Greetings and welcome to AutoZone’s 2021 Fourth Quarter Earnings Release Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded. It is now my pleasure to introduce Brian Campbell. Thank you. You may begin.

Before we begin, please note that today’s call includes forward-looking statements that are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are not guarantees of future performance. Please refer to this morning’s press release and the company’s most recent annual report on Form 10-K and other filings with the Securities and Exchange Commission for discussion of important risks and uncertainties that could cause actual results to differ materially from expectations. Forward-looking statements speak only as the date made and the company undertakes no obligation to update such statements. Today’s call will also include certain non-GAAP measures. A reconciliation of non-GAAP to GAAP financial measures can be found in our press release.

Good morning. And thank you for joining us today for AutoZone’s 2021 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'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 I have said previously, throughout the pandemic, we could not deliver the kind of results we have without the outstanding performance of our entire team, especially our store and supply chain AutoZoners. As our sales volumes have remained at historic all time highs our AutoZoners continue to enthusiastically meet and embrace the challenge. As we say, they're going the extra mile for our customers and we owe them a tremendous debt of gratitude. I also want to reiterate our highest priority remains being committed to keeping all of our customers and AutoZoners safe. Thank you, AutoZoners. Again, you are remarkable. This morning we will review our overall same store sales DIY versus the DIFM trends, sales cadence over the 16 weeks of the quarter, merchandise categories that drove our performance and any regional discrepancies; we’ll also share how inflation is affecting our costs and retails and how we think they will impact our business for the remainder of the calendar year. Okay. Onto our sales results, our domestic same store sales were an impressive 4.3% this quarter on top of last year's historic 21.8% growth. This time last year, we had no vision, none of delivering a positive comp this quarter, but our team once again performed…

Thanks, Bill. And good morning, everyone. As Bill mentioned, we had another great quarter. Our growth initiatives are continuing to deliver strong results and the efforts of our AutoZoners in our stores and distribution centers have enabled us to maintain strong results. 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 auto parts sales, which includes our domestic, Mexico and Brazil stores, were $4.8 billion up 8%. And for the total year, our total auto parts sales were $14.4 billion up 15.9%. Now let me give a little more color on sales and our growth initiatives. Starting with our commercial business, for the fourth quarter, our domestic DIFM sales increased 21% for $1.2 billion and were up 31% on a two year stack basis. Sales to our DIFM customers represented 24% of our total sales and our weekly sales per program were $14,400 up 18% as we average $74 million in total weekly commercial sales. Once again, our growth was broad based as national and local counts all grew over 20% in the quarter. For the full year, our commercial sales grew 22.6% and 29% on a two year stack basis. Our execution of our commercial acceleration initiatives is delivering exceptional results as we focus on building a faster growing business. The disciplined investments we're making are helping us grow, share, and we're making tremendous progress in growing our business in this highly fragmented portion of the market. We now have our commercial program in over 86% of our domestic stores, and we're focused on building our business with national regional and local accounts. This quarter, we opened 72 net new programs finishing with 5,179 total programs. We continue to leverage our DIY infrastructure and…

Thank you, Jamere. Nice job. Also, congratulations on your one year AutoZone anniversary that you celebrated last week.

Been fantastic.

As we start a new fiscal year, I'd like to take a moment to discuss our operating theme for the New Year. It is go the extra mile. And we will be hosting our annual national sales meeting here in Memphis next week to formally announce this theme. Being in person for the first time in two years, yes, we are going to host our AutoZoners who are vaccinated and wearing masks in person, and we are going to celebrate all they have accomplished over the past two years. I can't tell you how excited I am about next week. 2022 will again be focused on superior customer service and flawless execution. In fiscal 2022, we are launching some very exciting initiatives. We will be announcing some significant expansions to our supply chain to fuel the growth of our domestic and Mexico businesses. We are also targeting to open 20 new domestic mega hubs in the U.S. that will enhance our ability and support growth in our retail and commercial businesses. We'll open approximately 200 new stores throughout the Americas with notable acceleration in our Brazil business. These capacity expansion investments reflect our bullishness on our industry and our own growth prospects. We are being disciplined, yet we are being aggressed. Lastly, I want to reiterate how proud I am of our team across the board for their commitment to servicing our customers and doing so in a very safe manner. At the start of the pandemic last year, we could never have guessed the positive impact it would have had on our sales. First and foremost, our focus will be on keeping our Autozoners and customers safe while providing our customers with their automotive needs. And secondly, we must continuously challenge ourselves during these extraordinary times to position our company for even greater future success. We know that investors will ultimately measure us by what our future cash flows look like three to five years from now. And we welcome that challenge. I continue to be bullish on our industry and in particular on AutoZone. Now, we'd like to open up the call for questions.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question is coming from the line of Bret Jordan with Jefferies. Please proceed with your questions

Hey, good morning guys.

Morning, Brett.

Good morning, Brett.

On the share gain, could you give us a little bit more color I guess, as far as you know, where the share is coming from, is it warehouse distributors or from other two step distributors? And then, I guess are there particular categories that you're seeing relative outperformance and then I guess the cadence. You talked about maintaining the 10 points of share you'd picked up last year, is that slowed post COVID disruption. Are you still seeing the share gains continuing?

Yes. Terrific. So I'm going to bifurcate it and talk about retail and then come back and talk about commercial and then Jamere if you'll jump in and clarify anything if I miss it. Sorry. I had a mask on. First of all, on the retail business, we have very quantifiable data that we receive. It is not on the hard parts business. So think about it as everything in front of a parts counter, including batteries and spark and plus batteries and spark plugs. So we have real live data that is a larger set of data than just our traditional close in competitors. So we have facts there. We grew share very significantly this time last year. And as we began to lap those largest share gains in our company's history, we anticipated we might lose some of that share. We haven't lost any of it. I mean, it's on the margin. It's slightly positive, slightly negative month to month. But we basically grew our share in that dataset by 10%. So we moved from roughly 30% share to 33% share. I've never seen anything like that. And I'm really proud of our organization for sustaining that share over time. On the commercial side of the business, we don't have that kind of quantifiable data, but we obviously look at what's going on in the overall market. We look what's going on with our close in competitors and other competitors. And it's pretty clear when you're growing in these kinds of growth rates that we are significantly outgrowing the market probably by multiples two or three times the market growth. Where all is it coming from? You probably has as good insights into that as we do, we look at the, the publicly available data. We see that we're, we're doing very, very well in both the retail business and the commercial business. I think that the standout for us right now is the growth that we have in the commercial business. And our belief is it's because of not the pandemic, it's because of the initiatives that we've embarked on over the last three years, as we implemented this latest round of strategy work, where we're really working on making sure we've got the best parts coverage, we're continuing to amplify the Duralast brand. We've got great people doing great things. We're rolling out our mega hub strategy. Now we've implemented some technology to help us be more efficient. And we've also made sure that we're priced right, not necessarily versus our close in competitors, but we've looked deeper and looked at the warehouse distributors and making sure that our value proposition is appropriate for the kind of service that we're delivering. So those are my thoughts. Jamere, do you have anything to add?

Yes, I think a couple things stand out to me. One is that, as you mentioned, our business has been remarkably resilient and you combine that with a great execution that we have, and it's, it's striving exceptionally strong results. As we get further away from the lumpiness of the stimulus payments, I mean, it's clear that our share gains have been maintained. Bill talked about what we're seeing on the, on the sales floor market share. We've got great results and readouts from our loyalty programs that give us a lot of confidence. And our teams are doing a great job of executing. On the commercial side, we're continuing to see those significant share gains behind the business that are behind the initiatives that Bill talked about. And a couple of things really stand out to me, it's broad base. So it's national accounts and it's local accounts that are growing over 20%. We've seen the national snap back over the last year as car counts are up and staffing is improved and miles driven is improving. And our team is doing a fantastic job of executing with those customers. So we have a tremendous amount of confidence as we move forward into the year, and this is helping us create a faster growing business.

Great. Thank you. And Jamere, just a quick question on the accounts payable, I think that's a record at 129% of inventory. Is there a number or a range we should think about that being in going forward? Can it get it go higher than this?

It's benefited over the last year, quite frankly, because our terms have been up significantly in an accelerated sales environment. We don't expect us to go much higher than, than where we currently are. But we're continuing to do all the things that we can to manage working capital both with our suppliers and with our partners and but I wouldn't expect it to go much higher just based on the tremendous amount of [turns] (ph) that we've had over the last year or so.

All right. Great. Thank you.

Thank you, Bret.

Thank you. Our next question is coming from the line of Greg Melich with Evercore ISI. Please proceed with your questions.

Thanks. I really had two questions. One you mentioned 200 stores in the Americas. Could you sort of walk us through the breakdown of what would be domestic and then those other markets and basically is that a, a run rate we should use going forward? If you look about, look at the opportunities and I have a follow-up.

Yes. You can expect us to be in that zip code probably for the next couple of years or so. Roughly two thirds of that or more are going to be in and sort of the U.S. market if you will. We've, we've been looking at doing 150 to 170 stores, or so based on the opportunities that we see in the marketplace. You could see us do, 30 to 50 stores in Mexico, depending on the market conditions or so, and then, the remainder coming from Brazil. I think the good news for us is that we see tremendous market opportunities, both in the U.S. and in Mexico. And we talked about on our previous earnings call that we've been testing our market potential in Brazil for really the last decade or so and we think Brazil can be a very big market for us. So we've got great potential there. We've made some leadership team changes as well. So Tom Newbern is leading our international efforts going forward. Tom is a fantastic operator, has a ton of experience. And we look forward to that being a much bigger part of our story and our strategy as we go forward.

Great. And then the second question is linked to product availability and inflation. I think you mentioned that costs are going up, industries rationally passing it through. Was it fair to say the fourth quarter that inflation is maybe now running three to four in the top line, and how you think about that going forward?

Yes. We're not seeing it at that level yet Greg. I think we will see it at that level. As you know, it takes some time for those price increases to work themselves through the system. And right now is, is a little bit different in that you're seeing direct product cost inflation, but the, the hyperinflation that we're seeing frankly, is in the transportation, or are not directly in all the product costs. And so we're having to be thoughtful about how do we ultimately pass those price increases or cost increases on through retail prices in both the domestic, both the retail and the commercial businesses. We think that you will see it more in the range you're talking about in Q1 and Q2, if not even a little bit higher, but that seems to be where we're headed.

Got it. And the product supply there hasn't been an issue in terms of getting products?

No, there are absolutely significant issues in getting products. This we are running the lowest level of in stock that I can ever remember. It's, it's, 3% or 4% below where we normally run, it moves from one category to the other. This is the most difficult supply chain environment that I have ever seen, but I will tell you, our supply chain and merchants are working it so well. And so closely with our vendors and finding new suppliers along the way where we have to in the spot market or other areas that I think we are doing competitively. And when I say competitive, I'm talking about retail in general. I'm very proud of where we are, but very dissatisfied with it on a historical basis.

Got it. But competitively you feel you’re in a better than typical spot in your space, just that is tight out there.

Yes. And, and Greg, I think, we looked at our outperformance versus the market in both retail and commercial. The one piece that we really didn't highlight that I would highlight is AutoZone has been known as an execution machine for decades long before I got here. And I think that our core flawless execution has been a big contributor to our success over the last 18 months in these uncertain times.

Right. Well, congrats to you and the team.

Thank you very much.

Thank you. Our next questions come from the line of Chris Horvers with JPMorgan. Please proceed with your questions.

Thanks. Good morning guys. So you spoke to a two year contracts over a while with some moderation in July, and then in August. Can you share what that trend looked like for the DIY versus the commercial side of the businesses or, or what drove that to moderation? And then related to that, as you think about August did given the easier comparing DIY, did that flip back the positive on a one-year basis?

Yes. So if you, if you look at the trends that we saw. I mean, we saw most of the moderation, obviously in our DIY business where our comps were significantly higher last year in the fourth quarter. But a couple things stand out to us. Again, as we move further and further away from the, the lumpiness is the stimulus payments that we talked about. Our business was, was pretty resilient. And so our business actually outperformed our expectations. Our commercial business has been just remarkably resilient as well. And, if you think about the commercial business, it's a lot stickier. The relationships that we built with our commercial customers is, is driving that business. And as we see the macro environment improve, and those are things like car counts, those are things like miles driven. The fact that our commercial customers are, are staffing have been able to, get their staffing levels back to where they need to be. That, that business has been very, very strong, as we, as we exited the quarter. As been our past practice, we typically don't you know, talk about what we see in the, in the early innings of, of the, the following quarter. But what I will say is that, as we, as we exited the fourth quarter we were very pleased with the trends that we were, we were seeing. And it gives us a lot of confidence about not only the first quarter, but the year in total.

And then so did DIY in that last four weeks that you spoke to, to DIY turned back to being positive?

It was, it was, close to being flattish in that last four weeks or so. And again, when we get to the first quarter, we got much easier comps if you will. So that ought to give you some idea of what we're seeing in terms of trends moving into the first quarter.

It makes a lot of sense. So I guess on the pricing side so, so just to summarize there, it doesn't sound like you've seen any sort of fall out because of unemployment insurance expiring here in September. On the price side, you've invested in price and DIY to retain the share commercial to retain the share. How do you feel about where your price gaps are in the market currently in, in our things playing out the plan, i.e. there's not a necessarily a step up here from a price investment perspective that you feel you need to make to, in order to continue these great share trends?

Yes. We believe the price investments are behind us. And, when we look at the moves that we made last year, we're going to start the anniversary, those going into this year. And as we said, the strategy is working. I mean, we, you see it in the numbers. We put on the board in terms of our DIY results and our commercial results and price has just been one element of the strategy. So all the other things that we've talked about from an execution standpoint, and making sure that we have the right assortments, the investment that we've made in our products, the technology that we have on the commercial side, those things combined with competitive pricing have underpinned the growth story that you see here. So as we're in this inflationary environment, as Bill mentioned, we're being very disciplined. We're moving retails up on the commercial and in the DIY side, the industry has been very rational. But we're maintaining those competitive price differentials if you will, that have underpinned the share growth that we've seen over the last year or so. And that's what's really important. It's not an absolute price point of view is, if you will, but it's a relative price point. But as we have opportunities to take price up, we're certainly doing that.

Awesome. Have a great fall. Thanks very much.

Thank you.

Thank you. Our next question is coming from the line of Michael Lasser with UBS. Please proceed with your questions.

Good morning. Thanks a lot for taking my question. Bill, the industry has seen tremendous DIY growth over the last several quarters as consumers have largely been staying at home, have had more time on their hands to do projects on their cars. Why wouldn't the industry give a lot, a lot of that volume back as we get back to some sense of normalcy? And if that's the case, how can you manage its P&L to maintain the algorithm that the market to cut from the theme [ph] from models on.

Terrific question, Michael, I'll take the first part. I'll let Jamere figure out the second part. On the sales side, your logic is very sound. If you look at the, our business overall is up roughly 25% versus pre pandemic levels. You've been watching this industry for a long time. I've been watching it longer and, it's generally a nice grower, but in the, the industry grows around 4% a year to grow 25% over 18 months is pretty phenomenal. I think, as we said, in our prepared comments, we expected our sales to step down some this summer that we saw the last round of stimulus in March. Every time we've seen stimulus, we can see a direct correlation to our sales really grow at an exponential rate when that happens and then tail off some, but they never go back to where they were. And we spent a lot of time talking about the share gains that we have seen because we, we do think that that is beyond what's going on with COVID. I think it's somewhat related to COVID in that our teams have done a really, really good job of making sure that we have product of making sure that our customers and our AutoZoners feel safe in our stores. I would encourage, we've spent a lot of money making sure that we create a safe environment in our stores. And I would encourage you all to go in our stores and go look at us versus our competitors. Go look at us versus other retailers. It is a very, in this interesting time, a very comfortable shopping environment, as comfortable as you can find, I believe. And so I think that customers have changed their shopping behaviors. They're not necessarily wanting to go to…

Yes. From a P&L standpoint, here's the interesting thing for us. I mean, we have a tremendous amount of confidence in our business going forward. And if you recall, this is a business that has an algorithm that works at low to mid-single digit top line growth with high margins, that's fits off a lot of cash that we invest in our existing assets. We invest to grow our business and we return a lot of that to shareholders. Over the last couple of years or so we've had the opportunity to have outsize top line performance, and you've seen us ratchet up the things that we've done. So we've increased the level of investments that we've made in our existing infrastructure. We talked about, what we're doing to expand the capacity in our distribution centers and our supply chain. Bill talked about it in his, in his comments this morning. You've seen us invest in our, in our growth initiatives and we've had an outsize return to shareholders. So the algorithm works. It's worked for us in the past. It's worked for us through this environment where we've had accelerated sales, where we've done even more than we've done in the past. And we've got a tremendous amount of confidence in our growth prospects going forward. We're going to have tremendous financial firepower to grow this business and return cash to shareholders. And that quite frankly, is the AutoZone algorithm.

Very helpful. And my follow-up question is you seem to suggest that your gross margin is starting to stabilize either because you have lacked some of the price investments that you've made, or there's other factors that, that will also contribute your gross margins on pace to be 52.7% this year which is down almost a hundred basis points from, from the peak. So are you suggesting that you can get back to the peak level or now that you you've we based it lower, this is the right way to think about the gross margin moving forward.

Yes, I think we're not projecting that we're going to get back to any particular level, Michael. I think what we are saying is for the most part, the actions that we have taken in retail are done, many of those actions are behind us. We are very pleased with the competitive position that we have. We've always been pleased with our competitive position with our close in competitors, but we've looked a little bit beyond that, to those competitors, that I’ll call or a half a step away. In the commercial business, we took much more significant pricing actions. And they were on the margin in DIY. They were fairly significant in commercial, but we finished those actions at the beginning of, of this past quarter call it in June. So, and those took some time to roll in. We started it with six markets and we went to 14 markets and we rolled it to the chain. So we're beginning to annualize the first smaller tranches of that. And we will annualize that in in the beginning of next year's fourth quarter. We feel really good, really good about the actions that we've taken. They are an element, not the element of our strategy, but as you can see in our commercial performance, we were winning in the marketplace in a big way. So we will annualize that in nine months or so. We do not have the next tranche of pricing strategies that we are planning to do in DIY or in commercial. This was, this is what we wanted to do. And I think we're very pleased with how both have played out.

Yes. The only thing that I'll add there is that our core capability inside the company, hasn't changed. The things that we've historically worked on in terms of assortment the awesome work that our, our merchants have done over the years, the things that we see in terms of the industries, pricing dynamics, those things haven't changed. So, the core fundamentals and the core capability of the business hasn't changed over time. I've often said that, as we go through these dynamics, we tend to look at gross margins and pricing at a point in time. But over the long term, we've been very, very disciplined. As we've seen inflationary impacts hit the business, we've been very disciplined about raising pricing. And I've, I've often said that inflation is our friend in that, in that we're in that regard. So our core capabilities to expand margins hasn't changed. What we've done as Bill said is, we made some fundamental changes in terms of where we needed to be competitively in certain categories that have improved the growth rate of our business and nothing else about our businesses has changed. So all the great work that we've done in the past, we still have that capability going forward.

Very helpful. Thank you so much.

Thank you.

Thank you. Our next question has come from the line of Simeon Gutman with Morgan Stanley. Please proceed with your questions.

Hey everyone, a nice results. Maybe continuing on the gross margin thread maybe a comparer phrase what I heard from the last answer, which is, after these price investments we sort of that's the new base. And then from there, we could move into, the, where we were pre these price investments, which could have been up a little down a little sort of subject to the normal Jamere you said inflation, maybe mixed issues. But is there anything different about the go-forward once we laughed at these price investments and how you think the gross margin progresses? Because I think previously it's flattish maybe even up a little bit, is there anything wrong with that thought process in, in the out year?

I think you said it better than I did Simeon. The only thing that I would add to it is, and you mentioned mix. If our commercial business continues to grow at a substantially accelerated rate versus our retail business, that'll provide incremental headwind.

Okay. Got it. Okay. That's fair. And then my follow-up, maybe it is it's for you Bill, because you're, you had the quote in the press release about aspiring or aiming for growth prospects in this current fiscal year. I assume you're mentioning, it's meant to be sales curious if it can be sales and EBIT or one could be without the other. And then, 2022 is a complex year because of what you're lapping. Is there any reason we shouldn't be back to algo by 2023? The only thing different I heard on the call was just additional capital investments, Bill that you mentioned in terms of investment, not sure if those hit the P&L any different, but if you can speak about, theoretically the, the out year progression.

Yes. It's a, it's an interesting way out. I would've told you FY 2022 would have been the normalized year this time last year Simeon, but I just can't tell you what's going to happen in the environment. I mean, we're sitting here take, we'll get people with mask on. Jamere and I are taking our mask on and off to answer questions. I would have never dreamt we were here in June, right? We all took our mask off and we're done with them. And here we are with Delta variants, so I can't tell you what's going to be in front of us. I do think the algorithm of the company is not going to change. The only thing that you highlight that is different right now is we will spend a little bit more on CapEx. One of the things that we've learned is, is that we probably operated our supply chain to the optimal level as I keep calling it to three decimal points. We didn't plan our supply chain to have sustained 25% surge in volume for 18 months. That has put an enormous strain on our facilities, more importantly on our people. So as we think about the future, we're going to be a little bit more aggressive. We're going to have a little bit more capacity in our supply chain to handle the volatility that we have seen for the first time in my career over this period of time. So that that'll be, over, over a couple of year period, probably a couple of hundred million dollars a year in incremental capital that we'll spend. But as we've said, all along our capital allocation strategy is one, continue to invest in the existing assets that we have to have them perform at an optimal level. Two, invest in every growth aspect that we can, that will provide us a reasonable investor IRR, and then three, whatever we have left over we'll return to shareholders, that algorithm is going to stay the same. I hope in 2023, we're back to whatever normal is. It will be interesting to see what happens in the sales environment as, as we enter whatever the new normal is. I can understand people think that the sales environment might be challenged as we lap these enormous growth in FY 2020 and 2021. I would have thought the same thing a year ago. I'm getting more and more confident that some of this is structural and some of this is permanent. What percentage your guess is as good as mine, because I've never seen a global pandemic before.

Got it, okay. Good luck. Thanks.

Thank you, Simeon.

Thank you. Our final questions come from the line of Liz Suzuki with Bank of America. Please proceed with your questions.

Great. Thank you. So I guess first, just a question on, on same skew inflation you mentioned that the retail business had about two percentage points of benefit there, was that consistent in the commercial channel as well?

Yes, we saw similar inflation in both retail and commercial.

Great. And as we think about just modeling the impact of cost increases, when did you really start to experience an acceleration of cost inflation? And as you set out that inventory, could there be a period where you're able to raise price on product sold that may have been acquired before costs really went up, which would enable some gross margin expansion, just as we think about modeling the cadence of the sell in versus sell out, how should we think about that?

Yes, it's a good point. We started to see the cost inflation really at the tail end of the third quarter and pretty much all of the fourth quarter. And, our merchants have done a fantastic job of negotiating timing and also done a fantastic job of making sure that we got retails raised in a way that kept us competitive in the, in the marketplace. And the way that, costs actually ended up flowing through the system. You typically will have a little bit of margin accretion at least in the early endings, as you raise retails before all of the costs increases, make their way through. And to the extent that, we see price increases come, there are times where we actually move a little bit early. So those are things that can actually help you at least in the near term get a little bit of margin accretion and get out ahead of what you're seeing from an inflation standpoint. And that's no different than, what we've done in the past.

Yep. Great. And just, sorry, one more follow up just on, on cost. Just as you think about rising wages, what's your average, entry-level minimum wage for at AutoZone and what are your expectations for how that could trend going into next year?

Yes, we really haven't disclosed our average entry level wage, but what I, what I will tell you is for the last four years, I've been talking about, we've been operating in the toughest labor and market I've ever seen, and that our wage inflation has been significant. It has basically doubled the wage inflation during this period of time. It is very, very difficult to get new AutoZoners to join the company. I hear that from all of our retail peers. Fortunately in the last five weeks or so we, things have changed a little bit. I don't know if that's directly related to the change in enhanced unemployment or not. But we have seen a meaningful improvement in the ability to hire people in both the distribution centers and the stores over time. But we are dealing with the most significant inflation in the labor market that I've ever seen. And really don't anticipate that slowing down materially until the labor market frees up some.

Yes, it's a, it's a macro issue. And certainly we're not immune to the market dynamics there. What else is that, we've done a very good job of sort of managing it. Our operations teams, both on the stores and the supply chain side are working really hard to manage turnover in this environment. We've been competitive in the marketplace. And then, when it, when it's all said and done, we do have pricing power that underpins our capability to price, to deal with the influx of the impacts of inflation, whether it's product costs or transportation costs, or what we're seeing in terms of labor. And that's, that's one of the things about this industry, the discipline in this industry that gives us a lot of confidence.

Great. Thanks very much.

Thank you. Okay. Before we conclude the call, I want to take a moment to reiterate. We believe our industry is strong and our business model is solid. We'll take nothing for granted. As we understand our customers have alternatives to shopping with us. We'll continue to focus on the basics as we strive to optimize shareholder value in FY 2022 and beyond. We thank you for participating in today's call and have a great fall.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Have a great day.