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

Good morning, everyone, and thank you for joining us today for AutoZone's 2025 Annual Meeting of Stockholders. I am Phil Daniele, President and CEO of Customer Satisfaction, and I will be presiding at this meeting. Of course, it would not be an official AutoZone meeting if we didn't start our meeting with a cheer and a pledge. Damon Payne, will you please lead us in the cheer and the pledge. [Presentation]

Thank you, Damon. Does anyone have an Extra Miler story to share with us?

I have one. Steven Thomas, Senior Category Manager Friction and Hardware, Customer Satisfaction, 12-year AutoZoner. This comes to us from Store 2387 out of Kansas City. On Monday, November 10, 2025, Curtis Porter went out of his way to assist a commercial customer for my store, 2374, that was broken down on the highway in Grandview Missouri. He was able to get all the parts to the customer needed and then take them to the customer on the side of the road. He then stayed with the customer to help him and get back on the road safely. The customer even called me the next day, saying how thankful he was to have AutoZone to rely on when in need.

Now I will turn the meeting over to Jenna Bedsole, our Senior Vice President, General Counsel and Secretary.

Thank you, Phil. Ms. Cassandra Shedd from Computershare is serving as our independent inspector of elections. A complete list of the holders of record of the company's common stock on October 20, 2025, which holders are entitled to vote at this meeting is available here for inspection. 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 20, 2025. . Finally, a tabulation of the proxies received from the 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, Jenna. I hereby call this order to meet. As a reminder, it is not necessary for stockholders to vote at this meeting if they have already voted. If you have not voted or would like to change your vote, please raise your hand and a ballot will be provided to you. Before we proceed to the first order of business, I'd like to recognize our senior management team, the AutoZone Executive Committee who are with us today. Thank you for your leadership in delivering another great year for our customers, AutoZoners, communities and our stockholders. Also with us today are my fellow director nominees, whom I will introduce shortly and Mike Walsh from Ernst & Young LLP, our independent auditor. With that, let's proceed to the items of business. Our first order of business is the election of directors to serve until the next Annual Meeting of Stockholders in 2026. The following directors have been nominated for reelection to the Board. The following are at this meeting and present with us today. Myself, Phil Daniel, Mike George, Linda Goodspeed, Butch Graves, Brian Hannasch; Gale King, Claire McDonough, George Mrkonic, Bill Rhodes, Jill Soltau and serving with us virtually today is Constantino Spas Montesinos. The second order of business is the ratification of the appointment of Ernst & Young LLP as the company's independent registered public accounting firm for fiscal year 2026. 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 and for the advisory vote on executive compensation. Since there are no other matters to properly come before this meeting, we will now proceed with the vote. For those stockholders voting at the meeting, please complete your vote now, and we will collect your ballots. [Voting]

I now declare the polls for the 2025 Annual Meeting of Stockholders are closed. Jenna has the inspector of elections presented the results.

Yes. The inspector of elections has presented her preliminary report. They are present at this meeting in person or by proxy 14,846,704 shares of the company's common stock, representing 89% of the approximate 16.6 million shares outstanding as of October 2025. Based upon this report, all 11 directors have been reelected. The appointment of Ernst & Young LLP for fiscal year '26 has been ratified and the nonbinding advisory vote on executive compensation has been approved. The final vote results will be filed on a current report on Form 8-K.

Since there is no further business, the official business of this meeting is hereby adjourned.

At this time, we will open the floor for any questions. As there are none, I'm seeing no questions, I'd like to thank...

[indiscernible] I want to know what's the LIFO effect due to the tariffs. And are there any changes in the supply chain, the way we are sourcing the parts?

Yes. Well, the LIFO effect is caused predominantly by incoming cost that's higher than our current inventory. Those charges for the LIFO effect for Q1 was just under $100 million. For Q2, we're thinking it will be somewhere around $60 million. And that will continue as we see higher tariffs coming into our cost of goods. I assume that's your question.

[indiscernible]

Yes, we've been working on changing our supply chain strategies going back since some of the first tariffs came in, in 2016 and '17 and our strategy has been to diversify our sourcing in a number of countries that we source from as well as in virtually every category. So we have multiple suppliers for every category so that we reduce the risk and ultimately can control the cost as much as possible on those categories. Ultimately, we'd like to source from countries that have the quality that we need and require to take care of our customers as well as mitigating the tariff impact and making sure that we have a supply chain that's sustainable, so we have product for our customers.

One more question. Like what's the strategy as far as the international expansion in Mexico, especially?

So with -- as we've talked about plenty of times, our strategy, we like our Mexico and our Brazil strategy. Both of them are great businesses for us. As we've said, last year, we opened 89 stores in Mexico. We opened, trying to remember the number, 7 or 8 in Brazil. We'll continue that type of strategy. Ultimately, longer term, domestically, we'd like to open around 300 stores by 2028, and then we'll open another 200 stores internationally to get us to a total number of around 500 stores globally by 2028. Those numbers will continue to ratchet up as we get to 2028. So there'll be incrementally more this year in '26 than they were in '25, more in '27, and then we'll get to a steady run rate of somewhere around 500 stores globally. Thank you. Okay. Any other questions? Great. I'd like to thank our shareholders for your continued confidence in our mission, and I'd like to thank all AutoZoners across the globe for their commitment to living the pledge. Now let's deliver a great 2026 by focusing on continuing to providing wow customer service. Damon, could you come back up and close us out? And thank you.