End of the day presentation. We, on behalf of AutoZone, are presenting today. My name is Brian Campbell. I'm the Treasurer of the company. To my left is Charlie Pleas.
He's Controller, also in charge of planning and a few other fun topics for the company, and we're here to talk about our company and its results. We just reported our financial results 2 weeks ago. So without further ado, we'll try to walk through our presentation, answer any questions that may be on folks' minds. And thank you for your time. Nice to see you, Joe.
Forward looking statement. The usual, read that one quickly. Okay. AutoZoner and the pledge. What is the company's pledge?
The four lines were put together. As you can see here, we didn't put our year on, 1986. The company, this is the creed that we live by. So simply put, if you have a question at the store level, you don't know what to do, you don't know how to handle a customer or deal with an issue, please hark back. AutoZoners always put customers first.
If a guy walks in the front door, it's 8:59 and the store closes at 9 stay open and help them. Go out to the customer's car, help them in front of the hood, help them at 9:30 at night. It's what matters to differentiate ourselves from our peers. So hopefully, when you go by one of our stores, you'll see people working in the parking lot. It is what differentiates us.
It's how we talk about ourselves and customer service. Knowing of parts and products, a lot of training is put into that every quarter because we believe while price can be matched and even beaten, it's a no win proposition. We want to differentiate ourselves on service. Stores look great. We put a lot of money in consistently on maintaining stores and presentation.
And lastly, the merchandise assortment. We have over $500,000 in inventory per store. We utilize hub stores as well as distribution centers to move product around the country. We're in 49 states across the U. S.
Plus Puerto Rico, Mexico and a very small one store presence right now at the end of the quarter in Brazil. Company overview and who we are. We have approximately 5,000 stores across the world. We have 4,700 plus stores in the U. S, 300 plus stores in Mexico.
We have 3,100 of the domestic stores that have a commercial desk in them catering to primarily tax exempt customers, people that come in that for resale, purchase our parts and install them on cars. We have both large aftermarket garage chains, we have small aftermarket garage chains, plus we sell to dealerships, primarily dealerships that repair and resell used cars. In the brands of our historic sales, you can see that we've grown over a 10 5 year period and approximate mid single digit rate, so very consistent growth rate. Plus over these years, I'll tell you, our store growth has been very consistent, approximately 150 stores in the U. S.
Plus approximately 50 stores a year in Mexico during this time period. Registered vehicles, we talk a little bit about this as a driver of the industry. There are a lot of cars in the U. S. While we talk and read articles about how there are 15,000,000 new cars sold in the U.
S, there are 240,000,000, almost 250,000,000 registered vehicles in the U. S. This matters to us because the more cars on the road, the more hopefully they'll come into AutoZone either do it themselves and buy something for the car or go into a garage. So this is a metric that as you see here on the chart, it's flattened out and gone sort of sideways. And a lot of that was driven by there was an apex of new cars sold through 2,007, Starting in 'nine, 'ten and 'eleven, new car sales declined to the tune of $10,000,000 $11,000,000 $12,000,000 respectively for the years of new car sales off of a peak of close to $17,000,000 in the years before.
So that mattered to us. But during that time and as well, miles driven during a recession went down or flat lined. People weren't driving as much, plus gas prices remain stubbornly high even today in the country, dollars 3.70 on average, a national price for unleaded gasoline. So it's a metric that we study as well as a key driver. Age of vehicles.
Back to those cars that weren't sold and registrations remaining flat. What has been happening is that cars on the remote road have gotten older every year. So you'll see that middle line, red guy red line is cars at the top. Well north of 10 years and even 11 years old now, trucks, light duty trucks in the U. S.
Climbing as well. The average in between the 2 of them is approximately 10.5 years old. In the U. S. For the last couple of years anyway, just as a metric that maybe some of you don't know, trucks, light duty trucks, sport utilities sell almost an equivalent number of units as cars.
So we watch that metric. We like trucks. They're heavier duty, more utilitarian, more parts are sold on them, but we're not biased, we'll also sell to car customers as well. EPS growth as a company, we talked about mid single digit sales growth. The company has a financial model that we employ that we've been consistent with.
I noticed that lots of companies talk about buybacks. We do too. You'll hear about AutoZone. We've been doing this for 15 years. We started with approximately 160,000,000 shares outstanding.
At the end of last quarter, we were just north of 36,000,000 shares outstanding. We deploy free cash against buybacks. We are a company that generates a little over $1,000,000,000 in operating cash and spend approximately $400,000,000 in capital to have free cash of the difference. You can see our earnings per share on a 10 and a 5 year basis have been approximately 20%. So that's been a solid story.
The model is built on operating profit growth plus 5x to get this earnings per share growth to these results. EBIT growth, 1st Engineering kind of marching up the P and L. You'll see EBIT growth in this sort of mid to high single digit rate as well with sales up mid term. We've had strong gross margins in the business. We have built our own brands in this company.
We have brands like Value Craft and Duralast and Duralast Gold, the largest aftermarket parts brands in the country. And there are brands that we've been developing over the last 20 years that's helped us with gross margin. We're also efficient. We have the highest sales per store in the industry as well as the highest operating margins in the industry. You can see here our operating profit dollars exceeded the $1,600,000,000 last fiscal year.
2nd quarter that we just reported, it's going to look a lot like the year to date numbers. Sales were up 3%. Our same store sales declined last quarter, impacted materially by the last 2 weeks of the quarter, which wrapped the last week of January and the 1st week of February. Our same store sales again were down 1.8%. Our gross margins were up 50 basis points.
Operating profit margin was up 45 basis points that led to operating profit dollars up 6%, EPS up 15%. And without further ado, I'll just show the year to date numbers, which look very similar to those rates and those trajectories. What happened? We spent a great deal of time talking to investors and folks in and outside the company about the last 2 weeks. We noticed a correlation of our sales results to a lack of income tax refunds.
In the 11th week of our quarter, the previous year, the income tax refund dollar started to flow across the country. It did look like it impacted particularly the discretionary purchases of our business. Across all states, retail and commercial customers were impacted and led to the results that we saw. We were encouraged though that we, in our commentary, felt like as dollars do flow in the economy, we see a correlation of sales to those dollars flowing. So the IRS this year helped us out.
It was pushing 10.40 easy acceptances 2 weeks and it caused a strange cut off for us. So we spent some time talking about that. Retail, who we are. Guys, we are a retail company. Domestically, we're a commercial company.
We have a large international presence now and we have an all dataecommerce business. It's growing. So on the retail front, here's who we are. We have 4,700 domestic stores. The average square footage for our chain is 6,500 square feet.
You can see that we're pretty evenly distributed by quarter in up 30 to 40 stores a quarter that we open, spread out across the 49 states. Commercial, who we are, 11% program growth year over year, 8.8% sales growth. Mathematically, what you'll see with that number is last year it was last quarter, excuse me, and New Year's fell on a Tuesday. So we spent some time talking to folks about how Tuesday closure for garages did not help us. We lost basically 2 days of sales this past quarter versus the previous year, which slowed us.
And also on a trailing 12 month basis, we do about $1,300,000,000 in sales, up approximately 14%. So our point on this business was we look forward to hopefully reaccelerating this business on a go forward basis. Cash flow, we do generate a fair amount of cash. And on a quarterly basis, it's pretty consistent. You can see changes in debt.
Really the key takeaway on this is we have just under $4,000,000,000 We have a stated goal of remaining investment grade. We are rated by all 3 rating agencies with all consistent stable or positive outlook ratings from these companies. No change there in that regard. Balance sheet, we average inventory per store of $140,000 in inventory. We have inventory net of payables.
We have negative working capital as a company because we have slow turning merchandise and it's been a focus of ours over the last decade to work terms and turns to match. That's where you'll see that working capital negative. You'll see inventory and net fixed assets about the same at $3,000,000,000 And lastly, a stockholders' deficit, which causes sometimes questions, that's through the buyback. When you buy back stock at a higher price than what you sold it for when it went through an IPO, it actually shows up as a debit to shareholders' equity and that's why there's a balance there of a debit, dollars 1,500,000,000 dollars Here's who we are. Lastly, the focus.
We're focused on growing. It has been a rational industry retrospectively, made up of lots of players. There are approximately 35,000 auto parts stores in the country. We have 4,700 of them, as you saw before. We move product through parts availability and hub store deployment, spend a lot of money and time on training auto owners and making sure our stores look great.
And we talked about growth in commercial. It's a small percentage of our business and very, very rough numbers. It's 15% of our sales mix commercial. So it's a great opportunity. Both segments are about the same size in dollars.
So we think that's a great opportunity to grow returns. It's a low invested capital base for us. And international growth, very excited about that, but still methodical growth in the 40 to 50 store growth line. And lastly, relentlessly focusing on managing costs. All this has led to a key metric where we're bonused as a management team based on ROIC where we have returns on capital north of 30%, which allows us to be one of the higher returns on capital companies in retail.
So I appreciate the time, and hopefully folks are excited to talk about auto parts in the Q and A. But if you have questions, please let us know for Charlie and myself.
Great. Perhaps I'll ask the first one here. How do you see the pent up demand cycle playing out? How do you see pent up demand playing out?
Yes. The question we think it will play out. Now the timing, is it 1 for 1 due to income tax refunds? Or is it category specific that over the last year we were challenged on? We had some maintenance categories that had challenged us in cold weather climates the last year.
We think it will play out in our favor. We think that as we lap those comparisons, we can benefit. But at the same time, we manage to a bottom line in operating profit. So we always tell folks we're operating profit driven as much as sales, but we're encouraged. We believe that the things that we're doing are the right things with inventory deployment and hopefully we can grow as dollars come back to the economy and comparisons ease on a year over year basis.
We'll be good there. Great. Thank you.
Brian, could you talk a little bit more
about your private label? Obviously, you guys are
the industry leader. But further opportunities to expand whether that be by category or whether that be by expansion of a
good, better, best type of strategy? Sure. Charlie, if you want
to take that? We're continuing to look at that at a category level, specifically, it's where it starts. And we look at it from an example, I think, as we mentioned earlier, on batteries, as an example, we've expanded to a platinum level battery. We've got Duralast and Duralast Gold and stepped up to another level of platinum because of the demands of vehicles for additional power sources. So that's an ongoing exercise that our category managers go through.
But the thing that we are very cautious about is we want to make sure that we're only looking for the best opportunities there. We don't want to deteriorate that brand by putting in something that's not going to be effective for our customers. Yes. Hi. Question for you on new car sales.
Are you concerned at all about the pickup in new car sales as folks replace aging vehicles with new vehicles that theoretically need less maintenance? Is that a concern at all of yours?
It becomes a concern for us if those older vehicles fall out of the car population. In other words, we want that number of registered vehicles to remain flat. We're always encouraged. So with a shortage of used cars in the marketplace, what we're seeing thus far is the incremental additions to the car population have come back into resales. So are we afraid by it?
No, we need new cars in the population. That's a good thing. And probably the more normalized run rate for the country appears to be around this 15,000,000 count. And so that's more understandable. I think it was artificially low at 10%.
We like new cars. The fact is that newer cars, parts are higher priced. While there might not be as many repairs on those new cars, they carry a higher price tag on them. So folks at a very, very old level, while they repair their cars and we get many dollars from that customer, it's on a lower price per customer, lower price ticket. So both benefit us just in different ways.
And what you see in a lot of cases with those newer vehicles is accessories. People want to add or enhance by adding mats and seat covers and different things of that nature.
Yes. Hi. I was thinking about the advances in technology in cars. And how does that does that represent a challenge or an opportunity for you guys as technology gets more advanced and more advanced? Is it harder for you to do your business?
Or does it bring opportunity?
And what's on the head?
I mean, our customers are pretty industrious when it comes to the technology. What we do is we try and provide them with the tools such as All Data to help them to deal with the tougher jobs. We also have technology deployed at our stores to help them read codes in their cars and also to point them to our commercial customers to help them to deal with those advances. It's not something I think that we've seen as a challenge. It's always an opportunity for us.
And as Brian had mentioned, in a lot of cases, what it does do is it drives up the ticket on certain items because the technology advances makes that part more expensive.
And technology can be our friend. So in terms of helping customers how to repair an item, being able to print off a service diagnostic to utilizing the all data service product that's basically a service kinetic on how to fix a car for the garages, that's all beneficial. Parts are more expensive today. There's more things like electronic control modules and the old plug in coil system that was in place and those all carry a bigger ticket, but it's a little bit more complicated sell. You have to explain to a person, hey, what's wrong, those kind of things.
And that benefits both the walk in business as well as the do it for me, a. K. A. The commercial business. So it's a benefit.
Your commercial growth in this past quarter was probably the slowest it's been in some time, and you talked a little bit about the calendar shift. But what do you see kind of reaccelerating that growth, both internally and externally in terms of the factors?
I think that what Denise is talking about is a couple of quarters ago, we were growing at 20% square footage sales basis at absolutes, and this last quarter, we grew at approximately 10%. I think that the reacceleration for us is possible. We don't want to commit to 20%. But clearly, in our opinion, the 8% to 9% to 10% was low. What drives a little of that improvement?
Well, the fact that we will lap comparisons, numbers that were more challenging and are now getting easier for us. Other things that we're doing, the regionality issues will play out. Last year, I didn't spend a lot of time on this, but last year, there was a very mild winter in especially the Northeast and Midwest, and car parts in those markets did not get replaced over the last 12 months. So we spent a lot of today talking to folks about what does winter mean, late winter, how many days of cold affect your business, things like that. All of those things are where when that's more normalized, things break and parts business picks up.
But the focus, training of commercial specialists, we will continue to open garage programs, commercial programs to the tune of approximately 300 programs a year. But we will also do things like refine inventory mix in our hub assortment. So we believe that will be a growth vehicle for us for several years to come.
Could you just, I guess, just talk a little more about your international growth opportunities? What made Brazil attractive for you and any other regions you guys are
looking at?
Well, we've got certainly Mexico has been where our focus has been. And what we've found is we really don't want to distract ourselves significantly from our U. S. Business because that's where certainly we continue to see growth. We are at a point with Mexico that, that team has some energy and resources to point to another place.
Brazil was one of those countries that we looked at that had a similar kind of customer base to what we're used to dealing with and certainly the car population that's growing and economy that's also growing. And so we that was our choice, one of the list on our list that we pursued. Not going to be easy. Certainly, Mexico was not. We've got one store down there and we're continuing to work to make sure that, that store is successful before adding another.
And they'll be, just as Mexico was, a very slow and methodical process for us.
I think to your question, there's an opportunity for us to grow in other locations. Just right now, we've got our hands full continuing with Mexico at this pace, plus Brazil. Brazil is so there's so much about the country that's unique to the rest of South America in product procurement, to systems that's keeping us busy right now. It's a great opportunity, but it's all hands on deck.
What do you see as your long term store growth potential? I mean, there are 35,000 stores in the market. Where can there possibly be white space left?
Within the U. S, for the foreseeable future, we believe we can continue to open this approximate 150 store metric. It changes every year, not to be coy with the answer because every year suburbia changes and city demographics change, plus the metric is moving for us. As we have expanded our commercial business, it's allowed us to open stores in markets that previously we might have stayed away from. So for the foreseeable future, I'd say at this pace, we're more than comfortable with.
Okay. But in terms of geography, just give us a bit more color there?
I just want
to answer that, James. We see opportunities, as Brian was mentioning before, with the shifts in populations and cities with still in stores. So the geographies, there may be some concentration on certain parts of the country, but by and large we're adding stores across the country. Even with the changes in geography, we may be more in the Northeast, maybe more on the West Coast, but we're still opening stores in our hometown in Memphis.
And we're a Southeast company to begin with, but we're opening stores in the West, in the Northwest and Northeast. So lots of building opportunities.
I got the mic here.
Just as
a follow-up to the last question to your right here. Very good. So as a follow-up to the last question on kind of rolling out 150 units in the U. S. You mentioned that miles driven have kind of flattened out, so have the average age of vehicles.
Wondering who are you gaining share from?
What we didn't talk about with the 35,000 parts stores have remained relatively static in absolutes as some of the larger players have grown. And we've actually all grown sort of at the public eye, similar numbers, this mid-hundredy kind of number. What's happened is the a lot of the independents have consolidated. This is one of these industries that's unique, still less than America, where it's not a duopoly, 1 or 2 guys kind of running the space. And it's because it's a business very rational.
You've got a lot of guys that work their businesses. They're not talking about returns on capital. They're talking about payroll. So you've got a lot of franchisees. It's just sort of a relationship business, a service business that's allowing that to continue.
But the pressure points that causes some of the closures is this inventory assortment issue. As inventory proliferation continues, you're seeing a slow unwind of these stores. They're slowly closing. So I don't know if there's a prediction there on numbers of stores going forward, but it's harder if you're a smaller auto parts store in the country right now.
And do you have a sense for the combined market share between you and your main two peers?
We do. From a retail perspective, it's approximately a $45,000,000,000 industry that the top 3 guys hold about a 35% market share. And then from a commercial side, just north of $50,000,000,000 the top 3 folks hold them a smaller position, more like 15%. But the top 3 in commercial might not be the top 3 in retail. In particular, there's great competitors like a genuine parts company, NAPA, that has a very large presence in commercial.
Yes?
That was a much more interesting question than mine, which is about your uses of cash. You've been a very steady and very effective buyer of your own shares. Why do you not pay a dividend? What's the decision process behind that?
For us, tax law is changing all the time. But from us, the differential between ordinary income and long term capital gains was material enough for quite some time that we implemented this back in 1998, that buybacks made sense to us. As the long term capital gains and dividend rate came to more an equal number, we thought that we did consider, in fact, a dividend. What we don't talk about is when we look at things like our earnings yield on our price per share. And historically, we are a company that doesn't trade, let's say, north of 20x earnings.
So it makes sense for us to deploy capital against buybacks because the compounding effect of that buyback, we feel, is more dramatic on earnings per share than simply a dividend. Said differently, if everyone promises, we always say to take their dividend and buy back stock with it, with the incremental dividend, then it works. For us, we feel that the accretion from the buyback only builds on itself and it contributes. So at this point and then unfortunately, tax law is changing again. It's causing maybe dividend income to be stressed even more so.
So again, our position is if you need or would like a dividend, please, we encourage investors take 1 or 2 shares, sell them long term and create a dividend.
Yes. Hi, I just wanted to
ask again, you mentioned the delay in the tax refund. But I was just curious, that aside, do you have any sense of how much your customer might be impacted by higher gas prices or the tax increase at the start of the year? Yes. The
Tax Act, certainly both of those things tend to have an impact on discretionary income. We see those as typically the strain on our customer. The income tax piece was a bit more dramatic because it's a larger sum of money and that larger sum is typically deployed on higher ticket items, whether it's engine repair or whether there's a larger job, so even buying used cars. So I think over time, you'll determine what this payroll tax impact will be. Gas prices have been a cost and I guess ebbs and flows of them over the past several years.
I think that the payroll tax, it's hard to tell at the moment. That is not possible. Gas prices, they're always too high for our customer. I mean, especially the walk in customer where the average household income is not a large number for us. Stubbornly high unleaded gas prices affect driving miles.
It's just that simple. So that's not a good thing. We would like lower prices.
Yes, right here. Just going back to the competitive environment, you do operate in 2 relatively fragmented industries, especially in commercial. So how do you look at buy versus build? And how important will M and A be over the next couple of years in terms of capital deployment?
The buy is the answer. We want to buy. The reason being we don't close a lot of locations. Over since being public in 1991, we've closed just over 300 stores. 200 of them came when we did an acquisition in the mid-90s.
We literally close a handful of stores a year. As a result, the average age of our store is like Miles average age of a car, north of 10 years old. So from a present value basis on a lease obligation, depending on how you think about it, 8 years, multiples of 6 times, 8 times, discounted footnote of the operating lease, purchasing makes a lot of sense. The value creation from owning a property plus negotiation of CAM, common area maintenance, benefits us as well. So we'd like to own.
We can't always own. Certain markets, owners just won't give up the land and we want to be at a certain location, so then we lease. When we lease, we want to ground lease and build our own building. If we can't do that, we do a turnkey lease through a developer. But that's the big driver with the metric.
And I forgot if there was another question to your other half of the question, Hassane.
I think the other half of it was related to M and A activity. And with us, it's mostly a real estate play. And just as Brian was saying, we'd like to own. So when we're going about that business, we're really more focused on what's that real estate look like. We tend to look for stores that are going to be more in our retail location and that sometimes pushes us out of certain opportunities in that regard.
But it's for us, it's always going to be about real estate. We're not as much interested in just acquisitions to buy business of that nature.
Hi. Just a question on how you look at your sales and the old cars versus new cars. Is it fair to say, I mean, you say like new cars because they're higher parts costs and so on. But on the old parts on old car side, is it fair to say that as they progress and get older, the discretionary part of the spend on that car is less. So if you don't do the repairs that you actually have to do, then you have to take the car off the road.
I mean, is that how you think about yourself?
For us, the discretionary bucket is not certain parts. It's more like literally wash and wax and chemicals in that regard. So for those kind of items, it's in the teens as a percentage of our business. It's not a material driver. Now what I was saying is things break more frequently at basically 100,000 miles and above, but the price point is just a little bit less.
No, I can't say that in absolute, it's a bad thing to have the cars on the road or they sell or purchase less discretionary items. It's just a lot of parts, the way we purchase them, ultimately over time, people won't spend as much on a very, very old car just by de facto. So price points on certain items just come down.
I guess at some point you have to spend, otherwise you can't drive.
That's right. That's right. But there are things we want them to continue to drive. We don't want it to be a second car on the driveway just sitting there and being the primary the secondary vehicle not driven back and forth for work and work related purposes. So we think about things like that.
The question really comes down to how is that vehicle used? And right now in the U. S, ten and older, that's a primary vehicle. Americans are using that vehicle to get back and forth to work, not just parked in the driveway. So that's how we it's a balancing act.
Could you just give us your thoughts on the weaker car sales during the, I guess, 'seven through 'twelve timeframe? As they come out of warranty and enter the sweet spot that your space benefits from, does that become a pressure kind of say over the next 'fourteen, 'fifteen, 'sixteen to your comp? Or is that the wrong way to think about it?
No, it's not. The way we think about the math is we expect a certain amount of parts to be sold by each model year car. And to conceptualize very big round numbers, 10,000,000 less vehicles were sold on a normalized basis over the timeframe that you're talking about on this base of 250,000,000 vehicles. And so how does that affect you? We talk about cars once they hit 7 years and older being important.
We continue to sell lots of parts well past 10 years. I would tell you it is a headwind, but offsetting that has been these older vehicles continue to remain on the road and folks are driving them and repairing them. So you are not wrong that it is a bit of a headwind, but the absolute numbers plus the offsetting older ones have helped to The
average age has extended. So that sweet spot is expanding.
Yes. You mentioned that your ROIC is north of 30%. But that figure benefits in a significant way from the negative book value of your equity. Yes. So I'm just wondering if you could maybe highlight at a high level what the incremental return on your invested capital is when you roll out the commercial program and what it is when you roll out a new unit?
Sure. Working the first one, the returns from commercial are almost well, they're infinitesimal. Now what I mean by that, to be silly, is the working capital that's placed in the business for commercial is primarily inventory. And because it is a very, very basically offset with payables, the capital is very, very low. There is some capital from capitalized leases on trucks that we have, but it's super small.
So any operating profit is a benefit to the ROIC. Our company, just to give you an idea, has gone from the mid- to high-20s ROIC up to this low-30s over the last 3 or 4 years based on this benefit that's attributed itself to us. New stores, we want to hurdle a 15% lifetime ROIC, internal rate of return, and we're able to achieve that after 4 years. Our new stores have remained as productive on an annualized basis as the older ones. So that's what gives us encouragement that we can still open these 150 stores.
And how does new space productivity look? I think you said it takes roughly 4 years to get to the maturity?
To breakeven from a return on capital basis. So we spend at very the $1,500,000 to invest and open a new store. And we break even on that. Now we're generating operating profit in the 1st year, but the returns on capital are a fraction of that. But cumulatively, we'll break even, have an NPV of 0 after 4 years, just over 4 years.
And from that point forward, it's yielding. So that's why when you see these older stores, that's where the returns on capital have crept and climbed.
Thanks. So just one last question. Can you say what the productivity of the stores in its 1st year as a percent of maturity?
I can, but I can't the bottom line. I'll tell you that the sales are approximately 60%. So instead of doing a mature store $1,700,000 we're doing about $1,100,000 in the 1st year. They opened traditionally with retail only. More recently, we've been putting some commercial programs into newer ones.
But in general, we look at retail primarily first and then we layer in commercial to the returns.
Okay. Well, if there are no more questions are there any more questions? No. One more question. Okay.
I just had one really quick one about you mentioned a couple of times using your hub network more to improve the inventory turns. Yes. Maybe you could just give us a bit more granularity on that and how big an impact you think that could have in time?
Okay. Ultimately,
what we're looking for with the hub network is to be able to put parts in the market without actually having to have them in every store. And so the impact on turns, it tends to be definitely an item that we can use to leverage turns on. The ultimate issue is having the right size hub and that's going to be that's really been our focus. We've changed, I guess, 10 this quarter, kind of 77 life to date that we've touched. And so the expectation is we'll continue to go through and increase the size to meet the needs of that market.
Level such, we only turn inventory 1.5x, 1.6x a year. So because this stuff is so slow turning, we don't want to put it in every store. So the next nearest point is a centralized location like a hub. And so there's always a balancing act. Twothree of the inventory we carry in a store, we only carry 1 of, 1 each.
So it's this magic about not having a massive inventory proliferation. Well, thank you, everyone.
Great. Thank you so much.