William C. Rhodes
Chairman, President and Chief Executive Officer, Customer Satisfaction at AutoZone
Good morning, and thank you for joining us today for AutoZone's 2022 fourth quarter conference call. With me today are Jamere Jackson, Executive Vice President, Chief Financial Officer and Brian Campbell, Vice President, Treasurer, Investor Relations and Tax.
Regarding the fourth quarter, I hope you had an opportunity to read our press release and learn about the quarters' 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 want to recognize our AutoZoners' for their tremendous success this past year. They far exceeded our expectations from the beginning of the year and in a very challenging environment as our pledge states put our customers first, resulting in additional share gains and terrific sales performance on top of fantastic results in FY'21.
We grew our overall sales 11.1% on top of 15.8% growth last year, resulting in a two-year growth that is among the highest we've ever experienced. We could not have achieved this success without phenomenal contributions from across the organization. This year began with the resurgence of the pandemic, ongoing supply chain challenges, a very difficult staffing environment and finished with rising interest rates and inflation at its highest levels in decades, all as major storylines.
Throughout the year, our team's incredible supply chain efforts to improve our in-stock position likely at industry leading levels helped our sales growth. These efforts resulted in a positive retail comp and an exceptionally strong commercial comp for both the quarter and the year. Anyway, you evaluate our FY'22 performance, we had a terrific year, congratulations AutoZoners', and thanks for always putting our customers first, which led to this success.
This morning, we will review our Q4 overall same-store sales, DIY versus DIFM trends, our sales cadence over the 16 weeks of the quarter, merchandise categories that drove our performance and any regional discrepancies. We will also share how inflation is affecting our cost and retails and how we think inflation will impact our business for FY'23.
Our domestic same-store sales were an impressive 6.2% this quarter on top of last year's 4.3%. On a two-year's basis, we delivered 10.5% comp and on a three-year basis, a remarkable 32.3% stacked comp. Our team once again, executed an exceptionally high level and delivered amazing results, despite the difficult comparisons and significant challenges I mentioned above. Our growth rates for commercial and retail were both strong, with domestic commercial growth, north of 20%. This quarter was our sixth consecutive commercial growth above 20%.
Additionally, commercial set a fourth quarter record with $1.442 billion in sales, an impressive accomplishment. We generated $260 million more in sales this quarter than in Q4 last year. For the fiscal year, our commercial sales were $4.2 billion versus $3.3 billion just a year ago, up over 26%. Last fall at our national sales meeting, our Senior VP of Commercial, Grant McGee declared a stretch goal to achieve $4 billion in sales for FY'22. That lofty goal ultimately wasn't near lofty enough. We also set a record of average weekly sales per store for any quarter at $17,000 per store versus $14,000 for last year.
Domestic commercial sales represented 30% of our domestic auto parts sales. Another record for us compared to just 26% in last year's quarter. Our commercial sales growth continues to be driven by key initiatives. We have been working on for the last several years. Improved satellite store inventory, massive improvements in hub and mega hub coverage, the strength of the Duralast brand, better technology to make us easier to do business with, improved delivery times, enhancing our sales force effectiveness and living consistent with our pledge by being "priced right" for the value proposition we deliver.
We continue to execute in commercial and we are extremely proud of our team's performance. We're also very proud of our organization's performance in domestic DIY. We had a positive 1.1% comp this quarter, while our two-year comp decelerated from Q3s, we believe the more relevant comp is the three-year and we are higher than last year's quarter at 24.5% versus 21.6%. For the year, we were very proud of our DIY results, considering, we grew so much in FY'21.
To level set, we had an 11% DIY comp in FY'21. And for the full year '22, we were up 2.9%. These results are very strong considering the difficult comparison, which was driven by the various forms of stimulus last year. From the data we have available to us, we continue to retain the vast majority of the enormous share gains in dollars and more importantly in units that we built during the initial stages of the pandemic. And our recent performance gives us continued conviction about the sustainability into FY'23.
Now let's focus on sales cadence. Our quarter span 16 weeks early May through the end of August. Our same-store sales increased materially over the first four weeks to high-single digits, 8.4%. The next eight weeks, our growth was nearly halved dropping to 4.9%. And then it reaccelerated over the last four weeks up 6.8%. All of these year-over-year comparisons are difficult to interpret as so much was going on last year and even the year before. However, for Q4, our two-year comp was 10.5%. And the four week periods of the quarter increased 10.4% 9.4%, 7.9% and 14.4% respectively. But our three-year comp was 32.3%, and for the four-week periods of the quarter increased 35.2%, 33.5% 30.1% and 31% respectively.
We have been encouraged by the sustainability of the enormous sales gains we generated since the beginning of the pandemic. Regarding weather in May and June, we experienced slightly cooler and wetter weather trends across the country. By July, however, it became very hot across most of the country and it remained unseasonably warm for August overall. We feel weather had a small but slightly positive effect on our sales performance. As we look forward to the fall months, we anticipate normal weather patterns. As a reminder, historically, extreme weather, cold or hot drives parts failure and accelerated maintenance.
Regarding this quarter's traffic versus ticket growth, in retail, our traffic was down roughly 7%, while our ticket was up about 8%. Our transaction count decline wasn't surprising and was driven by lower demand for discretionary sales floor items. However, we were pleased to be in line with last quarters' three-year transaction trends. We are also quite pleased with the ongoing growth in unit share, we are seeing in our market share data. We're also very encouraged by the sales trends we continue to experience in commercial. Our sales growth is coming from transaction growth from new and existing customers, along with higher tickets, as we price for inflation.
I regularly visit our stores and commercial customers and find it very encouraging to hear the positive comments from our customers and AutoZoners on our offerings. The reception our AutoZoners are receiving from our customers, and as importantly, our perspective customers has changed meaningfully over the last few years, as we continue to implement and execute our commercial acceleration strategy. I'll say it now, but we're determined, determined to continue to grow meaningfully faster than the market. And we're focused on future growth opportunities to keep our momentum. Our goal stated simply over time is to become the industry leader in both sectors.
As we start our new fiscal year, we continue to be pleased with the momentum we are seeing in both domestic businesses heading into the fall months. During the quarter, there were some geographic regions that did better than others as there always are. This quarter, we saw a 30 basis point difference between the Northeast and Midwest compared to the balance of the country with the Northeast and Midwest being higher. As the Northeast and Midwest were warmer in May and June, their sales accelerated. However, this trend reversed itself over the last eight weeks of the quarter. As the remainder of the country, heated up those regions grew their comp sales faster than the Northeast and Midwest markets. Heading into the first quarter of the new fiscal year, we continue to believe weather will have only a minimal impact on our sales.
Now let's move into more specifics on performance for the quarter. While I said, our same-store sales were up 6.2% versus last year's fourth quarter, our net income was $810 million and our EPS was $40.51 a share increasing 13.4%. Regarding our merchandise categories in the retail business, our hard parts outperformed sales floor categories with approximately a 2.5% difference between them. As gas prices increased, our discretionary sales floor merchandise categories certainly softened. The discretionary categories represent approximately 20% of our DIY sales in any one quarter. But this quarter they were weaker at 19% of the retail mix. This category was down 6.5% on the quarter versus up 3.5% last year in Q4.
More recently as gas prices have abated we are encouraged to see the discretionary categories bounce back a bit. In general, the categories that are driven by failure due to heat performed well. And we were encouraged to see our battery category successfully lapped very strong performance last year and exceed our expectations. We believe our hard parts business will continue to do well this fall, as we expect miles driven to improve while our growth initiatives are delivering solid results.
Let me also address inflation and pricing. This quarter, we saw our sales increase by 11% from inflation in line with cost of goods, which was up about 10%. We believe both numbers for the first quarter will be similar, as rising raw material pricing, labor and transportation costs are all impacting us and our suppliers, inflation has been prevalent in the aftermarket space. We believe inflation is stabilizing. We are seeing transportation costs begin to moderate after reaching historic levels, where we are not seeing product costs deflation yet nor are we seeing any signs that labor wage growth is slowing.
Importantly, I want to point out that our industry has been disciplined about pricing for decades, and we expect that to continue. Historically, as costs have increased, the industry has increased pricing continuously to maintain margins. It is also notable that following periods of higher inflation, our industry has historically not reduced pricing to reflect lower cost. While we continue to be encouraged with the current sales environment, it remains difficult for us to forecast near to midterm sales. What I previously said, is that the past five quarter sales have all been consistent on both a two and three-year stack comp basis. It's difficult to predict sales going forward. We are excited about our growth initiatives, our team's execution, and the tremendous share gains we've achieved in both sectors.
Over the past 12 to 18 months, the overall macro environment has been favorable for our industry, despite inflationary pressures for some of our customers. And even at these near-term trends fade, we believe that we are in an industry that is positioned for solid growth over the long-term. For our first 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. We will as always be transparent about what we are seeing and provide color on our markets and outlooks as trends emerge.
Before handling the -- handing call over to Jamere, I'd like to highlight and give some color on a few of our key business priorities for the new fiscal year. First, we are focusing on our supply chain with two initiatives that are in flight to drive improved availability. One is our expanded hub and mega hub rollouts. We know intelligently placing more inventory in local markets will lead to our ability to continue to say, yes, to our customers more frequently and in turn drive our sales.
Secondly, we are expanding our distribution center footprint. We announced the development of two new distribution centers domestically, and one additional DC in Mexico. These DCs will allow us to not only reduce drive times to stores, but they increase our capacity. Note, we didn't expect to grow our business 30% in three years as we did. And they will allow us to carry inventory that is slower turning yet in demand that across the country. I'm also excited to announce that we opened a new facility on the west coast, just this month to handle direct import product on a timelier basis. This facility will flow products, ordered abroad and distribute them to our other DCs, postponing the inventory allocation and therefore reducing safety stock.
Our supply chain strategy is focused on carrying more product closer and closer to the customer. And we believe it has been a significant contributor to our recent success, especially in commercial. Additionally, we plan on continuing to grow our Mexico and Brazilian businesses and almost 800 stores open internationally. These businesses had impressive performance this past fiscal year and should continue to grow in 2023 and beyond. We are leveraging many of the learnings we have in the U.S. to refine our offerings in Mexico and Brazil.
Now I'll turn the call over to Jamere Jackson. Jamere?