 last quarter. As a result, accounts payable as a percent of gross inventory finished the quarter at 127.7% versus last year's Q2 of 126.8%. Lastly, I'll spend a moment on capital allocation and our share repurchase program. We repurchased $906 million of AutoZone stock in the quarter. At quarter end, we had just under $1.8 billion remaining under our share buyback authorization. Our strong earnings, balance sheet, and powerful free cash generated this year have allowed us to buy back 4% of the company's total shares outstanding since the start of the fiscal year. We've bought back well 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 our disciplined capital allocation approach that enables us to invest in the business while returning meaningful amounts of cash to shareholders. Our leverage ratio finished Q2 at 2.3x EBITDAR. We remain committed to return to the 2.5x area during FY 2023. To wrap up, we continue to drive long-term shareholder value by investing in our growth initiatives, driving robust earnings and cash, and returning excess cash to our shareholders. We're growing our market share, and we're improving our competitive positioning in a disciplined way. Our strategy continues to work. As we look forward to the back half of FY 2023, we're bullish on our growth prospects behind a resilient DIY business and fast-growing commercial and international businesses that are growing considerable share. I continue to have tremendous confidence in our industry, our business, and the opportunity to drive long-term shareholder value. Now I'll turn it back to Bill. Thank you, Jamere. We are proud of the results our team delivered in the second quarter, but we must continue to be focused on superior customer service and flawless execution. Execution. Our culture of always putting the customer first is what defines us. As Jamere said a moment ago, we continue to be bullish on our industry and, in particular, on our own opportunities for the remainder of the year. We will continue to invest in initiatives that drive an appropriate return on capital, and we continue investing where our returns are the highest. For the remainder of fiscal 2023, we are launching some very exciting initiatives. This year, not only will we be opening roughly 200 stores across the U.S., Mexico, and Brazil, but we will be opening many more Mega Hub and Hub stores. We're focused on initiatives to continue driving strong performance in both our retail and commercial businesses. For the remainder of 2023, we are keenly focused on relentless execution. We will not accept shortcuts. We remain focused on achieving our store opening goals, both domestically and internationally. We're working diligently to expand and enhance our supply chain, and we have to achieve this growth all while managing our cost appropriately. Simply said, we have to focus on exceptional execution in order to drive continued share gains. We know that investors will ultimately measure us by what our future cash flows look like in three to five years from now, and we welcome and accept that challenge. I continue to be bullish on our industry and, in particular, on AutoZone, which is led by AutoZoners. Now we'd like to open up the call for questions. Certainly. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We do ask to please limit yourself to no more than two questions. One moment while we poll for questions. Your first question for today is coming from Bret Jordan at Jefferies. Hey, good morning, guys. Good morning, Bret. Good morning, Bret. On the talk of lower transportation supply chain costs, but higher wage inflation. In this environment where some of your inputs are gonna come down and maybe you've got the opportunity to capture, you know, margin as customer prices stay firm, are we less likely to see this over or excess margin because we've got either price investment from peers or wage inflation that might offset some of the cost of good benefit? That's a fantastic question, Bret. I'll start, and Jamere, you're welcome to build on it if you want to. First of all, I think it's important for you all to understand as we saw these enormous spikes in the freight cost, we did not pass all those costs along. I'll use brake rotors, for instance. I mean, the cost of shipping brake rotors from China to the U.S. were astronomical for a period of time. We couldn't pass all that cost on to the industry. Some of this is we will recoup some gross margin percentages that we didn't get in the midst of the freight issue. As we look forward, I think you gotta separate the gross margin piece from the labor piece. We are going to continue to see elevated wage growth. We've seen it now for probably five years, Bret. We'll continue to monitor that. Our pricing is really more focused on what our product costs are and what those freight costs are. We will be mindful of labor costs, but generally, that's not a big driver of what we do with our pricing to the customer. What we need to do is make sure that we're finding ways to be as efficient as possible with the labor that we have. Over time, I think wage rates will go back to more normalized growth rates. We haven't seen the moves and actions by our near-term competitors impact our business, really at all. Most of those moves, quite frankly, were targeted in much the same manner, as our moves were a couple of years ago, which was how do we all improve our competitive hand relative to the warehouse distributor. We haven't seen much of an impact there. As a result of that, we don't see a need to make pricing actions to sort of counter what's being done in the marketplace by some of our near-term competitors. Okay, great. A quick question on ALLDATA. I think you'd mentioned expanding the user base. Is there a way to make that a product selling tool as they use your shop management software? Is there a way to link it to your inventory or make it more transactional? Yeah. First of all, at ALLDATA, we're very focused on providing value via our ALLDATA offerings to our customers at ALLDATA. We also look for ways that we can enhance our commercial relationship at AutoZone with their customers. We've done a lot of that by cross-selling, leveraging our two sales teams to generate leads for each other. So far, we haven't really integrated a lot with the call it up and down the street customer, but we have made some really meaningful progress with some of our national accounts and have some exciting things underway right now that helps, you know, integrate us more and more with them. Over time, that's certainly the vision that we have, is how can we, you know, be on their desktop as both ALLDATA and AutoZone in a seamless way. We gotta make sure that we don't drive the customer to that instead, we have a product offering that the customer wants to adopt. Great. Thank you. Yep, thank you. Your next question for today is coming from Seth Sigman at Barclays. Hey, everybody. Good morning. My first question is just around the improvement in transactions or ticket count. I guess that coincides with less average ticket growth. Bill, to your point, there really shouldn't be a lot of elasticity in this business since it's more need-based, right? Is there something else that you would point to that's driving that acceleration in transactions? Thank you. It's a great question. Frankly, I don't have a great answer for you. As you know, you've been following this industry for a long time. One of the dirty little secrets of the industry is that for decades, and basically for the 28 years that I've been in this business, there has been transaction count declines. They've gone down over time because the technology that has gone into the parts and products that we sell have increased, and therefore, the price of those products have increased. I often use the example of spark plugs. Back when I got in this business, we only sold copper-clad spark plugs, and they were $0.59, and they would last 30,000 miles. Today, we sell iridium spark plugs that cost $11.99, and they'll last 100,000 miles. There's many examples like that. 2.2% decline in retail transaction counts is historically very good. I would caution everybody, as I mentioned in my prepared remarks. Q2 is our most volatile quarter every year, and it is really driven by weather patterns. I don't wanna read too much into an improvement in Q2. We were very excited to see it. Let's see how we do in Q2 and Q3. We're also still going up against the massive surge in growth that we had since 2019 as a result of COVID. What we're focused on is we thought for a period of time that some of the sales growth that we experienced during COVID, we would give back. We're sitting here and have been for the last year saying, "I don't think we're gonna give it back." Now we're saying, "Look, we think we can grow from here and maybe have normalized growth rates and maybe even accelerated slightly growth rates to what we experienced historically because of our growth initiatives." That's the way we're thinking about it. Does that make sense? Yeah, that's helpful. I appreciate that. Maybe just one follow-up is on the cost side. You did discuss some external cost pressures. I think you're probably referring to wages, and some of your competitors have also talked about wage investment. I guess when we look at your SG&A growth up high single digits, is it fair to assume that, you know, that already reflects AutoZone investing in its people, investing in its infrastructure? Does that already reflect some of those cost pressures that you're referring to? Certainly does. I mean, one of the things that we've been really clear about is that, you know, we're gonna grow SG&A in a disciplined way as we create a faster-growing business. The two ways that we've done that, one is investing in labor to maintain high levels of customer service. You saw us do that throughout the pandemic, it paid, you know, great dividends for us during that timeframe. The other thing we've talked about is investing in a disciplined way in IT, which is enabling growth in both our DIY and our commercial business. Every one of our growth initiatives, whether it's on the retail side of the business or the commercial side of the business, includes some element of improving the customer experience, those things have required us to accelerate some of our investments in IT. We like those investments. They are improving the customer experience. They're also improving the experience for our AutoZoners, and quite frankly, we think we'll get benefits in terms of productivity in the future. Okay, great. Thanks very much. Thank you. Your next question is coming from Zach Fadem at Wells Fargo. Hey, good morning. Could you walk us through the sequential performance for commercial in a little bit more detail? As last quarter stepped down a touch on a multi-year basis, while this quarter bounced back nicely. The question is, could you walk us through what you think could be driving the fluctuation in the Do It For Me transactions from Q1 to Q2? Then with the three-year commercial compare looking a bit tougher, is it fair to assume that double-digit growth can sustain in the second half of the year? Yeah, great question. A couple things I'll highlight. As I mentioned, you know, we've had 10 straight quarters of double-digit sales growth, and quite frankly, six of the last eight have been above 20%. We like the competitive dynamics in the marketplace today. We also like the fact that we're under-penetrated. You know, we are a four out of five share in a huge market that's approaching $100 billion. There's a tremendous opportunity for us to create a faster-growing business. You know, if we look at our business on a two-year basis, on a two-year stack basis, we're over 45%. You know, we like where we are from a commercial standpoint, and all the initiatives that we have in place, improving the quality of our Duralast brand, expanding our assortments, with our Mega Hubs, improving our delivery times, leveraging technology, and the competitive pricing dynamics that we saw in the marketplace a couple of years ago that we addressed, give us a lot of confidence about it. You know, we've been comfortably double digits. You've heard us say that, you know, our goal is to continue to grow that share, and growing that share means that, you know, we aspire to have a business that's growing double digits really as far as the eye can see. Got it. That's helpful. Jamere, just to clarify your gross margin commentary, you mentioned no negative LIFO impact in Q3. Does that mean your LIFO balance of $106 remains stable in Q3 and Q4? Or is it fair to expect that line to gradually or maybe more drastically shrink sequentially? Big picture, is it fair to say this 52% gross margin is a fair run rate for the business going forward? First on LIFO, you know, what we, what we said is that, you know, we anticipate minimal, if any, LIFO charges in 3Q. And by the fourth quarter, and certainly into FY 2024, we could potentially see that $106 million balance start to burn down, which means we'd actually take gains through the P&L. It will take several quarters for us to work our way through $106 million based on our current forecast today, but we'll be very transparent about what we're seeing. And what, you know, gives us this confidence, quite frankly, is that, as I mentioned before, we're seeing freight moderate. As such, you know, in the back half of this fiscal year, barring any disruptions like we've seen in the past, we're not expecting it to take any charges and, again, possibly see us flipping back to gains. You know, in terms of our gross margin run rate, you know, we've said that our commercial business is going to grow faster than our DIY business, and that's gonna put You know, let's call it 35- 40 basis points of headwind on our gross margins going forward. That doesn't mean that, you know, you can expect our gross margins to deteriorate into perpetuity. We're still running the same plays with intensity inside the company to drive margin improvement that will mute some of that, if not offset all of it. We feel pretty good about those initiatives. Our merchants and our supply chain teams are doing a tremendous job, as Bill mentioned, before, not only working on in-stocks, but driving margin improvement. As some of the cost pressures ease in the marketplace and some of the cost pressures that our vendors and suppliers have been seeing, it gives us an opportunity to go work on margins in a more fulsome way going forward. Got it. Thanks for the time. Yep. Your next question for today is coming from Scot Ciccarelli at Truist Securities. Hi, guys. I just had a quick question on the your outlook for same-SKU inflation for the rest of the year. I know you've said, you know, you think it's gonna moderate somewhat. Just wondering, do you think that would get to, like, the mid-single digits or low single-digit range? Yeah, that's a great question I wish I could answer. You know, there's just so many pushes and pulls right now in the economy, with our costs that I'm not sure we can answer that. That seems like a reasonable assessment, you know, we're just gonna manage through it just like we have. You know, we've gone through some pretty big cycles over the last 24 months, we're gonna manage our business appropriately. Whether it's 5% or 7%, we're just gonna manage through it. Got you. That makes a lot of sense. Then just to follow up on an earlier question. I know you mentioned, you know, transactions kind of accelerated in the quarter, and it really kind of offset some of the ticket decel. Do you think that could continue to happen, or is there any data point do you think that that might not happen again in the second half? I think that's a reasonable assumption. You know, we wanna grow transactions. I talked about the challenges that are related to that, but our goal is to grow transactions. I also mentioned in the prepared remarks that we're very focused on unit growth. We believe that's the lifeblood of this organization. We're focused on how do we grow units over the long term in both our retail and commercial business. We've been very pleased with the unit market share gains that we've had over the last three years. We're continuing to grow unit share even after the growth we've had over the last three years. Great. Thank you. Thank you. Your next question for today is coming from Brian Nagel at Oppenheimer. Hey, guys. Good morning. Good morning. Morning. My first question is a bit of a follow-up to a prior question, but it's with regard to the commercial growth. You know, we've seen substantial growth there for a while. You know, as you move past the effects of the pandemic, the growth rate has moderated but still stayed very healthy. You know, I guess, the question is: How do you think about that longer term trajectory commercial growth? If you look at some of the markets that are maybe more mature for AutoZone, you know, do those give you insight into either from a market share perspective or more closer to a terminal type growth rate for that business? Well, terrific questions. I wanna be clear about one thing. I don't believe the vast majority of the growth that we've seen in the commercial business over the last three years was a result of the pandemic. There's no question the outside growth in our DIY business was mainly attributable to the pandemic. I don't think that was the case with commercial. I'm sure it had some positive effects, but I think what the strategy that we began to deploy about four years ago have really been the driver of our commercial performance. As we continue to further and further mature on that strategy, we have seen some deceleration in our commercial growth. It's still fantastic, but it's not growing in the twenties. Our goal now is what's next? We're working on that even as we speak. What are the next levers that we're gonna pull to continue to grow in the commercial business? Just a reminder, we, you know, we've got mid-teens market share in the retail business, and we have about 25% or about 4% total market share in the commercial business. We've got a tremendous runway in front of us. When you talk about certain markets and what do we see, we certainly have some markets that are more mature than others. I would say the most encouraging thing to me is to see how broad-based the acceleration has been in our 61 regions that we have across the United States. I was in a market last week, arguably our most mature market. I'm not gonna tell you where that is. It has significant hub coverage, and it has significant Mega Hub coverage. In that market, we continue to grow at very rapid rates. I am particularly optimistic as we continue to deploy the strategy of Mega Hubs. We have roughly a little over 80 Mega Hubs today. We're going to 200 and hopefully in short order. We're gonna get to 300 hub stores. That'll be 500 stores in the United States with materially different product assortments than we've had historically. To me, that is the biggest part of our strategy. No, that's very, very helpful. Appreciate it. Just a quick follow-up, different topic. was mentioned in the prepared comments that you think the winter, I guess, was harsh enough to drive that typical, you know, spring type business. I know that you made that comment. The question I have is, you know, as you look at the weather, and it seemed to be very variable across the United States this year. Are you seeing it, much in the way of a, as kind of a spread in your comps between those markets which have been weather impacted versus those who have been less impacted? Yeah, I mean, we always see that. My point was, we've been through years where we just didn't have a winter. It's not just the spring, frankly, it's as much in the summertime, where we just don't see the parts failures on the failure side of the business that we do historically, and the maintenance side. You know, snow and ice and cold are all put stress on automobiles, and we generally see that over the next six to eight months once the winter subsides. That's what I was really getting at. I do have a bit of caution right now. I talked about tax rebates that are flowing right now. The one thing that I worry about a little bit is we haven't had great weather in the last week or so. We need to get some good weather so DIYers can crawl underneath their cars while these tax rebates are flowing. We see a massive surge during this time of the year when our customers have more discretionary dollars. Very helpful. Thank you. Yep. Thank you. Thanks. Your next question for today is coming from Simeon Gutman at Morgan Stanley. Hi, this is Jackie Sussman on for Simeon. Congrats on a good quarter. I guess first, just on the used car cycle, you know, that kind of seems to be this ongoing tailwind for the industry. Is there any way to assess where we are in that cycle? I guess, does lapping this higher mix of used cars or an older car fleet become a challenge at some point, or do you guys expect a softer landing? You know, clearly, used cars are still in tight supply, and prices are up. You know, we've seen prices moderate a little bit year-over-year, but they're still up 24% or so, over a two-year basis. I think the second dynamic associated with that is the fact that financing costs have gone up fairly significantly as well. You've got interest rates that have made financing a vehicle, whether it's new or used, significantly more expensive. I think the combination of those two dynamics puts tremendous pressure on consumers. What we've seen historically is that when the consumer is under pressure, whether it's a recessionary cycle or it's a cycle where new and used car prices spike, they tend to hang on to their vehicles longer, invest in repairing those vehicles and ride to the other side of tougher market conditions. We certainly think that's going to be the case. While the prices have come down, we still see a very tight market that's out there today, and quite frankly, a market that's significantly more expensive than what consumers experienced prior to the pandemic. Got it. That's really helpful. Thanks. Just quickly, another on the wage inflation. I guess that kind of feels like the most stubborn cost pressure, as you mentioned in your prepared remarks. Is a way to think about it that the cost of business seems structurally higher as a result, or are there efficiencies within the labor and fulfillment model you have that you could focus on as an offset? There's no question that the cost of doing business are structurally higher. I just make sure I amplify this point. Our wage wage rates are up double, more than double what they normally are, that is stick to your ribs inflation. It'll be with us forever. That's gonna continue. It's been going on for five years, not at this, not at this level, but we had acceleration before the pandemic. Once the pandemic hit, it went up significantly more. We've been able to manage it. We're looking for creative ways, like always, to be more and more efficient. We can't drive that level of efficiency in a 43-year-old business without some kind of structural change, which we'll be looking for, but we haven't identified at this point in time. Yeah. I just think from a macro standpoint, you know, if you look at unemployment being at 3.4% or so, and wage rates being in the, you know, with a five handle on them, and we're in a dynamic where the combination, as Bill said in his remarks, the combination of market pressures, and regulatory pressures, which is, you know, an increasing push to raise minimum wage rates, this is an environment that we have to plan for in the future. The good news, again, about our industry is that, you know, as we've seen inflationary impacts, whether it's product costs or it's wages or it's freight, I mean, we have typically seen this be an industry that is very disciplined about passing those costs along to consumers. given the relative inelasticity of the demand for our bread and butter products, you know, we expect that to not cause our business to wobble at all. Your next question for today is coming from David Bellinger at Roth MKM. Hey, good morning. Thanks for taking the questions. First one on the sequential improvement in discretionary categories. Why do you think that's happening now? Was there anything unique within the Q2 period? Are you seeing differences across demographics? Meaning, is the discretionary improvement also occurring with your lower, or call it the lowest income customer base as well? Yeah. I mean, you know, what we've seen in total is that, our business has been remarkably resilient across both our upper income consumers, but also the lower end consumers. Again, that's because the lion's share of our business, our bread-and-butter categories, if you will, are break, fix, failure, maintenance related sort of categories. The knock-on effect of that is that, to the extent that folks are making purchases for those bread-and-butter products, if you will, then the discretionary categories tend to ride along with that as the basket gets built. We've been fortunate in that regard. The other thing that I don't wanna underestimate, and I actually wanna underscore, is the fact that we've been very focused on our growth initiatives. Our growth initiatives are about, you know, driving more customers and more purchase occasions for AutoZone. As a result of that, you know, we're seeing the opportunity for us to continue to win some market share. Some of that sequential improvement that you're seeing in traffic is, you know, actually the impact of some of the things that we've been doing from a growth initiative to drive more customers into our store. Thanks, Jamere. I follow up on the 4% market share you highlighted before in commercial. Do you have a sense of where the more, the more mature markets are tracking in terms of market share? Should we think about that as potentially in the double- digits at this point, and a, and a path to where some of these newer programs can get to in due time? Yeah, we're definitely not in double- digits in any markets that I'm aware of. You know, I would think maybe we're at 6% in that kinda ballpark. Look, if we have 16% or whatever share in retail, my thing is, why can't we have that in commercial? That's the kind of thought process we need to have. I think one of our challenges is sometimes we think about where we are, and it limits what we think about the possibilities. We're trying to eliminate some of those glass ceilings and say, "Why don't we have the same amount of share in both?" Which would mean the commercial business would be meaningfully larger than the retail business. The good news for us is it's not just focused on new customers, but it is increasing our share of wallet with our existing customers. To Bill's point, you know, that's where, you know, we're focused as a, as a company at getting, you know, what we believe our fair share or what our entitlement should be. We're pretty excited about those initiatives going forward. Great. Thank you. Thank you. Your next question for today is coming from Michael Lasser at UBS. Good morning. This is Atul Maheswari from Michael Lasser. Thanks a lot for taking our questions. Our first question is on the commercial business. Compared to last year when you were regularly doing 20%+ to now growing in 13%-15%. What has changed? Is it just fewer new customer additions or less ticket per customer? I think as I said before, I think part of what's changed is some of the massive improvements that we've made from our new strategy on commercial acceleration have matured more, but they're not mature. You know, I would just say it this way: we are very pleased with the commercial growth that we've experienced over the last six months. As I also said, we're looking for those next items that are in the next part of our strategy that are gonna drive accelerated growth. Yeah. We're continuing to win market share. I mean, I would venture to say that the commercial market is not growing, as fast as we're growing, which the knock-on to that is that we're growing market share, and we're pleased with our progress. Got it. That makes sense. Thank you for that. As a quick follow-up, I know you talked about tax refunds. How are you thinking about near-term trends given some of the data shows that tax refunds are lower year-over-year, and then there's potentially some headwinds from SNAP as well? Well, we've never talked about SNAP. I don't think that that's a big part driver for our business. The data we have available to us shows that tax refunds are remarkably similar to the way they were last year and are slightly up. We look at that data, it usually comes out on Mondays, and we see where the big drops happened last week. Last week was a big drop, as it was last year on tax refunds. As far as we're concerned, we see everything on track. We're hoping that we get some great weather that's very conducive to DIY and that those customers come to us. Thank you. Good luck with the rest of the year. Thank you very much. Before we conclude the call, I wanna take a moment to reiterate we believe 2023 will continue to be a solid year for our industry, and our business model is working. We must take nothing for granted as we understand our customers have alternatives to shopping with us. We have exciting plans that should help us succeed for the future. I wanna 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 future, we are confident AutoZone will continue to be successful. Thank you for participating in today's call. Have a great day. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.