AAP - Earnings call transcript Q4 2018 | Advance Auto Parts, Inc.

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Operator

Welcome to the Advance Auto Parts Fourth Quarter 2018 Conference Call.

Before we begin, Elisabeth Eisleben, Vice President, Investor Relations will make a brief statement concerning forward-looking statements that will be discussed on this call.

Elisabeth Eisleben

Good morning and thank you for joining us to discuss our fourth quarter and full-year 2018 results. I’m joined by Tom Greco, our President and Chief Executive Officer; and Jeff Shepherd, our Executive Vice President, Chief Financial Officer, Controller and Chief Accounting Officer.

Following their prepared remarks, we will turn our attention to answering your questions.

be as our Securities defined Act XXXX. please include today Litigation begin, of statements forward-looking by we advised comments that may Reform Before the Private

such differ and Exchange risks which Commission, Securities duty the are Risk no those While Company’s number the uncertainties, materially to in we statements section results to a maintain may projected actual made. update and in Factors statements described filings due of the from forward-looking in with

non-GAAP results financial detail Please these helps management the certain We the consistent in reconciliations Additionally, call. believe most statements. more release regarding release to measures the The our and include statements financial refer will comments how and non-GAAP these by related measures. information investors call press GAAP quarterly this measures complete and be additional providing measures today in of comparable results. forward-looking governed content contained with our our today views understanding referenced and accompanying a to today’s earnings issued financial gain for financial of our our financial is statements of

Now, Tom let call Greco. turn me to the over

Tom Greco

our full morning. was and our progress toward X.X%. X.X% for to comparable quarter, strategic and for unwavering fourth you to And fourth were to network Good dedication personally results. want long-term an their deliver commitment, our Independent sales I Advance up XXXX joining billion today and quarter Carquest meaningful throughout and store $X.X entire us of Elizabeth. increased In the focus Thanks, objectives exciting sales net the year. team thank year Advance, and year This discuss for the thank to

to points, the margin and increased $X.XX. XX year compared XX.X% per earnings Our adjusted quarter, of share X%, increased operating to income our adjusted prior basis

year full XXXX performance. our Regarding

we margin $XXX an store year-over-year. increased to and GPI. in rate detail, to Our billion, income increased would and we building for year-over-year $XXX our the points Yes! to living Adjusted acquisition team since everyday XX been our Customers, members, XXXX win our the of continuous Passion net have not foundation more work strongest improvement full free to-date comparable delivered year Jeff our without over throughout is cultural possible for than X.X% million, the results quarter term. shortly. mission, delivered to completed growth we've we X.X% increase our The reinforcing flow more operating XX,XXX in X.X% speak long financial Passion sales, and for was of need and The sales hard truly will increase our the $X.X basis annual the beliefs cash million

positive throughout the in Both pleased Specifically, filters Northeast by sales growth oil delivered and on management, in quarter, nearly category led balanced and engine metric. comp consistent, south AAP north divisions regions. very with Gulf geographical From undercar. the saw with sales and Mid-Atlantic, strong brakes, our fourth and Carolinas, I'm Appalachian, improvement perspective, we our every Coast, a

continue DIYers. growth driving improvements DIY last outcomped seeing quarter, DIY across the business fourth business In for enterprise, businesses. professional omnichannel key first proposition the quarter, we the discussed meaningful professional in both in metrics customer our As the we're our history, strengthen time our as recent in and our value initiatives for to

in for Worldpac and professional and objective with customers. With our center, in both XXXX, AAP. focused full we business both ensuring our building the capabilities led on deliver this our professional, growth and fourth best-in-class front We experience new across we're customers, and year partnerships success to by strengthen to quarter for our future all their delivered remain our commitment independence. Carquest to Turning growth businesses professional

tools online one value in added August, launch our other customer example, the stop MyAdvance many This of AdvancedPro and customers. catalog, tools unified shop. our professional suite, resources, For formally professional support, eServices disparate integrating training a portal, for in with multiple includes we're

We pickup are and omnichannel the investments capabilities As in us If increasing from job. a well competitors buy advice product complete our we of to engagement and further up getting for DIY streamlining result, our on XX% to improve search load lead online single growth customers get the on to which the share will part our performance, work reach the investments senior and buy drive for and we're in industry-leading done. our our We've training online correct have the grow they will their this the and assortment. provides customer enabling first our off first to to DIYers. customers ensure will shipped a and launch our rolling as We're today with and by advice. intelligence learning include made in our unique and are AAP. extend of and making a online out and and rollout, search on with also industry-leading parts. a to Advance our X on they partnership, for the to start customizations as significant location partners machine strong inputs. a able differentiates we're plans of enhance based for half Walmart DIY our Aligned business to fulfillment page to usage help made tool business. together and knowledgeable in leader team our and AAP recently to artificial we're market as focus, working year. about in members provide proposition engagement focused announced excited building Walmart and online the that track in the a store, launch improved store. speed, compelling all the this omnichannel our selling members over This team Walmart website the confidence parts QX. We're they to right platforms to and Advance of Customers in customer customers’ phase part leveraging progress Expanding pick value team attachment with assortment our will solution appointed tools significantly this to assortment phase well job product This our home platform broad vehicles as delivering with and customer the We're experience. be increasing we've improved significant The an partnership, are have talented of while enable available begin a together trusted increased the

and end-to-end drive I'm performance footprint distribution centers. which made pleased a year. Overall, last last improving third, included we've share asset Finally, year, introduced repurchasing to in-market with chain supply XXXX footprint strategy, in first, improve XX a store the and and second, we approach Worldpac our market-by-market We're elements of through our new approach our to optimizing branch base; optimization the our key share; three market-by-market progress openings. over

We expect further in to continue gain value share. ‘XX this customer strengthen to our momentum proposition and

closed AAP members on consolidated Consistent top-performing and we differently In quarters, retaining closures during to the that stores other previous locations. are is very our past. sales store addition, team through with our XXXX. we and maintain than team ensuring laser-focused approaching XXX Most the we transfer importantly, in

of Gallman execution to Regarding optimizing distribution XXXX. half XXXX. track our thrilled closing successful Columbia, team's in our our closing and Slone this on pleased as are the first Carolina distribution team with We're supply San complete our leadership to joining in Center We're on centers in and Antonio of I'm we make Distribution chain. the continue Reuben process progress our South with centers, in

other to opportunities significant have chain operations and execution, did improve collaboration and we While and increase store we supply merchandising. such functions as transparency between supply chain

in out, of telematics improves In pro We also network. delivery summary, delivery our new long-term goals, and reliability confident the and XXXX of on to deliver improve technology further chain tools quarter, in the our the team's for rolled our our including which dashboard, I'm accuracy in and ability including optimization leverages supply entire and distribution fourth customers. execution

Finally, primary leadership December our our in in areas people; it Sustainability and highlights we in on community. inaugural roles. and and people representation progress further agenda, within report made our Report increased XXXX This and published as ESG progress again, our Social Corporate report I'm we pleased three in Once posted diversity to on website. planet; we culture

members We of this key has field within industry of program to is incentive positions. XX,XXX than invest broader our operations our store grants more question retention frontline with through in our top a to-date. There program unique retail. frontline that continued in Frontline remains been performers team driver and increased of the Fuel a no

collision frequency incidents We also a talented improvements number a team of Mike health XX% XX% a meaningful and launched initiatives appointed and additional Miller. leader, safety including the Mike's reportable safety our driving and in built reduction an several in world-class reduction rate. environmental,

of health greenhouse by will expect Long-term, environmental safety and terms X%. emissions we reduced we In significant our drive environmental, agenda our productivity. gas

elevated playing U.S. Building for our families veterans in national American Association, our in to and Heart organizations Heroes, JDRF, and In the as communities organization homes terms involvement their for of an community, constructs Homes by leadership we new who returning such the roles

delivered to enterprise future performance critical areas momentum accelerated growth. each responsibility While we’ve in the to continuing to-date, XXXX, to progress we’ve of our summary, look recognized these improvements updates I In these ensuring efforts. forward on more. translated do in we have across

to industry it XXXX the improving As and growth, top-line deliver turn our encouraged Jeff continue parts margin XXXX. and by cash said on financial details previously, ability the we to and our confident strong we’ve for to flow over I'll our are that, be With macro in outlook. for in performance indicators expansion auto

Jeff Shepherd

the to QX, enabled Thanks, throughout business. for their thanking the want begin Tom, entire good improvement morning, discipline and team’s I across the everyone. Advance XXXX. meaningful by In dedication team

prior XX.X% offset prior news of Our headwinds And quarter. of improvements on versus basis quarter. of commodity increase increases initiatives units and from efforts this including our through throughout inventory impact result our to-date margin points a chain from by were pricing adjusted we've MCO, the by increases. and and cost adjusted million, year tariff an tariff The On related is, improved successful see good we drivers year year X.X% actions. on inventory was partially a the prior shrink. reduce any minimal commodity productivity existing the gross These passing result quarter. position as better profit of supply were increase been of $XXX The the basis, linked a to profit gross XXX

work pricing to with continue negotiate customers. our We and supplier partners to our minimize closely impact to

the million $XXX year-over-year. Our $XX fourth adjusted increase quarter, SG&A an of was million in

our points adjusted percentage sales, bonus normalize in a majority was higher by The of XXXX. to expense, increase by driven net expect XX basis which As we SG&A of increased XX.X%. this to

related campaign, digital marketing spending also our new including We capabilities. increased to of acceleration an

expenses fuel higher to mile increased include related were which delivery last due cross-banner expenses, our to increased Additionally, transportation and costs visibility.

and stronger top-line and in opportunity to These expenses and enabling clearly finally, were safety contract directly were was And is fees efficiencies. further the performance, well million, $XXX reduction due claims fourth occupancy we income third-party in XXXX. XX.X% capability services to insurance offset capital the rent spend. fourth quarter, have correlated from our this operating to While costs. an partially quarter quarter Adjusted by lower significant performance of as in improved improve higher as headwinds the increase increased the

chain XX was year than Our technology operating in million. of our $XXX related $XX increased our margin quarter. full capital QX spending supply a in ramp basis information QX points XX% the spend adjusted to quarterly the to bringing and to was More throughout Consistent X% XXXX, in with million, projects. spend income CapEx

IT officially payroll initiatives started Xst. moved capabilities. addressing lack the banners system integration of Our longstanding and on of and We've to single all integration system January critical opportunities include a investments,

ERP systems, the also over happen team which finance launched years. will Our next project office to our back our two integrate

efficiencies in Reuben access and centers. existing wireless work distribution to operations, to invested handheld including within we scanners improve accuracy team improve and and network his upgrades, As the chain supply

some increased customer year in of $XXX cash billion. purchases Adjusted previously will X.X%, in year the to the the current full year by drivers X.X% a increase profit to increase for cash margin our we to increased coverage. we November and implemented, projection. QX. billion sales SG&A first, resulting in sales rollout million. million, increased higher to inventory the year-over-year $X,XXX adjusted enable by to in to basis Dynamic that to and net expect flow dynamic these cash are our of planned basis, $XXX flow for basis gaps to slightly full significant $X.X for XX XXXX dynamic were And QX several implement XXXX, points. inventory in The Consistent how which compared mitigate On assortment assortment, comp fully and found factors, X.X% increased we risk income a $XXX adjusted Adjusted putting deploy our to SG&A expectations. year operating increased assortment as for margin million For were million XXXX, was gross forward our sales successful and million. profit to free XX.X%. improved income was significantly X.X% increase was $XXX will points below free to commitment performance. inventory than with XXXX. of of gross in for XX.X%, higher We turns. adjusted with gaps the $X.X improve increase flat a rate delivered we we when operating year-over-year more potential XX Because increased in in the addition beginning an were line Adjusted originally primary first, X.X% over $XXX.X an full-year discussed the million operating X.X%, our Full-year and flow improvement

Second, focused on store chain. as we purchases to capabilities trended higher, sales improving our in-stocks, in supply were throughout ensure replenishment resulting higher

we well our across first quarter opened is first to maintaining branches said, in to XXXX years, as XXXX. With openings while Third enterprise. committed the next that assortment XX our the to support as over of new several planned customer all improving related the optimizing in purchases world-class inventory focus and our were that remain

XXXX, in an this delivering AP XXX XX.X% Our capital basis of end and to our year of cash approach to resulted year-over-year. allocation disciplined improvement managing ratio on priorities points an

to on priorities an improvement investment addition to during confident of progress, cash financial XX in return return this capital, basis-point we return rating, which the prior repurchased invested flow Advance shareholders, in generate opportunistically the was to of notable We're the grade $XXX to In stock a cash the we XX.X% opportunistic ability a business and year. In fourth delivered to million and a business quarter. capital with the to to from investment shareholders. compared worth our maintain our line committed

to of of average subsequent price year-end, stock such, As $XXX we worth at $XXX.XX. million Advance an repurchased

forecast additional and time. do at not guidance this repurchases Our any include

and using redemption the keeping available hand. shareholder drive month, we generate our on last value, million our of flow early business Additionally, $XXX cash announced the We're our while financial ability to in to notes confident cash XXXX from priorities.

we fourth but capitalize opportunity recognize in with the year, quarter ahead. still pleased we and We what deliver are work full were able do have that to both to significant to on the

objectives comparable range we we of this continue X.XX of strategic XXXX, further the X.X%. billion XXXX, we're net deliver with As to sales with In execution deliver expect to store confident sales will in to our we or disciplined improvements $X.X X% in year.

year, XX related of $XXX range in in expansion XX points, We chain expect a We of million to CapEx in of to the ramp which and operating in continuing and adjusted of investments. $XXX to investments store line million XX estimate transformation includes supply $XX optimization million which related our focused on year, two-thirds estimate with agenda to to we which this $XXX approximately in In footprint. chain further e-commerce transformation $XXX expenses a of more and XXXX, this integration is million our margin in a IT, marketing our expenses XX in includes income range a continued of supply XXXX. million than operating range basis to technology,

be Our rate XX% is to XXXX to tax expected XX%.

our Finally, focused we improving and remain cash cash disciplined in on management flow.

execution appropriate deliver CapEx on We're plans. optimistic successes your making OpEx to executing the to it continue both we about financial Tom pleased at in as on as and XXXX our open future objectives. from free laser-focused long-term sharing and investments flow while $XXX said, term XXXX, the look momentum a our ended to our Operator? to and that, addressing let’s we minimum need In perspective, we're of expect With forward strategic we short remain up flawless to with XXXX, For cash where questions. million. continue deliver summary, but we

Operator

from first Morgan with instructions] Stanley. Gutman comes [Operator Our question Simeon

Your open. line is

Xian Siew

is Hi Siew Simeon. Xian guys. This for on

about EBIT maybe the to guidance is would of over and teens conservative, represent from range little time, a here. XX margins or XX just longer little is talked point some time reach So, of gains significant kind you've maybe A wondering, taking we mid soon? expect But a bit to progress to bit sounds -- which take encouraging. should journey faster were over going we

Tom Greco

expand last supply driving margin same investment margins to chain of that prepared help the that long-term to morning. ‘XX material expansion and talk drive full optimization, top-line these growth, That This top-line the growth in some around productivity. at company. ‘XX, while we're had Jeff focus which to happy OpEx cost the we'll go to and of in in We term. about about savings drive both, in we feel e-commerce; point the the we do made and in and range making in unlock old net in differentiate areas, Good cost in were offsetting is, are expansion. $XXX XXXX, of remarks, XXXX. expanding with And investments really is of happy deeper in And XXXX productivity They'll in us feel you margins success. They'll at chain; drove into margin in supply our top-line critical these the necessary investments, the They There able people, we us and growth. our over the in to pretty time. expansion And in long in reinvesting investments in a ‘XX two that drive margin something $XX growth. but business of secondly, is or itself do are primarily long-term drive either to productivity heard by our all, order we're they're our budgeting important AAP difficulty will continue significant that year. of XXXX and to the drive of we three good a first million going each I'm OpEx the and are investments The areas, back progress zero-based it future marketing. to of the technology third, limit one will productivity focused And feel things. and million growth

Xian Siew

on term, that. to on of will us from? you. it of margins up kind biggest the biggest what's Thank sales And Longer opportunity, remind just is just then, Can productivity? you where come upside more follow or the the inefficiency the

Tom Greco

We of X% have mean, can we I both. believe range. at combination the margin a we now drive in rate healthy growth industry, performing which drive that or think we also obviously of of the value can expansion. we significant right very shareholder And is through above

So, role of both those in our of play a overall the financials. trajectory key

Operator

Thank you.

with Horvers Our Morgan. question from Chris next J.P. comes

Your line is open.

Chris Horvers

half you to annualize going morning, as gross last the of leverage year Good should Thanks. the front back from guys. this year, to be How how think components, about should talk expenses this it's for we Can margin SG&A? and margin more investments well. cadence? be weighted? And you year? guide You we versus half past Do think about about have some the versus in thinking terms

Jeff Shepherd

good morning, Chris. Yes. Hey,

throughout think for is we're overall the As see be the going the steady improvement going to to year, we margin year. --

we on basis SG&A margin flat breakdown SG&A. and to gross going we're our between rate think terms on a the margin, of In be

So, keep recall, previous now, gave color the Right we that the XXXX, flat prepared remarks as basis. about just came that we and investments rate OpEx will on in both us in on modeling that those in talked we with question at in you XX.X%. a we're

about that's the it. thinking way So, we're

Chris Horvers

opportunity square first debt think sort of XXXX? How down in the repurchase the share do And you you You Can repurchases coming, cash terms in pay in Understood. the that free $XXX for opportunity. share about up then, think you how flow? use of about of have the million quarter.

Jeff Shepherd

opportunities unchanged expenditures talked This XXXX, range the just then, from in opportunistic we Yes. back our excess million And look to to cash had reinvest don't to grade we with And allocation capital going investment increase that have guidance excess repurchase to plan, be to is And shares We We $XXX a about revised remind repurchasing are XXXX. continue worth have be in to cash to in currently, that. $XXX the going to our expect Since opportunistically our giving business. but of maintain to remained is opportunistic we're you, which our of shareholders. and in anything capital to shareholders. repurchased we the our return $XXX rating, going those shares. priorities million. we're continue be to at

Chris Horvers

about you time last multiple going about do And talk Thank the how you're can Understood. three about chain projects? integration? How those You thinking supply have to you. I you chain supply phases think question, think, complete different on Tom, phases, currently. the

Tom Greco

in, thinking. fourth Sure, and quarter, we familiar Chris? our new our with doing. Slone, came the Well, a as Board. Reuben were dimension you to in know, was brought He He's was on Reuben what very

to momentum in standardization core very building focused really a he's think, on our supply processes. chain. He's ramp the up rigorous I of execution

note our haven't supply it's changed, supply execution, within important the feel about big the tackling just to chain three your So, progress that The blocking making elements of strategy chain. really on and basic we're our good point. the I to

is market of The our completed based country. obviously, here a think, cash on share within the in building to the each And We thorough drive entire a every market, first forward really market the supply chain plan I plan. enterprise’s opportunity going existing goal by is we've The review of flow drive footprint. market one DMA infrastructure. leverage size margins, for our expand the to

heard you about us optimization. talk Secondly, DC

DC continue the in of San and this work South forward. half DC the network. our plan Columbia, Antonio first the of optimize to on during see us closures close and of XXXX, the track our end optimization at We're we're of the going completed XXXX, Carolina need. we executing you'll our and We than disciplined to process pretty DCs more have We Gallman

very optimization. store in-store, it’s of This terms and market well. in Finally, in well also asset is performing and underway our

at look sort stores, we connect entirety Hubs clear then we're and stores Advance we Here, with Super backdrop, Worldpac Advance branches, assets, as in store how on stores, to these with to and International and of across independent. we We're of the branches. and Advance to executing goals asset DCs, the Worldpac once course, year. entirety and Carquest and and Carquest base of And we both the in-market the corporate look and AutoPart great optimize. bases best asset And this including board. XXXX, our this job the a last closed a XX opened closures we and And exceeding did established XXX consolidated and hubs, about

really leadership. similar under plan approach take Reuben’s to And I'm it's going executing. good get about we So, better feel I confident in XXXX. to we're how a

Operator

you. Thank

question Our with UBS. Michael comes from next Lasser

line Your is open.

Michael Lasser

for Good Thanks a taking lot question. my morning.

what Why As longer do do think the growth more out be you you rate? the difference similar you -- DIY terms run, look this over in expect business and to of quarter? drove that CISM

Tom Greco

be growing. this seeing sweet is of one vehicles driven is miles growth we're spot. points a vehicles And the sweet as vehicle will year, industry spot all, ones on of year then, in standpoint, up, The positive, year, couple expect from the DIY. outperform this course, going know. car of park go strong big Michael, the found to Well, we The leading is indicators first the GDP really this an we industry big professional that you being are up in to that

number, a population. positive is that's flat X for in real vehicle industry XX-year then old that year. overall. you in know, to as that And last course, roughly the was down and That XXXX Of

more. And we're in more cars seeing a the complicated, side size. tends benefits benefit that professional a getting bit Obviously vehicles So, professional the positive spot. in with sweet to the trend the little that

remarks grow growth expect to call DIY DIY, we're with range. and we to DIY performance the we the DIY our as of rate All above professional said that low in recent is it So, pleased a time, in business outcomped in most the digit our bit said, of prepared professional quarter. that X% the first It little single really the X%, our of business.

Our advertising, Think us for Advance sure. Think Ahead, helped

the omnichannel team driving per us. effort the is is stores; well units field Our helping And we're executing obviously, in transaction.

So, would time. helping DIY perform all of performance well. our our those how own expect business macro as than a professional things And we’ve to on that's though we level, higher DIY internal on are modeled over

Michael Lasser

the as us the performed been quarter-to-date? you And weather to has start funky, sense really some the give how can quarter business

Tom Greco

about We the progress are volatile. bit late like tax And been refunds we year-to-date I really are it's performance our little our feel great a year-to-date. where we it's on Obviously, like The clearly winter, basis. and but execution. on

And so things the our seeing rate seen to better consider awareness you side, If on continue professional side uptick then, omnichannel and we Think momentum; the we're managing continues our getting to business, cross-banner gain of Ahead, drive cost there. Think sourcing we're well. a as close go we up; DIY Advance, we’ve a nice

positive things a of on us quarter-to-date are all So, basis. those for

Operator

you. Thank

Our comes next RBC question Markets. with from Capital Ciccarelli Scot

open. is line Your

Scot Ciccarelli

that that to is event Good outlined. you really in to term? be just you XXXX a to continue morning, position business the Do the guys OpEx incremental want you invest guys, you recognition need where Ciccarelli. it to Scot you Question investments over about highlighted or the the as longer envision it

Tom Greco

of Let me a term. start that and areas is first I'll take But, ‘XX, in, the longer investing to over in we're Jeff of Scot. couple all, talk about it there to

integration e-commerce, If over largely are by that's you we're Examples about that technology making. It's far half. here the talk investment related. biggest and

enterprise, OpEx the new we expense we and a office one system, simplify IT, across to getting are getting system, cases, cost to the implement one implementing in complexity business and management have we're really payroll commensurate In design reduce and systems. to as getting So, system. single These XXXX cost our large warehouse these takeout back technology-related the that base. without in platforms the

obviously expect system. So, doing future, our in remove payroll retire the to sometime way that's when old our we're the able to we ERP fully costs or these of things, whether

chain a turnover operations turnover similar in terms And a team third, now talked thing year, centers had in down campaign. in DIY our addressed of our frontline you'll store professional. about that; advertising brand, in same wage there. investment turnover then, recall, to our supply we making this drive our couple terms and Secondly, years the down. And in to crisis the both in on and very we've do we're a I the been is ago. distribution We've building of people, organization our marketing,

to As meter back. obviously don't lift represent But, the a continue little continue marketing certainly the like drive Jeff our can see I’ll vast sales it we're campaign invest. we returns investment industry the the talk we comps majority of above to average, And we in the our about bit going and OpEx these there, growth to let ‘XX. future. our areas If three

Jeff Shepherd

And in do after Yes, just these of of terms clearly we're longer than expect those some not in only in Tom others. but detail going to the have XXXX. investment tails But see to provided, type think we that just sure. then, also that. that we’d normalize in ‘XX this of the And

Scot Ciccarelli

it. Got

was Can what just And helpful. then, housekeeping a very the impact tell in fourth the us quarter? inflation you item. Okay, of

Tom Greco

Scot. a Yes. unit It per was about X basis, points on

Operator

you. Thank

James. Raymond Our from Wewer with next question comes Dan

open. line Your is

Dan Wewer

Thanks.

continue to years you continue it item a First XX%, charges. Company that question farthest? additional I XX% line XXXX beyond relates set How the EBITDA does up transformation had And rate? to many will until reaches

Tom Greco

Dan. Yes. Hey,

But talked about previous to the that ‘XX. continue would going ‘XX, ramp we that, In de to continue we are in again, integration, certainly with just point. would fairly expect the down. questions, some minimis I it you to I on see of and see the it we'll of into be it seeing think After to at it terms as transformation, start will

Dan Wewer

you about talked growth? revenue little a is on your with a to you the know Can seem then, off more offer. your promotions do-it--yourself exceeding you acceleration do-it-yourself that’s be that second commercial. contributed XX% to what your a I question, about aggressive and e-commerce talk And sales

Tom Greco

in DIY, start transactions our now. they're certainly Well, strong online or e-commerce device we're About seeing XX% business. whether on a then of the retail growth mobile

to when So, have searches do customer there they're they the doing job. for the and their to really you what for be investigating need initial

We've all the And a That the of online omnichannel going made involves variables. time. load of those progress, be it's whole lot to that. search journey about So, we're excited effort. quality of our very website, an key speeds, each page improving

our to there. physical drive make have asset including going to the to assets essentially to going stores. base, continue customer in the our online all drive We're our parts retail our when we're gets So, It's to and they really our business, leveraging to assets going sure online continue adapting need. business we're they

Dan Wewer

sales and operating really guidance sound margin you rate? partnership. And discuss XXXX the how your Tom, that you about for for Walmart Can benefits for excited

Tom Greco

be Yes. the itself, year believe a Well, all, going first we is great of the and this to guide AAP. industry for for

ship enter home towards last to phase to in Walmart, the want today And pick on of Walmart is back of online end couple pick a year. of really the to they'll There's on Walmart then, can this up the will really assortment broader is a clearly, versus that prepared remarks, of we the and there we’ll website; the initiatives part the see Walmart purposes. up for second phases, that phase towards store will really website and to that what end. put parts up, Advance into first acceleration kick we our stand in said branded the presence get our the to able back it be customer as have Walmart the where be in an website, be call, performance So, a we year. the have to an we for

a be isn't that have. guide will guide. of the lot there to So, believe sales Dan, sales all sales we that in contemplated, We upside incremental

Operator

you. Thank

Our question Nagel Oppenheimer. comes from next with Brian

Your open. line is

Brian Nagel

question. maybe nice got I've a on Hi. of my a couple Congrats Good year. questions. taking Thanks for morning.

off, perspective. a from bigger just First picture

tailwind opportunity from efforts, obviously comments the have business. Your perspective sales nice a at more or of and fall a at looking you to your a the you lot line? within If industry then here you’re and or efforts do tailwind your improving to your less turnaround happens, bottom let would indicators throughout -- you or will and an the that suggested accelerate just have --

Tom Greco

Well, sales a mean, there's I we it's lot. good that high that question, fixed helps have incremental base cost Brian. clearly, us a

There eventually, make address. ago. we the we're And the make long going need as big are sure term, to to we're we that few out couple making chunks. a investments minutes of those So, we for costs we in said have that feel to come a pretty areas

payroll to think single four retire we old you for, a there to those If have to currently systems, those have single want of about ERP payroll new a a system, we single currently to to a get system getting we those, we've moved getting retire need and system we system, systems. to

largely investments technology the the the to this of the pertain of all space and integration we're Company. in simplification year So, making the

important. want of be other our the whether to driving the very competitive the to marketplace. side We want customer top that's We The top On strengthen proposition we're value coin, line is line. in We more on the us side we're to there we're side. relevant. professional our the that DIY And are things believe the on making are that or some drive that things there business. much the doing doing

the think, look goal actual strong you at last performance, an basis. the year it that's our I ongoing of industry. the to on half at And if relative back was

So, drive decisions come feel we're the on as that are the decisions clearly, backdrop about we year, make we're very and We is good make this top exceed continue we’ll that industry basis, year-to-date To they the to to those continue very to a we along. we’ve they those to good. extent guide come. where going provided going line But, the as sales hard.

Brian Nagel

Then, helpful. I the That's second question very had.

the comments the on assortments You'd inventory. and prepared dynamic your mentioned in efforts

to or this of the out and extent see this needs way is has a So, how in back -- One, with be from second, to much should to should held just here? sales? a inventory better maybe to of expect again a continued that now, be that, alone So, where sales? driver there get parse and that couple position a into inventories itself build we at that And it look effort a then, we is of questions.

Tom Greco

back we Brian. and continue to There's there, a replenishment doing see all, to clearly of between of the Advance inventory. Carquest We start couple of opportunities half implementation of that cross-banner things first plan ‘XX. the Well, in to optimize and we're reduce our

legacy us when further centers miles versa. parts to So, ship to from throughout to and vice network. Obviously, inventory Advance that's DC distribution and able optimize legacy this reduce Carquest completed, enable essentially, we'll stores will our be stem

also chains we're supply integrating Secondly, those chains. two to together. Cushing the together, work. Worldpac come leading in starting all are assorting supply that we’re AutoPart is Bob International And

Carquest of work replenishment cross-banner Advance about you then from completed, course big first if Worldpac supply are down AI, thinking as we're and and streams, So, four big and those chains two. and two two those initiatives to moving

is to tools, of called actually showing learning optimize slow think our a the close that is of I new the inventory assortment. And basic question -- this. inventory early pretty you're us way a So, continue chain go that our learning What We've these of sales we're from we reduce to in founded back stuff. changes, you been forward. going inventory. should more there, excited we and skews, way relevant, mentioned this about see which to yes, assortment. up. turning call, with held the by probability dynamic as machine is we assorting throughout returns And we to our supply assortment, to rate used that make know But, faster because very dynamic turns you can little help skews increase bit think I our us because your answer have think, old us we're I to replacing the evolved seeing turning point And dynamic and sell the assorting, going we're on assortment, about that

plugs essentially a or assortment assortment in improve. we're anything category else, by definitely out that the tool the just we seeing rate using we have close dynamic changing So, have, the like spark

opportunities we So, see there.

Operator

you. Thank

comes question next Securities. Wedbush from with Seth Basham Our

line Your open. is

Seth Basham

Thanks My a DIY Was to XXX XX around as of the in the a is trends basis color DIFM? us it of give Could first fourth XX, or good you outperformance more lot XXX, degree was quarter. points? points bit top morning. and question basis to relative little it the

Tom Greco

were We was It know, break you trends through that was pretty but similar specifically, the what others. slight, Seth. it up quarter heard to you've Yes. was don't it from slightly higher. The as

essentially November positive. Our slightly strong, October, and was period XX, XX December which is and

So, positive not but as strong and as in December. slightly November October,

similar. -- DIY was the So, Pro comparative and at but relatively

Seth Basham

That’s helpful.

with you DIY or else? cetera weather, Pro, market, advertising what inflection was behind out was it around initiatives of that et something comping it drivers more or As some of more think the the in your

Tom Greco

I on would had definitely -- the we we're that executing see that syndicated that. feel we Obviously, that Well, on omnichannel some DIY better do data than performing syndicated we been. topic we're in think in do stores. corroborate better that

awareness advertising. advertising they’re too the they that awareness think numbers; up nicely; health, the numbers the behind low went did I go But, in up see still new our way we view. the

Our buy in is execution improving. online, pickup store

those factor. things of are All

think I stronger DIY, performing better. So, that's our in we're I relative why is performance think and

Seth Basham

housekeeping question. And it. one just Got last

the of mentioned comps in what for guidance but impact our XXXX? the in fourth in embedded inflation is You quarter, it

Tom Greco

said there we some on there. Seth, today, on that's that uncertainty we of obviously have see tariffs. we what is based per But, surrounding to similar It's a still it's couple there, points unit basis, what a what in

Operator

you. Thank

Jefferies. Our Bret from comes next Jordan question with

Your line open. is

Bret Jordan

I question seeing maybe that question that? Yes. you points the that's the lot color not And morning. it maybe seems -- Good of a inflation we’re guess, inflation inflation unit comp you're couple -- or On expect that some really majority your of pickup in inflation of expecting of represents sort of and Hi. a on better XXXX. on

Tom Greco

be that it's for for everybody the Company think, think Well, sales that in industry guide. again, full-year We the you I last is tell can our on itself that performance the year. in Advance I I've with for Bret, year going said. is a focused strong to reasons our guide and exceeding line all

cost around guide the we're base -- we from year. guide the did as building fixed think, sales standpoint, we're building our I our sorry, last

of to sure trying make able goal the we're to guide. sales is Our All that that overall to Company. the exceed we're deliver financials do is

goal the So, sales to is guide. beat the

Bret Jordan

at up then, pick option, And to ship to an on picking Advance? the relationship. going at be not or to home a up Walmart Is are going either you Okay. question Walmart

Tom Greco

what point, going customer to at it is the the customer. Walmart. we do partnership rooting plan and we're up some what pick At have to available this to entire And We're wants do.

them. we going Walmart advice of as along is easy initiative. the to we'll is as great team. they've got I plans. Jefferies, the it. coming our got with believe a can on for customer. convenience store But, Nicole dedicated that know is the she's excited do She's Obviously, this Advance of We've the advantage working team we're on trusted -- partner about this. And And excited our with an to the Walmart very it partnership; is and to So, work provide. make top possible collaboratively up employees leadership terrific one people, a We're to building the

come. to more So,

Bret Jordan

the revenue What front some that do you you some with built on XXXX? if much as you’d into see that you relationship cost being well sort end? Obviously, might Walmart. But, development of share maybe impact got margin the carved on how as cost out in

Tom Greco

we're do that financials. obviously, in impact way We our Bret. haven't and do thoughtful broken a this on mean, that in out, overall positive I to way has a a it going

Operator

you. Thank

comes question with Bottiglieri Chris next from Our Research. Wolfe

open. is line Your

Chris Bottiglieri

XXXX, I the you inflation on in conversations to this benefits? question. savings, the process? update kind get in that in are change you And you that impact of about environment, hoping then, could how taking cost us type still do those far would you as expect think how material for was of along those Thanks of Hi.

Tom Greco

through be material Yes. doesn't through costs, going really categories. in things the to the think, revisiting cycle of We're go material there. about phase we're Sure, the stop costs and these we call of probably categories. Chris, I’ll it I terms XX% as this way But, going of back one is X, is it

heavily focused we first really AAP on The round CQ.

now vendors, incorporating we're As we back to and AI. Worldpac certain go

our Certainly the with it's we around uncertainties partners. with So, ongoing an closely negotiation. commodity other continue work headwinds, vendor and to tariffs

on XXXX that in something supplier inflation it's about our and talked actively we've we're So, working partners. with

Chris Bottiglieri

was was, and then, you. inflation quarter, in that thinking ‘XX? should gross like, given quantify what Got margin how I to -- was seeing, we're this on the LIFO impact we reserve what how And hoping the the about

Tom Greco

the saw we fourth headwind. quarter something That’s in actually a Yes. here, was

million when again, were see But with later actions, headwind. XX-K more that about our here offset to we productivity on You'll today it publish we measures. a including $XX than able other was

So, are to than the offset costs, your that. to we able wasn't with increasing headwind, more point, while the tariffs, commodities, it the

Operator

Thank you.

Our comes next Suisse. Sigman Credit from question Seth with

is Your line open.

Seth Sigman

the then, morning. any Hey, you Good progress how how And that I on and see Thanks. much that little to indication ramping? guys. the may just about cost a the the the That that’s side, negative I know efficiencies short and talk you impact could quarter fourth next for wanted quantify potential there, the cross-banner had currently on helping visibility in comps greater be if you. and be year. in some implications helpful. then term, Thank would just the

Tom Greco

down Sure. break It’s consider a let big improvement. way. comp you -- When factor in this our me it of terms

about XXXX at comparison our to of related we by basis industry our compare If improvement, think you it that improved comp you our to overall about is least if the primary you points. competitors. that XXXX at half comp, We and XXX to think look

cross-banner XXX things, about -- visibility, points and So, execution. three just all that and of what's is around DIY big performance, general odd remaining, there's that XXX our or number or XXX is, then whatever

The excited like drive it's we'd around that. to optimize more So, to the gaining but and it about team we cost And we're bps the our it's very little does would relatively at work attribute to very about to XX that us inside it, to continue than visibility, cause we company, to, strong and very going have get momentum cross-banner initiative to a is part. excited it, about bit it. a small,

Seth Sigman

centers. headwind less start a XXXX? maybe drivers But, the there, in lot to color And headwind on of you margin of on to headwind, has the gross to supply just XX up some that about is through the to implied think Okay. can which been year, bps a on you outlook, on touched us you be a chain, you. I reductions. specific XX of close as a Any think, little Thank distribution some the walk material a then, I which more the for think how as key going that? on cost or bit potentially

Tom Greco

Yes.

a actually terms as fact two number in of a the of supply distribution chain, lapping think, on it I centers basis that those, on touched in flat in those year. opened quarter, rate we're you relatively we last was fourth

overcoming of some there's talking investment with to those some some we that. hope we get that initiatives with to think but headwinds out cost terms optimization, it, ongoing. productivity productivity get about comes point, be some chain. in your there. been can is we're supply to the along going Obviously, Material of So, of We that we've

think we there. to confident and that’s efficient other And dynamic productivity moving will to slower improvements going XX can our and we points use those more assortment, we managing be to still help basis XX inventory measures, drive We’re like continue then, shrink us better things of as see including improvement.

Operator

to no currently Thank you. back questions. showing turn this And remarks. closing further At time, Tom I'm I’d call like Greco to the for over

Tom Greco

extremely of to and continued to And now us. in focus agenda. I our all transformation in their ‘XX thanks Well, our second are proud ‘XX. for joining team's begin completed of year my the you execution and team We've leadership

opportunity team capitalize for Thank AAP. the in look ahead plan, and discussing the in with forward help We the on best path you. quarter we journey, the the And May. have heard right right of the work transformation you've two and bear in past ahead as beginning over years our to are confident investments a made our we're the we in industry results have our on to we So, to first while efforts today, members us results. fruit lot strategic significant I'm diligent improving

Operator

wonderful today's And this and Ladies a gentlemen, participation. concludes conference. have you for Thank day.

Advance Auto Parts (AAP) 19 Feb 192018 Q4 Earnings call transcript