Jamere Jackson
Chief Financial Officer and Executive Vice President, Finance and Store Development, Customer Satisf at AutoZone
Thanks, Phil, and good morning, everyone. As both Bill and Phil had previously discussed, we had a solid fourth quarter, stacked on top of an impressive fourth quarter last year, with 6.4% total company sales growth, a 1.7% domestic comp, a 14.9% international comp on a constant currency basis, a 10.8% increase in EBIT, and a 14.7% increase in EPS. In addition, our results for the entire fiscal year were very strong as total sales grew 7.4% and EPS grew 12.9%. We continued to deliver great results, and the efforts of our AutoZoners and our stores and distribution centers have continued to enable us to grow our business and our earnings in a meaningful way.
To start this morning, let me take a few minutes to elaborate on the specifics in our P&L for Q4. For the quarter, total sales were just under $5.7 billion, up 6.4%. For the year, our total sales were $17.5 billion, up 7.4% versus last fiscal year. I continue to marvel at the strength of our business since FY '19. Our sales are up an amazing 47%, or nearly $5.6 billion since 2019.
Let me give a little more color on sales and our growth initiatives, starting with our domestic Commercial business. For the fourth quarter, our domestic DIFM sales increased 3.9% to $1.5 billion and up 25.9% on a two-year stack basis. Sales to our domestic DIFM customers represented 26% of our total Company sales and 30% of our domestic auto parts sales.
Our average weekly sales per program were approximately $16,700, down 1.8%. Now, it's important to point out that our sales per program productivity was impacted materially by the late in-quarter openings of approximately 120 new programs. While these openings depressed the point in time productivity metric, we're encouraged by the growth prospects of these programs and their early contribution to our Commercial business. These openings are part of our effort to open more stores with Commercial in response to the tremendous opportunity to grow our market share.
Our commercial acceleration initiatives are delivering the expected results as we grow share by winning new business and increasing our share of wallet with existing customers. We now have our Commercial program in approximately 90% 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 156 net new programs, finishing with 5,682 total programs. As I've said since the outset of the year, Commercial growth led the way in FY '23, and we feel good about our prospects heading into the new year. For FY '23, our Commercial sales were $4.6 billion, up 8.7% versus last year and up 37% from two years ago. Importantly, we have a lot of runway in front of us, and we expect to deliver on our goal of becoming a faster growing business.
To support our Commercial growth, we now have 98 Mega-Hub locations, with 13 new stores opened in Q4. While I mentioned a moment ago, the Commercial weekly sales per program average was $16,700 per program, the 98 Mega-Hubs averaged significantly higher sales and are growing much faster than the balance of the commercial footprint. In fact, our Commercial Mega-Hub business grew twice as fast as our overall Commercial business in Q4.
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 an objective to reach 200 Mega-Hubs supplemented by 300 regular Hubs in the near-term. Our AutoZoners and our customers are excited, and we're determined to build on our strong momentum.
On the domestic retail side of our business, our DIY comp was up 1.4% for the quarter. For FY '23, our DIY comp grew 1.8% and 4.7% on a two-year stack basis. The business continues to be remarkably resilient as we've managed to deliver positive comp growth through this cycle. As Bill mentioned, we saw traffic down slightly and 2% ticket growth. As we move forward, we would expect to see slightly declining traffic 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.
Importantly, our DIY business has continued to strengthen competitively behind our growth initiatives. In addition, 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 have driven a positive comp. We're forecasting a consistent and resilient DIY business environment for FY '24.
Now, I'll say a few words regarding our International business. As you may have noted, we changed our disclosure on our International business and we will continue to do so going forward. With 12% of our total store base outside of the U.S., the current revenue contribution and the growth prospects moving forward, we simply have to share more about International. We continue to be pleased with the progress we're making in Mexico and Brazil. During the quarter, we opened 27 new stores in Mexico to finish with 740 stores and 17 new stores in Brazil, ending with 100. Our same store sales grew 34.1% on a reported basis and 14.9% on a constant currency basis. We remain committed to Mexico and Brazil, and given our success in these markets, we will accelerate the store opening pace going forward. By 2028, after a robust strategic review of the market and ultimate store count potential, we've revised our strategy and anticipate opening as many as 200 stores annually in these markets in a disciplined fashion, making this an attractive and meaningful contributor to AutoZone's future growth.
Now, let me spend a few minutes on the rest of the P&L and gross margin. For the quarter, our gross margin was 52.7%, up 118 basis points, driven primarily by a non-cash $30 million LIFO credit this quarter. For Q4 last year, we had a $15 million LIFO charge. Excluding LIFO from both years, we had a 37 basis point improvement in gross margin. I will point out that we now have $59 million in LIFO charges yet to be reversed through our P&L, and we expect these to largely reverse over FY '24. We're currently modeling $15 million in LIFO credits in Q1 as inflation continues to abate and we turn our inventory. And as I've said previously, once we credit back to $59 million through the P&L, we will not take any more credits, and we will begin to rebuild our unrecorded LIFO reserve.
Moving to operating expenses. Our expenses were up 7.6% versus last year's Q4 as SG&A as a percentage of sales deleveraged 34 basis points. The accelerated growth in SG&A has been purposeful as we continue to invest in an accelerated pace in IT and payroll to underpin our growth initiatives. These investments will pay dividends in customer experience, speed, and productivity. We are committed to being disciplined on SG&A growth as we move forward, and we will manage expenses in line with sales growth over time.
Moving to the rest of the P&L. EBIT for the quarter was $1.2 billion, up 10.8% versus the prior year driven by our positive same store sales growth and gross margin improvements, including the LIFO year-over-year benefit. EBIT for FY '23 was just under $3.5 billion, up 6.2% versus the prior year, also driven by strong top line growth.
Interest expense for the quarter was $108.7 million, up 70% from Q4 a year ago as our debt outstanding at the end of the quarter was $7.7 billion versus $6.1 billion at Q4 end last year. We're planning interest in the $88 million range for the first quarter of FY '24 versus $57.7 million in this past year's first quarter. Higher debt levels and borrowing rates across the curve are driving this increase. For the quarter, our tax rate was 22.4% and up from last year's fourth quarter of 22.1%. This quarter's rate benefited 22 basis points from stock options exercised, while last year, it benefited 70 basis points. For the first quarter of FY '24, we suggest investors model us at approximately 23.4% before any assumption on credits due to stock option exercises.
Moving to net income and EPS. Net income for the quarter was $865 million, up 6.8% versus last year. Our diluted share count of 18.6 million was 6.9% lower than last year's fourth quarter. The combination of higher net income and lower share count drove earnings per share for the quarter to $46.46, up 14.7% for the quarter. For FY '23, net income was $2.5 billion, up 4.1% and earnings per share was $132.36, up 12.9%.
Now, let me talk about our free cash flow for Q4. For the fourth quarter, we generated $1.1 billion of operating cash and $701 million in free cash flow. For the year, we generated $2.1 billion in free cash. 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 ratios remain below our historic norms.
Our inventory per store was down 0.006%[Phonetic] versus Q4 last year, while total inventory increased 2.2% over the same period last year, driven by new store growth. Net inventory, defined as merchandise inventory less accounts payable on a per store basis, was a negative $201,000 versus negative $240,000 last year and negative $215,000 last quarter. As a result, accounts payable as a percent of gross inventory finished the quarter at 124.9% versus last year's Q4 of 129.5%.
Lastly, I'll spend a moment on capital allocation and our share repurchase program. We repurchased $1 billion of AutoZone stock in the quarter, and at quarter end, we had just over $1.8 billion remaining under our share buyback authorization. The strong earnings balance sheet and powerful free cash we generated this year has allowed us to buy back 8% of the shares outstanding since the beginning of the fiscal year. 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 to cash to shareholders. We finished Q4 at 2.3 times EBITDAR, which is below our historical objective of 2.5 times EBITDAR. However, we remain committed to our leverage objective, and we expect to return to the 2.5 times target in FY '24.
To wrap up, we remain committed to driving long-term shareholder value by investing in our growth initiatives, driving robust earnings and 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 FY '24, 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 driven by a high degree of confidence in our strategy and our exceptional team of AutoZoners.
One last housekeeping point. I'd like to remind you that, in FY '24, we will have a 53rd week in our financial results. This extra week will be added to our Q4 results. As a result, our fiscal year will now end August 31st, 2024. In order to model that extra week, I encourage you to look at our financial breakouts of both our fiscal 2019 and 2013 fourth quarters, which were the last two years we had the extra week, and we show breakouts of the full P&L accordingly.
And now, I'll turn it back to Bill.