Philip B. Daniele, III
President and Chief Executive Officer at AutoZone
Good morning, and thank you for joining us today for AutoZone's 2025 second-quarter conference call. With me today are Jamere Jackson, Chief Financial Officer; and Brian Campbell, Vice-President, Treasurer, Investor Relations and Tax. Regarding the second-quarter, I hope you had a chance to read our press release and learn about this 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 the quarterly earnings conference calls to see them. As we begin today, we want to thank our more than 125,000 across the globe for their commitment to delivering on our pledge to always put customers first. Their contributions allow us to deliver the consistent performance we have enjoyed over many years. We can only succeed if we all work together to deliver our goals. First-off, this morning, I'll say the quarter played out the way we thought it might. We felt optimistic that our execution could drive sales increases. And we also believed we would experience winter weather earlier in the quarter than we did last year during our second-quarter.
Now let me highlight a few highlights from this quarter and give a little more color on our execution, the current environment and our outlook. For the quarter, with our continued focus on what we call Wow customer service, our total sales grew 2.4%, while earnings per share decreased 2.1%. We delivered positive 2.9% total company same-store sales with domestic same-store sales growth of 1.9% and our domestic commercial sales grew 7.3% and were up 10% on a two-year stacked basis. International same-store sales increased 9.5% on a constant-currency basis. While our international business continued to comp impressively, we faced an approximate 1900 basis-points of currency headwind, which resulted in an unadjusted negative 8.2% international comp.
As you know, the US dollar has continued to have a negative impact on our reported sales, operating profit and EPS. We expect this trend to continue for the remaining two quarters of this fiscal year. Jamere will provide more color on our foreign currency impact for the third and fourth quarters as well as the full-fiscal year. In terms of execution, specifically related to our domestic commercial business, our focus on improving both availability and speed of delivery helped us significantly improve our year-over-year sales growth. We drove commercial sales up 7.3% versus up 3.2% in the first-quarter.
We believe the initiatives we have in-place have a long runway and will drive further improvement. We are pleased with our efforts and execution thus far. Secondly, the environment did improve as we experienced winter weather earlier than we had the last couple of years. Due to a colder November and early December, our sales noticeably increased. Our domestic same-store sales cadence was 4.3% in the first four weeks, plus 2.8 in our second four weeks and a negative 1.2 over our last four weeks. This compares to the previous year's second-quarter where domestic sales were a positive 1.4% in the first four weeks, a negative 4.9 in the second four weeks and a positive 4.4 in the last four weeks.
On a two-year basis, DAP comps were a positive 5.7 in the first four weeks, a negative 2.1 in the second four weeks and a positive 3.2 in the last four-week segment. It is important to point out that the Arctic cold that came early this year came later in the last four-week segment last year. That is why the last four-week segment was such a difficult comparison for us. Thirdly, the domestic comp variation over the four-week segment was driven by volatility in our retail business. In fact, for our domestic retail business, the last week of the quarter was by far the worst week with our DIY comp being down almost 7%, but it was understandable.
That week for much of the country was very cold-weather along with heavy snowfall and it hurt our customer traffic. That is what happens during the winter quarter, which is always the most volatile. During the weeks where weather is extreme, our traffic softens significantly, but returns once people are able to get back-out to shop. We seem to capitalize on The pent-up demand. Our commercial comp, on the other hand, was much more consistent over the 12 weeks of the quarter. This consistency was very encouraging to us and informs us that we are on the right track to continued future commercial sales growth. While the macro-environment has continued to force customers to be cautious with their spending, the consistency of our failure and maintenance business continued this past quarter. Weather in Q2 always had such a big impact on our results. With a winter that started earlier, we benefited this year from more failure-related part sales. Winter also causes discretionary categories to be a lower percentage of our sales mix. Now let me make a few comments on our DIY business. Our domestic DIY results showed an improvement to last quarter as Q2's DIY comps were plus 1.1%. Our discretionary merchandise category continued to be the lowest performer across domestic DIY sales. For our second-quarter, discretionary category sales were approximately 16% of our mix and they were down on a same-store sales basis. Our belief is that discretionary sales will continue to be pressured until the customer gets some economic relief and consumer confidence improves. Our DIY comp was up 2.9% in the first four-week segment, plus 2% in the second segment and down 4.3% during the third, fourth week segment. That compares to last year's Q2 DIY comps of 0.7% in the first four weeks, negative 6.2% in the second four weeks and a positive 4.8 in the third, fourth week segment. With regards to inflation's impact on DIY sales, we saw both DIY average ticket and average like-for-like same SKU inflation up slightly for the quarter. We continue to expect that inflation in our ticket will be up approximately 3% over-time, and we anticipate average ticket growth will return to historical industry growth rates as we move farther away from the hyperinflation over the last couple of years. We also saw DIY transaction count down approximately 1%. This too was better than the down 1.8% we experienced in our traffic trend for last quarter. While we do not have final share data for the last segment of the quarter, we were encouraged by the recent favorable share trends. We believe we have a best-in-class product offering and service offering, and this gives us confidence that when customers return to their historical shopping habits, we will be the beneficiaries. Next, I'll speak to our regional DIY performance. We saw slightly weaker performance in the Northeast, Midwest or Mid-Atlantic, sorry, and Rust Belt versus the rest of the country. These markets were up 0.5% versus 1.1% across the rest of the domestic markets as sales are heavily dependent on winter weather. Winter weather benefited these Northeastern and Rust Belt markets earlier in the quarter and our sales increased nicely during those times versus Q2 last year. However, the last week of the quarter was much weaker in the Northeastern and Rust Belt markets as they were down 10% versus the rest of the country being down roughly one. Again, weather created a lot of volatility during the second-quarter of our fiscal year. We would expect our performance to improve as our customers are now able to get back-out and shop. Next, I will touch on US commercial business. Our commercial sales were up 7.3% for the quarter versus last year, and this compares to 3.2% total commercial growth in Q1. For commercial, the first four weeks of our 12-week quarter grew 8.8% due to the impact for -- from winter weather previously discussed. The second four-week period grew 5.9% and the last four-week period grew 7.1%. Commercial was also impacted by the last week of the quarter due to the severe winter storm. More broadly, across the US, our commercial business grew at a slower pace in the Northeast and the Rust Belt versus the rest of the country. The spread was pronounced 600 basis-points between the Northeast and Rust Belt versus the rest of the country as many of our customers closed their businesses while these storms rolled through these markets. We expect performance in the Northeast and the markets to improve over the remainder of the year as the colder winter weather has historically led to parts failures and increased maintenance as the summer goes along. While we have continued to see wide variations in performance across the more weather sensitive markets, we remain confident in our initiatives. We are very encouraged with our improved satellite store inventory availability, significant improvements in hub and mega hub stores coverages, the strength of our brand and good execution on our initiatives to improve speed of delivery and improve customer service, which gives us confidence as we move throughout the year. This quarter, year-over-year inflation on a like-for-like same-SKU basis in our commercial business increased versus Q1, contributing to our average ticket growth of 0.5%. Lastly, while ticket growth was slightly positive, we were very pleased with the growth in our commercial transactions year-over-year. Our sales growth will be driven by our continued ability to gain market-share and an expectation that like-for-like same SKU inflation will accelerate as the year moves along. For the quarter, we opened a total of 28 net domestic stores. We remain committed to more aggressively opening regular stores, hubs and mega hub stores. Hubs and mega hubs comps continue to grow faster than the balance of the chain, and we are going to continually aggressively deploy these assets. In FY '25, our openings will continue to be skewed to the back-half of the fiscal year. For the 3rd-quarter, we expect both our DIY and commercial sales trends to improve as our comparisons become slightly easier and we gain momentum from our growth initiatives. We will, as always, be transparent about what we are seeing and provide color on our markets and outlook as trends emerge. Now let me take a moment and discuss our international business. In Mexico and Brazil, we opened a total of 17 new stores in the quarter and now have 949 total international stores. As you can see from our press release, our same-store sales were up 9.5% on a constant-currency basis. While slightly below double-digit growth, we remain very positive on our growth opportunities in this market. Today, we have just under 13% of our total store base outside of the US and we expect this number to grow as we accelerate our international store openings. For the fiscal year, we expect to open around 100 international stores, and we will accelerate our openings over the remaining two quarters of the fiscal year. While there will always be tailwinds and headwinds in any quarter's results, what has been consistent is our focus on driving sustainable long-term results. We continue to invest in improving customer service, product assortment initiatives and our supply-chain. We believe we are well-positioned for future upswings in consumer demand. We are investing in both capex and operating expense at the right time for market-share growth. I'd like to recognize all Auto's owners who helped to get our two new domestic distribution centers open this quarter. Both our California and Virginia DC will help us tremendously with the future parts needs of our customers. The Virginia distribution center will be AutoZone's largest DC and both DCs will deploy new technology and automation. We are very excited by the supply-chain efficiencies these facilities will provide us. In summary, we have continued to invest in driving traffic and sales growth. This year, we expect again to invest more than $1 billion in capex in order to drive our strategic growth priorities. We are investing in accelerated store growth, specifically hubs and mega hubs, placing inventory closer to our customers. Distribution centers that drive efficiency and reduce supply-chain costs and leveraging technology and our IT systems that improve customer service and our AutoZoner's ability to deliver on our promise of Wow customer service. We believe this is exactly the right time to invest in these initiatives in order to grow market-share now and be ready when industry demand ramps-up. Now, I will turn the call over to Jamere Jackson.
