William C. Rhodes, III
Chairman, President and Chief Executive Officer at AutoZone
Good morning and thank you for joining us today for AutoZone's 2023 second quarter conference call. With me today are Jamere Jackson, Executive Vice President and Chief Financial Officer; and Brian Campbell, Vice President, Treasurer, Investor Relations and Tax.
Regarding the first-quarter, I hope you've had an opportunity to read our press release and learn about the quarter's results. If not, the press release along with slides complementing our comments today are available on our website www.autozone.com under the Investor Relations link. Please click on quarterly earnings conference calls to see them.
As we begin, we'd like to thank and congratulate our AutoZoners' across the company for their commitment to delivering exceptional customer service. For the second-quarter, our team delivered total sales growth of 9.5% versus 8.6% in the first-quarter, in-line with our expectations. We were pleased with this performance as we were up against 15.8% total sales growth in last year's second-quarter. We could not have achieved these results without phenomenal contributions from across the organization.
Once again, our AutoZoners' efforts generated double-digit domestic commercial growth and single-digit domestic retail same-store sales growth. As we move further and further away from the societal impacts experienced as a result of the pandemic, we are very pleased with our team's ability to not only retain the tremendous growth we experienced over the last three years, but continue to grow on-top of those phenomenal levels. Our team is relentlessly focused on getting back to normal or as I call it, "Exiting pandemic mode". We must get back to our well-known and highly-regarded flawless execution.
In all candor, we still aren't there yet. We also have to reignite our innovation engine. We have some very good initiatives and development in both retail and commercial and we have some significant improvements underway in our supply-chain as we modernize and expand it for the next decade of growth and beyond. We are halfway through our fiscal year and we are pleased with our performance so far.
More encouraging, we feel good about the balance of the year and know our AutoZoners are keenly focused on delivering great service and terrific performance. This morning, we will review our second quarter same-store sales, DIY versus DIFM trends, our sales cadence over the 12-week quarter, merchandise categories that drove our performance and some regional callouts. We will also share how inflation is affecting our cost and retails and how we think inflation will impact our business for the remainder of our fiscal year.
Let's now move into more specifics on our performance. Domestic same-store sales were up 5.3%, our net income was $477 million and our EPS was $24.64 a share, increasing 10.5%. Our domestic same-store sales comp was on top of last year's 13.8% and in-line with last quarter's 5.6% comp. On a two-year basis, we delivered a 19.1% comp and get this on a three-year basis, a 34.3% stacked comp. Our team once again delivered amazing results despite the comparison to the last couple of years being the hardest quarterly compare for the entire fiscal year.
Now, let me spend a few moments on our growth dynamics in the quarter. Our growth rates for retail and commercial were both strong with domestic retail sales up nearly 5% and domestic commercial growth north of 13%. We continue to set commercial quarterly records with $955 million in sales, another impressive quarter as we generated $111 million more in sales than in Q2 last year.
On a trailing four-quarter basis, we delivered just under $4.5 billion in annual commercial sales, up an amazing 19% over last year. We also set another Q2 record for average weekly sales per store at $14,500 versus $13,500 last year. Domestic commercial sales represented 30% of our domestic auto parts sales versus 28% this time last year. It was encouraging to see our transaction trends improving from last quarter.
Our retail transactions meaningfully improved and were down just 2.2% for the quarter, while our commercial transactions were up mid-single-digits and improving. Our average ticket in both retail and commercial experienced solid mid-single-digit growth. Ticket growth decelerated from Q1 as we began to lap the acceleration in inflation we experienced this time last year. We're beginning to see signs of product cost and freight inflation slowly and we expect to see these begin to return to historical norms overtime.
We are continuing to experience substantially higher wage inflation than historically in the mid-single-digit range, more than double our historical experience. While the staffing environment is substantially improved versus this time last year, we don't envision wage inflation abating soon as there continues to be regulatory and market pressures. While we have to manage through these external forces, our focus continues to be on driving profitable market-share growth, particularly in units and transactions.
Our growth initiatives are doing just that and include new-store unit growth, improved satellite store availability, hub and mega hub openings, improvements in coverage, leveraging the strength of the Duralast brand, enhanced technology to make us easier to do business with and more efficient, reducing delivery times, enhancing our sales force effectiveness and living consistent with our pledge by being priced right for the value proposition we deliver.
Our goal remains overtime to become the industry-leader in both DIY and commercial. Our strategy, execution and market momentum give us confidence as we move forward. Digging deeper into our domestic DIY business this past quarter, we delivered a positive 2.7% comp on-top of last year's 8.4%. Our DIY results were similar to last quarter's results on a one-year and two-year basis and accelerated on a three-year basis.
As previously said, our ticket growth was up 5% versus last year, and we're pleased with our transaction count trends improving, as we reported transactions down just 2%. These results are very strong considering the difficult comparison to last year. From the data we have available, we continued to retain the majority of the dollar share gains we've built during the pandemic and we continue to grow unit share, a critical measurement of our success. Our performance gives us continued conviction about the sustainability of our sales growth for the remainder of the year.
As we've shared forever, our second-quarter is always the most volatile sales quarter due to the holidays, their timing shifts and more importantly weather, specifically extreme temperatures, which all can have a tremendous impact on our weekly sales. This quarter was no different with softer sales at the beginning of the quarter when the weather was mild and wet, followed by a large spike around Christmas with the very cold temperatures the country experienced. We exited the quarter with normalized growth rates. We do believe we had enough harsh winter weather that we won't be talking about the lingering effects of a mild wet winter weather or wet and mild winter for the next several months.
Our attention has now turned to tax rebate season, which historically draws enormous demand in our category. Regarding our retail merchandise categories, our sales floor outperformed hard parts with approximately a 1.5% difference between them. Our relative outperformance in sales floor categories is attributable to the discretionary categories improvement. As gas prices naturally have come down and consumer has shown surprising resiliency, our discretionary categories performed better. The discretionary categories represented approximately 18% of our DIY sales in the quarter. We were encouraged to see our battery, oil and wiper categories perform well and successfully lapped very strong performance last year. These categories have exceeded our expectations all year.
Our friction category for both DIY and Commercial performed below our expectations for much of the quarter. However, it bounced back late and we are encouraged by our recent trends. We believe both our sales floor and hard parts businesses will continue to do well this spring, as we expect miles driven to continue improving while our growth initiatives continue delivering solid results.
Let me also address pricing. In Q2, we experienced high-single-digit pricing inflation in-line with cost of goods. We believe both numbers will decrease in the current quarter as we begin to lap the onset of high inflation last year. To be clear, we do not believe inflation is going away, especially wage inflation, but I expect it to slow a bit as the economy slows.
I want to highlight that our industry has been disciplined about pricing for decades and we expect that to continue. Most of the parts and products we sell in this industry have low-price elasticity because purchases are driven by failure or routine maintenance. Historically as costs have increased, the industry has increased pricing commensurately to maintain margin rates, increasing margin dollars. It is also notable that following periods of higher inflation, our industry has historically not meaningfully reduced pricing to reflect lower costs.
Over the last three years, we've encouraged investors to keep a keen focus on our two and three-year comparisons. As we return to normal, we believe our year-over-year comparisons will be more-and-more relevant. While it's difficult to predict sales, we are excited about our growth initiatives. Our team is improving execution and the tremendous share gains we've achieved in both sectors.
For our third quarter 2023, we expect our sales performance to be led by the continued strength in our commercial business as we execute on our differentiating initiatives combined with a resilient DIY business. We will as always be transparent about what we're seeing and provide color on our markets and performance as trends emerge.
Before handing the call to Jamere, I'd like to give a brief update on our supply-chain initiatives. I'll start with our in-stock position. I've spent several quarters talking about how we were not back to where we were pre-pandemic. I'm pleased to report, we are continuing to improve and are very close to our targets. Our merchandising and supply-chain teams have worked diligently and creatively to get our levels back up and we've made enormous progress. There are still a few categories where we're not where we want to be, but we have line-of-sight to putting this behind us. This has taken a lot of effort by our vendor community and I'd like to publicly thank them for their tremendous efforts as well. We know this will pay future dividends.
Second, our supply-chain initiatives that are in-flight to drive improved availability are on-track. One, we've often highlighted is our expanded hub and mega hub rollouts. We know intelligently placing more inventory in local markets, closer to the customer will lead to our ability to continue to say yes to our customers more frequently and in turn drive sales.
Additionally, we previously announced the development of two new domestic distribution centers and additional capacity in Mexico. All three efforts are under construction and are expected to be completed by early fiscal 2025. These distribution centers will allow us to not only reduce drive times to stores, but also increase our capacity.
With the tremendous sales growth we've experienced since 2020, the additional capacity will enable us to carry more slower turning inventory that is not yet in high-demand. I'm also excited, we opened a facility on the West Coast recently to handle direct import product on a timelier and more effective and efficient basis. This new West Coast facility is already paying dividends by allowing products ordered abroad to be distributed to our other DCs to reduce safety stock and drive productivity.
Our supply chain strategy is focused on carrying more products closer to the customer and we believe it has been a significant contributor to our recent sales success, especially in commercial. Simply put, every time we intelligently add inventory to our network, our sales grow.
Lastly, we plan on continuing to grow our business in Mexico and Brazil at almost 800 stores combined across the two markets. These businesses had impressive performance again this quarter and they should continue to be key contributors to sales and profit growth for decades to come. We are leveraging many of the learnings we have in the U.S. to refine our offerings in Mexico and Brazil.
In Brazil, in particular, we are targeting to expand our store footprint significantly and aggressively over the next five years. We are very excited about our growth prospects internationally. We are dedicated to growing our business in a disciplined and profitable manner well into the future. And we know with our AutoZoners leading the charge, we will continue to be very successful.
Now, I'll turn the call over to Jamere Jackson. Jamere?
