AutoZone, Inc. (NYSE:AZO) Q2 2023 Earnings Call Transcript

What are the next levers that we are going to pull to continue to grow in the commercial business? Now just a reminder, we have got mid-teens market share in the retail business and we have about 25% or about 4% total market share in the commercial business. So we have 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. But I was in a market last week, arguably our most mature market, I am not going to tell you where that is. And it has significant hub coverage and it has significant mega-hub coverage and in that market we continue to grow at very rapid rates.

And so I am particularly optimistic, as we continue to deploy the strategy of mega-hubs, so we still have — we have roughly a little over 80 mega-hubs today. We are going to 200, and hopefully, in short order and then we are going to get to 300 hub stores. So that will be 500 stores in the United States with materially different product assortments than we have had historically. To me, that is the biggest part of our strategy.

Brian Nagel: Yeah. That’s very, very helpful. I appreciate it. And then as a quick follow-up, a different topic, you have mentioned in the prepared comments that you think the winter, I guess, it was harsh enough to drive that typical spring type business, you made that comment. The question I have is, 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 as kind of spread your comps between those markets which have been weather impacted versus those that have been less impacted?

Bill Rhodes: Yeah. I mean, we always see that. But what my point was, we have been through years where we just didn’t have a winter and 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. It’s snow and ice and cold or all put stress on automobiles and we generally see that over the next six months to eight months once the winter subsides. So 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, because we see a massive surge during this time of the year when our customers have more discretionary dollars.

Brian Nagel: Got it. Very helpful. Thank you.

Bill Rhodes: Yeah. Thank you.

Jamere Jackson: Thanks.

Operator: Your next question for today is coming from Simeon Gutman at Morgan Stanley.

Jackie Sussman: Hi. This is Jackie Sussman on for Simeon. Congrats on a good quarter. I guess, first, just on the used car cycle that kind of seems to be this ongoing tailwind for the industry. Is there any way to assess where we are in that cycle and I guess just 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?