Total sales grew 8.1% despite severe winter weather in the final weeks of the quarter which temporarily suppressed commercial activity.

Domestic commercial sales increased 9.8%, driven by improved satellite store inventory and the expansion of the Mega Hub network.

Management attributed a significant portion of the commercial slowdown to business closures during weeks 10 and 11, where growth dipped to 1% compared to 12% in the preceding 10 weeks.

DIY same-store sales remained resilient at 1.5%, supported by a 5.2% increase in average ticket which offset a 3.6% decline in traffic.

The company is aggressively accelerating its global footprint, opening 64 stores this quarter compared to 45 in the prior year period.

International constant currency growth of 2.5% reflects a soft macro environment in Mexico, though the company continues to gain market share in that region.

Strategic investments in the supply chain, including the 'Supply Chain 2030' project, are aimed at placing inventory closer to customers to improve delivery speed.

Management expects to open 350 to 360 new stores for the full fiscal year, with a long-term target of 500 annual openings by 2028.

Average ticket growth is expected to peak in the fourth quarter as the company begins to lap high prior-year inflation and weighted average costs rise due to tariffs.

The company anticipates a 'snapback' in demand during the spring and summer seasons, as extreme winter weather typically drives later failure and maintenance events.

LIFO charges are projected to remain at approximately $60 million per quarter for the remainder of fiscal 2026 due to persistent tariff-related cost pressures.

Capital expenditures are planned at nearly $1.6 billion for the current year and a similar amount for next year to support hub and Mega Hub expansion.

A non-cash $59 million LIFO charge significantly impacted margins and EPS; excluding this, EPS would have grown 7.1% instead of declining 2.3%.

Foreign exchange served as a material tailwind, with the strengthening Mexican peso contributing $0.95 to EPS.

Inventory per store rose 8.1%, reflecting strategic investments to support growth initiatives and the impact of inflation.

The company noted regional underperformance in the Mid-Atlantic and South Atlantic areas, while the West Coast was impacted by milder but wetter weather.

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Management expects same-SKU inflation to remain in the mid-single-digit range through the third quarter before tailing off in late fiscal 2026.

Most price increases are driven by 232 tariffs, and the company uses a multipronged strategy of vendor negotiation, sourcing diversification, and retail price adjustments.

Management dismissed concerns about losing position on the commercial 'call list,' noting that the late-quarter slowdown was strictly due to physical shop closures.

Early Q3 data shows a 'nice snapback' in commercial activity as shops reopened following the winter storms.

Mega Hubs are currently performing significantly better than internal models and reach targeted returns in a short period.

The company increased its long-term target to over 300 Mega Hubs at full build-out to maximize local inventory availability.

SG&A growth is expected to moderate in the second half of the year as the company annualizes the accelerated store growth from the prior year.

Management aims to maintain operating margins in the 18% to 19% range, balancing commercial mix pressure with supply chain efficiencies.

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