Dive Brief:
- AutoZone’s efforts to strengthen its supply chain strategy helped drive an 8.4% year-over-year increase in sales in the past quarter — the largest reported increase since Q2 of fiscal year 2023, President and CEO Philip Daniele said during a Q3 earnings call last week.
- This year the auto parts retailer is investing nearly $1.6 billion in capital expenditures, most of which is allocated to hubs and “mega hubs,” Daniele said. AutoZone expects to invest a similar amount of money next year.
- AutoZone’s mega hubs aim to place inventory closer to customers, Daniele said. This quarter the retailer opened 14 mega hubs, which serve both as stores and distribution points, and it plans to open an additional 15 locations in Q4.
Dive Insight:
Mega hub stores are a critical part of AutoZone’s long-term plan to improve inventory placement and grow parts availability. Since its initial rollout, the retailer has made significant headway on its goal to drive faster store fulfillment. In 2024, AutoZone was targeting 200 mega hub stores and was operating just above 100 locations.
Mega hubs, which typically carry more than 100,000 SKUs, drive a “tremendous” sales lift inside physical stores and serve as an expanded source for other retail locations, CFO Jamere Jackson told analysts.
AutoZone is targeting nearly 300 mega hubs in the near term and currently operates 156 locations, Jackson said. The retailer plans to open at least 40 mega hubs in fiscal year 2027.
“The combination of the demand for parts in the marketplace, the customers' desire for us to have those parts closer to the customer so that we can provide a better service level is really what's fueling our strategy,” Jackson said.
Another auto parts retailer, Advance Auto Parts, has also been overhauling its distribution strategy in a bid to position goods closer to its customers. Advance Auto Parts recently announced that it was nearing the completion of its distribution consolidation strategy, and is also on track to open up to 15 market hubs this year for same-day parts coverage.
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