AZO - NYSE

Good day, everyone, and welcome to Auto

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-Ks 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 GAAP to non-GAAP financial measures can be found in our press release.

Good morning. And thank you for joining us today for Auto

With me today are Jamere Jackson, Chief Financial Officer, and Brian Campbell, Vice President, Treasurer, Investor Relations, and Tax.

Regarding the first quarter, I hope you had an opportunity to read our press release and learn about the quarter's results. If not, the press release along with slides complementing our comments today are available on our website at www.autozone.com under the 130,000 Auto

Based on our inflation expectations, we continue to

expect our average ticket to grow sequentially through the third fiscal quarter which ends in May. During the fourth quarter, will begin to lap the increases in inflation we saw in this past year's fourth quarter. We also saw DIY traffic down 3.4% as traffic was roughly two x down roughly two x in the middle four-week segment versus the first four weeks. And the last four weeks due to the weather comparisons and positive impacts from hurricanes in those same markets. We are encouraged by our most recent trends and we expect our DIY business to remain resilient in this environment. Next, I will touch on our domestic commercial business. As I mentioned, our commercial sales were up 14.5% for the quarter. The first four weeks grew 15.2%. The second four-week segment grew 13.8% and the third four-week segment grew 14.6%. As with DIY, our commercial sales were impacted during the middle four-week segment due to the weather comparisons to last year. Our commercial results have been boosted by our improved inventory satellite store investments and availability, significant improvements in our hub and mega hub coverage, and continued strength of our DuraLast brand and execution on our initiatives to improve speed of delivery and customer service. These initiatives are delivering share gains and give us confidence as we move further into FY 2026. Year-over-year inflation on a like-for-like same SKU basis for commercial business was up 6% and grew similarly to our average ticket growth of 6.1%. Lastly, we are very pleased with the growth in our commercial transactions with traffic up 5.9% on a same-store basis we continue to grow market share. Our future sales growth will be driven by share gains, and an expectation that like-for-like retail SKU inflation will continue as we move forward. As I said earlier, we opened a total of 39 net domestic stores and 14 stores in our international markets. And we remain committed to more aggressively opening satellite stores, hub and mega hub stores. Hubs and mega hubs comps results continue to grow faster than the balance of the chain, and we are going to continue to aggressively deploy these assets. For FY '26, we expect to continue to open stores in an accelerated pace and Jamere will share more on our new store development progress in a moment. Overall, we are encouraged with our sales performance this quarter. We believe we are positioned well for growth in FY 2026 and we expect both DIY and commercial sales trends to remain solid. We will, as always, be transparent about what we are seeing and provide color on our markets and outlook as trends emerge. Now let me take a moment to discuss our international business. Across Mexico and Brazil, we now have 1,044 international stores. As I mentioned, our same-store sales grew 3.7% on a constant currency basis behind a softer macro environment in Mexico. While we are continuing to gain market share, the economy is experiencing slower growth. As the economy improves, we expect our sales to reaccelerate as we continue to invest in our new stores and distribution centers. Today, we have almost 14% of our total store base outside of The US and we expect this number to grow as we accelerate our international store openings. In summary, we have continued to invest capital in opening new stores, driving traffic and sales growth. While there will always be tailwinds and headwinds in any quarter's results, what has been consistent is our focus on delivering sustainable long-term results. We continue to invest in improving product assortments in stores and online improving efficiency in our supply chain which positions us well for future growth. We are investing both CapEx and operating expense to capitalize on these opportunities. This year, we are investing nearly $1.6 billion in CapEx to drive our strategic growth priorities, and we expect to invest a similar amount next year. The majority of our investments will be in accelerated store growth, including hubs and mega hubs, that place more inventory closer to our customers. Are also investing in two new distribution centers one in Mexico and one in Brazil. All while continuing to invest in technology to improve customer service and our Auto

Our operating results remained strong for the quarter and were highlighted by solid top-line revenue. Total sales were $4.6 billion and up 8.2% versus Q1 of last year. Our domestic same-store sales grew 4.8%, and our international comp was up 3.7% on a constant currency basis. Total company EBIT was down 6.8%, and our EPS was down 4.6%. As Phil stated earlier, excluding our noncash $98 million LIFO charge, EBIT would have grown 4.9% and EPS would have been up 8.9%. Foreign exchange rates positively impacted our results for the quarter. For Mexico, the peso strengthened just over 6% versus the US dollar for the quarter, resulting in a $37 million tailwind to sales. And $11 million tailwind to EBIT and a 44¢ a share benefit to EPS versus the prior year. We continue to be proud of our results as the efforts of our Auto

to EPS.

And lastly, in Q2, we expect LIFO to reduce EBIT by approximately $60 million impact our gross margin rate by approximately a 140 basis points and our EPS by approximately $2.7 a share. And now I'll turn it back to Phil.

Thank you, Jamere. We are excited to start the calendar of 2026. We have a lot to accomplish this fiscal year. We are committed to flawless execution and wisely spending our capital to drive growth and efficiency. We feel we are well positioned to grow sales across our domestic and our international store base with both our retail and our DIY customers. We expect to manage our gross margins effectively and grow our operating expense in line with an accelerated store opening assumption. We continue to put our capital to work where it will have the biggest impact on our sales and long-term profitability. That's our stores, our distribution centers, investing in technology to build a superior customer experience. The top focus areas for 2026 will be growing share in our domestic commercial business, and continuing our momentum in international. We are excited about what we can accomplish in the second quarter. But we understand that we cannot take things for granted. We must remain laser-focused on customer service, flawless execution, and gaining share in every market in which we operate. Fiscal twenty twenty six top operating priorities will continue to be based on improving execution and delivering Wow customer service. We will continue to invest in the following strategic projects. Remaining focused on driving DI, or do it yourself and commercial sales growth which we're which we are doing in a meaningful way. Ramping up our domestic and international store growth, drive our new and mega hub openings, and focus on optimizing our new distribution centers and our supply chain capabilities. We are excited about what we can accomplish in this new year, and our Auto

Certainly. Everyone at this time will be conducting a question and answer If you have any questions or comments, please press 1 on your phone at this time. We do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. We do ask that participants please ask one question and one follow-up, then reenter the queue. Once again, if you have any questions or comments, please press 1 on your phone. Your first question is coming from Brett Jeffries, excuse me, Bret Jordan from Jeffries. Your line is live.

Hey. Good morning, guys.

Good morning. Could you talk about the maturation schedule of the new

stores now that it's become a very you know, I guess, a more significant item, you know, as as far as the ramp and then incremental investment that's required, I think you're talking about a couple of DCs internationally, but as far as domestic store growth, are there more DCs or accelerated hub expansion as you build this new store base? I mean, just sort of trying to think about some SG and A expense at the front, but when do we start getting the return?

Yeah. Thanks for your question, Bret. So, you know, typically, our new stores mature on about a four to five-year time frame, if you will. And, you know, we've seen this historically over time. And it's fairly predictable. Our teams do a great job of getting those assets into the market, and then building our business around them. You know, regarding SG and A, we had about two points of the growth in our SG and A that was related to new stores and the acceleration of our commercial programs. And you'll see this ramp you know, continue as we, peak at the 500 stores globally that we're expecting in in FY '28. You know, what has us excited is, you know, in in addition to the new satellite stores that we're building, we're also you know, building out our Mega Hub footprint, which, as we mentioned, is gonna grow to 300 mega hubs. We've got about a 100 of those in the pipeline today. And we feel very good about our execution there. So as we look at, you know, the way our our operating margins will progress know, between now and then, you'll see this roughly two points of of incremental SG and A associated with this, with this ramp, if you will. And then you'll see that sort of lop off, and and we'll return to the kind of operating margins that we that we have in the past. As it relates to investments, you know, obviously, we've been investing in distribution centers. We had a couple of new distribution centers that we put in over the last couple of years or so. Those have come online, and we're getting the productivity out of them. We're also investing in distribution centers in Mexico and and Brazil, and all of this will underpin the growth. So that two points of SG and A that I that I talked about you know, includes all the investments that we need to make you know, across the business.

Maybe I'll add a little bit.

To that. We, you know, we've we've talked a lot about

this project we've had in place for several years now, which is supply chain 2030. Which is really looking at what did our supply chain need to look like to get us to these faster growing store numbers. Most of those investments in The US have already been in place. And stood up. Those two new DCs we opened up last year, There's also some new efficiency strategies built in those distribution centers as well as direct import facilities. In Mexico, we've talked about, we we opened up a new DC, and expanded one, and we're in the process of expanding our Monterey distribution center. To almost double the size. And that'll be open fully operational probably in March. And then we're bringing our distribution from third party to our own supply chain down in Brazil, which should help us for quite some time. So most of The US expansion is done It'll be about improving efficiencies. Mexico will be will be done you know, effectively in March or April. And and that'll take us for quite some time for the next couple years from the supply chain perspective.

Okay. Great. Thank you.

Quick question on the on the commercial growth on a two, three-year basis. You sort of parse out what might be national account versus domestic? I mean, obviously, not a lot of new national accounts entering the market. Is this skewed more to up and down the street business? Yeah. We're we're growing on the commercial side of the business, and

all of the different segments that we break out. Obviously, to your point, there's not a lot of new national accounts, you know, that you would consider branded national accounts. National accounts. But we're growing share of wallet in all of those segments, national accounts, we call up and down the street customers, which are you know, generally the local mom and pop, shop, as well as what we call verticals and associations. We're we're growing across all of the the four segments. Pretty healthily.

Thank you. Appreciate it. Thank you. Your next

question is coming from Christopher Horvers from JPMorgan. Your line is live. Hi, guys. It's Bharat Rao on for Christopher Horvers. Thanks for taking the question.

So on DIY, given the sequential slowdown, you said weather was a headwind in the middle four weeks. Can you help us parse out how much of that was additionally attributable to any government shutdown noise or like any sort of observable deterioration in the underlying trend or demand? Yeah. I I wouldn't say that the demand as necessarily deteriorated. As we mentioned, kind of that weather segment in the middle of the we broke the quarter down into to twelve-week quarter down into four-week segments. The middle section of that segment year over year, you had some changes in weather in more of the northern markets, and you had the impact from the hurricane that benefited us last year that did not reoccur this year. So it was really a wobble in the middle four-week segment. Not related to the customer, per se, more related to the impacts from last year. Both positive weather event due to hurricanes and a cold snap that happened, last year as opposed to something that really deteriorated in this year. And that middle four-week segment, as we mentioned, was was down significantly compared to the first four-week segment and the third four-week segment. Hope that's a little clearer. Got it. That's helpful. Yep. And then a quick one on SG and A. So previously, you talked about

mid single digit SG and A store growth for the year and came in at the higher end in 1Q despite softer sales. So now that you're accelerating store growth and you said 2Q SG and A will be similarly up to one q, you help us understand, like, how does the curve of that SG and A per store growth look throughout the year? And does that pretty much moderate into next year? Thank you.

Yes. As I mentioned, we had about two points of of growth that was related to new stores and and really the opening of new programs. And in our commercial area of the business domestically. And we expect that continue. And and then if you look at, you know, our store opening ramp, know, we're gonna continue to open new stores. It's gonna be back half weighted. As I mentioned, we'll open 350 to 360 stores globally in total. And a and a good chunk of that will be weighted in the back half. So you'll see some acceleration as we as we move through. And, again, this is all you know, predicated on the growth that we're seeing. We're continuing to invest in a disciplined way. In those growth initiatives. And, you know, we quite frankly, we like the earnings and the cash story that this is gonna generate for us as we come out of this.

Got it. Thank you, guys. Happy holidays.

Happy holidays.

Thank you. Your next question is coming from Simeon Gutman from Morgan Stanley.

Hi. This is Skyler Tennant on behalf of Simeon. Thank you for taking our question. On our first question, we wanted to ask whether the consumer is showing any signs of elasticity to higher prices or whether you're seeing any signs of trade down?

Yeah. We, we kinda figured this question was probably coming. At the end of the day, I I would kinda characterize it as the the lower end consumer has been under pressure for frankly, quite some time. I'd say more than two years. And what I would say is they've been relatively stable. So there hasn't been, you know, a significant wobble in the in that lower end consumer. The higher end consumer, we think, is still doing okay. And we we think that's been relatively stable, over the last couple of quarters. We don't have a lot of categories where you would see trade down. We have some, you know, good, better, best opportunities in batteries and brakes and wiper blades, things of that nature. But the vast majority of our inventory is generally one part that fits a particular vehicle, and there's not a whole lot of you know, upsell opportunities. Based on, you know, good, better, best opportunities. So we don't see a lot of trade down. There's a little bit, but it's really not been that meaningful.

Okay. Thank you. And as a follow-up, how are you thinking about inflation? Has it impacted the entire products catalog? And for items not impacted, are you seeing any signs of demand elasticity there?

Yeah. The the inflation we think the inflation gonna continue to increase, you know, through what would be our third quarter. On a year over year basis, and then some of the impacts from tariff and cost started in Q4 of last year. So we'll start to lap some of that. I suspect that there'll still be some increases, but they'll probably be a little bit less muted in the lighter part of of what would be our Q4 more like the summertime. But, you know, as far as you know, separating out what has tariff impact and not have had not had tariff impact Most of the product that we sell is essentially break fix or it's required maintenance. And there hasn't been a lot of volatility in those product categories. In this you know, purely discretionary, categories. Which, is a relatively small part of our business, more like 16 to 17% of the of our total market. Those categories were impacted over the last two years and had some pretty significant downfalls. But over the last year or so, they've actually been relatively stable and seen some Over the last year. minor improvement in sales.

Great. Thank you. Good luck, and happy holidays.

Thank you. Happy holidays to you too.

Thank you. Your next question is coming from Michael Lasser from UBS. Your line is live.

Hi. This is Vane Brock on for Michael Lasser Thank you very much for taking our question. The first question is on the comps.

We're wondering how likely is it that the same store sales momentum would be sustainable domestically as comparisons become more challenging in the third quarter as well as fourth quarter? And you lap a greater inflation number in 4Q. Yeah. I would I would characterize that we think those numbers are be relatively stable. Again, our comp there was an increase from a if you think about a two-year stack, you know, in the latter part of Q3 and Q4, and it might moderate a little bit. But we're confident behind our that we have in place that we will continue to grow market share. On both the DIY and the commercial business. So they may flatten out a little bit, but at the end of the day, I I think we're gonna gonna continue on this growth trajectory, for both DIY and on the commercial side of the business.

Gotcha. That that's helpful. And as far as my second question goes, I'm gonna try to approach the SG and A topic a little differently. Since the beginning of fiscal year 2024, SG and A growth has outpaced sales growth. In each quarter and by about two to three percentage points on average. So how should we expect that gap between sales and SG and A growth to unfold going forward, especially as you accelerate unit growth And as part of that, would it be fair to think the model is more reliant on recouping some of the gross margin headwinds you faced in the past couple of years to return to operating margins of 19% plus?

Yeah. So, you know, the first thing that I'll say, and, you know, we've reiterated this this point is that, know, we're growing SG and A in a disciplined way as we create a faster growing business. And so what you've seen is that, you know, the investments in in SG and A have been purposeful. We've had accelerated growth in SG and A related to new stores and acceleration of our commercial business. And two things. Number one, you're starting to see the growth shoots associated with that. And we'd like the earnings profile of the new stores, First of all, they're coming out of the chutes. But more importantly, when those stores mature mature in the four to five years. What I'll say about the gap between sales growth and s g and a growth over time is that s g and a will slightly outpace the sales growth as we as we move through. But as we get to the point where these these stores mature, then we'll manage know, SG and A growth in line with sales. But I think the key takeaway is that it's been purposeful. And this is underpinning the the growth that we've talked about. And, and we like the earnings and cash profile on the backside of this.

Got you. Thank you very much. And the model's reliance on gross margin to to get back to 19% margin profile?

Well, I think the reality is if you'd look at the the model today and you're talking about operating profits, if you will, you got two points associated with this accelerated growth that we're talking about. You got about a 140 basis points associated with LIFO. So between those two, you add back, call it three and a half points to you know, a business that that's gonna do 17 and some change on a GAAP base. And you're back at your 20% operating model. If you do that, on top of a much larger store base, again, that's what has excited about the model as we as we move forward.

Super helpful. Thank you very much.

Thank you. Your next question is coming from Scott Ciccarelli from Truist. Your line is live.

Hi there. This is, Sherman on for Scott. Thanks for taking my question. LIFO charges were less than expected this quarter and now you've lowered your expectation of the headwind for the next three quarters by around 25%. Just want to know if this is from just greater tariff reductions or maybe more focused mitigation efforts. And then, like, could that taper, like, the upper end of your same SKU expectations? Like, for inflation throughout the year? Thanks.

Yeah. So two things on on LIFO. Number one, we have not seen as much, cost impact as we had originally anticipated. I think know, we've talked very openly about the fact that we're running you know, a tried and true playbook One is to the extent that there's an opportunity to negotiate lower cost with vendors, and protect the customer, we've been doing that. There's an opportunity for us to diversify sources, to and maintain the sales, we're doing that. And then the third leg of stool, obviously, has been the raised, retails. So we haven't you know, in running that playbook, we haven't seen as much inflation as we would have anticipated. Think the second dynamic is, you saw the announcements where the IEPA tariffs on China moved from 20% down to 10%. And so that does lower our expectation going forward. But, you know, what we're what we're seeing, and you heard Phil talk about this little bit earlier, is we're still expecting to see higher costs associated with tariffs as we move through. And that is going to have some impact on, on ticket average and and and have some impact on comps going forward. It's just that, you know, what we had anticipated originally. We're seeing better performance from a cost standpoint. And lower, I e, tariffs, from the rollback that was announced in November.

Yeah. I would I would continue to add that our, you know, our merchants have been working at this tariff mitigation, country of origin, diversification, and multiple supplier diversification. Frankly, since the original tariffs went back went in back in 02/1617, and they've become pretty good at it. You know, having multiple sources for country of origin, as well as multiple suppliers to supply a particular category has been a strategy we've had for quite some time. We've had a strategy for diversifying our sourcing out of China into other countries. For know, years and they've become very adept at it. To Jamere's point, we're running that same playbook. And our our folks have gotten pretty good at doing that as well as continuing to improve our supply chain efficiencies where help which are helping our gross margins. But you know, we they've just done an exceptional job, which you saw in our gross margin. Overcoming the vast majority of the mix shift to a lower margin business that grew faster on the commercial side of the business. So we think that's a that's a really good story for us.

Was really helpful. Thanks so much, guys.

Thank you.

Thank you. Your next question is coming from Steven Saccone from Citi. Your line is live.

Hi. This is, Ariana on for Steve. Thank you for taking our questions. My first question is, can you give any color on the merch margin performance in the quarter? And like any color on the outlook for this fiscal year?

Yeah. We had a very strong quarter from a merch margin standpoint. And what what you see in our underlying, gross margins is, you know, we were up nine basis points excluding LIFO. We've had about a 34 basis points drag just from the mix shift associated with a faster growing commercial business. So all of the merchant actions that were taken inside the company are are working really hard to offset that drag from the drag that's associated with the commercial rate. So, and that's a playbook that we're continuing to run with intensity. And the teams are doing a a pretty good job there.

Thank you. And then my follow-up kind of pinged back some of the previous question. So, like, where do you kind of expect these skew to peak in three q as it, like, accelerates sequentially.

Yeah. I mean, I I won't be date certain about when it will will peak, but what we can tell you is that, you know, we're gonna continue to to see inflation coming through, you know, our our cost of goods sold. We're seeing it know, both in terms of what we're seeing from vendors, but also from tariffs. And as that rolls through, you know, it is potential to see another point or two over the next couple of quarters, impacted on same SKU and and resulting in that higher average tickets.

Got it. Thank you so much. Happy holidays.

Thank you. Thank you.

Next question is coming from Kate McShane from Goldman Sachs. Your line is live.

Hey. Good morning. This is Mark Jordan on for Kate McShane. My first question, I think, might be a quick one, but it's just what drove the difference between same SKU inflation in the retail business and the commercial business? Is that just the mix of the parts that are being sold?

Yes. It's the it's a mix and combination products and parts that get sold between the two. You know, the the commercial side generally, you have a higher hard part mix. And you have generally newer less let me say this the right way, Newer SKUs in their life cycle which generally are a little more expensive because they have more technology associated with them, essentially.

Okay. Perfect. Thank you very much. And then in terms of product categories, just wondering if there's anything to read through there in terms of the healthier core customer. Which categories were stronger and which were weaker during the quarter? And are you still seeing improvement on the discretionary side? Yeah. I I would say I mean, our our failure categories and our maintenance categories continue to be the best performers. Which I think is indicative of the the health of the automotive industry in in total. Our weaker performers have been over the last couple of years, frankly, the, more purely discretionary items Over the last year or so, those items have kinda flattened out from a a negative comp perspective and continue to and started to slightly grow year over year which we think is a is a pretty good sign. That that that segment of of product has kinda bottomed out will probably continue to grow from this point forward.

And just thinking about the comm

there, is that mostly being same SKU inflation driven on that side or is units up as well? It on the on the purely discretionary product, it's a little bit of both.

Perfect. Thank you very much.

Thank you.

Thank you. Your next question is coming from Michael Montani from Evercore. Your line is live.

Yes. Hi. Good morning. It's Mike Montano on for Greg Melich. Thanks for taking our question. I just wanted to ask a little bit about the underlying, performance in merch margin, if I could. So that was

strong in the quarter, Jamere. And wondering how to think about that into next quarter. And then also, if you look at, you know, private label

you know, supply chain optimization, price optimization, like, can you help us just understand a little bit more the drivers that are offsetting that thirty percent forty bps mix headwind that you referenced?

Yeah. I mean, you know, we continue to run merch margin playbook as I as I've historically said with intensity. Know, our teams are doing a fantastic job looking for alternate sources looking for new brands to introduce, and quite frank frankly, when they're opportunities, to move more to our to our house brands to help us drive, margin opportunities. And I that's, you know, that's a playbook that we run over time in in teams continue to execute very well on that. You know, we're gonna continue to have a fairly significant headwind from a fast growing commercial business. And we're really pushing hard on merch margins to to mute that or offset that completely. And that's that's what we'll do as we move forward.

Thank you.

Thank you. Your next question is coming from Robbie Ohmes from Bank of America. Your line is live.

Good morning. This is Vikilio on for Robbie Ohmes. Thank you for taking our question. Can you talk about your expectation for early calendar 2026? As we'll likely have the combined impact of a hot summer, cold winter, and maybe some tax refund tailwind from the one big beautiful bill. Thank you.

Yeah. Great question. You know, if you think cyclically about how our business performs in Q2 and what that means

for

You know, Q3 and Q4. Q2 is always our most volatile quarter.

Due to primarily these, you know, these big weather events that move across the country. What we would like to see, and it looks like we might get this year, is we like to see cold weather followed by precipitation in the form snow and ice Those have a tendency to put a lot of strain on the undercar parts of the vehicle. So think suspension,

brakes, chassis parts, things of that nature, and cold weather puts a lot of pressure on batteries.

Which are a pretty big part of our business. So what we'd like to see is a nice cold weather winter, and that'll help sales coming into the the summer and their spring and summer times, which is kinda what we saw this last year. If you remember the comment that we made, our northern stores performed a little bit better than our southern stores. Some of that was due to some weather comparisons, but it's also the knock on effect of a better winter last year that carries on through the spring and the summertime. Which is what we saw in those categories. So that's kinda what we we think will happen. It's hard to predict the weather. I don't think Jamere and I are very good at that. But it looks like the beginning, and it's gonna be cold next, couple of weeks, colder than last year. That's generally good for us. And they're saying it looks like in the later part of the winter, we're gonna get more snowfall in the Northwest and the Midwest. Than we did or Northeast and the Midwest than we did last year. So those should've should set up pretty good for us.

Yeah. That's in the summer. Yeah. I mean, the one thing that we always talk about is, you know, remember that because of all the weather cycles, I mean,

q q two you know, our Q2 in the early part of the year can be pretty volatile.

And, you know, we always say that we're a couple of storms away from greatness or a couple of storms away from it being not as good as we anticipated. So, know, there's typically some volatility in the quarter. We're focused on execution, though. I agree with that. To answer your your question,

on taxes I I don't think we really know the answer to that and how that's going to lay. I will say that generally, our Q2 ends right about the time of tax refund. So there can be some volatility on whether that ends up in you know, how much of it ends up in our in the end of our Q2 and the beginning of our Q3. So there can be some volatility around that time frame.

Thank you. Happy holidays. For us to predict.

Thank you. Our last question is coming from Justin Klabur from Baird. Your line is live.

Hey. Thanks. Good morning, everyone.

Wanted to ask the SG and A question just one more time. I apologize.

I understand the impact from store growth and how that builds from here, but just wanted to clarify that growth on a per store basis Are are you telling us we should expect that

5.9% pace

in one q to effectively continue, or

are there certain offsetting levers to bend that growth curve on a per store basis as you start to annualize, you know, some of these investments to improve service and delivery speed?

Yeah. I mean, you're gonna be somewhere in that in that same

Okay. Thanks for that. And then if I could just follow-up on the international outlook. You mentioned softer trends in Mexico, but you know, the two-year stack did improve sequentially. So was that just driven by Brazil? And then, would you expect that two-year stack to remain relatively stable internationally just as we think out over the next few quarters? Thanks so much, guys. Yeah.

I think you'll you'll see it be fairly consistent, we believe, over the next couple of quarters.

And, you know, just speaking at our international business as a whole, we really like the accelerated growth we have there. We think we have opportunities to gain market share in in all of our international markets. Both with a with a growing DIY business as well as a rapidly growing commercial business. And, you know, as those consumers get a little healthier, as the economic continue to hopefully improve, we expect our sales to accelerate in those markets as well. So international markets are fantastic for us. Thank you for the Thank you both. Okay. Before we conclude the call, I'd like to take a moment to reiterate that we believe our industry remains in a strong position and our business model is very solid. We are excited about our growth prospects for the new year but we will take nothing for granted as we understand that our customers have alternatives. We have exciting plans that will help us succeed in the future, but I want to stress that this is a marathon and not a sprint. As we remain focused on delivering flawless execution, and striving to optimize shareholder value for the future, we are confident that Auto