The auto parts retailer opened 16 mega hubs this quarter and 39 this year in total as it advances its inventory replenishment strategy.
AutoZone’s supply chain investments that started in 2020 are now in the final stages of completion, Daniele told analysts. In Q3, Daniele told analysts that efforts to strengthen AutoZone’s supply chain drove an 8.4% year-over-year increase in sales.
This year, AutoZone invested about $1.5 billion in CapEx primarily placed toward store growth and hubs and mega hubs, Daniele said. The auto parts retailer expects to invest a similar amount in FY 2027.
“We ultimately had to do some work in our supply chain to make sure we were able to service our base stores that we had and do that well and efficiently, and we needed to expand our supply chain to make sure that we could accommodate what we believe is the right strategy in new store growth,” Daniele said.
AutoZone has accelerated its growth in “mega hubs” over the last few years — a core part of its replenishment model. In 2024, for instance, the retailer targeted 200 hubs but is now working toward its goal of operating 300 mega hubs over the next three years. The hubs typically carry over 100,000 SKUs, serve as an expanded assortment source for other stores and help drive sales.
“One of the reasons that we moved our targets from 75 to 110, and ultimately to 300 is that when we attach a mega hub to a satellite network, we see an acceleration, and it’s a dynamic that we continue to see,” CFO of Customer Satisfaction Jamere Jackson said on the call. “When you jam more parts in the local market closer to the customer, then to Phil’s point, it drives sales.”
AutoZone opened 16 mega hubs during the quarter and 39 for the year, Jackson said. In total, the retailer operates 172 mega hub stores. AutoZone plans to open more than 40 mega hubs in FY 2027.
“Let me provide one other piece of perspective on the importance of mega hubs,” Jackson said. “There are approximately 2,000 commercial programs that are linked to a mega hub network. These programs sell 16% more annually than the balance of the commercial programs in the chain.”
Elsewhere in its supply chain, Daniele reported that AutoZone’s new distribution center in Brazil is complete and already reducing supply chain costs. Meanwhile, AutoZone’s new distribution center in Monterrey, Mexico, is now double the size.
“We opened our new expanded Monterrey, Mexico, distribution center and broke ground on another planned DC in Mexico,” Daniele said. “This expanded Mexico supply chain will allow us to serve our customers better, reduce supply chain costs and better support our international store growth.”
Auto parts retail rival Advance Auto Parts is also making progress on its distribution consolidation strategy. Advance Auto Parts earlier this year reported that it was nearing the completion of its distribution overhaul.
More recently in August, Advance Auto Parts said company leaders are accelerating the pace of openings this year by planning to open up to 20 market hub locations. President and CEO Shane O’Kelly said during an earnings call in August that the retailer aims to operate 60 market hub locations by mid-2027.