AutoZone, Inc. (AZO) Earnings Call Transcript & Summary

Welcome, everyone. I am Michael Lasser, the hardline, broadline and food retail analyst from UBS. We are very excited to have the team from AutoZone with us today. To my immediate left is Bill Giles, the company's Chief Financial Officer; and to his left is the company's notorious Investor Relations Head, Brian Campbell. I will go into a bunch of questions that we think are pertinent for the market. If you have any others that you'd like us to weave into the conversation, feel free to go to www.ubs.involved.events.com, and we would be more than happy to include those as part of our conversation. Bill, I know you love talking about the weather. I know you do love talking about the weather. We obviously saw an abnormally warm and dry winter, particularly in certain parts of the country. The debate amongst the market is the fallout to the auto part retail sector going to be limited to the winter season or because you might not have gotten the corrosive material on the underbelly of a car, you didn't get the physical contraction of the parts themselves because of the physics and how they respond in the cold weather that there might be an enduring impact over the next couple of months?

Yes, that's the big question. And I know everybody is, and we're focused on that, too. We've got a fair amount of work on that, analysis on that. We have had mild winters in the past, for sure. Each one has its own storyline attached to it. We reference 2017 and 2013. Of course, there are other factors going on at the time, whether it be delayed tax refunds or other factors that have impacted the sales. I think what was interesting for us on this particular one was that, clearly, there was an impact on these cold weather categories, batteries, rotating electric, those specific categories as well as geographic areas of the country that would be more prone to experiencing cold weather that did not. And so when we carve those out, we feel a little bit better about our trends and where we were at. So we begin to feel as though that is isolated around that. At the same time, in some of the other previous ones, we pulled forward some maintenance into our second quarter into that January-February time frame because the weather was mild there or whatever. That didn't seem to happen this year. I don't know exactly why, maybe the outside weather wasn't as conducive, it was dry in the early part, but there was fairly rainy during that January-February time period, maybe that was less conducive for people to do maintenance work. So that quarter is behind us. Is there a lingering impact? There's no doubt that on some of the undercar businesses may not have quite the level of demand that they would have otherwise have had, had we experienced a more difficult winter with the roads broken up and so on and so forth. And maybe later in the year, the batteries won't have as much pressure because they didn't go through a very harsh winter, but we believe, for the most part, that, look, if you step back from a fundamental perspective, the industry remains exceptionally healthy. We obviously came through Q1, and so that speaks to the fact that we're operating in a relatively healthy industry. During the quarter on a retail basis, which is the only way we can measure market share based on data available to us, we gained some market share. So again, don't believe it was a specific issue relative to the weather. And so those things combined -- tax money is flowing again, similar to the way it did last year, and actually, very similar to the way it did last year. So that's year-over-year comparable. So I think that things are positioned well for us as we head into our Q3 during the spring season, this February, March, April time period. Tax money is flowing. The industry remains relatively healthy. The fundamentals are in place. We're going to continue with the initiatives that we had in place. So we remain optimistic as we look forward.

On your call on Tuesday, you provided really helpful information in a couple of ways. One, you noted that there are really 3 categories that got impacted; batteries, starters, alternators and one more. And you also noted that the spread between the good markets and the not-so-good markets, which I think was 580 basis points or the widest you've seen in that gap in a long time. When you look back in periods where there was uncooperative weather and then it lasted for an extended period or there was an extended drag, were those same -- were the conditions the same? For example, did you see more of a broad-based impact on the business rather than just 3 categories like you saw this time around?

It was probably a little bit broader, but it definitely would have come back to those 3 categories, it would have had to because of the cold weather, but it probably was a little bit broader. But as I said before, I think that if you look at '17 and '13, there were some other underlying components, whether they be delayed taxes, et cetera; if you look at '16, probably had relatively comparable weather on an absolute weather-to-weather basis; we didn't have quite as bad an impact as we saw in '17, which would lead you to believe that there were probably some other things going on at the same time.

And what's interesting is it impacted both the DIY and the commercial business. Commercial business had been growing double digits, and it slowed to mid-single digits. Were you able to attribute all of that to the weather for why you see such wide gap between your nonweather-impacted markets and the weather impacted?

For the most part, yes. I think that once we did our analysis, that's what got us somewhat comfortable with. And look, we don't know what the future holds. But that is what got us comfortable with kind of isolating it off to that.

Sure. And I think it was Brian Campbell's idea for you to commit to getting back to double-digit.

It was.

Yes. So when that -- if and when that might not happen, we know who to hold accountable for.

Well, that's the important part.

What did you mean the drivers? Can you help us with the road -- I think that would be critical.

Yes. I think that it's really going to be continuing to execute what we have in front of us. I think the organization, the team and the commercial team has done a terrific job at integrating the operations members with the commercial business, getting store managers, district managers to go out and visit the customers. We're continuing to do that, continuing to build momentum on that. I think our ability to say yes is getting better as we put more inventory in closer to the customer, and we're opening mega hubs or opening hubs. You can see our inventory levels have elevated a little bit. I think those will be good things, both on the DIY side and on the commercial side for us to be able to say yes. We're adding some technology to improve our experience with our customers. So there's a lot of activity going on there. So that will continue to build, and I'm sure we'll make some mistakes along the way. But I think overall, we will continue to provide a better experience for our commercial customers as we move forward. So we feel relatively optimistic and bullish on the commercial side of the business and what we have built and what we're continuing to build as we move forward on it. I don't know, Brian, you would add anything on to that at all?

We are still small enough...

$9,400.

Yes, average for sales.

In our absolute dollars and both our productivity per program, that gives us an encouragement we see what others can do in the industry. We see our growth curve in the business. We feel like we've got several years to go before we have to worry about slowing down. Our goal is to just keep going what we're doing.

Some of your competitors do $18,000 to $20,000 in pro sales per week. When you look at the distribution of your programs, are you -- do you see the opportunity to bring up those lower volume programs, move the entire distribution? And you have some programs that are just really juicy right now and doing those types of volumes that you're...

We would.

We would.

I mean, absolutely, we have 4,900 programs. On average, you see our numbers. So that's -- there's 2 ways to take it. We look at that as an encouragement. We see that as an opportunity to take our averages up. We've improved our averages materially over the last year. I mean, we now are averaging over $10,000 on a yearly basis, and that's exciting for us, So yes, do you see some programs that are successful? Absolutely. And you know where that comes from. It doesn't come from thousands of accounts being supported at a commercial store. It's doing more business climbing, the call list, penetrating the customers' list more and more, and that's the opportunity for us.

AutoZone has been addressing the commercial market for a long time. There has been an increased emphasis over, I'd say, the last 5 years with an acceleration in the deployment of commercial desk to more store programs. In that immediate acceleration, there was stops and starts, for lack of a better way to say it. What's been striking about the last 2 years is, is the consistency with which the business -- that side of the business has been successful. And I know you reeled off a bunch of things. The store managers going out and making visits to customers, having better inventory availability. Could you say, if you had to highlight one thing that's changed, would it be just the focus of the stores, incentives of the stores to really drive this business home? Is that -- I know everything works together, but...

Yes, yes. I was just going to say that. I think, it's a great question, by the way. And I would say it would -- that might be one of the last pieces and that may be one that really helped us out a lot. But I think that there were enormous number of building blocks that had to take place because on the one hand, I would absolutely say that the level of engagement in the store operations organization with the store managers going out, making visits, et cetera, has been impactful, no doubt and measurably impactful. But in order for them to be able to do that and have the confidence, we really needed to make those other investments prior to that. So they needed to be able to have a strong foundation for which they could go out and then be able to leap off of whether that be back office production, inventory availability, all those things that are necessary to -- in order to take that last person, who is the face of the customer to really be able to stand there with the level of confidence and knowing they've got the back of the organization as operating as it should be. And believe me, we have plenty of opportunity to get better. But I think all of those things had to be in place in order for them to get in front of the customer and have those conversations.

And what types of incentives are in place today that might not have been in place a couple of years ago to really drive home the important...

Yes. I think the store managers are much more engaged in both from an engagement perspective as well as a compensation perspective on the commercial side of the business as well. And so I think that we're helping to educate them relative to their ability to increase their own personal income based on the performance and what the key metrics are for them to be able to execute in order for them to drive that business. And those are the things that have kind of helped come together. And again, we've hopefully given them the tools to be successful and now they can go out and execute those tools.

And one of the enabling factors has been the hard work that AutoZone's done around its supply chain in the last couple of years. It's interesting. There was some experimentation with different frequencies of delivery. There was experimentation done with different types of distribution systems. It seems like now the approach is mega hubs, super hubs. Can you give us a sense for where it stands today? What's working the best? And what are you going to continue to push? And where will you go?

Yes, I think we're pretty comfortable with these MegaHub hub concept. And just to remind everyone about what are you talking about when you're talking about hubs and mega hubs, and you've got satellite stores or the retail stores, of which 85% of them have a commercial program inside of them. And they probably carry on average 23,000, 25,000 SKUs. So hub store would carry anywhere from 40,000, most likely 60,000 SKUs overall. And there would be about 170 hub stores that are delivering product to the satellite stores 3x a day, demand driven. So someone's makes an order, and it's one of those tail end SKUS. And then a MegaHub would get closer to that 100,000 SKUS. So 60,000 to 100,000. There's 35 mega hubs today. And on both hubs and mega hubs, we can believe we can grow both of them. And what's really interesting is that today, all of our stores are touched by a hub store either 3x a day or maybe once a day. And our mega hubs are delivering to, obviously, their own satellite stores, but they're delivering to other hubs. And then those hubs are done delivering it out to the satellite stores. So as we add more hubs and mega hubs, we are not increasing the level of coverage that we have because everyone is already getting touched. As we continue to add more hubs and mega hubs, we are reducing the amount of time it takes for those deliveries to get to the end customer, and we're putting more inventory into the marketplace. And that is ultimately the end goal. We've got about 10 distribution centers today, and those distribution centers deliver to mega hubs and hubs all week-long and satellite stores anywhere from 1 to 3x a week, as you mentioned before about the more frequent delivery, we've played with that a lot. We think we're at the right optimization of that today. There's a certain segment of stores that are getting more deliveries. And so as we continue to roll this out and expand this, we believe that we will continue to grow market share now in those individual markets for which we expand the hubs, the mega hubs because again, their local stores were already getting that inventory, but now they're going to get it faster and more efficiently.

So give us -- can you put some frame around that? So if you're hitting the stores 3x a day, that means that within a 6- to 8-hour period, they can get a part that they need. Is there a goal to take that from 6 to 8 hours to 4 hours, because typically these commercial customers require that a part is delivered within a half hour to an hour?

Yes. And I think that's where on the hub stores, and we don't have a specific time to give you, but you're on the right track on that as far as the more hubs that we get out there, the more we can get that product to the commercial customer almost immediately or within 30, 40, 45 minutes or whatever, where today, it may take several hours. So the more hubs that we get out there, the faster we will be able to get that product to our commercial customer. There's no question that we will be cutting down delivery times on that.

And I want you to reiterate your point, which is we're not putting more -- necessarily more SKUs in place, we can just get our SKUs faster to our stores.

Correct. That's exactly right.

Because what's interesting is the perception at one point was as this industry becomes more competitive, eventually price will be the lever that everyone pushes, whereas the most recent developments suggest that it's actually not price, which is a lever that some of the players are pushing, but inventory. You saw one of your competitors is adding $100 million of inventory into the field this year, perhaps in response to some of the growth in inventory that AutoZone has achieved. So where can this go? And what's the -- financially, what's the outcome of having this inventory buildup within the industry?

That's a good question. I mean, it's always, and we -- Brian and I have always talked about how capital-intensive the business is, in general, because we turn at about 1.3, and that's only likely getting more pressure on it as you add more inventory with SKU proliferation, et cetera. So the requirement to have more inventory in place is important, and I think that puts more financial pressure on those that are not as strong as others. And so certainly, we're in a position where we were able to make those investments, both from an inventory perspective as well as a technology perspective, and I think that those will put some pressures on other organizations on a longer-term basis. But as far as where it goes, I do think that you will just continue to see, because at the end of the day, inventory wins. And you're right about that. And we've always kind of had that belief when we did a lot of consumer research that at the end of the day, do you have the product? This is question one. And then the next questions don't matter if question one is now, and then can you get it here in a reasonable amount of time, and then are you reasonably priced? And so those are what we're working on. So when you think about it back in your original question about what's the last leg, that's really done most, we had to get that inventory in place. We had to get a delivery mechanism in place so that we can get the product there, we can be -- we are going to be reasonably priced, and then how do we become a better business partner with our commercial customers.

And this raises an interesting idea, which is that there are 4 or 5 large competitors at the top of the industry. Still a lot of small ones, particularly on the commercial side of the business that have really healthy, longstanding relationships with these commercial customers. Does this inventory investment that the larger players are putting in place, doesn't that widen the gap and make it more difficult for some of these smaller players to operate? And then there's another side of it, which I'll let you, but that's first.

Well, I do agree with that, 100%. I think that's exactly what it is because when we talk about the commercial business and you look at ourselves and our kind of close, in line competitors that look like us, and those are the publicly traded companies that we talk about and spend all of our time on it, and, in fact, you are totally right. The large portion of the industry is happening at the independent WDs, regional players, some are a little bit larger and have presence in several geographic areas, but for the most part they're all very regionally developed. And so from our perspective, yes, that's where -- that will continue to be an opportunity. And that is where, as we gain market share, who knows where we will get it from, but we'll get it from everybody at some point in time, but there's a significant part of the business that's taking place in, what I call, nonhousehold names.

Now with that being said, 80% of the business still comes from the DIY market. The perception from some is that over the long run, the DIY market could be more susceptible to some online-only competitors, not just Amazon, but PartsGeek and RockAuto and all these that are online-only plays. And, a, does the inventory investment help distinguish AutoZone from some of those players? And, b, what are the factors that will distinguish AutoZone from some of those players to make sure that their competitive intrusion doesn't become greater?

I think that the online-only players, it's important to stress, have one advantage, they play a price card. I would tell you that the availability and the speed of delivery the brick-and-mortar retailers have that to their advantage when played appropriately, they use large hub stores for delivery. AutoZone has done well at promoting its BOPUS product, pick up in store and buying online. That is the fastest-growing and the largest category for us when orders are purchased online. So it's probably not fully appreciated with those that like you mentioned a couple of times, there's PartsGeek or RockAuto, those do not have a brick-and-mortar presence.

I think I should've mentioned IR Geek, sorry, it was not PartsGeek.

IR Geek. But those are names that, I would say, they have a little bit -- they can't meet the same customer service level that the brick-and-mortar can. So that's really where we're trying to improve the content on the website, make sure that our pricing has to be right, but we're offering things like next-day delivery, as long as you order up to 10:00 and in some markets even it's late midnight we're offering for delivery. And that's an exciting product, and that's growing fast. But by and large, BOPUS, pick up in store, where customer service is still in demand is what I feel like is something that basically solidifies the need for brick-and-mortar. We're saying, there are so many different products and choices when you go to our website that, that advice is just not an easy repeat transaction. You have so much choice that I think you need that advice, and we're basically drawing that customer to say how to, and our AutoZoners in the stores really help that with -- they make a difference. That customer service is the key part of our culture.

This is a dumb question, I mean, you're not going to like it, but I'll throw it out there anyway.

We may ignore it. Yes, go ahead.

And it won't be the first time. Take second quarter weather-related slower business. Quarter before that, DIY business is actually up and outperformed your competitors. If Amazon, PartsGeek and others like that didn't exist, how fast do you think your DIY business would be growing?

That's a...

Dumb question.

I was going to say it was a good question. Now that -- yes, again, I would say, yes, that's a dumb question. The -- I don't really know the answer to that question. I think that it's -- we don't see -- I'm sure we're getting impacted at some level by the online players, but we don't see a measurable impact from the online players. It's very difficult for us to see that. We know the industries are growing or gaining share on the retail side, we're clearly gaining share on the commercial side. We're growing at twice the rate of the industry, so -- maybe faster, but it's hard for us to pinpoint and say that they're impacting us by X. Because to your point, some of the categories that they're playing and we're not overly penetrated in on some of these accessory-type businesses, custom accessories and so on. And so we certainly have a very strong accessory business. But I think they're playing in certain niches that we probably wouldn't be in.

Now I want to bring up some of the recent events, the coronavirus. You rightfully pointed out that your inventory turns 1.3x a year. So you have, call it, 270 days of inventory on hand, you should be okay for a little while. Now with that being said, presumably, there's a range of velocity of turnover within your assortment. Are there any categories that are at risk, like, are there any categories that are at risk? And are you seeing any bottlenecks of getting product from Asia right now?

Yes, we're seeing some slowness coming from Asia, but the product -- there is product flowing. Obviously, it isn't flowing at the level that it needs to be. And it's our understanding the factories are coming online and are progressing online, and the government is going through a certification process with each of the factories. And they're ramping up, specifically the factories that are supplying us are ramping up. So we think that it will be, as we said on the call or Bill said on the call, it's -- the next few weeks will be critical as we kind of watch them continue to ramp up. To your point, you're right. Our inventory turns relatively slow. We have X amount of weeks of supply in the system. We also have the ability to buy from ourselves, if we are able to rebalance out some of that inventory. So for now, we seem to be okay. And for what we can see in front of us, we don't see a significant disruption. If things change, then we'll have to address that when it happens. But at the moment, it feels as though we have inventory available. There's inventory coming and will be coming based on our understanding. And so we don't see this as being, at the moment, disruption of any great magnitude. I'm sure that there will be a little bit of a flow for the -- our distribution folks as it will be for any company, who is getting very low volume right now and will get ramped up pretty significantly.

And on the demand side, there's a really interesting set of dynamics for AutoZone. On the one hand, you have largely a nondiscretionary category, things break, they need to be fixed, and that's what the service that AutoZone plays into. On the other hand, it's heavily driven by miles driven. And so if people are not going to work or they're quarantined, perhaps that, over shorter run periods, impacts miles driven. And yet, on the other hand, my friend at Fox tells me that it's going to be very nice weather in March for the next several weeks. So on the other hand, if we do see this hibernation, people are at home, and they have a little time on their hands, and they do want to clean up their car, get it ready for spring...

AutoZone is the place to go.

That could be a helper. So how do you weigh all of those factors to have some general sense of the way that if this gets bad, how that's going to impact AutoZone?

Yes. It's a good way to think about it. I mean, frankly, it's difficult for us to know exactly what will happen, I know you're not suggesting that is. What we have to do is we have to be able to be ready to service our customers. And so we've got to ensure that all the things that we can do to be put in place and the things that we can control that we are in control of. We've got to manage our ability to provide great customer service, whether sales are strong or whether sales are weak, and we need to manage our P&L accordingly, and I think we've demonstrated that we have an ability to do that in the last quarter. So our focus is going to be on ensuring that our AutoZoners are ready, our training is in place, our inventory is in place, our marketing is in place and that we're ready for our customers, if we do get a spike; and if, for whatever reason, we don't, we have the ability to be able to react to that. So that's more important to us than anything. But I think you could be right. And who knows, maybe in the summertime, people travel abroad less and travel within the United States more.

Sure. That could be another dynamic where...

It could be another dynamic.

Air travel declines, so that helps vehicle travel. And if you could get as much hand sanitizer as possible to sell in your stores, that would probably...

That would be a big one.

That would be a good guide, too. Now for the last year or so, there's been some moving pieces within the P&L, mostly on the SG&A side as the company has experienced some above average increases in expense growth, are we past that? And now you can manage your operating expense rate growth more consistent with how you've done in the past and how you will grow your sales?

Yes, I think I would leave it as how we will grow our sales. So it may or may not be consistent with the past, but one thing that we've always said for years is that we will -- we're going to play in the environment we're in. And so whatever that environment is, then we will adjust our tactics and our strategy to respond to that. And so we used to provide a growth rate for SG&A last year. And the reason we did it was because we were making an investment, and therefore, it was our belief that we needed to provide a little bit more color so people had a feel for the kind of investments that we're making. We're past that now. We're still making investments in technology and then payroll and some other things ongoing. So going forward, we're not focused on letting people talk about how much SG&A is going to grow as a percent. It's more to the points that you made, is that we will grow our SG&A in line with our overall performance and our overall objectives.

And some of that growth had been driven by a tight labor market, which was necessitating that you pay your workers a bit more. Where do you stand with that? And what are potential offsets that will allow you to feel less of a burden from that pressure?

Yes. I would say that we made some investments in fiscal year '19 in order to respond to areas of the country that we believe that we were not as competitive as we needed to be in order to attract great quality people. And so we made some of those adjustments. At the same time, you have that blanketed impact of the regulatory environment, where you've got minimum wage rising in several states and that continues to exist. So that pressure will continue into the future. And then as far as offsets are concerned, ultimately, we hope that we can drive sales. We'll have great people in the stores, as we do today, that are well trained, providing great, well, trustworthy advice. And that, that will help to continue to build a little bit of momentum and drive sales, to be able to drive a little bit of leverage down on a long-term basis. And so there will be some investments that are made that may not get fully offset. But overall, we believe on a long-term basis, it will continue to drive EBIT, EPS and ROIC.

Can you clarify one factor that came out of the quarter, which was, your sales were down, but you still got supply chain leverage. How do you reconcile that?

Yes, I think there were a few things. The supply chain organization did a good job, obviously, managed through the quarter knowing it was a difficult quarter, et cetera. And we may have had a little bit less than some of the activity coming into the tail end of the quarter. So I think that it was 20 basis points, so it was impactful for us, but not huge. And so I think that they did a really good job. I don't know if we'll be able to sustain that leverage in the future, but I felt that they did a nice job of managing to the environment that we're in.

The other question on gross margin is as you see your commercial business grow faster than the overall business, inevitably that's going to put some pressure on -- from mix. There's a variety of different viewpoints on how the gross margin in the commercial business compares to the gross margin on the DIY business, somewhere in the 500 to 1,000 basis point range, maybe more or less, Brian look at confusion suggests that's wrong, but that's fine. But let's call it that, just -- well, is that close?

We'll go with your number.

We'll go with that. How do you manage that? How are you still able to generate growing gross margin? And I know you can't take that to the bank, but still the investment community cares a lot about that.

No, no question about it. I mean, from our vantage point, look, if gross margin goes down a little bit because commercial is just growing at such a terrific rate, that's great, because we're managing both sides of that, and that we want to be able to continue to grow retail and continue to grow commercial. We recognize with a 4% market share, the opportunity for us to grow commercial is huge. And so we certainly are growing at close to twice the rate of the industry. We believe we can grow close to double digit. So we're excited about that, and we certainly wouldn't want to do anything to prevent that from happening or for the retail side of the business to happen. Within each of those silos, there are opportunities for us to be able to improve their individual gross margins. And so whether we lower acquisition costs through increased direct importing, well the supply chain continues to do a terrific job and are able to find opportunities to leverage, whether we're able to effectively offset tariff increases with adjusting and raising prices in an optimal manner, which I think we've done a really good job of the -- merchandising organization has done a great job of being able to manage the increases that we've received in tariffs over time. And so all of those things together, from our perspective, points to a healthy margin on both sides. And up to this point, we have either allowed gross margin to come down a little bit or be leveraged a little bit all in the context of, obviously, on the retail side of the business, it's getting stronger. And because that's helping to offset some of the pressures that you have on the commercial side of the business and both margins are doing well. And so that's kind of our view. And the other one is, it's worth pointing out, I know you know this because you and I have talked about this before is that, it is a rational industry from a pricing perspective. And so there's not a lot of irrational behavior, and part of that is because the elasticity that you see from adjusting prices is just not there. And so we've proven over time that, again, back to our original conversation, inventory is the most important thing on both DIY and retail -- DIY and DIFM. We've got to be in stock. We've got to have the inventory available. We've got to be priced right, and we've got to be providing great trustworthy advice or great delivery times. And so if we can do both -- all 3 of those things on both sides of the business, then we'll have good, strong sales, gross margin will hang in there and be -- continue to be good. And we'll hopefully be able to manage our way through SG&A.

We're running down on time, but I do want to dig into that a little bit further because AutoZone built this wonderful brand in Duralast that's nicely over 50% of the company's sales. To what extent can you continue to push more Duralast product, more direct sourcing? Where are there opportunities? It's already -- there's -- you already have a lot of products that...

We do. And it's definitely going to be less as we move forward. Over 50% of it is Duralast private label product, even STP oil that we have today, which is a brand that we control on the oil side of the business. So there are opportunities for us to be able to introduce Duralast into other categories and do some -- or do continued line expansions. So I think that less so, but -- and there are examples, but we have done a nice job of introducing the Duralast and managing the Duralast brand, quite frankly, and making sure that we're thoughtful about the categories that we do put it on and the categories that we don't put it on.

And it has become more well regarded by the quality of it, the commercial market seemingly allowing you to push it a little further. Is that right?

I think so. I think that it was always used to be this focal or that the quality of the Duralast product wasn't good, et cetera. And we've done a lot of consumer research over time and from the commercial customers. And the commercial customers today would say, that's not true anymore, that they have a lot of confidence in the Duralast product, they have a lot of confidence in the quality of the product. And so I think Duralast is really in a very well positioned place at the moment, and we will just continue to strengthen that brand every day.

We look forward to watching the progress. Thank you very much. Please join me in thanking AutoZone for its participation.

Thank you, Michael.