AutoZone, Inc. (NYSE:AZO) Q3 2019 Earnings Conference Call Transcript

May 21, 2019 • 10:00 am ET

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AutoZone, Inc. (NYSE:AZO) Q3 2019 Earnings Conference Call Transcript

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Presentation
Executive
William C. Rhodes

To begin this morning, I want to thank all AutoZoners across the organization for their commitment to our Company's pledge, especially putting our customers first in everything that they do. Their passion for living our culture of surprising and delighting customers is our greatest strength. Overall, we were pleased with our performance for the third quarter. Our commercial sales again accelerated from the previous quarter and we posted the highest sales increase in DIFM since the fourth quarter of 2012.

Our DIY business also remained solid. The quarter began very soft as tax refunds were delayed and as late February saw milder weather with significant precipitation. Once tax refunds began in earnest in early March, our sales rebounded nicely and remained pretty consistent for the remainder of the quarter. Yes, heavy precipitation in certain weeks slowed trends in both DIY and commercial, but that's normal in the spring. Ultimately, we were pleased with our sales performance in both retail and commercial for Q3, ending the quarter with same-store sales growth of 3.9%.

Now, let's focus on the two different customer bases we serve, DIY and DIFM. We previously mentioned that our DIY market share gains were strong in the first half of last fiscal year and that growth materially subsided in the second half. This year, based upon the data available to us, our share gains are accelerating. While our retail business is far more mature than our commercial business, we were pleased with our performance in Q3 and remain optimistic about the fourth quarter and beyond. Our optimism comes from the inventory availability and staffing initiatives that we have in place.

Our constant focus on enhancing the customer service experience is making a difference. As a reminder, last fall, we made meaningful wage adjustments to our most tenured hourly AutoZoners to ensure they were being compensated appropriately and consistent with market trends. We believe these adjustments have and will continue to help us attract and retain high quality talent that is providing WOW customer service. It's imperative to remember the high touch nature of this business and the vital role our highly knowledgeable AutoZoners play to help our customers maintain and enhance their vehicles.

Regarding commercial, our sales growth eclipsed last quarter's double-digit gains, increasing 14.9%, marking another great quarter of growth. We are encouraged by this acceleration and it has been focused -- a focused effort for us for quite some time. We have been steadily building a stronger foundation and our customers are continuing to notice, recognize and reward those improvements. Over the last several years, we have improved our product coverage and we work diligently to enhance the quality of the parts and products we sell many under the Duralast name.

Our buying team has done an excellent job in identifying opportunities where our coverage could be improved, where we can improve on the already high quality parts we have and do it all at a good cost, so we can provide our customers a good