Greetings. Welcome to AutoZone's 2023 Q3 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note, this conference is being recorded. Before we begin, the company would like to read some forward-looking statements.

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. 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 a discussion of important risks and uncertainties that could cause actual results to differ materially from expectations. Forward-looking statements speak only as of the date made, and the company undertakes no obligations 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.

I will now turn the conference call over to your host, Bill Rhodes, Chairman, President, and Chief Executive Officer. Sir, you may begin.

Good morning, and thank you for joining us today for AutoZone's 2023 third quarter conference call. With me today are Jamere Jackson, Executive Vice President and Chief Financial Officer; and Brian Campbell, Vice President, Treasurer, Investor Relations and Tax. Regarding the third 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 we begin, I would like to thank our AutoZoners across the company for their commitment to providing our customers with WOW! Customer Service, which has been the secret to our long-term, consistent success. For the third quarter, our team delivered total sales growth of 5.8%, which included a 1.9% domestic same store sales comp. While our topline results were below our expectations at the start of the quarter, our sales improved later in the quarter as we experienced improved weather. We were pleased to deliver operating profit growth north of 9% and EPS growth of 17.5%. Both our operating profit and EPS growth were the highest growth rates we've had in over a year. As many retailers have reported, March was a tough month, as cool, wet weather impacted customer traffic. In addition, snow accumulations were down significantly in February and March for much of the country, which also had some impact on our business. We mentioned in our last call that weather, particularly during tax refund season, really matters. Unfortunately, it was unfavorable this year, as our results reflect. We also, after rapid growth and extensive market share gains in commercial, experienced some headwinds this quarter and our growth was disappointing to us. We were…

Thanks, Bill, and good morning, everyone. As Bill mentioned, we had solid results for our third quarter. This quarter, we delivered a 1.9% domestic comp growth, a 9.3% increase in EBIT, and a 17.5% increase in EPS. To start this morning, let me take a few moments to elaborate on the specifics in our P&L for Q3. For the quarter, total sales were just under $4.1 billion, up 5.8%, reflecting continued strength in our industry, solid execution of our growth initiatives. Let me give a little more color on our growth initiatives, starting with our commercial business for the third quarter. Our domestic DIFM sales increased 6.3% to just over $1.1 billion and were up just over 32% on a two-year stack basis. Sales to our domestic DIFM customers represented 31% of our domestic auto part sales. Our weekly sales per program were $16,786, up 1.2%. We experienced growth across both our local customer base and national accounts, with local being the stronger of the two categories. Our results for the quarter set another record for highest weekly sales volume in the history of the chain at $92.5 million. I want to reiterate that our commercial business is strong and we believe we grew share despite a deceleration in our growth rates this quarter. We have a commercial program in approximately 88% 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 26 net new programs, finishing with 5,526 total programs. As expected, commercial growth continues to lead the way in FY '23, and we continue to focus on growing our business faster. Our strategy remains intact, as we continue to gain share in the industry. And as I have noted on past calls, our mega…

Thank you, Jamere. We are proud of the results our team delivered this past quarter. We remain on track to deliver a solid 2023. But we must continue to be focused on superior customer service and flawless execution. Execution and our culture of always putting the customer first are what define us. As Jamere said a moment ago, we continue to be bullish on our industry and, in particular, on our own opportunities for the remainder of the year. We will continue to invest in initiatives that drive an appropriate return on capital and we continue investing where our returns are the highest. This upcoming quarter will be very busy for us. We'll be opening over 100 stores in the Americas. We'll also remain focused on those initiatives that we have underway to grow sales in both our retail and commercial businesses. As we have mentioned previously, we are doubling down on execution and are focused on driving share gains. We know that investors will ultimately measure us by what our future cash flows look like three to five years from now, and we accept that challenge. I continue to be bullish on our industry and, in particular, on AutoZone and AutoZoners. Now we'd like to open up the call for questions.

Thank you [Operator Instructions] Our first question this morning is coming from Bret Jordan from Jefferies. Please go ahead, Bret.

Hi, good morning guys.

Hi Bret.

Could you talk a little bit more about the internal factors that impacted growth? I think you said you'd deemphasized some internal disciplines in the prepared remarks. Could you maybe give us some more color there and maybe what the turnaround time on those disciplines might be?

Yes, it's a great question, Bret. Thank you for it - yes, I would - I want to make - be very careful how I say this. We unintentionally deemphasize some of the processes and procedures that we have in place, and that's not to be surprising. During the pandemic, we had to do a lot of things differently. And also in the commercial business, in particular, we were growing very, very rapidly. And we just got away from some of the process, procedures that we have in place. And we are going back to those and reemphasizing those. But to your point, that's not going to turn around in a day. It's going to turn around in months, not days or weeks. And we're working very diligently on it today. But - it's some simple things like periodic - how are we deploying our sales force, what our national account focus is? And just things like that, that we have very disciplined processes that just in the midst of the pandemic, we kind of turned our back on a little bit.

Okay. And then a question on the Q4 outlook, just given the call out of the weather impact in March, if we go back to past years like '17 or maybe 2012, where real mild winter negatively impacted the early summer. Are you seeing any of that as we go into the fourth quarter or was it really just sort of a one quarter event with the weather?

I think that's a great question, too, Bret. And you're exactly right. We've seen it in the past. The one-time that's different this year is, we did have winter in December. So in 2017, we never had a winter. I also talked about that our brakes category has been a little bit softer. That can be a place where we see some lingering effects. I don't think it's going to be anywhere on the order of magnitude of what we saw in '17, but it might be a little bit softer.

Okay, great. Thank you.

Thank you.

Thank you. Your next question is coming from Christopher Horvers from JPMorgan. Christopher, your line is life. Please go ahead.

Thanks, good morning everybody.

Good morning.

So a couple of questions on the top line, the rebound that you saw in April and May, can you talk about how DIY and Do-It-For-Me performed in that rebound? And Jamere, you talked about the low double-digit as far as the eye can see is your expectation that you can get back to that low double-digit pace in Do-It-For-Me in the fourth quarter?

Chris, I'm going to let Jamere answer that second part if you don't mind. It was his statement. I think he's ready for that, too and I am as well. I think - the businesses trended very similarly. I think one of the things that I also pointed out, it was not just that the weather was poor. The weather hit us at the worst time of the year for us during the all-important tax refund season. You all have seen tax refunds were down a little bit this year. But to us, the bigger implication was the weather was just pretty awful. It was cold and wet and mild during that period of time. And so, we saw both businesses trend down and they both have improved at some level, like I called out in the prepared remarks. Jamere?

Yes. So listen, as I said in my remarks, I mean, we're still committed to being a double-digit grower over time. We're underpenetrated; we have roughly a, four to five share and that gives us an opportunity to create a faster growing business. We're executing our growth playbook and that growth playbook, quite frankly, still has a lot of runway associated with it, and we saw significant share gains over the past three years. So things like improving the quality of our parts and our Duralast offerings, expanding our assortments with Mega-hubs, improving our delivery times, leveraging technology, the competitive pricing that we've done, all of those things still have a lot of legs associated with them. So when I think about what Bill talked about as it relates to execution, first, we believe that we grew share in commercial despite the growth rate deceleration. And secondly, we believe that those growth initiatives still have a lot of runway. And we have other initiatives in flight, as Bill mentioned, that we'll execute in Q4 and during FY '24 that we believe will accelerate growth. So nothing's changed in our strategy. Nothing has changed in our outlook as we move forward.

I don't think anything has changed in our commitment. We need to be a double-digit grower in commercial. And we weren't this quarter.

Got it. And then on the gross margin line, so - a two-part question. So as input and freight costs come down from your vendors, how are you thinking about maybe passing along some of that back to the consumer? Is that different from prior cycles? And then understandably, you're not - you're only going to get the LIFO back? But then ultimately, we get the turn of that inventory, and I know you're working hard to sort of leverage or increased scale with these vendors given the growth and Do-It-For-Me. So shouldn't we see have line of sight gross margin expansion beyond, just recapturing the LIFO headwinds?

Yes, I'll take the first part and turn it back to Jamere to talk about LIFO. As far as - first of all, we have not seen meaningful reductions in product costs at this point in time. We have seen meaningful reductions in freight cost. But if you recall, we did not even attempt to pass on all the freight costs to our customers, because we knew it was somewhat of an anomaly, and would reverse course at some order of magnitude. So as we are beginning to see some product costs reductions, I don't anticipate that we will reduce pricing as a result of those. And for one really strong reason, our wage inflation has been more than double what we've experienced in my 28 years here. We have to somehow get paid for that wage inflation, too, in the P&L. And so, if we get some reduction in product costs, I will anticipate that those will be used to offset some of that wage inflation. Jamere, you want to talk about LIFO?

Yes. So as I mentioned, we were up 56 basis points and 42 basis points of that was a LIFO tailwind. The remaining margin was driven by, as I said, merchandising margin actions, which more than offset the natural mix drag that we had from commercial. So as we continue to see those freight costs abate, we'll see those gains come back through to the P&L. And then as Bill said, what that means for us going forward is all of the things that we're working on in terms of merchandise margin actions will actually be accretive to the business, if you will, and we'll get back to our normal state of running the margin intensity playbook that we've run in the past. So, we feel pretty good about that. We've seen some inflation cool off in the supply chain. But as Bill said, the stickiest portion of that are wages and wages, we don't anticipate going down. So, there'll still be some cost pressures there. But it's good to actually be in a position to have some deflationary conversations, now versus where we were when we were in the heart of the pandemic when quite frankly, everything was moving with red arrows in terms of inflation. So, we think we have some opportunity there, and that should give us some margin tailwind as we move forward.

Thanks very much. Have a great rest of spring.

Yes, you too.

Thank you. Your next question is coming from Simeon Gutman from Morgan Stanley. Simeon, your line is live. Please go ahead.

Hi, good morning, everyone. Kind of a follow-up to the prior question. I wanted to ask what the commercial run rate looks like. It's going through some normalization. You both have said double-digit. I assume that's comp, not just total sales? And that's going to be at least two-x what the industry grows at in theory, if we take the historic run rate. So why is that, call it, high single, even low double why shouldn't that be the normalized run rate? Or - how else are you thinking about it, yes, so I'll leave it at that?

First of all, you said same-store I don't think we said same-store maybe Jamere did in his remarks. I just think, Simeon, we've got less than a 5% market share. We have over 15% in the retail business. We have a very fragmented industry in commercial with some competitors that, frankly, don't have a lot of the strengths that we have. I would anticipate us to grow meaningfully ahead of the market. And the market over long periods of time, you know DIFM is running 4%, 4.5%. So we - to me, growing double that, seems like it makes sense. Frankly, we didn't do it this quarter. We've got some work to do to reaccelerate our growth, but we also were celebrating some 25% and 27% growth over this period of time. The other thing that Jamere worked on is, we're not sitting here and sitting on our hands either. We're also working on - what are, the next generation of initiatives that we're going to deploy to make us provide better customer service for our commercial customers and be a better partner with them. I'm excited about some of the things that we're working on. They're not even in test yet. And as you know, we will go off and test them. But we're committed not to a quarter's growth rate in commercial. We're committed to being the largest player in the commercial business over the long run.

Yes. And my follow-up is, are you seeing anything with regard to price in terms of competitive posture? Is anything visible on the street? And then thinking about it yourself I know we talked about not engaging in it again, but it seems like the industry could go through another nice wave here with credit crunch and continued aging of the vehicle population?

Yes, great question. Yes. Have we seen things in the pricing environment in the commercial sector different than before? The answer is absolutely yes. One of our competitors well-advertised that they had changed their pricing posture. But I want to back up and I want to remind everybody, we did something similar about two years ago. And when we did it, first of all, we had tested it in six markets and then 14 markets before we rolled it to the other 40 some odd markets. We knew what was going to work. And it had nothing to do with our pricing posture versus our close-end competitors. It had everything to do with trying to optimize our value proposition versus the warehouse distributors who hold the vast majority of share in this industry. As we've seen a competitor move their pricing, we see no indications that, that competitor has - is lower than us on pricing. I think that they seem to have reduced that gap similar to what we did. We don't have perfect visibility to it, but that's what we're seeing at this point in time.

And the other thing I'll remind you, just in terms of our initiatives, pricing was a leg of the stool, if you will. And pricing is a pretty dynamic environment. And what we've always said is we're going to be priced right in the marketplace. So if indeed, there was some action there that suggested we needed to go to something, we would certainly do that to continue on this journey, as Bill mentioned before, of growing our market share and growing our gross margin dollars. That's been a winning playbook for us.

Thank you both.

Yes, thank you Simeon.

Your next question is coming from Zach Fadem from Wells Fargo. Zach, your line is live. Please go ahead.

Hi, good morning, and thank you. Is there a way to size up the impact of internal factors versus external factors on the comp this quarter? And as you think about all the moving parts around tax refunds and weather and perhaps some deferred maintenance from a gradually slowing consumer, to what extent do you view these Q3 headwinds as a one-off or transitory versus the beginning of perhaps a bigger change in trend for the industry?

I don't necessarily know that the industry changed. We'll have to see as we get more visibility to what happened across the industry. Certainly, our results changed. I can't go through and parse it piece-by-piece clearly, the weather implications from March or an anomaly that should not repeat themselves. I don't anticipate in the summer-time, they're using not a lot of weather impacts in the summer or fall. They generally have more pronounced in winter and spring, when the weather is more volatile. I think some of these internal things that we're talking about, as I said a minute ago, they're going to take us a little time, because we can start doing the processes again. But the ramifications and the outcomes that come along with those processes and as I said, they're going to take months, but we'll get there. Again, we're playing for the long game.

Got you. And then on your SG&A per store, it stepped back down to that 2.5% range. To what extent was this planned versus a pivot from slowing sales? And then as we look forward, is it fair to say that we've now returned to a more normalized lower single-digit run rate from here or would you expect it to step back up as sales perhaps recover?

Well, I think what we've said historically is we've been very disciplined on SG&A growth, and we've grown SG&A sort of in line with the top line. And you saw this quarter that as sales were a little bit lighter, we were able to deliver upon that. But what I'll also reiterate is that we're going to invest in SG&A in a disciplined way for the things that we need to do to create a faster growing business. One of the areas that I've talked about in the past is the investments that we're making in IT, for example, to improve our speed, to improve our productivity, to improve the way that we're doing business in our stores and improve the experience that our customers have with us. And so to the extent that we need to lean in and invest a little bit more in SG&A to deliver upon that, we will. But this is a business that has been very, very disciplined about managing the SG&A line. And when we need to manage it to deliver a certain result, we'll do that, but we're not going to do that at the expense of our growth initiatives.

Got it, appreciate the time guys.

Yes, thank you, Zach.

Your next question is coming from Steven Forbes from Guggenheim Securities. Steven, your line is live. Please go ahead.

Good morning.

Good morning.

I wanted to focus on the domestic Mega-hub initiative. So can you first just confirm the year-end target? I think you said '22 to '25 new Mega-hubs versus seven year-to-date. But I just want confirmation on that? And then, can you speak to any bottlenecks or limitations that would potentially prevent a more accelerated ramp in 2024 and beyond or just any comment on how the Mega-hub real estate pipeline looks today?

Yes, we've talked about our growth initiatives still having a lot of runways. And quite frankly, the Mega-hub is one of those. Candidly, Bill talked about execution. We would like to open more, and we would like to open them sooner. And this is a matter of execution versus a macro or competitive issue. So we've got a big quarter plan for Q4. And the teams are working on all the things that we need to work on from site identification to streamlining our processes to get more open faster. But this very clearly is an execution point. I want store development inside our company. And when we talk about places where we need to exit pandemic mode and have better execution, this is certainly one of them.

And then maybe just a follow-up, staying on the footprint opportunities, you talked about international, but curious maybe if you could expand on how you sort of expect the footprint in both Brazil and Mexico to grow over the coming years? And then you also mentioned ROIC, so curious if you could just update us on how the return profile of the international location compares to the company average today?

Sure. So in Mexico, excluding the pandemic, we've opened 40 stores a year for a very long period of time. We didn't open as many in the pandemic. Our team down there owes us a few of those openings. So hopefully, we will grow at a little bit faster rate on a store count basis in Mexico going forward. A little over a year ago, we defined our test in Brazil as over and made Brazil a part of our ongoing strategic growth plan. And so, they are now moving forward very rapidly. We're going to open 20 some odd stores this fiscal year and hopefully, we'll grow from there. So, it will become a bigger and bigger part of our organic - sorry, of our organic growth. On Brazil, the ROIC is negative. We've said it several times as - until we get to scale, some level of scale, we are continuing to lose money in Brazil because of the overhead infrastructure and warehouse and delivery infrastructure. We clearly see - a line of sight to profitability, and we see a line of sight to good returns. In Mexico, our returns are better than they are in the United States. It's been a very good performing market for us for 25 years now. And the most exciting part is as we get further and further in the growth spectrum, we see more and more growth in front of us in Mexico. So, we don't see any slowing down anytime soon.

Thank you.

Yes, thank you.

Your next question is coming from Scot Ciccarelli from Truist Securities. Scot, your line is live. Please go ahead.

Good morning guys. It makes sense that some of these execution issues can't be fixed in days or weeks, but it would also imply that they've been going on for a while. So I guess my question is like why would the slowdown show up so starkly this quarter? I guess I would have expected more of a trend line rather than a step function change in, let's call it stack growth trends? Thanks.

I think it's a fair question. And I want to be careful and not to say that all of this was due to those processes. I think that that's an element. We talked about weather. And there's, other things that are happening in the marketplace. So, I don't want to pin at all on that. And you're right. Those things have been going on for probably a year to two years. They're just going to take some - it's not putting those processes back in place. It's going to change it. It's the outcomes that come along with those processes weeks and months later.

Yes. And I think what you're hearing from our tone here is that, number one, we believe that the industry is healthy, and they're very healthy industry dynamics. Number two, we're continuing to grow share, but we have set a very ambitious goal to grow our business faster, particularly in commercial, where we said our business should grow double-digits. And as we look at the path forward, while we don't see an immediate snap back to that potentially. We think all the growth initiatives that we have in place, all the new things that we have in flight, give us a lot of confidence that we'll be able to go do that. So these are not things to Bill's point, where we're saying - we're pinning everything on some macro issue or pinning everything on execution. But we control our own destiny and the things that we've talked about from an execution standpoint, are things that will help us drive better performance as we move forward.

And the only thing I'd add further, we're playing the long game. Yes, we're disappointed with a 6% growth. That's not going to deter us. With in fact it makes us hungrier and work harder, so we're looking at this over the very long-term.

That's helpful. And then just a quickie, hopefully, how big of a sales gap in sales performance did you see in different markets that may help us better kind of gauge the impact of weather in the quarter? Thanks guys.

Yes. I mean, we saw mixed results. We talked a little bit about - the comments about the Northeast and the Midwest that clearly where we underperformed and those are markets that, quite frankly, if we get some decent weather here over the next quarter or so, we could see that rebound and produce a better result. But those are probably two areas regionally where we saw slightly lower performance than we saw across the rest of the chain.

Thank you.

Thank you.

Your next question is coming from Michael Lasser from UBS. Michael, your line is live. Please go ahead.

Good morning, thank you all for taking my question. So Rhodes, your commercial business decelerated at the same time there was a meaningful acceleration in the performance of the commercial businesses of one of your peers. What does that tell you about structural limitation in terms of your commercial business's ability to gain market share?

It's an interesting way to put it, Michael. Yes, I'll be crystal clear. That is not lost on us what you just pointed out. I'll also point out that, as I mentioned in the pricing discussion, they embarked on a - pivot in their strategy a little over a year ago and not dissimilar to what happened to us two years ago was they changed their competitiveness versus other sets of customers - competitors in the marketplace. And obviously, that strategy has worked. And it - so happened to coincide with the slowdown for us. I don't necessarily pin those two things together.

From my vantage point, Michael, I mean, again, as we've said before, they grew share, and those results were very impressive, but we also grew share as well. And our focus, again, is on how do we grow faster and win even larger shares than what we've grown over the past quarter or so. And that focus hasn't changed.

And a follow-up on your prior statement, Jamere, in order to get back to the double-digit growth for your commercial business, does that mean even to see an improvement in sales per existing customers or an increase in your total customer count to get to that level?

Well, we clearly, as we've talked about, we're a four or five share in what's approaching a $100 billion market. So - and that opportunity for us is to grow our share of wallet with our existing customers. And it's also to grow new business both in national and with locals are up and down the street as we affectionately call them in-house. And we believe that opportunity is still in front of us. So, as we look at our commercial business going forward, what gives us a tremendous amount of confidence, the things that we put in place have worked. We know that we have some things that are in flight today that are very, very promising that we're launching in Q4 and over the next year or so. And we think those things are going to pay dividends for us as well, but it's clearly an opportunity for us to go deeper in the wallets of our existing customers and grow new customers at the same time.

Thanks very much.

Thank you.

Your next question is coming from David Bellinger from ROTH MKM. David, your line is live. Please go ahead.

Hi, good morning. Thanks for taking the questions. So if we look back at this quarter, 3% comp in February, close to 4% in April and May as you move past some of these weather and tax refund fluctuations. So is that a good sustainable run rate to think about for comp sales growth from here and as you hold on to price and continue to make these underlying investments in the business?

As you know, David, we "don't give guidance" but we pointed out and called out March as the anomaly. So your supposition is generally in line with that thinking.

Got it. And then - just a follow-up on your prepared remarks, you talked about the sales floor and some discretionary categories, believe improving, I believe, is what you said. So that seems that odds with some of the other retailer comments out there. So anything to read into that, is there more of a trade-down benefit behind it? And maybe a positive for those types of categories, if we see more indications of just a broader spending slowdown, just how do you think about those specific categories?

Yes. If you recall, the categories that I called out were not necessarily discretionary. They're sales floor categories, but batteries, oil and wipers, none of those are discretionary. I don't think we've seen a big rebound in our discretionary business, except we've seen it a little bit improved at times as we've gotten back into in-stock. Those are some places we didn't have the in-stock levels that we would have liked. But generally, the places where we've seen the sales floor recover were more maintenance-oriented categories.

Great, thank you.

Yes, thank you.

Your next question is coming from Greg Melich from Evercore ISI. Greg, your line is live. Please go ahead.

Thanks. My first question is on inflation. Thanks for giving us the ticket up 4% and traffic down 2% for the company. Was it fair to say that inflation might be up six and that the difference might be items of basket or trade down or mix if we look at average ticket?

Yes, that's the right ZIP code. We saw inflation up kind of in the mid-single digit-ish range, if you will. And then there's, always things in the basket and mix that can cause you to have a slightly different ticket print than that.

Greg, I'd also like to remind you that historically for a long time, this industry has a trajectory that has pressure on customer count and growth in average ticket, because of the technological innovations that are happening in components on a vehicle. So, we've seen our ticket growth 3%, 3.5%, 4% basically since I've been in this business with generally a drag on transaction counts. So the gap between where we are today and where we are historically is closed considerably.

Got it. And then my second question is, you went through weather and geographies. Is there any difference on how the more urban or densely populated stores are performing versus rural? I'm just thinking that's one thing we've seen from de-densification over COVID and with shrink, particularly impacting some retailers, a lot of retailers.

I think shrink would be a different story than sales. We don't see any big significant difference in our sales trajectory in rural versus urban environments. Clearly, it's a tough environment out there on the shrink front. Our team is managing shrink okay. We have some trends that are a little bit worse than what they have been, and we're focused on that. But as you know, a lot of retailers are talking about organized retail crime and it's a real problem. Fortunately for us, there are a lot of times focused on more consumable items, which are not necessarily available in an AutoZone store.

And in certain areas, you haven't like chain store hours to sort of either protect employees or anything you have to go to that extreme?

Absolutely not, no we do put guards in certain stores to make sure that we do control the environment.

Right thanks, and good luck.

Yes, thank you.

Thank you.

Thank you. Our final question this morning is coming from Steven Zaccone from Citi. Steven, your line is live. Please go ahead.

Great, good morning, everyone thank you for squeezing me in. I wanted to ask on pricing. If we think about mid-single digits in the third quarter, what will it be in the fourth quarter? And as we look to next year, would you still expect it to be a slight tailwind to comps or could it, in fact, be flattish?

We expect the fourth quarter to be generally in the same ZIP code as what we saw in Q3. And then as we look to next year, there are several things that are at play here. But the ones that I think you ought to spend the most time thinking about as you're looking to correlate that to what you see in pricing is what we've talked about in the wage environment where wages are still stubbornly high. Let's call it, in the 4% to 5%-ish kind of ZIP code. And I think that sort of translates to at a minimum, what you see - you ought to see from a pricing environment. And there are puts and takes, obviously, from pricing. As Bill mentioned, there will be some categories where we'll see some deflation, some that will see some inflation. But generally speaking, we're fading more to the historical norms than we have in the past.

Okay, great, thank you. And then I hate to go back to commercial, but I did want to clarify something and just given your commentary about some of these internal factors, is it fair to think the time line to return to double-digit commercial growth may take a couple quarters? Anything you can say on the time line would be helpful for us as we assess our models?

Yes, I think we'll stick with what we've already said. This is not going to turn around in the weeks. It's going to take months. Is that four? Is that eight? I don't know until we get into it.

Thank you.

Yes, thank you very much. Okay. Before we conclude the call, I want to take a moment to reiterate we believe 2023 will continue to be a solid year for our industry, and our business model is working. We must take nothing for granted as we understand our customers have alternatives to shopping with us. We have exciting plans that should help us continue to succeed, but I want to stress that this is a marathon and not a sprint. As we continue to focus on the basics and strive to optimize shareholder value, we are confident AutoZone will continue to be successful. Lastly, as we celebrate Memorial Day next Monday, we should all remember our countries, heroes both past and present. We owe these Americans a tremendous debt of gratitude. Thank you for participating in today's call. Have a great day.

Thank you. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you once again for your participation.