Financial Data and Key Metrics Changes - Total sales for the quarter were $4.5 billion, up 5.4% year-over-year, while earnings per share (EPS) decreased by 3.6% [30][31] - Domestic same-store sales grew by 5%, and international same-store sales increased by 8.1% on a constant currency basis [30][31] - Total EBIT was down 3.8%, impacted by foreign exchange rates and unfavorable LIFO comparisons [31][44] Business Line Data and Key Metrics Changes - Domestic commercial sales increased by 10.7%, marking the first double-digit growth since Q2 FY 2023 [10][21] - Domestic DIY same-store sales grew by 3%, with traffic up 1.4% and average ticket growth of 1.5% [36][30] - International same-store sales faced a negative 9.2% impact due to currency headwinds, despite a solid 8.1% growth on a constant currency basis [12][38] Market Data and Key Metrics Changes - The U.S. DIY business showed resilience with maintenance and failure categories outperforming discretionary categories [16] - Regional performance varied, with the Northeast and Rust Belt outperforming other regions for the first time in a while [19] - Commercial sales growth was slower in the Northeast and Rust Belt compared to the rest of the country, with expectations for improvement as the year progresses [22] Company Strategy and Development Direction - The company remains focused on improving customer service and expanding its hub and mega hub store formats to drive sales growth [29][55] - Continued investment in technology and supply chain improvements is expected to enhance customer experience and operational efficiency [29][50] - The company plans to open approximately 100 international stores this fiscal year, with a commitment to accelerating store growth [26][50] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about sales growth momentum as comparisons become easier in the fourth quarter [25][52] - The company anticipates that inflation will stabilize, with average ticket growth expected to return to historical rates [17][65] - Management highlighted the importance of maintaining gross margins and managing operating expenses in line with growth initiatives [42][53] Other Important Information - The company plans to invest approximately $1.3 billion in capital expenditures to support growth initiatives [28][29] - Free cash flow generated for the quarter was $423 million, with a strong liquidity position and a leverage ratio of 2.5 times EBITDAR [47][48] - The company repurchased $250 million of its stock during the quarter, with $1.1 billion remaining under its buyback authorization [49] Q&A Session Summary Question: Can you provide details on tariffs and sourcing? - Management indicated that China is the primary source of imports, but efforts have been made to diversify sourcing to mitigate tariff impacts [61][63] Question: What is the outlook for inflation and pricing? - Management expects inflation to trend towards 3%, with potential pricing actions to offset tariff costs [64][65] Question: Can you discuss the impact of new distribution centers? - New distribution centers are expected to reduce supply chain costs over time, although initial startup costs may impact margins [111] Question: How is the company managing SG&A expenses? - Management emphasized disciplined investment in SG&A to support growth initiatives while managing expenses in line with sales growth [42][73] Question: What factors contributed to improved sales growth this quarter? - Management noted that the culmination of various initiatives and an improving sector backdrop contributed to better sales performance [96][99]

Financial Data and Key Metrics Changes - Total sales for the quarter were $4.5 billion, up 5.4% year-over-year [28] - Domestic same-store sales grew 5%, while international same-store sales increased 8.1% on a constant currency basis [28] - Earnings per share (EPS) decreased by 3.6%, impacted by foreign exchange headwinds [29][45] - Total EBIT was down 3.8%, with a significant impact from foreign exchange rates [29][43] Business Line Data and Key Metrics Changes - Domestic commercial sales increased by 10.7%, marking the first double-digit growth since Q2 FY 2023 [9][31] - Domestic DIY same-store sales grew by 3%, with traffic up 1.4% and average ticket growth of 1.5% [34] - International same-store sales faced a negative 9.2% impact due to currency fluctuations, despite a solid 8.1% growth on a constant currency basis [11][36] Market Data and Key Metrics Changes - The U.S. DIY market showed resilience with maintenance and failure categories outperforming discretionary categories [15] - The Northeast and Rust Belt regions outperformed other markets, indicating a positive trend due to favorable weather conditions [17] - Commercial sales growth was slower in the Northeast and Rust Belt compared to other regions, with expectations for improvement as the year progresses [20] Company Strategy and Development Direction - The company remains focused on improving customer service and expanding its hub and mega hub store formats to drive growth [22][52] - Continued investment in technology and supply chain improvements is prioritized to enhance customer experience [26][52] - The company plans to open approximately 100 international stores this fiscal year, reflecting confidence in growth opportunities outside the U.S. [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about sales trends for both DIY and commercial segments as comparisons become easier in the upcoming quarter [23][52] - The company anticipates ongoing challenges from foreign exchange rates but believes it can manage gross margins effectively [50] - Management highlighted the importance of maintaining focus on execution and customer service to capitalize on growth opportunities [52][53] Other Important Information - The company plans to invest approximately $1.3 billion in capital expenditures to support strategic growth priorities [25] - Inventory per store increased by 6.7%, driven by new store openings and additional inventory investments [46] - The company repurchased $250 million of its stock during the quarter, with $1.1 billion remaining under its buyback authorization [48] Q&A Session Summary Question: Can you provide details on tariffs and sourcing? - The primary source of imports is China, with efforts to diversify sourcing and mitigate tariff impacts through various strategies [58][60] Question: What is the outlook for inflation and pricing? - Inflation is expected to trend towards 3%, with potential tariff costs influencing average ticket growth [62] Question: How do you view the impact of tariffs on inventory and costs? - The slow inventory turnover has delayed the impact of tariffs, but the company is confident in its ability to manage costs effectively [66][67] Question: Can you discuss gross margins and SG&A expenses? - Gross margins are expected to be slightly down in Q4 due to various pressures, while SG&A expenses are being managed in line with growth initiatives [68][69] Question: What factors contributed to improved sales growth this quarter? - A culmination of ongoing initiatives and an improving sector backdrop contributed to better sales performance [95][97] Question: How are hubs and mega hubs performing? - Hubs and mega hubs are growing faster than the rest of the commercial base, contributing positively to overall sales [103][104]