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

Hello, and welcome to the Annual Meeting of Stockholders of AutoZone, Inc. Please note that today's meeting is being recorded. [Operator Instructions] It is now my pleasure to turn today's meeting over to Bill Rhodes, Chairman, President and CEO of AutoZone. Mr. Rhodes, the floor is yours.

Good morning, and thank you for joining us today for AutoZone's 2021 Annual Stockholders' Meeting. Of course, it would not be an official AutoZone meeting if we didn't start our meeting with the cheer and pledge. In honor of his amazing 19 years of service and his upcoming retirement, I would like to ask Mark Finestone to start us with the cheer and pledge. Mark?

A-U-T-O-Z-O-N-E. Who's the best?

AutoZone.

Who's #1?

The customer. AutoZoners always put customers first. We know our parts and products. Our stores look great. We've got the best merchandise at the right price.

Thanks, Mark. Does anyone have an Extra Miler story to share with us today?

I do, Bill. This one comes to us from Port Charlotte, Florida. I am a registered nurse, just off work with a failing battery. I have a full day tomorrow and the car barely turned over tonight. I'm pretty sure I was one of the last customers of the Port Charlotte AutoZone tonight, but they didn't bat an eye. I was expecting them to say, come back tomorrow. But one of the AutoZoners got the manager, Joe, and he tested the battery, gave me options, put in a new battery and even threw in a couple of auto tips. Thank you AutoZone for choosing such friendly and knowledgeable employees. I'm a customer for life.

Thank you, Priya, for that great story. In light of health and safety concerns of continuing COVID-19 pandemic, our meeting today is being conducted as a virtual-only meeting. You may submit questions or comments by clicking on the Q&A icon at the top of your screen. Now I'll turn the meeting over to Kristen Wright, our Senior Vice President, General Counsel and Secretary of Customer Satisfaction.

Thank you, Bill. Ms. Cassandra Shedd from Computershare is serving as our independent inspector of election. A complete list of the holders of record of the company's common stock on October 18, 2021, which holders are entitled to vote at this meeting is available for inspection by clicking on the document stand. Also, I have received an affidavit of mailing from Computershare stating that notice of the meeting was duly given to stockholders of record as of the close of business on October 18, 2021. Finally, a tabulation of the proxies received from stockholders indicates that more than a majority of the outstanding shares entitled to vote are represented at this meeting and a quorum is present.

Thanks, Kristen. I hereby call this meeting to order. As a reminder, it's not necessary for stockholders to vote at this meeting if they've already voted. If you've not voted or would like to change your vote, please click on the Vote link on the annual meeting site. Before we proceed to the first order of business, I'd like to recognize our senior management team, the AutoZone Executive Committee. Thank you all for your steadfast leadership during this time of unprecedented challenges. With us today are my fellow directors, who I will be introducing shortly; Jeff Smith from Ernst & Young, our independent auditors; and Elizabeth Levy, a representative of As You Sow, to address the stockholder proposal. There are 4 matters to be brought before the meeting today. Only these 4 matters or items will be voted on. The first 3 items are the company proposals and the fourth is a stockholder proposal. Our first order of business is the election of directors to serve until the next Annual Meeting of Stockholders in 2022. The following directors have been nominated for reelection to the Board, all of whom are current directors and are present virtually and present physically with us at this meeting: Doug Brooks, Linda Goodspeed, Butch Graves, Enderson Guimaraes, Bryan Jordan, Gale King, George Mrkonic, Jill Soltau; and myself, Bill Rhodes. We also thank Mike Calbert, who is not standing for reelection to the Board, for his service to AutoZone. The second order of business is the ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm of the company for the 2022 fiscal year. The third order of business is a nonbinding advisory vote to approve the compensation of our named executive officers. The Board of Directors unanimously recommends that stockholders vote for each of the director nominees, for Ernst & Young's independent registered public accounting firm and for the advisory vote on executive compensation. Now we will move on to the shareholder proposal submitted by As You Sow on behalf of stockholder, Elizabeth Gale Michaels Revocable Trust. Elizabeth Levy will present this proposal and will have an opportunity to speak for 3 minutes. Operator, would you please unmute the line of Ms. Levy? Ms. Levy, welcome.

Just one moment. Ms. Levy, your line is open.

My name is Elizabeth Levy. I want to thank you for the opportunity to present Item #4 requesting that AutoZone produce a climate transition report disclosing enterprise-wide greenhouse gas reduction targets aligned with the Paris Agreement's 1.5 degrees goal. In other words, Net Zero target. A 2021 United Nations report states that even with recent climate pledges, the world is on track for global temperature rise of 2.7 degrees Celsius by the end of the century. Scientists have made it clear that ambitious emission cuts must be taken in this decade to prevent the most severe climate impact. Shareholders are increasingly concerned about material climate risks to their companies and their portfolios. Investors and the financial sector are calling for every company to develop clear, consistent and credible Net Zero by 2050 target and transition plan. BlackRock CEO underscores that climate risk is investment risk and that investors are asking companies to disclose the plan for how their business models will be compatible with the Net Zero economy. The transition to Net Zero is gaining momentum throughout the corporate world. 400 of the world's 2,000 largest publicly-listed companies have now adopted Net Zero emissions targets. As the transition accelerates, companies with a well-articulated, long-term strategy and a clear plan to address the transition to Net Zero will distinguish themselves with their stakeholders. Our company has yet to establish and disclose enterprise-wise greenhouse gas reduction targets aligned with the global 1.5-degree goal or a climate transition plan to achieve this necessary goal. While AutoZone has undertaken actions to reduce greenhouse gas emissions, which we applaud, its actions do not go far enough. For example, our company's current target to reduce heat and electricity-related emissions by 15% by 2025 is insufficient and out of step with industry commitments to Net Zero target. AutoZone can join climate leaders and provide investors with assurance that management is reducing its full climate impact, building on climate-related opportunities and addressing growing climate risk, including a radically changing landscape for vehicles. We look forward to our company joining the rest and reducing emissions at the scope and rate calls for at this critical time. Thank you for the opportunity to present on this important issue.

Thank you for your viewpoint. The Board recommends a vote against this proposal as we explained in the proxy statement. Since there are no other matters to properly come before the meeting, we will now proceed with the vote. Those stockholders voting at the meeting, please complete your vote now. [Voting]

While we pause to allow completion and tabulation of the votes, we'd like to open the floor for questions. Kristen, do we have any questions?

No, we have not received any questions.

I now declare the proposal of the 2021 Annual Stockholders' Meeting are closed. Kristen, has the inspector of elections presented the results?

Yes, the inspector of elections has presented her preliminary report. There are present at this meeting in person or by proxy 18.8 million shares of the company's common stock, representing 89.7% of the approximate 20.968 million shares deemed to be outstanding as of October 18, 2021. Based upon this report, all 9 directors have been elected. The appointment of Ernst & Young for fiscal year 2022 has been ratified. The nonbinding advisory vote to approve the compensation of our named executive officers has been approved, and the stockholder proposal on climate transition plan reporting has passed. We will publicly disclose the final vote results on a current report on Form 8-K as required by applicable rules.

Since there's no further business, the meeting is hereby adjourned. I'd like to thank our stockholders for your continued confidence in our mission. And I'd like to thank our all AutoZoners across the globe for their commitment to providing Wow! Customer Service and living the pledge. Now let's proceed to deliver a great 2022. Mark, close this out. Thank you, all.

Today's conference has concluded. You may disconnect and have a pleasant day.