AZO
#Yes, we've got a few partnerships with a few important vendors, and also with customers as well.
And that's pretty much ongoing.
We will continue to grow the ALLDATA business.
We feel good about ALLDATA business.
We think that it's a leader in the industry.
And we had signed an agreement with AMCO, you may have seen, referring to recently to provide them with service through all their locations.
So it's a great product, well respected in the industry and has good prospects going forward.
Sure.
Yes, and that's a very good question and that's spot on.
So we were 37 basis points of deleverage due to supply chain and we had articulated a 25 to 30.
So it was a little bit higher.
I think part of that is really just as we continue to roll out new programs with activity.
If you look at the quarter in a little bit more finite detail, we probably rolled out about 300 programs onto the program this quarter, although we took off a couple of hundred programs that got us to that net 80.
So there was a lot of activity that occurred during the quarter.
And as we began to ramp this up, our handling costs, our internal cost to deliver more frequently will rise a little bit.
And also keep in mind that this quarter and particularly next quarter as well are slightly lower volume quarters.
So we really won't have the opportunity to leverage quite as much as we might during the summer months, so to speak.
So I think overall we feel pretty good about the estimates that we've given on an annualized basis, although on any given quarter they may fluctuate a little bit.
Yes, it's a great question.
And we do see variability.
And that's the reason why we're going to go forward with a strategy that says roughly two-thirds of our stores are going to see three to five time per week deliveries, and one-third of them are going to continue to see one time a week delivery.
The big variable that drives it, as you would expect, is store volume.
You're talking about replenishment levels.
And the more product that you sell, the more frequently you need to replenish it.
And so we do see significant variability, but it's along the volume scale.
I wouldn't say it would be changing the mix necessarily.
I think that as the commercial business continues to grow we will continue to invest in commercial sales pros, as you call them, in the organization.
I think really the comparison this year versus last is that we increased our service levels relative to where we were last year.
I think last year we probably cut back a little bit more than we wanted to.
I think actually, we probably might have called that out last year, that we thought our service levels weren't at the level that we wanted them to be.
And so this year we didn't want to repeat that mistake.
So we stuck with our model during the quarter and I think we delivered better service levels.
I think as far as resetting some of those stores we talked about, we've got a new store prototype so all the new stores open will be under that prototype.
We've gone back, I can't remember, I think about 126 stores that we've already remodeled on that new store prototype.
And we will continue to do that.
But frankly, I suspect we'll get into the hundreds of stores.
I don't see that being 1000 stores necessarily because we're going to have physical constraints as we go through the process.
But where we can find opportunities to add more hard parts into space-constrained stores, we're going to continue to that.
It's different enough for us to justify the investment.
We can debate what meaningful is.
But those stores are performing better and those hard parts are moving.
If I can add onto that.
Number one, the new prototype is not materially more expensive than the old prototype.
So as we open new stores, there's no meaningful cost differential.
The real benefit comes in the really, really space-constrained stores that we have.
Remember, we still have a lot of 3800 square foot stores or 5000 square foot stores.
When those stores are performing at high volumes and we're able to go in and remodel them to the elements of this new prototype, that's where we can really see a differential.
Sure.
Great questions.
First of all on the peso, our same-store sales are domestic only.
So the peso variances aren't impacting our same-store sales at all.
If you look at last quarter our same-store sales did 4.5%.
They did 3.5% in Q1 of 2016.
You can almost point directly to the last two weeks' performance as to why that's different.
And as we mentioned in the prepared remarks, we went up against the polar vortex last year in those two weeks, and we had phenomenal weeks.
This year we had good weeks but they were up against phenomenal weeks.
And that's basically the differential in our same-store sales for the quarter.
We plan to open ---+ we opened 158 stores last year, I believe it was, 157.
We plan to open about 150 stores this year on a domestic basis.
We're looking to grow Mexico around 40 stores and Brazil, we're kind of taking them one at a time.
It's a great question.
All right.
So a couple of things.
Number one, when we acquired IMC just over a year ago they had 17 branches.
We've now open five new branches.
We stand at 22 open locations.
Those IMC branches are servicing 600 AutoZone stores, but that's not a function of how many branches we have.
That's a function on some short-term system limitations that we have at AutoZone to be able to serve up that catalog in our AutoZone stores.
We're working ---+ we did some short-term solutions that have allowed us to get into those 600 stores so we can test it.
Now we are having to go back and do the more robust work to industrialize those system improvements.
That will be coming later in the year, which will allow us to expand how IMC services the AutoZone stores.
I want to also be careful to not overstate the implications of IMC servicing AutoZone stores.
Yes, we will leverage IMC.
But that's not going to be the big driver of our commercial business.
The reason, the main primary reason we bought IMC is because we think IMC in and of itself is a good business and we will continue to expand that business, as we've shown with the five stores that we've opened to date.
Yes, if you take a look at the industry leader in the import side of the business, they've got well over 100 locations.
But I don't see why we can't do the same over time.
There is some of that.
There is an ability for us to be able to extract some information.
I think that we still have a lot of work to do relative to acquiring more information out of all of that in order to improve some of the synergies across our commercial business as well.
So I would categorize it as it, is helpful on identifying certain trends.
But we still have a long way to go in doing that.
Thank you.
Good morning.
No, we haven't gone into the specific distinctions between inventory delivery frequency and mega hubs.
What we continue to say is that you have both of the programs.
They are going to add between $1000 and $1500.
Now, that also varies because some of the mega hubs are ---+ the stores that are serviced by that mega hub are serviced by them three times a day directly, while other stores are serviced by other hub stores that get deliveries three times a day and then other hub stores get overnight deliveries.
So there's quite a bit of variability in it.
But we continue to be pretty comfortable saying if you get frequency of delivery and mega hubs, it means about $1000 to $1500 per store.
It's just as simple as, number one, we wanted to go test this program until we got five up and running.
We made the decision in the late summer/early September to move forward with this strategy.
Now it's a function of the real estate development pipeline.
And remember, I mean, even for a regular AutoZone store it can take us two years to get a store open.
So it has nothing to do with anything other than our real estate pipeline and how long it's going to take us to do that.
Trust me, we are pushing very hard on that front.
Yes, everybody always wants us to talk about that, and we stay away from that.
Unlike a lot of organizations that will have their conference call four to six weeks after their end of the quarter, it's only been two week and two days.
So I think that it's not a good prudent strategy for us to talk about what's happened in the first couple of weeks.
And we've been consistent about that for a long time.
So I don't want to break that.
Now, I will say this.
Weather normalizes over time.
And I also want to reiterate that a really cold winter is great, but what we really look for is just a few good, hard cold snaps.
And that's when we really see big spikes in our business in certain failure-related categories.
Okay.
Thank you very much.
Thank you.
Before we conclude the call, I'd like to take a moment to reiterate that our business model continues to be solid.
We are excited about our growth prospects for the year.
We will not take anything for granted, as we understand our customers have alternatives.
We have a solid plan to succeed this fiscal year, but I want to stress that this is a marathon and not a sprint.
As we continue to focus on the basics and focus on optimizing long-term shareholder value, we are confident AutoZone will continue to be very successful.
We thank you for participating in today's call.
And we would like to wish everyone a very happy and healthy safe holiday season and a prosperous New Year.
Thank you very much.
