Jamere Jackson
Chief Financial Officer and Executive Vice President - Finance and Store Development, Customer Satis at AutoZone
Thanks, Bill. Good morning, everyone. As Bill mentioned, we had a strong second quarter. Our growth initiatives continue to deliver strong results. And the efforts of our AutoZoners in our stores and distribution centers have enabled us to take advantage of robust market conditions. To start this morning, let me take a few minutes to elaborate on the specifics in our P&L for Q1. For the quarter, total auto part sales, which includes our domestic, Mexico and Brazil stores, were $3.6 billion, up 16.2%.
Let me give a little more color on sales and our growth initiatives. Starting with our commercial business, for the first quarter, our domestic DIFM sales increased 29.4% to $900 million and were up 41% on a two year stack basis. Sales to our DIFM customers represented 25% of our total sales. And our weekly sales per program were $14,400, up 25% as we averaged $75 million in total weekly commercial sales. Once again, our growth was broad-based as national and local accounts both grew over 25% in the quarter.
Our execution of our commercial acceleration initiatives is delivering exceptional results as we focus on building a faster growing business. The disciplined investments we are making are helping us grow share. And we're making tremendous progress in growing our business in this highly fragmented portion of the market. We now have our commercial program in approximately 86% of our domestic stores, and we're focused on building our business with national, regional and local accounts. This quarter, we opened 32 net new programs, finishing with 5,211 total programs. We continue to leverage our DIY infrastructure and increase our share of wallet with existing customers.
As I said on last quarter's call, in fiscal year '22, commercial growth will lead the way, and our first quarter results reflect this dynamics. Our growth strategies continue to work as we continue to grow share. We are confident in our strategies and execution and believe we will continue gaining share. Delivering quality parts, particularly with our Duralast brand, improved assortments, competitive pricing and providing exceptional service has enabled us to drive double-digit sales growth for the past six quarters. Our core initiatives are accelerating our growth and position us well in the marketplace. And notably, our mega hub strategy is driving strong performance and position us for an even brighter future in our commercial and retail businesses.
Let me add a little more color on our progress. As I mentioned last quarter, our mega hub strategy is giving us tremendous momentum, and we're doubling down. We now have 62 mega hub locations and we expect to open approximately 16 more over the remainder of the fiscal year. As a reminder, our mega hubs typically carry roughly 100,000 SKUs and drive tremendous sales lift inside the store box as well as serve as a fulfillment source for other stores.
The expansion of coverage and parts availability continues to deliver meaningful sales lift to both our commercial and DIY businesses, and we are testing greater density of mega hubs to drive even stronger sales results. By leveraging sophisticated predictive analytics and machine learning, we are expanding our market reach driving closer proximity to our customers and improving our product availability and delivery times. These assets continue to outperform our expectation, and we would expect to open significantly more than 110 locations we have previously targeted.
In commercial, we are building a meaningful competitive advantage and we continue to have confidence in our ability to create a faster growing business. On the retail side of our business, our domestic retail business was up 9% and up 21.4% on a two year stack. The business has been remarkably resilient as we have gained and maintained over three points of market share since the start of the pandemic.
As Bill mentioned, we saw an increase in traffic versus the prior year as our initiatives are continuing to drive tremendous sales and share growth along with a relentless focus on execution by our AutoZoners in our stores and distribution centers. These initiatives include improving the customer shopping experience, expanding assortment, leveraging our hub and mega hub network and maintaining competitive pricing. These dynamics along with favorable macro trends and miles driven, a growing car park and a challenging new and used car sales market for our customers have continue to fuel sales momentum in DIY. And the execution of our AutoZoners who are taking care of our customers gives us a key competitive advantage.
I'm also very pleased with the competitive position of our DIY business and our outlook going forward. Our in-stock positions, while still below where we would like for them to be, are continuing to improve as our supply chain and merchandising teams have made great progress in a challenging supply chain environment. We've been able to navigate supply and logistics constraints and have product available to meet our customers' needs. DIY has been a strong contributor to the growth of our company. And while comps are difficult because of our strong past performance, the fundamentals of our business remained strong.
Now I'll say a few words regarding our international business. We continue to be pleased with the progress we're making in Mexico and Brazil. During the quarter, we opened two new stores in Mexico to finish with 666 stores and one new store in Brazil to finish with 53. On a constant currency basis, we saw accelerated sales growth in both countries. We remain committed to our store opening schedules in both markets and expect both to be significant contributors to sales and earnings growth in the future. With approximately 10% of our store base now outside the U.S. and our commitment to continue expansion in a disciplined way, international growth will be an attractive and meaningful contributor to AutoZone's future growth.
Now let me spend a few minutes on the P&L and gross margins. For the quarter, our gross margin was down 65 basis points, driven primarily by the accelerated growth in our commercial business where the shift in mix coupled with the investments in our initiatives drove margin pressure, but increased our gross profit dollars by 14.9%. I mentioned on last quarter's call that we expected to have our gross margin down in a similar range this quarter as we saw in the fourth quarter of last fiscal year where we were down 82 basis points. However, the team has been focused on driving margin improvements, primarily through pricing actions that offset inflation to drive a better than expected outcome.
As Bill mentioned earlier in the call, we are continuing to see cost inflation in certain product categories along with rising transportation and distribution center costs. We continue to take pricing actions to offset inflation, and consistent with prior inflationary cycles, the industry pricing remains rational. We would expect our margins in the second quarter to be down in a similar range as the first quarter.
All of the actions we are taking have resulted in us growing our DIY and DIFM businesses at a significantly faster rate than the overall market, and we're committed to capturing our fair share while improving our competitive positioning in a disciplined way. We are laser focused on taking care of our existing customers, driving new customers to AutoZone and over time growing absolute gross profit dollars at a faster than historic rate.
Moving to operating expenses. Our expenses were up 10.4% versus last year's Q1 as SG&A as a percentage of sales leverage of 171 basis points. The leverage was driven primarily by our strong sales results. While our SG&A dollar growth rate has been higher than historical averages, we've been focused on maintaining high levels of customer service during a period of accelerated growth and taking care of our AutoZoners during these extraordinary high sales growth times. We're also investing in IT to underpin our growth initiatives. And these investments will pay dividends and user experience, speed and productivity. We will continue to be disciplined on SG&A growth as we move forward and manage expenses in line with sales growth over time.
Moving to the rest of the P&L. EBIT for the quarter was $754 million, up 22.6% versus the prior year's quarter, driven by strong top-line growth. Interest expense for the quarter was $43.3 million, down 6.3% from Q1 a year ago as our debt outstanding at the end of the quarter was just under $5.3 billion versus just over $5.5 billion last year. We're planning interest in the $45 million range for the second quarter of fiscal 2022 versus $46 million in last year's second quarter. For the quarter, our tax rate was 21.9% versus 22.2% in last year's first quarter. This quarter's rate benefited 159 basis points from stock options exercised, while last year it benefited 134 basis points. For the second quarter of fiscal 2022, we suggest investors model us at approximately 23.6% before any assumption on credits due to stock option exercises.
Moving to net income and EPS. Net income for the quarter was $555 million, up 25.5% versus last year's first quarter. Our diluted share count of 21.6 million was lower by 9.1% from last year's first quarter. The combination of higher earnings and lower share count drove earnings per share for the quarter to $25.69, up 38.1% over the prior year's first quarter.
Now let me talk about our cash flow. For the first quarter, we generated approximately $800 million of operating cash flow. Our operating cash flow results continue to benefit from the strong sales and earnings previously discussed. You should expect us to be an incredibly strong cash flow generator going forward. And we remain committed to returning meaningful amounts of cash to our shareholders.
Regarding our balance sheet, we now have nearly $1 billion in cash on the balance sheet and our liquidity position remains strong. We're also managing our inventory well, as our inventory per store was up 10% versus Q1 last year. Total inventory increased 3% over the same period last year, driven by new stores. Net inventory, defined as merchandise inventories less accounts payable on a per store basis, was a negative $207,000 versus negative $99,000 last year and negative $203,000 last quarter. As a result, accounts payable as a percent of gross inventory finished the quarter at 129.4% versus last year's Q1 of 114.1%.
Lastly, I'll spend a moment on capital allocation and our share repurchase program. We repurchased $900 million of AutoZone's stock in the quarter. As of the end of the fiscal quarter, we had approximately 20.7 million shares outstanding. At quarter end, we had just over $1 billion remaining under our share buyback authorization and just under $700 million of excess cash. The powerful free cash we've generated this quarter allowed us to buy back approximately 2.5% of the shares outstanding at the beginning of the quarter.
We bought back over 90% of the shares outstanding of our stock since our buy back inception in 1998, while investing in our existing assets and growing our business. We remain committed to this disciplined capital allocation approach. We expect to maintain our long-term leverage target in the 2.5 times area and generate powerful free cash flows that will enable us to invest in the business and return meaningful amounts of cash to shareholders.
To wrap up, we had another very strong quarter, highlighted by strong comp sales, which drove a 25.5% increase in net income and a 38.1% increase in EPS. We are driving long-term shareholder value by investing in our growth initiatives, driving robust earnings in cash and returning excess cash to our shareholders. Our strategy is working. And I have tremendous confidence in our ability to drive significant and ongoing value for our shareholders.
Now I will turn it back to Bill.
