Good morning, everyone. My name is Michael Lasser. I'm the hard line retail analyst from UBS. Thank you very much for joining us today. We're very pleased to have AutoZone with us.
With us from the company is Brian Campbell, who's the Vice President of Investor Relations and Charlie Pleas, who's the Senior Vice President and the Controller. When I think of AutoZone, I think of consistency. The company follows a very disciplined and rigorous model of generating stable comp growth, modest unit expansion and then typically buys back about 10% of its shares per year. This formula has been quite lucrative as it's been one of the best performing retail stocks over the last decade. And I hope this morning we'll find out if that's going to continue to be the case.
So with that, I'm going to give it over to Charlie, who's going to give a few opening remarks and then we'll have a broader discussion.
Good morning. We've got a few slides that you should read very closely. Everybody done with that? Forward looking statements, our lawyers are our pictures are very well placed on that. So we're here to talk to you about AutoZone today.
And this is our pledge. AutoZone is always the customers first. And that's certainly a part of all the things our folks focus on every day. Whenever they're concerned or they don't know whether they're doing the right thing, they always can archon back to our pledge that putting customers first. The activity isn't involving the customer, then we should change that.
We know our parts and products, parts knowledge and the products that we sell is important to us and we emphasize that with our sales people on the floor and in the field. And certainly, we always are focused on having our stores be presentable and look great for our customers to have a great shopping experience. And we've got the best merchandise at the right price and we continue to work with our vendors to ensure that we've got the product that our customers are seeking and certainly have that priced competitively. Company overview, Nation's leading distributor of automotive replacement parts and accessories, an extensive line of products for cars, sports utility vehicles, vans and light trucks, light trucks and certainly those utility vehicles are kind to us and unkind to the roads. So that really tears a lot of parts up.
So we're focused on those vehicles in particular. We operate 4,700 stores or so in the 49 states. The District of Columbia, Puerto Rico, we've got 300 or so, 334 in Mexico and one store in Brazil got the flags on it. And soon hopefully we'll have another soon. 3,146 commercial programs, it's certainly one of our legs of growth and things that we've been focused on, and especially a lot of the work that we've been putting in our hubs, 10 new remodels this past quarter, 77 so far, putting new merchandise in the market and expanding our lines to ensure that those stores are able to not only work for our retail customers, but for our commercial customers.
And then 2012 net sales of $8,600,000,000 EBITDA of $1,800,000,000 And you can see over the past 10, 5 years, we've had fairly steady mid single digit growth in our sales. And that's kind of the real finance story of AutoZone. We can talk a little bit more about some of the things that we focus on registered vehicles. CAR POC is certainly something we look to as well as miles driven. And as you can see, it has tailed off a little bit over the tail end of 2012.
It's something that we focused on. And then the average age of vehicles has extended offsetting that somewhat. And those particular vehicles, cars, trucks and all have grown over the past that age 7 5 to 7 years is what we were focused on and somewhat extended to 10 years, so favorable for our industry. Financial results, record EPS growth, Michael spoke of that. We continue to see great performance over time.
2012 was not an exception for us, 10 year CAGR up 20%, 5 year just over. And then some of the financial results, EBIT, a fairly consistent growth over not only the past 10, but 5 years. And that's one of the things that we are most proud of that we've been able to consistently grow our EBIT over time. And then Q2, many of you, I'm sure, listened in or read our conference call script. Net sales growth 3%, same store sales down this past quarter.
We talked about a fairly flat growth in sales over the balance of the quarter in the last 2 weeks, really a significant drop off, definitely impacted by us on the delay in taxes, not something we've experienced before, but our retail customers and certainly commercial customers are impacted by that delay. And our last 2 weeks were down 8%, which pulled our quarter down 1 0.8%. We were able to get some good leverage on our gross margin, 51 basis points there and manage our expenses well, only having 6 basis points of deleverage and growing our EPS again for the quarter at 15%. So we'll take questions.
So just a logistical point before we kick it off. Russ is in the back with no cards and pens. If anyone has a question, he can write it down and then we'll work that into the conversation. I want to start out with an industry question between 2,009, 2010, 2011, industry saw great, great growth. It was well above the historic average.
And then last year was that we definitely saw a deceleration across the sector. There's been a lot of debate about is it was it weather related given the abnormally warm conditions from last winter? Is it Was it some other factor? It also occurred at the same time that new car sales were rising. So could you provide a little perspective on your view of really what drove the industry wide deceleration in the last few quarters?
Certainly, there was some regional concerns for us and we've got data that we're all at least the major players are involved in and there was definitely an industry slowdown. A lot of the things that we saw that particularly in the Northeast region in this area, Midwest Rust Belt, last year winter was extremely mild and the result was, if you think in terms of what happened last year at the same time, we were selling products that usually are spring related products, wash and wax. And that was we talked about at the time of pull forward, which we had and are challenged with for Q2 and Q3, some pretty nice comps in the early in Q3, tail end in Q2 that we are up against. And I think the industry as a whole, particularly those of us who are in that Northeastern region, had that impact. If you looked at the rest of the country, West to Southeast, not as bad as it certainly wasn't as bad of an impact or slowdown as we had in that Northeast region, and there's a fairly large concentration of stores in that area.
We think the customer was challenged. The consumer was challenged financially as well. That need for maintenance wasn't as strong. Failure was still there, but the maintenance side of the industry was not there. And so if
it really was weather and what I think the basic assumption is right now given the geographic differences, especially how consistent those differences were across all the various participants from the industry. If it truly was weather, when do you expect to start to see that a resumption of what are more normal trends within the industry? Maybe you don't at that time. What might be the explanation? All
right. We actually at the beginning of Q2 and we talked about a little bit, we were seeing some improvement in those areas of the country that were challenged last year. And certainly, we've had a little bit better winter this year and more closer to normal.
Remember, you're in Boston. They've got a lot of snow. Exactly. Closer
to normal. And but there was it came later in the season, but it was there. So certainly, we hope to see some benefit from that as we move through the spring season, and that's typically when it starts.
Yes. And the other piece of it with new car sales rising, the vehicle population potentially changing, given the dip that we saw in 2,007 and 2,008 in the new car sales, as those mature into the sweet spot of the industry, which is historically has been considered 7 to 10 years old, how do you think that plays out? Do you think that as those cohorts enter the vehicle population and there's actually deceleration in the rate of growth of new cars entering your base. Is that going to have an impact on the industry?
Well, it's to some degree that's offset by the fact that you're not you hadn't seen a significant change in your scrappage rate. So that's when we look at those factors, we're looking to see how many cars are going out of population. And as we've seen, the lives have extended. And so, I think you'll get some offset to that decrease in new car sales by the fact that those others, the used cars are staying out for so much longer and they certainly are important to us and help our industry grow. And then how does it
how does parts proliferation and really the sophistication of parts play into it where new cars are coming off the line, they're more expensive to put parts together. And so even if there is a change in the vehicle population, could that have an offsetting impact of it as well?
It does and certainly And maybe
you can explain kind of the life cycle of parts and how and what you've seen in terms of inflation of parts over time?
Right. Over time, certainly, we've seen parts proliferation as industry has always also talked about the slowdown in traffic over time and that's being offset by the improvement in ticket. And certainly, that's been driven by parts are more expensive, they may last longer, but when they break, they cost the consumer more. We talk about an example of just a regular coil in early '80s, late '80s, all cars had one coil that had a plug wired go into your ignition your firing system. Now typically with cars, that was a $20 part.
You've got an 8 cylinder car, every cylinder has a coil. So you've got where you were buying them $20 part, you've got now a 6x or 8x20 dollars expense. And so it becomes exponential. And that's the same way with most of the other parts that you run into with the cars as they become more sophisticated. That part becomes more expensive.
And that ticket is a bit of an offset to the slowdown in traffic. And so that as there's been a deceleration in
the last couple of quarters, you continue to see this dynamic where parts are more expensive, inflation is benefiting the core. What has it been more specifically within the maintenance category that's really gotten hit hard? Yes.
I think when we were looking at it last year, there was a lot of conversation around more than you realize, and in particular in the Northeast, the snow and the salt that's associated with eliminating that and the brine that they put on the roadways, it deteriorates and accelerates the deterioration of those parts that are and when you think of undercar, a lot of people think, well, that's not maintenance. Well, brake pads are certainly one thing that we can all agree on is more of a routine kind of maintenance job at 30,000 miles is what you would expect. But when you get those outside elements impacting them, that deterioration gets accelerated and you have to replace them more frequently. The road conditions are also impacted negatively by that those elements, which causes other car parts that are that don't fill as fast to have more routine maintenance to those. So that did not happen.
And to a great degree, we noticed those changes and trends in those particular areas. And so the expectation is that you would see more of that. And that really the conclusions were drawn truly based on that. Now there's no guarantee. There's certainly not that the consumer is going to react to that maintenance now and do it right away.
It could still be extended. I heard this story a few days ago of check engine light being on in a car and they're using electric tape to cover it. You don't have to look
at it.
It doesn't matter. Right. You should
get that taken a look at. You would think you'd be one person that could actually get that fixed. You would think he'd
do it, but he puts brake pads on backwards.
Right. So coming back to this idea that what you're suggesting is there's pent up demand, because eventually brake pads are going to be fixed. And if there has been some softness in these regular replenishment categories, when do you typically see that? At what point is that released? Is that a couple of quarters down
the road? Is it more immediate as the weather sets in? It tends to it really starts in the spring and then you see it throughout spring and summer As those urgencies become more and the sound is too loud for you, the earphones don't drown it out anymore, you have to do something with it.
One question we got from the audience along these lines is what percentage of your SKUs are tied to DIY oil changes?
Yeah, why oil changes? We wanted to get Brian back to the electrical tape. Just a handful, maybe 3 or 4 SKUs in it, oil and oil filters and maybe some other additional forgotten filters that we talk about, but not a big, thanks.
But they turn pretty rapidly. They do. Oil is one
of the highest turning SKUs in our store, and it's what we promote, advertise, offer a special every month. And you can you tend to have a decent sized basket with oil sales because it brings opportunities for other additives in the mix of sales. So the oil certainly is with all of us is what gets our customers in the store. It's the most regular routine.
And if we make the assumption that it wasn't weather, for whatever reason, it's new car sales coming, the vehicle population is changing. Last summer, there was started to be some chatter that one of the players was promoting a little more aggressively and using oil as a vehicle to draw in traffic. Do you expect that the industry could start to become more promotional as the pie is not growing as fast and perhaps everyone's fighting for a piece of it?
What we've experienced certainly in the recent months and probably I'd say the past couple of years has been a fairly rational approach to pricing in the space. In particular, with oil pricing was one of the items that because it's a lead, we saw a lot of lower end pricing there. But over the past year to 16 months, you've seen it's certainly fairly consistent behavior. Everybody is going to have a high end deal and a low end deal, and it just varies month to month as to what brand you're using. But I think that I would hope that it certainly would continue.
I hadn't seen any indication that it won't.
Okay. Let's switch gears and talk a little bit about the commercial side of the business. In the last few years, you've seen very good growth on the commercial side, in part by rolling out new programs at your store base. Can you give us an indication of how far you are along that penetration curve? Where you think you can ultimately go?
And will the there's been some recent debate on whether or not the incremental programs can be as productive as the existing programs?
Sure. We certainly when you look at last year as compared to this year as to how many programs we opened, there was a definite deliberate effort to slow down the openings in Q2. And that was mainly driven by the timing. Last year, we were really scheduled to open 300 programs. We opened 400, probably more of an opportunistic approach to it than not.
But the consistency is still going to be there this year. The intent is to open 300 programs as well, 100 so far and look to do the rest in the coming quarters. We don't think ultimately that there is any delta thinking of opening the most productive programs first versus not, more often is these programs are opened across the country and it's a regional approach. So a regional manager may come with 3 programs this year versus someone on the other side of the country coming with 3. They're doing it where they have the skill set.
So if I've got the talent in the field and those folks are ready to go, I've already deployed a salesman there. I'm going to add stores where I've got the sales force. And we're doing that methodically across the country. We have a list ongoing of programs and where they're going to be across the country. And as they come to the top of the list from the standpoint that we've got the resources there, the trucks have been So I think it's going to be ongoing.
It's we're not certainly not through our chain. And that's not to say that we're going to be 90 plus percent, but we're not at a position where we think we've opened all we can. And in addition to that, probably more than we've ever in the past, we're opening stores with commercial already installed. And so that approach in conjunction with going back and hitting those stores that have been open for a while, we'll keep that going. So do you
think that so right now, you're in 60% range penetration. You suggested that maybe 90% would be too high or maybe not? We don't
know yet. We don't know how high is high. And so every store is being considered for. What typically stops you is if you've got a program within 5 miles of another, that would be California as an example, where your stores are heavily clustered, you're going to have less concentration programs.
Okay. And as you look at the map right now, do you have any big greenfield areas in the country that you really under penetrated relative to others within your commercial program base? I think it's probably if you looked at
it 5, 10 years ago and saw where our store count was, where we had them a greater opportunity with that, probably Sendler. Where we have greenfields for stores, that's probably where we are with commercial as well.
Okay. And have you the recent programs, it sounds like from the last quarter call, have been a little bit softer than some of the legacy programs that you've rolled out. Do you have a hypothesis on what may have been causing that?
I think if you compared when you looked at similar stories for retail, you had a similar story for commercial. So those programs that were in those areas that weren't as challenged were performing just as well as it had been. So we didn't see any slowdown there other than what we've seen across the industry. And there was some slowdown in the commercial and retail for the industry over that month of January. So I don't see anything that gives us structurally a different point of view about commercial.
We think it's still our vehicle one of our stronger vehicles for growth, and we're continuing to invest in it. And there's no change in those plans. Yes.
As a tangent to the discussion of the commercial business, what's critical in this industry is being able to get the right part at the right place at the right time. AutoZone follows hub and spoke distribution model. Some of your competitors have distribution larger, more densely populated distribution centers across the country. Can you talk about the pluses and minuses of each approach? And why you think the hub and spoke model is the most effective avenue moving forward?
Well, when you think about hubs as a concept, I think AutoZone was the primary genesis of that, the hub being in market closest to the stores with a storefront. And if you'll note, our competitors like that model. They have more hubs than we do. Yes. Vacation is the biggest form of the product.
Exactly. So I think when you're starting to say what's the pros and cons, our distribution centers, we try to centrally locate those and with the effort to making multiple deliveries to hubs on a weekly basis. And we think and hadn't gone away from the concept that that's the right way of going about it. Now we've, over the past couple of years, have made efforts to go back and look at all of our hubs wherever they are in the country and determine whether the size is appropriate. Because as I said, it is most important to have those parts in the market to where you can get them to those stores and to the customers when necessary.
So I think if more than anything, we're looking at the width of the SKU count in those hubs, and the depth as well to ensure that we can have local market parts to deliver to our satellite stores in a timely fashion. No traction from that. I think the majority of our investment going forward will be to continue to make sure that locations are the right place and the size is there.
Can you give us some sense of the distribution of your sales by SKU and the DIY side versus the commercial side? So are 80% of your DIY sales coming from 20 percent of your SKUs, whereas in the commercial side, 70% are coming from 50%. It'll give us some order of magnitude to help size the supply chain relevance within each sector. And you don't have to give us an answer. No, no, no, no,
it's fine. What we're talking about is how do you get the SKU to the local level the fastest and how do you offer this access. All the SKUs that have been added, I'd argue, across our industry have been ever slower turning SKUs. So the trade off here is, hey, if I add these really slow turning items, I'll pick up a bigger basket over time. Other items will be added.
What you see is these SKUs are actually slowing inventory turns of the overall chain down. So we used to average about 2 turns a year and now we're at 1.6 times a year. So the formula unfortunately what turns fastest, the As, the B movers, how we define it, it's the old eighty-twenty rule. These top SKU buckets are what moves. But just because you have that, certain customers, they think they can't find the Ds and Es, then they don't want to call.
In the past, the right model, you had a very clever, the cyber model would be go straight from the vendor just in time inventory, don't stock anything. Well, that's not possible. Vendors can't get it there in 5 minutes. Stock at a warehouse and deliver overnight. Well, that might not be fast enough.
So then we've gone to the hub in the local market, so not every store has things. But I think what we're talking about here is the industry with all these makes and models only CAT SKU. I'd expect this will be a continuing discussion point in the question every year.
Okay. How big can it get?
And then how much you want to invest in it? And how efficient do you want be with your capital. Yes.
And I guess this is a natural time to lead into new channels of distribution, particularly the Internet. Historically, this is the auto parts sector, given the SKU intensity, given the relationship between you and your customer, both on the DIY and the DIFM side. This is thought to be an industry that's more insulated than others from Internet competition yet you went out and made a nice purchase of an online only player. Can you talk about how the customer for AutoAnything compares to who you're serving through your store base? And how do you expect to see that evolve over time?
Brian is going to love this one.
I'm sure this is the first time you've heard it.
Yes. The Internet, Michael is right. The fact is not a lot of products are sold today on the Internet. We don't see it as being a large venue today for hard part purchasers or even much from an accessory standpoint. However, it is growing.
The company that we purchased is impressive growth year after year. They're a profitable company. Impressive growth year after year. They're a profitable company, but they sell a little bit higher ticket to a higher income consumer. We do share vendors, but the category of products aren't stocked in our storage necessarily.
The overlap is minor. So it's we feel there's some negotiation opportunity with product costing, shipping costs, IT infrastructure on both sides, autozone.com, learning from auto anything and vice versa, but a little bit different customer. So we're trying to figure out how does that fit with us. To your point, not a lot of hard parts right now being sold on the web, but we want to get out in front of it in case it gets bigger. We want to be an industry leader in that space.
So don't look for Duralast and the brand to be sold on AutoAnything's website. The integrity of the websites remain consistent. A couple of things that are important for AutoAnything, their culture was really a lot like ours. So they really align very well with us. They're really focused on the customer.
They're focused on ensuring that they've got the right information. And I think when you talk about what we find is most useful for our customers on the web, it's information. They're going there that whether it's pricing or just knowledge about how to do a job or watching YouTube videos that are pop outs from our website, information is what they're seeking.
And from what the response, it sounds like it's more discretionary products, it's more aficionados. So it's more of a want based purchase than a need based purchase that you're more typically skewing towards in your store.
Is that fair? Performance accessories. Yes. Okay. Wait a couple of day kind of delivery.
Yes.
Moving on to the financial piece, given we've got the BrainTrust here. You've gotten a lot of audience. Exactly.
Thank you. Thank you very much. We'll give that guidance then.
You've gotten a lot of credit for your capital allocation. So for your over credit for your capital allocation strategy, which has been really prototypical within retail over the last few years. I think there's less awareness of how well you manage the expenses within the business and that may become more obvious to the market as if the industry remains in a more slower growth phase for an extended period of time. How long can you maintain this operating margin expansion or operating margin growth in a flat type comp scenario for an extended period of time?
Well, there's always been and continues to be focus from our merchants on finding the best prices for product. And they continue to work with vendors to not only help them build stronger relationships, whether it's through import or through improvements in their factories. And just looking at things where it's how do we make our PIC lines more efficient or how do we make product more presentable, all of those things are a part of the focus. But we continue to expect improvements in gross margin, not dramatic changes, but enough to show that we're continuing to grow it there. And even when you think in terms of gross margin in the past, I guess, over the past year, you saw a lot of improvements in shrink.
So that's just one of the ways that we've gone through to try and take cost out of the business, and we'll continue to focus on those as well as when you look at the expense lines. Our fields have done an outstanding job over the past quarter, and we'll continue to make sure that we've got customer facing labor there and then taking task out where necessary.
And I'm going to push a little harder because I think it's an important point. Is it you've got another year left, another 2 years, another 3 years, even if you comp in this flattish growth, your algorithm is to generate mid teens type EPS growth. I think that's very alluring to shareholders and potential shareholders. I think the fear is that the industries, if it wasn't weather, what's the risk reward profile in that scenario? My sense is it's pretty good.
Is that for an extended period of time, is that fair? We've got a pretty good track record
of being able to manage in good and bad times. And our management team hasn't changed a lot over the years. And there's a reason why there's that consistency there in our performance.
Yes. And then on the gross margin side, have you tested elasticities within the sector? This comes back a little bit to the promotional aspect, but could you because with AutoZone having a 20% operating margin, it's really that incremental dollar of sales because $0.20 of it isn't going to fall to the bottom line. Perhaps you would be willing to sacrifice a sacrifice a penny of margin to be willing to drive that incremental dollars. So I know that it's complicated by the fact that these are largely inelastic goods.
But is there some elasticity you can push on in order to drive the top line?
It's all Brian's fault.
It is, yes. I don't think so.
I think that you can be sharp on your sort of chemicals and accessory offerings, window signage, near term promotional and stuff that's like motor oil, we talked about earlier as a question. But it's hard. It's not an industry built on that. Half of our sales come from failure related items. But there are things on availability we can do back to that other discussion I think that are important.
There's so many cars in the population that are getting worked on all the time. Our opportunities still remain great. So as much as I think back to your point, we can operate in a low same store sales environment. Not only do we not want to be there, we don't expect to be there. We expect to be able to grow.
And so we expect to be able to grow on the U. S. Side as well as international. So commercial continues to be a great opportunity for us. So hopefully with all these things, while we can operate conservatively, yes, we can and we have for, I guess, from several years there in the early 2000s at a lower volume, hopefully, we're not having those discussions with you.
And one really compelling aspect of the business, one of many compelling aspects of the business has been the vendor financing program, where now your AP to inventory ratio stands well in excess of 100%, which is a remarkable feat. Where can it go? And how are you going to manage that in the future as far as balancing the margin with the terms you're getting from vendors? And it's all part of the cost structure to a vendor. Everything is made every vendor has
a balance sheet and income statement as well. And so they look at days extended versus initial cost of goods. And it's everything's a negotiation, a put and a take. So when costs increase, it's passed through. Where can it go?
We have indicated not a lot higher. We think we have some room with those things. What's benefited AutoZone is the ability to negotiate private label products, our brands. We've created this Duralast and Duralast Gold brand as well as Value Craft at the opening price point. It continues to help us go forward.
So I think that that story remains a positive for us.
That's a good thing. And private label penetration, I think it's north of 50%. Is that is there still room on the horizon to push that further? What are big categories that have yet to be touched by private label? I think in the last few years, it's been windshield wiper blades.
Maybe you could identify a couple others that are potential candidates.
We've gone through a lot of the areas that we could. I mean, more often than not, if anything now, it's looking at the mix of products within categories, whether it's your good, better, best tier. So you may pick out you had a you've got a good and better, you may add a best tier. But there's wipers were a great example. That was something we didn't have a lot of penetration in.
And then over the past several years, we've gotten there. We look at chemicals from time to time. But our biggest focus is really making sure that whatever we do with Duralast brand, it's quality associated with it and nothing that we do deteriorates that brand because it's important to us.
Okay. My final question is on capital allocation. You, as I mentioned, prototyped the very effective strategy of IMAC about 10% of your shares per year, maintaining a consistent leverage ratio. And my two questions along those lines are, A, have you thought about the potential for increasing your leverage ratio from time to time? If trends do slow and you see some strain on the P and L, how would that influence your perspective on raising the leverage ratio at least temporarily to maintaining your posture?
And then what about a dividend?
I mean, these are all alternatives to the free cash. We're fortunate as a company to have a larger operating cash flow generation business than CapEx. I'll tell you the ability to incrementally flex leverage is not something that's embraced by rating agencies nor our fixed income investors. Many of you are out in this room. So unfortunately, an answer to flexing, it's very hard.
We state a targeted metric of remaining in this status of sort of BBB, Baa2 range. We want to remain there. So whatever leverage is carried has to answer within that guideline. I'm trying to remember the last question was sort of if business gets weaker, for example, do you leverage up? That's actually the counterintuitive at that point.
You have to watch your money at that point because it works both ways, so leverage and deleverage. The last metric the last question that you
asked for dividend.
The dividend map is just cash utilization. Do you apply the cash leaving on your balance sheet in a money market account or cash equivalent? Do you pay a dividend or do you buy back stock? It all has tax ramifications. Our opinion is from an accretion standpoint, the math that we've run for 15 years, our belief is that the accretion growth rate, the cumulative growth rate from buyback will be greater than simply dividend.
Now that doesn't make all investors excited, but we believe ultimately it will pay off to be more value add for investors than simply a dividend, especially as tax law changes have worked against more recently dividend. So at this point, we're not embracing
it. So the sound of the tone suggests that sticking with the strategy, it's working, go with it. It is. And one last thing is, if asked, is there a stock price where
you would not buy your stock back? The answer would be yes, there is. And we think about those things. And we would communicate that to investors. And what would be the alternative if we weren't buying back stock, we would offer
it to them. Maybe you can just give us the price right now. It's higher than it is
right now. There's great time and effort expense. We have lots of financial experts on our Board of Directors that keep us busy as well as our senior leadership, Charlie, that debate this issue about capital allocation, appropriate utilization of cash all the time. So we manage the business hopefully very efficiently. That's our goal every day.
I think we have 2 minutes left. So along the capital allocations line, we have seen some acquisition activity of accelerate by some of your peers at the end of last year. It sounds like there's still more opportunity within the market. How do you see AutoZone participating or not participating in some of that consolidation activity?
We're always looking at it from a real estate perspective. We are looking for sites that meet our requirements from a visibility perspective. And then we were focused on it from a retail customer perspective, and that's a little bit different from some of our competitors. So a lot of these sites are in light industrial areas. That's not going to be attractive for our retail consumers.
And from a commercial perspective, as long as we are within that vicinity and we can get it there in a timely fashion, that's fine. So we opportunistically look at it from just a real estate focus. So we're not really looking to acquire inventory or anything of that nature. It's more about where we want our locations to be.
And you did mention that you put a foothold in Brazil. What do you see as the capital needs for furthering your expansion into Latin America, which does seem like a pretty attractive market for the future?
It is very much. Brazil is small in nature. So don't expect great growth from AutoZone as we're still learning. We're a greenfield operation there. So it's not a big capital outlay.
AutoZone is always very careful about currency valuation, devaluation, making sure that you pay as you go strategy. So look for Brazil to be steady growth, maybe a handful of stores this year to the next kind
of thing. Okay. Thank you very much for joining us today.
Thank you.