Jamere Jackson
Chief Financial Officer at AutoZone
Thanks Phil. Good morning, everyone. For the quarter total sales were $4.3 billion, up 2.1%. Our domestic same store sales grew three-tenths of a percent, and our international comp was up 13.7% on a constant currency basis. Total company EBIT was down nine-tenths of a percent, and our EPS was down a tenth of a percent.
As Phil discussed earlier, we had a headwind from foreign exchange rates this quarter. For Mexico, FX rates weakened 13% versus the U.S. dollar for the quarter, resulting in a $58 million headwind to sales, a $17 million headwind to EBIT and a $0.68 a share drag on EPS versus the prior year. We continue to deliver solid results despite the challenging economic backdrop that Phil discussed earlier, as the efforts of our AutoZoners in our stores and distribution centers have enabled us to continue to grow our business.
Let me take a few moments to elaborate on the specifics in our P&L for Q1. I'll start with giving a little more color on sales and our growth initiatives starting with our domestic commercial business. For the first quarter, our domestic DIFM sales increased 3.2% to $1.1 billion. For the quarter, our domestic commercial sales represented 30% of our domestic auto parts sales and 26% of our total company sales. Our average weekly sales per program were $15,900 flat to last year as we lapped several new programs that we opened that are not at maturity. Our commercial acceleration initiatives are continuing to deliver good results as we grow share by winning new business and increasing our share of wallet with existing customers.
We continue to have our commercial program in approximately 92% of our domestic stores which leverages our DIY infrastructure, and we're building our business with national, regional and local accounts. This quarter we opened 37 net new programs, finishing with 5,935 total programs. Importantly, we continue to have lots of opportunities to expand sales per program and open new ones. We plan to aggressively pursue growth across our domestic commercial customers which represents a tremendous sales opportunity for our company.
To support our commercial growth, we now have 111 mega-hub locations. While I mentioned a moment ago that our commercial weekly sales per program average was $15,900 per program, the 111 mega-hubs average significantly higher sales, and are growing much faster than the balance of the commercial business in Q1. As a reminder, our mega-hubs typically carry over 100,000 SKUs and drive tremendous sales lift inside the store box as well as serve as an expanded assortment source for other stores.
The expansion of coverage and parts availability continues to deliver a meaningful sales lift to both our commercial and DIY business. These assets are performing well individually, and the fulfillment capability for the surrounding AutoZone stores is giving our customers access to thousands of additional parts and lifting the entire network. We have now set a new objective to have just under 300 mega-hubs at full buildout. Our customers are excited by our commercial offering as we deploy more parts in local markets closer to the customer while improving our service levels.
On the domestic retail side of our business, our DIY comp was down 0.4% for the quarter. Importantly we maintain share in DIY and we're well positioned when the industry reaccelerates. As Phil mentioned, we saw traffic down 1.8% along with a positive 1.3% ticket growth. As we move forward, we would expect to see slightly declining transaction counts offset by low to mid single digit ticket growth, in line with the long-term historical trends for the business driven by changes in technology and the durability of new parts. Our DIY share has remained strong behind our growth initiatives.
Importantly, the market is experiencing a growing and aging car park and a challenging new and used car sales market for our customers which continues to provide a tailwind for our business. These dynamics, ticket growth, growth initiatives and macro car park tailwinds, we believe will continue to drive a resilient DIY business environment for FY '25.
Now I'll say a few words regarding our international business. We continue to be pleased with the progress we're making in our international markets. During the quarter we opened six new stores in Mexico to finish with 800 stores, and five new stores in Brazil ending with 132. Our same store sales grew 13.7% on a constant currency basis and 1% on a reported basis. We remain committed to international, and given our success in these markets, we will accelerate the store opening pace going forward. We are bullish on international being an attractive and meaningful contributor to AutoZone's future sales and operating profit growth.
Now let me spend a few minutes on the rest of the P&L and gross margins. For the quarter our gross margin was 53%, up 16 basis points. This quarter, while we did not book any LIFO adjustments, we did have a $2 million unfavorable LIFO comparison to last year. Excluding LIFO from both years, we had a 21-basis point improvement in gross margin driven by continued improvement in merchandising margins.
As a reminder for Q2, last year we had a $14 million credit, and we do not expect to have any credits this Q2 as freight cost increases are offsetting deflation in the remainder of our cost of goods. At quarter end we still have $19 million in cumulative LIFO charges yet to be reversed through our P&L. And as I've said previously, once we credit back the $19 million through the P&L, we will not take any more credits, and we will begin to rebuild an unrecorded LIFO reserve.
Moving to operating expenses, our expenses were up 4.5% versus last year as SG&A as a percentage of sales deleveraged 75 basis points. While we are managing our SG&A spend in a slower growth environment in a disciplined way, we will continue to invest at an accelerated pace in IT and capex to underpin our growth initiatives. We believe these investments will pay dividends in customer experience, speed and productivity, and are important enablers for us to gain future market share. We will remain committed to being disciplined on SG&A growth as we move forward, and we will manage SG&A expenses in line with sales growth over time.
Moving to the rest of the P&L, EBIT for the quarter was $841 million, down nine-tenths of a percent versus the prior year. As I previously said, FX rates reduced our EBIT by approximately $17 million. On a constant currency basis, our EBIT would have been up approximately 1%. Interest expense for the quarter was $107.6 million, up 18% from Q1 a year ago, as our debt outstanding at the end of the quarter was $9 billion versus $8.6 billion a year ago. We're planning interest in the $108 million range for the second quarter of FY '25 versus $102.6 million last year. Higher debt levels and borrowing rates across the curve are continuing to drive interest expense increases.
For the quarter, our tax rate was 23% and up from last year's first quarter of 21.6%. This quarter's rate benefited 72 basis points from stock options exercise, while last year it benefited 147 basis points. For the second quarter of FY '25, we suggest investors model us at approximately 23.4% before any assumption on credits due to stock jobs and exercises. We are assuming Q2 option exercises are less than Q2 last year, which had $23 million of credits.
Moving to net income and EPS, net income for the quarter was $565 million, down 4.8% versus last year. Our diluted share count of $17.4 million was 4.7% lower than last year's first quarter. The combination of lower net income and lower share count drove earnings per share for the quarter to $32.52, down a tenth of percent for the quarter. As a reminder, the unfavorable FX comparison drove our EPS down approximately $0.68 a share.
Now let me talk about our free cash flow. For the first quarter, we generated $565 million in free cash flow versus $595 million last year in Q1, driven by lower net income and higher capex. We expect to continue being 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, our liquidity position remains very strong, and our leverage ratio finished at 2.5 times EBITDAR. Our inventory per store was up 5.4% versus Q1 last year, while total inventory increased 8.7% over the same period last year, driven by new store growth and inventory placement to support new growth opportunities. Net inventory defined as merchandise inventories less accounts payable on a per store basis was negative $166,000 versus a negative $197,000 last year and negative $163,000 last quarter. As a result, accounts payable as a percent of gross inventory finished the quarter at 119.5% versus last year's Q1 of 124.4%.
Lastly, I'll spend a moment on capital allocation and our share repurchase program. We repurchased 505 million of AutoZone stock in the quarter, and at quarter end we had $1.7 billion remaining under our share buyback authorization. Our ongoing strong earnings balance sheet and powerful free cash continues to allow us to return a significant amount of cash to our shareholders through our buyback program. We have bought back over 100% of the then outstanding shares of stock since our buyback inception in 1998, while investing in our existing assets and growing our business. We remain committed to this disciplined capital allocation approach that will enable us to invest in the business and return meaningful amounts of cash to shareholders.
To wrap up, we remain committed to 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 continues to work. We're growing our market share and improving our competitive positioning in a disciplined way. As we look forward to the balance of our fiscal year, we're bullish on our growth prospects behind a resilient DIY business, a fast-growing international business and a domestic commercial business that is continuing to grow share. I continue to have tremendous confidence in our ability to drive significant and ongoing value for our shareholders behind a strong industry, a winning strategy and an exceptional team of AutoZoners.
Before handing the call back to Phil, I want to remind you that we report revenue comps on a constant currency basis to reflect our operating performance. We generally don't take on transactional risks, so our results primarily reflect the translation impact for reporting purposes. As I mentioned earlier in the quarter, foreign currency resulted in a headwind on revenue and EPS. If yesterday's spot rates held for Q2, then we expect approximately a $95 million drag on revenue, a $30 million drag on EBIT, and $1.30 a share drag on EPS. And if rates remained at the current spot rates for the full fiscal year of 2025, we would expect approximately a $355 million impact to revenues, $120 million impact to EBIT, and a $4.90 a share impact to full year EPS. And now I'll turn it back to Phil.
