Welcome to AutoZone's 2025 Q4 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. If anyone should require operator assistance during the conference, please press zero on your telephone keypad. Please note this conference is being recorded. 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 obligation to update such statements. Today's call will also include certain non-GAAP measures. The reconciliation of GAAP to non-GAAP financial measures can be found in our press release. I will now like to turn the call over to your host, Philip Daniele, President and CEO of AutoZone. You may begin.

Thank you. Good morning, and thank you for joining us today for AutoZone's 2025 Fourth Quarter Conference Call. With me today are Jamere Jackson, 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 quarter's results. If not, the press release, along with slides complementing our comments today, are available on our website under the Investor Relations link. Please click on the quarterly earnings conference call to see them. To start out this morning, I want to thank our more than 130,000 AutoZoners across the entire company for their commitment to delivering on the first line of our pledge: AutoZoners always put customers first. Our operating theme for FY 25 was "Great people, great service," and we have lived up to that theme. Their contributions continue to allow us to deliver solid results. We will continue to succeed as long as we are all working towards the common goal of delivering what AutoZoners call "wow" customer service. To get started this morning, let me address our sales results. Coming into the quarter, we were optimistic that our focus on improved store execution would drive sales growth for both our retail and commercial channels. More specifically, we felt the momentum we gained over the last two quarters with our domestic commercial same-store sales would continue this quarter. We are very pleased that our domestic commercial sales accelerated again this quarter, up 11.5% on a 16-week basis. Additionally, our domestic retail comp performed well at 2.2%. Finally, our international constant currency comp remained solid, up 7.2% for the quarter, and relatively consistent on a two-year basis with last quarter's results. We are encouraged by our continued sales results, and we…

Thanks, Phil, and good morning, everyone. Our underlying operating results for the quarter were strong, highlighted by strong top-line results. Total sales were $6.2 billion, up 0.6% versus the 17-week quarter last year. On a 16-week comparison to last year, our sales grew 6.9%. Our domestic same-store sales grew 4.8%, and our international comp was up 7.2% on a constant currency basis. Total company EBIT was down 1.1%, and our EPS was up 1.3% on a 16-week basis. I do want to point out that excluding our non-cash $80 million LIFO charge, and reporting on a comparable 16-week basis, EBIT would have grown 5.5% and EPS would have been up 8.7%. As Phil discussed earlier, we also had a headwind from foreign exchange rates this quarter. For Mexico, FX rates weakened just over 5% versus the US dollar for the quarter, adding a $36 million headwind to sales, a $14 million headwind to EBIT, and a 57¢ a share drag on EPS versus the prior year. For the full year, our sales were $18.9 billion, up 4.5% versus last fiscal year on a 52-week basis. We continue to be proud of our results as the efforts of our AutoZoners in our stores and distribution centers have enabled us to continue to grow our business. Let me take a few moments to elaborate on the specifics in our P&L for Q4. And first, I'll give a little more color on our sales and our growth initiatives. Starting with our domestic commercial business for the fourth quarter, our domestic DIFM sales were $1.8 billion, up 12.5% on a 16-week basis. For the quarter, our domestic commercial sales represented 33% of our domestic auto parts sales and 28% of our total company sales. Our average weekly sales per program were approximately $18,200, up…

Thank you, Jamere. We are excited to start FY '26. We have a lot to accomplish in this new fiscal year. We are committed to improving our execution and driving Wow customer service. We feel we are well-positioned to grow sales across our domestic and our international store businesses with both our retail and our commercial customers. We expect to manage our gross margins effectively and operating expenses appropriately for future growth. We continue to put our capital to work where it will have the biggest impact on sales: our stores, our distribution centers, and investing in technology to build a superior customer service experience. The top focus areas for FY '26 will be growing share in our domestic commercial business and continuing our momentum internationally. We are excited to get started on our first quarter. We understand we cannot take things for granted. We must remain laser-focused on customer service, flawless execution, and gaining market share in every market in which we operate. This time of year, we also enjoy reflecting on the past twelve months' highlights. Our teams achieved several impressive milestones this past year. First, $18.9 billion in sales, and we hope to celebrate the $20 billion milestone soon. Domestic commercial sales at an amazing $5.2 billion. Average weekly sales domestically of just over $48,000 a store, equating to just over $2.5 million per store annually. We opened an amazing 195 new stores domestically. This is the most stores we opened annually in the US since fiscal year 2004, over twenty years ago, and we opened a record 109 stores internationally. Globally, we opened a record 304 net new stores, over 43% more stores than the year before. In a week or so, we will be hosting our national sales meeting here in Memphis and we'll discuss…

Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We do ask to please limit yourself to two questions. If you have any additional questions, you may reenter the queue by pressing 1. One moment, while we poll for questions. Your first question for today is from Bret Jordan with Jefferies.

Good morning, Phil. You were calling out inflation, I think, at least 3% in the fiscal first quarter. It's sounding from some of the WDs like they're seeing a fair amount more price than that. Is that your supply chain allowing you to sort of get to market at a lower cost and use price as a share gain? Or are you really expecting more than three, you know, sort of tied to same SKU tariff tailwinds?

I think, Bret, we suspect it will probably, you know, we said kind of at least 3%, probably goes up from here. I mean, at the end of the day, you know, we've talked for years about this industry being pretty disciplined and rational in pricing. And, you know, we're going to use the pricing lever as we need to. To cover the cost of goods and make sure we stay competitive in the marketplace.

And then interesting you commented that discretionary is up for the first time in a bit. Is there anything either internally that you're doing to drive that? Are you seeing sort of green shoots as far as that consumer base?

Yeah. Well, I think it's kind of two points. At some point, you know, it really spiked up, and I'm going back several years, you know, coming out of the pandemic, the discretionary categories really spiked up. And then they've really declined over the last two years. As we said, it's the best growth we've had over the last couple of months since '23. So I'd say it's probably bottomed out and slowly started to gain some traction. There's a little bit of green shoots, but I would say it's a little early to say. I still think that, you know, the lower-end consumer is still under quite a bit of pressure. And, you know, this is mostly on the DIY sales floor side of the business.

Great. Thank you. Appreciate it.

Thank you, Bret. Thanks, Bret.

Your next question for today is from Michael Lasser with UBS.

Good morning. Thank you so much for taking my question. Can you provide a sense of how the arc of the LIFO charges will look from here? You indicated to expect $120 million in the first quarter. Is it reasonable for us to simply annualize that number, getting to around $520 million or so for the full year, or would you expect that to peak and then fade off? And how will your margins look as that cycle fades? Meaning, you get all of the margin headwind back on the other side of this cycle?

Yeah. Thanks, Michael, for the question. So, you know, for the first quarter, we're expecting the number to be in the $120 million ZIP code, if you will. And we expect pressure, quite frankly, for the subsequent quarters, Q2, Q3, Q4. I would say over those three quarters, right now, our modeling is probably in the $80 to $85 million-ish a quarter range. It's a pretty dynamic environment, obviously, because it's associated with tariffs. But based on the visibility that we see right now, it could be in the $80 to $85 a quarter going out Q2, Q3, and Q4. As always, we'll be pretty transparent about what we see there and share the next quarter's outlook. What I'll say in total about that is, you know, as you've seen in the past, you know, as we have booked these LIFO charges and as we sort of anniversary those, and, you know, they become part of the base as we see product cost deflation over time, which we have. Then we would expect to see these gains potentially rolling back through the P&L. And over time, we'll get back to, you know, these reversion out and being gained through the P&L. The timing of which right now is a little bit uncertain, but that's what you can expect in the future. And then the last thing I'll say about LIFO is it is a little bit of a bellwether, if you will, for what we expect to see coming on inflation. And as Phil talked about a little bit earlier, I mean, we see at least 3% inflation. But what I'll tell you is that based on what we're seeing from tariffs and the costs associated with tariffs, and the playbook that we have, which is negotiating with our vendors to absorb a portion of the cost, to raise retails where necessary, and make sure and doing all of this that we're taking care of the customer. I mean, that playbook is still active. And we're going to be pretty disciplined about what we do. But our goal over time is to maintain our gross margins and our gross margin rate.

Got you. Very helpful. My follow-up question is on SG&A. Your SG&A growth was elevated this quarter. It sounds like it might remain elevated for at least the near term. Others are having a similar dynamic. Is this a reflection of an arms race within the industry where there's just an opportunity to put more operating expense in the ground, and that will translate to better share, and eventually, that will subside, or is it just more expensive to run an auto parts business these days?

Yeah. I wouldn't characterize it as an arms race. What I'll say very specifically is that we're investing heavily primarily in new stores this year. And that new store growth will be, as I mentioned, 325 to 350 stores in The Americas, which is going to, you know, include an acceleration for both the US and Mexico. And I'll remind you that, you know, new stores typically mature in four to five years, and so their SG&A drags, you know, as in the early years. And then as those stores mature, we actually start to leverage SG&A. What I'll say is that, you know, we expect this SG&A growth to be in the mid-single-digit ZIP code as we move forward and execute on this plan. And coming out on the other side of that, we're creating a faster-growing business, and you can see the growth shoots in our current quarter's comp. And we expect to continue that momentum as we move forward. So, you know, the cost to operate, you know, in this industry, you know, we've always managed that with discipline. I think what you're seeing here is us very purposefully investing in growth initiatives that are going to pay real dividends for us in terms of a faster-growing business going forward.

Thank you very much, and good luck.

Thank you. Thank you.

Your next question is from Greg Melich with Evercore.

Maybe I'd love to follow-up on the last question, and then my follow-up would be on price elasticity. On SG&A growth particularly, what sort of comp now do you expect given the growth plans to be necessary to leverage SG&A? If we think about the next couple of years?

Yeah. I mean, you know, one of the things that we've said is that, you know, we will manage the SG&A line in line with sales growth. So, you know, if we're expecting to invest this kind of SG&A going forward, particularly with new stores, then, you know, we obviously would expect an acceleration in the comp. I won't be date certain or very specific about what that comp looks like. But what you can anticipate for us is if we're expecting to grow SG&A in this ZIP code, then you can see us to have a little bit faster growth on the comp line. And, again, we'll be transparent about what we see in the market going forward. But we like the growth prospects that we have. We're growing share both in DIY and in commercial. Our Mexico business is doing very, very well against a tougher macro backdrop. But, you know, we have a lot of confidence in this growth plan. Hence, you know, we're going to continue to accelerate store growth in the future.

Got it. And I guess the fun part of the question is really on price elasticity. It seems like as the first wave of inflation has come through, I know there's usually some or maybe some items out of the basket, maybe a little bit of deferral, but it sounds like you guys have seen no price elasticity to unit demand as this is occurring?

Yeah, you know, we've talked about this for a long time. You know, if you think about the way we kind of characterize our big segments of categories, failure, maintenance, and discretionary, the first two, they're, you know, they're break-fix. Or, you know, customers learn over time that if I don't do the maintenance on the car, I ultimately end up with a bigger failure project that costs me a lot more money. So customers can defer that maintenance for some period of time, but ultimately, they realize that they've got to fix it or it creates more damage. You know, again, the discretionary segment of our business specifically on the DIY side is, you know, pretty small relative to the other two. There's just not a lot of elasticity variability in the categories that we play in. Some deferral back and forth, weather is dependent on a couple of them. I think you saw we talked a little bit about our performance in the Midwest. The Northeast was a little better because we got a more normal winter, which drives more, you know, brake sales and undercar sales because it just drives failure on those types of parts. So we feel good about that. The industry has been able to pass on these costs to the consumer. And we saw it in the pandemic. We've seen it over, you know, fifteen, twenty, thirty-year time horizons. It's all been pretty disciplined and rational. We suspect that that's going to continue.

That's great. Congrats and good luck.

Thank you. Thanks.

Your next question for today is from Christopher Horvers with JPMorgan.

Thanks, guys. Good morning. So I want to make a longer-term question here. Can you talk about the growth opportunity in Mexico, about 900-ish stores? How big is your market share? How big is the market? You know, there's about 37,000 auto parts stores in the United States. Is that a comparable number? And do you think over time that you could perhaps double your store base from here?

Yeah. I think we see some pretty long shoots for store growth and share growth in all of our international markets, and obviously, also in Mexico. I will say that the competitive set in Mexico is a lot different than it is in the US. Although, you know, there are some pretty good competitors down there that have higher store counts. But there's also a large part of the marketplace that is maybe category-specific. You know, maybe they're focused specifically on undercar or starters and alternators or brakes or something of that nature. As opposed to somebody like us where we have kind of all categories and great service. So we've got a pretty big store count advantage over the rest of the marketplace, but we still see lots of opportunities to continue to expand our store count footprint. Specifically in the southern half of the country and some of the more dense markets. Take Mexico City, for example. We just don't have a lot of stores there. And it's one of the biggest cities in the world. Lots of opportunity for us to continue to grow.

Yeah. I think to put it in a little perspective, I mean, you've got a car park there that is older than the car park in the US by roughly three years or so. And you've got a number of outlets there that are very fragmented, if you will. So if you look at the size of our chain today, we're probably larger than the next seven or eight chains combined. So our market share position there is very strong. And as Phil said, we've got a tremendous opportunity to go forward. Hence, we've talked about accelerating store growth in Mexico. So we're pretty bullish on it going forward. You know, you've got a growing and aging car park, and you've got a competitive set there that we bring to the market is differentiated. And we're pretty excited about the opportunity to grow market share.

Got it. And then two quick margin follow-up questions. First on LIFO, is the LIFO numbers that you put out, Jamere, predicated on that 3% inflation in the balance of the year? And then on SG&A, SG&A per store growth in '26, given the timing of openings, do you expect that to be weighted to the back half of the year?

Yeah. I mean, we expect, you know, from an inflation standpoint, for that inflation number to continue to creep up as we talked about. And, you know, what we anticipate going forward is that, you know, you could see, you know, another couple of mid-single-digit increments of inflation as we work our way through tariffs and, you know, build our inventory accordingly. So with that, if that is the case, then you could see, you know, the LIFO in this ZIP code. Again, it's a pretty dynamic environment. You know, what I'll tell you is that our merchandising teams have done a really good job along with our suppliers in finding ways to go mitigate costs. We haven't experienced as much cost as we would have anticipated given all the announcements that are out there. So as the environment unfolds, then we've reacted accordingly. And, again, the playbook is the same as we move forward. And then on SG&A per store? Back half? Yeah. From an SG&A per store standpoint in the back half, I mean, you know, we think we're going to be somewhere in this mid-single-digit growth for the entire fiscal year. Probably accelerates a little bit in the back half because our store count will accelerate in the back half of the year. It'll be a little bit more level-loaded than it was in this past year, but still a little bit more skewed to the back half of the year. So as you're sort of building your models, you know, call it mid-single digits for the year and maybe have a little bit of acceleration in the back half, and you should be in the right ZIP code.

Thanks, guys. We're on both.

Yeah. Just that we ultimately, you know, the store count growth year over year, you know, we've kind of said we plan to be somewhere around that 500 stores a year in 2028. So we are, as Jamere said, we're going to continue to ramp up our store counts both domestically and internationally to get somewhere close to that. You know, roughly 300 in the US and 200 internationally over time.

Got it. Thanks so much.

Your next question is from Steven Zaccone with Citi.

Good morning. Thanks very much for taking my question. I wanted to follow-up on the pricing elasticity question. It sounds like things have gone well thus far. But as you think about same chain inflation stepping up over the next couple of quarters, do you have concerns that there could be some more price elasticity in the category? How does that factor into your same-store sales outlook?

Yeah. Great. Well, yeah, I mean, yes. I think there probably will be more, you know, same SKU inflation as we move throughout the year as the full impact of tariffs come in. And prices continue to migrate up to cover those incremental costs. But I don't, you know, again, if the categories that we play in, if the starter breaks, your car is not going to start. And you have to ultimately do one of two things. Either bum a ride or get your car fixed or take an Uber. And none of those are, you know, probably that customer's probably not that excited about that. I'd like, you know, remind everybody too, most of the categories in the ticket averages that we're talking about here are, you know, somewhere in the mid-35 to forty dollars on DIY, and they're 60 to $90 on the commercial side depending on the category and the job that's being done. So that, you know, an incremental one, two, three, or 5% is not a significant dollar amount. It's not like we're buying, you know, cars that are where the price went up 5 to $8,000 or, you know, a couch where it went up 20 or 30%. It's just not that big a dollar amount. So it's a little easier for the consumer to swallow that price. But we do expect it's going to continue. We expect the industry will remain rational and disciplined in its approach to pricing. The one thing we don't want to do, and we'll always watch, is make sure we're not destroying demand. Because we think that's very important to keep the customer coming into our stores. The shop buying from us. Those are important.

Okay. Thanks. And then the follow-up I had was just on gross margin. Merchandise margin has been strong the last couple of quarters. It looks like that's going to continue in the first quarter. Can you just elaborate a little bit more on what's driving that? And can it continue through the balance of fiscal 2026?

Yeah. I think our, again, our teams in merchandising have done a fantastic job of finding opportunities for us to drive gross margin improvement. It's a playbook that we've run for a really long time. It's a combination of finding, you know, cost opportunities with our vendor community. It's innovation in those categories that enable us to go do that, and it's an opportunity for us to sweeten the mix a little bit. And we've sweetened that mix in some instances by moving more volume into, you know, our Duralast brand. So teams have done a very good job of doing that over time. It's a playbook that we've run. We run it with intensity inside the company. And we count on that to help us grow our business. And that's really important for us as we think about sort of margin expansion in the future. Obviously, our commercial business is a little bit lower gross margin, although we like the operating margins associated with that. We think the work that we've done on the merchandising side, particularly with merch margins, has the ability to basically mute that pressure that we see on gross margins. So you get an opportunity to have a faster-growing business with commercial that doesn't create a dramatic drag on your gross margins as you move forward.

Great. Thanks very much.

Thank you.

Your next question is from Brian Nagel with Oppenheimer.

Hi, good morning. Thanks for taking my question. So first question, I know it's a bit of a follow-up, but just on the topic of tariffs and trade policy, so as we look at these fiscal Q4 results, how should we think about what the impacts tariffs have? I mean, is there a way you can say it was, were the incremental tariffs a driver of sales? Did you see some sort of, say, impacts on the margin here in the quarter?

Yeah. I would say, you know, the best way to think about it is you've seen our ticket growth basically accelerate in both DIY and commercial. And a portion of that ticket growth is very clearly driven by the cost increases that we're seeing associated with tariffs. Now, while we've been running the playbook, as I mentioned before, of having, you know, very healthy negotiations with our vendors, by, you know, moving sources in some cases. You know, the reality is that some of that is finding its way into the product cost and finding its way into same SKU inflation. And the entire industry has moved retail prices up accordingly. So there's a very direct impact associated with tariffs and the fact that you're starting to see more pronounced same SKU inflation and as a result, retails across the industry are going up. As we move forward and we continue to see that, and to have probably fewer opportunities to mitigate that, you'll continue to see same SKU inflation tick up and likely see retails moving up accordingly. And, again, you know, back to the previous question on it, this is largely a break-fix business where, you know, the lion's share of our business is in failure and maintenance-related categories. So, you know, we believe that the industry will continue to be rational in terms of how we price, and we don't expect a notable drop-off in terms of units.

I think those long-term trends too have been in kind of that three, little more than 3% same SKU inflation or ticket average inflation, driven by some number of, you know, negative transaction counts. And those have been in place for, you know, I said this on several calls, twenty and thirty years. You had a big bump through COVID, specifically because of the supply chain crisis. It was muted coming out of that for the last couple of years, and tariffs are now putting it back in somewhere in that 3% range. I think over time, because of technology, parts consolidations, and improvements in longevity of parts, you're going to see that natural incline in average unit retails and slightly decline in transaction counts.

No. That's very helpful. And then, so as a follow-up to that, if you look at the cadence of sales through the fiscal fourth quarter, I mean, recognizing, as you pointed out, there's some noise with the timing of, I guess, the Fourth of July holiday. But the business in both your DIY and your commercial side, sales growth strengthened. So how much is there a way to think about how much of that is this when we're talking about your, you know, tariffs rolling through? I know there was weather improved for you. But then, you know, I guess the final piece would be actual better underlying demand. So how, I mean, the question I'm asking is, how should we think about that? Improving trend and sales growth through the quarter with all this going on?

Yeah. Great. You brought up a couple of great points. One is, if you think year over year, the early part of summer was very, very wet and slightly mild relative to the previous year and relative to history. About mid-July, it started to crank up the heat, and you saw we saw the heat categories really take off in that time frame. And, you know, brakes, undercar, those sorts of categories have been really strong up in the Northeast and the Midwest on the back of some better winter and spring weather, which we thought was going to be an advantage for us. I would say all those things you mentioned are reasons that we're pretty optimistic. You know, the marketplace is still pretty good. The weather's been pretty good for us. Specifically in the back half of the year, we are getting some same SKU inflation. And I'll also say that I believe what we're doing, our initiatives are also paying out. We have opened more new stores, but we've continued to improve our assortments at the store level. We've opened up hubs and mega hubs and gotten that inventory closer to the stores. Our in-stocks are at an all-time high. We feel really good about our execution in our stores, both on the DIY side and the commercial side. So I think it's all of those kind of coming together. Tell a pretty good story for us, and it's why we're confident going into the next couple of quarters.

I appreciate all the color. Thank you.

Thank you.

Your next question for today is from David Bellinger with Mizuho.

Hey, good morning, everyone. Thanks for the questions. Maybe for Phil, just with all the pricing going into the category. And this is inflation on top of inflation, even pre-tariff inflation. How concerned are you that we could see another deferral cycle show up, maybe sometime in 2026? Is that something you're watching for or just being a bit more mindful of and only increasing prices by that 3% as opposed to something more?

Yeah, like I said before, a minute ago, we're going to watch our, you know, demand signals that we get, we watch that like a hawk. But at the end of the day, I'm not that concerned about a massive deferral because I think, you know, the consumer at the bottom end has been under pressure for well over two years. Those maintenance deferral cycles, you've probably run through them. If that's been your car where you didn't replace brakes, at some point, you don't have a whole lot of choice. You've got to do it. The discretionary stuff could continue to be under some form of pressure, but it's also gotten to a point where I think it's got really low over the last two years and coming back into a more normal cycle, I would think. So. I'm not that worried about a massive deferral cycle unless inflation ticks up more than what we think it's going to be in that mid-single-digit range. You know, if it went up significantly more and there was an additional shock to the system, I think we would worry about that. But at this point, I think the consumer has been dealing with this inflation for, you know, since probably April or May, depending on the category. And it's showing up in our category today, but we think it's manageable. And we think customer demand stays intact.

I appreciate that. And then just my follow-up question on Mexico and the comments on the long-term growth opportunity there, should we see the Mega hub model at some point roll out to Mexico and sort of replenish the stores more frequently? How should we think about the build of that geography and what other features or capabilities these stores could get over time?

Yeah, we're light on the hub and Mega hub strategy down in Mexico and have been. It's been mostly a, you know, kind of a satellite strategy down there. We spent the last couple of years really working on our assortment in Mexico to really capitalize on the commercial opportunity. We say commercial is our biggest opportunity in the US. Well, oh, by the way, it's the biggest opportunity in our international markets as well because the mix of volume, roughly 40% DIY in the US, 60% in Mexico in commercial in the US. It's more like, you know, 65. You know, 35, 40 in the it's the inverse of the US. So we like our opportunities down there. So we're strengthening those assortments, and that says we probably need hubs and mega hubs down there to make sure we're satisfying the commercial customer as well.

Very good. Thank you.

Thank you.

Your final question for today is from Steven Forbes with Guggenheim Securities.

Good morning, Phil, Bryan. For Phil, just revisiting the path to 500 stores by 2028, I guess sort of a two-part question. One, as we think about the 200 international stores, can you break that down by country? And then how does the year one expense weight differ between a new U.S. store versus an international store? Like, is there anything we should note as we dramatically increase the number of international stores to the mix?

Yeah. So, you know, in terms of the split, obviously, we will, you know, have significantly more of those international stores in Mexico versus Brazil. One, because we see the market opportunity in Mexico. We have scale there today. And to Phil's point, there are opportunities for us to improve strategically there to really grow our business. And so, you know, to the extent that we're going to put those strategies in place in Mexico, we would expect most of that international mix to skew towards Mexico versus Brazil over time. I think in terms of the cost profile on a relative basis, it's very similar to, you know, what we see in the US. Obviously, the absolute cost per is different in the international markets versus the US, but the cost drag in the early years is very similar to what we see in the US. You know, the stores typically take somewhere between 4 and 5 years to mature. We see a drag in the early years. But as those stores mature and the same-store sales continue to grow, then those stores become very profitable for us as we move forward.

And then just a quick follow-up right as we think about marrying expense growth to sales growth, the comment that you made earlier on the call to another question. Does that apply for 2026? You know, given the ramp in new stores and the comments around mid-single-digit expense per store growth, because it's really setting up, you know, sort of a high single-digit-ish growth profile for expenses and almost like an indirect sort of framework for sales as well.

Yeah, I think, you know, the way to think about it is that, you know, if SG&A is going to be in that ZIP code and it's going to be driven by new stores, as we've suggested, remember, we jammed a lot of new stores into the back half of last year that are going to be SG&A drags for us as we enter this year. And then we're layering on top of that an accelerated sales growth plan this year. So to make, you know, the math work for us, I mean, we essentially have to go drive the sales growth from those new stores and from our existing footprint to make, you know, to make the model work for us. And we're doing that. And you're seeing that on the top line. If, as we said in the past, and we continue to manage the business this way, if we don't see, you know, the kind of performance that we need to see from a sales standpoint, then we know how to reach into the middle of the P&L and pull the expenses out so that we deliver the kind of profitability that we need to. So it's accelerated. But that acceleration is predicated on us continuing to move in the right direction on the top line.

Thank you.

Thank you. All right. Thank you for joining us on today's call. Before we conclude the call, I want to take a moment to reiterate that we believe that our industry remains in a very strong position, and our business model is solid. We are excited about our growth prospects for the new year, but we will take nothing for granted as we understand that our customers have alternatives. We have exciting plans that will help us succeed in the future. But I want to stress that this is a marathon and not a sprint. As we continue to focus on flawless execution and strive to optimize shareholder value for the future, we are confident that AutoZone will be successful. Thank you for participating in today's call.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.