AAP - Earnings call transcript Q2 2021 | Advance Auto Parts, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome to the Advanced audio -- Advance Auto Parts ' Second Quarter 2021 conference call.

Before we begin, Elisabeth Eisleben, Senior Vice President Communications, and Investor Relations, will make a brief statement concerning forward-looking statements that will be discussed on this call. I will now turn the call over to [Indiscernible].

Elisabeth Eisleben

Discuss our Q2 2021 results that we highlighted in our earnings release this morning. I'm joined by Tom Greco, our President and Chief Executive Officer, and Jeff Shepherd, our Executive Vice President and Chief Financial Officer.

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

of forward-looking by we that to and All performance. projected forward-looking those advised please statements those statements materially from Actual forward-looking fact remarks than Before statements. plans, be future contain regarding our our begin, projections, not including statements, but today the initiatives, may other results implied historical limited differ are guidance, or statements. could

to recent factors differ caption, and about Additional on the that Exchange with under risk actual results Securities Form made be could the Commission. can information forward-looking factors cause found in annual XX-K, and statements, filings and our subsequent most report

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

Tom Greco

and of XXXX. share ongoing more earnings the we QX, and for to thanking and independent an It's that Thanks, we're profit, X.X%, customers Elisabeth. And your of reporting both Delta good the the of income delivered of stack, Carquest of throughout store operating one work margin you the we morning. to healthy began amid financial recent performance positive we're deliver XX.X%, In increase entire per reviewing pandemic on a today. in and safe basis two-year we We start growth surge sales growth family as continued difficult sales, versus I'd comparisons. the to hard [Indiscernible] In strong all hope like variant. comparable and points quarter, and by because adjusted XX our Advance the serve quarter. you're

expenses of DIY we significantly strategic initiatives unusual highly and the a channel ongoing actions, anticipated, expanded from XXXX, additional our reduced professional professional As between lapped accelerated the we where we operation from we business in and XXXX, reminder, a and As shift hours margins. of reflective QX delivery quarter

to margins and our compared Headwinds the points expanded Our sales XX.X% improved than repurchases within actions environment cash through anticipated Adjusted QX XXXX, and more compared cash stack, to XXXX. EPS returning two-year flow SG&A, increased XX.X% the comp half talent. QX of a compared of doubled, $XXX.X dividends. diluted to XX.X% On to $X.XX an of and a competitive free known combination to XXX million and extremely quarterly offset of for which XXXX. shareholders a first led year, Year-to-date in higher return than cash share basis

as Our operational growth factors expansion were by of sales improvements. driven margin well a internal and combination as industry-related

from stimulus. which the demand a remained with improve. in along On benefited Meanwhile, macroeconomic fleet. impact of contributes used in the driven an consumers industry to car industry sales, backdrop government drivers long-term positive miles recovery in side, aging This the quarter increase of gradual includes as the an to continued

periods QX, late all growth of comp While in we of in year-over-year some delivered XXXX. slowed quarter positive growth three as the our we weeks highest lapped sales our of

by the in our Our the and more abrupt channel slight motor business. in consumers hot due professional our in Beginning channel from a decline our performance, mix, to at their the across behavior we led summer, industry in context. double-digit part growth summarize to we DIY which in DIY pandemic vehicles, QX, Southwest, the category the resulting of momentum from To by in stay-at-home shift omnichannel back orders. shifts XXXX provide To continued Regionally, and Northeast, and in repairing benefiting growth. our own to understand a to drove it's look This our an consumer implementation with followed filters was categories. important saw professional led growth hard West oil, strength growth key business unusually led Florida. saw breaks,

leverage business DIY In digital from and to chose home many consumers online shop as surged our services. addition,

for large de-prioritized These that Finally, robust retailers the sales long-tail auto as gains in in a other in professional to factors our such and share we business business decline in market in as slight items, pandemic. and these QX resulted our led temporarily box discussed parts XXXX. the DIY growth also Contrary to to consulants historical factors of our indicated XXXX. last research response trends, year,

as leveraged we repaired As highly how enabled unusual time, this to lap to began customer move they extensive This vehicles. us their maintained decision and we research on our [Indiscernible]. shifted quickly customers

as Strategic platform. miles driven It to saw online proposition. base Within probe advanced sales getting to into QX, and which XXXX. trends we continued demand key Specific in very machine with conversion dynamic comp margin more our counts and to growth QX different increased is and discussed, expansion a improved environment to previous the our ultimately including value our transaction along in as QX improved customer Our late directly see the average the asset return improving starts across and to learning professional as factors sales our double-digit adapted increased and our versus board, of demonstrates professional we flexibility people This are resulting customer performance we growth more began diversified just in parts closer the rates, year. in we investments improved indicators in work assortment, leverage strengthening growth. catalog, assortment XXXX, to traffic, availability and related ticket. the with business, mobility

also programs customers. our continue in help technical serve training to installers better to invest their We

to program national enabling expand providing American Our of them call pro-focused range shops. independent continue to and strategic for initiatives is broad increase have well our Each TechNet accounts of both local a we first TechNet with as services. members, these been performing North a Advance, with us status also differentiator

the Finally, Carquest added through stores. year, new we net we're independent the XX half that pleased first of

QX, the We also announced proposition to as combine an family. with differentiated family extremely of business or despite all the in summary, banners our We're planned including Baxter pro-customer growing at by locations In highlighted their customers an professional additional Carquest in XX relationships our West Canadian business lockdowns. joins conversion of market. performed Auto Baxter's with Parts our strong expectations stringent the our excellent this excited value in above

double-digit with in considering DIY increases line omnichannel, strong our Moving our expectations, XXXX. performed business in to

professional mix QX also were sales omnichannel Within growth discounts. reduce DIY DIY prior a Perks online to increase as to moderated DIY DIY optimize slightly, consumer along with down wallet highly consistent behavior remain and effective upgrades on a quarter back in-store advertising, consumers and omnichannel growth. still Perks garages. omnichannel, working to in ago improving We the to we significant contributor rewards. broader an increase of focused in margins see our access throughout to While versus share versus purchases, experience our status saw a and We've two-year the mobile make easier in-store contributed return We to factors, year. their members to increase our app DIY platform. through loyalty some gradually inefficient shift larger Speed These made to retail. it comp in our with for Speed year been several was the DIY gross to

was top of operating expanded management which category the quarter highest quarter. strong We customer Shifting our QX, this initiatives, led representing among grew gross in Speed margin the margin elite significant by our QX continue graduation of we increased rates positive and In see to XXXX, income, the drove XX%. members to existing our X%, in membership Perks our on expansion tier in by expansion spend VIP members. margin

major our on unit category Carquest work where growth products. our with steering saw First, for we high-margin conversion extremely suspension, first and our strong premium

are standards consistent In they level installers, is professional now highly improved delivering rates and CQ with addition, the of high customer product regarded quality defect our lower by satisfaction.

of anniversary the also the DieHard We celebrated battery one-year recently launch.

year Further DieHard now professional planned channel Carquest categories. expansion distribution a of the gains strong and extended brands share where X start. is DIY omnichannel, off sales other in we're Following terrific to we've for into relevant DieHard the

quickly In inflation platform we improved new our enterprise terms enabled to the of expectations pricing initial This escalated strategic for pricing, us respond capabilities, our our leveraging beyond significantly year. as platform.

to continuing in experienced centers, retailers, our overall QX. faced global we're level in workers unplanned Like of of high an headwinds distribution continued the supply we Moving demand. chain. and our process chain supply initiatives, offsetting to a several inflation most Wage to execute within disruption we shortage while

or external shortages. to This complete XXXX. challenging And compensation. The in the to productivity. new the and supply initiatives. includes delivering warehouse improvements LMS LMS. In we're of and on implementation critical System material that internal component labor continue we've chain addition, execute management track performance-based a DCs a accuracy, in raw our on-hand our new of converted, enable challenges completed, our will operating we're procedures suppliers implementation Once Management experienced fill Labor we and is environment, which system, of our WMS standardize Despite WMS, or rate,

freight planned logical nearly by end stores DC. on the XXXX. execute CBR to continue track initiative, stores QX, transitioning to most remain or stores we Cross-Banner XXX We QX, Replenishment, also of the of completion In our additional the originally and with the converted servicing

In call we the SG&A, delivery discussed knew XXXX, a mix we're these in QX is Worldpac pandemic. channel a lapped cost will QX reduction track addition in which more discuss International, along reduction beginning these a we shift, labor completed the detail of to to costs not costs would integration actions result to year, which minutes. of in primarily a several at with substantial We on actions and of Shifting in-store expected CBR, last a AutoParts next reduction the early in XXXX. year. on replicate our few be with we Jeff as in

to initiatives, store. our make progress profit of and sales continue terms per we In on

X.X sales per on delivered And team improvement. track sales we Our per of our average our remain store million to reach within goal store timeline.

store X-wall than enabling per expansion. sales is also profit store, faster Our per growing margin

We've new positive the lot profit stores, improvements, we XX added to branches, pruning Carquest also In growth. underperforming a to Advance and and we're back XX the year, impacts opened operational per X discussed the Carquest store. implemented of net and first independents drive half stores, Worldpac sales to addition earlier. we've and store work been as of of In

PEP of We stores resulted planned group very some resurgence Bonds our also this about in XXX has delays in of variant fall. the Delta We're scheduled our The opening the conversion schedule. excited of locations California opening with of our California. announced the store first a in expansion construction-related

conversion the to to banner stores all first complete of XXXX. the quarter, the the expect successful end of advanced We by

costs, SG&A our safety. we're including other and a focused corporate reducing on on focus continued Finally,

systems technology completed cost was injury and our finishing reduction of of recordable total early expected to finance a The be compared which we're to platforms single We're a are our Both last structure. corporate over the to our of savings merchandising review drive expected platform. SG&A to time. integrating SG&A these of XXXX. stages in large-scale component the XX% our consolidation, XX% is rate end ERP Our Separately, QX XXXX, compared QX to the also year. by up decreased

our were In terms of limited this QX earlier the action. due in to of the year, restructuring of savings functions corporate timing announced the

very We favorable industry-related in beginning as expect savings In strong team's we're for drivers for SG&A shareholders. of aftermarket. caring executing financial outlook We're QX. a the the to our associated strategy to focused restructure in demand return to our long-term dedication excess with pleased remain grow expand our performance on the customers and continue automotive with margins, long-term and back delivering optimistic summary, to QX. market, indicate We significant cash above

results. pass me to more discuss financial details our let it Jeff on Now, to

Jeff Shepherd

deliver Adjusted members to sourcing, sales And and want [Indiscernible] and team who profit ongoing XX.X% net to customers our continue while safety brand management results X.X% prioritize of of helping strategic Tom. good the our primarily points our a Tom's quarter. echo their margin expanded our health Thanks, to billion. XXX and the to expansion. strategic to members to for execution category fellow the In thanks basis of gross morning. result solid pricing, initiatives, team including $X.X QX, increased I as

primary X% supplier where [Indiscernible] approximately factors. the partially year. were mitigate inflation We favorable partners and by supply three costs increase in was offset chain result inflationary will the costs our We're the same costs and we unfavorable channel year. working to of also Year-to-date with quarter, prior through inventory-related experienced versus In These the balance possible. SKU expect mix. this benefits of

in First, our XXXX higher than we our incentive compensation were the lapped sales as prior was challenging pro quarter year. when negative. a in professional business much Primarily very

wage expectations experienced we beyond Second, inflation in stores. our

of to the back expect the half continue headwinds both We year. in

and expected, delivery as incremental associated -- we and Third, professional incurred with costs

Tom Greco

June, It's grow. we're concerned, we've everyone for months very well we're in general, the there's this as through of room calendar normalized really fragmented is as very as a industry terms. to In lots April far the of performing well, for relative

normalize able were to the quarter sales we Again, sales good grow feel growth. margins peers, to market, quarter we of that in relative pleased on X% our also of just have when We we're total very margins, we top our our the the performance. the about gross

Simeon Gutman

your for XXXX first in than operating increase has How an be is SG&A, how quarters, off due been in the more much the to potential My expansion our was Understood. increase following going second wages and generated and is this follow-up inflating you gross going XX% quarter versus expectation expenses sustainable around on continue question to couple then a quarter. in as to margin are to or by in sources up of savings quarter? much even XX% of this that what's the seems the expected other you next of reasonable wages

Jeff Shepherd

in costs got that evens [Indiscernible] that experience when you Yeah. -related we those basis Well, And might SG&A I in about actually $X when take the to do in we remember XX better a specific to have be little didn't compare million. on bit COVID you XXXX. think relative fact, a we just to XXXX, you out

April In than They're expectations. our a terms the our margins, inflation continue that's especially And don't many in Certainly of of the all little the laid of of execute and to lot within certainly we initiatives, we throughout in saw what inflation, our P&L if half begin experienced our expansion are costs but quarter, was over you the the 'XX half SG&A just of 'XX. going year. initiatives out in margin well gross start we kind X%, inflation back or in back either back, mind, expectations. wage this stepping just a think that at to of keep in higher product continue the we into

SG&A the positive back year, help we're continue So margin Operating going the will for us continue but show going to throughout so we're the until we that confident challenged example, million But to gross hopefully start of our with that seeing of is margin. be $XX that then not restructuring, can half, somewhat. and to balance

Michael Lasser

a Thanks lot.

Jeff Shepherd

Thanks, Michael.

Operator

Your of of next line Morgan question comes the Gutman Simeon Stanley. from

open. is line Your

Simeon Gutman

morning, margin. Thanks. question everyone. on Okay. first My is gross Good

This about looked on, may that like part of initiatives it there talk be strong line it Can was the on inflection reflective any pretty you're it's it and working collective that that repeatable? not a item. is if quarter, of you then

Jeff Shepherd

category strategic yes, mentioned, own directly sourcing, Thanks, Simeon. it's But the brands. short It's And as initiatives. answer the is pricing. our our combination our we attributable strategic of to management our Tom rolled out

together these drove half margin will so absolutely and as if that saw improvement the in them that inflation, gross year. quarter, costs. mentioned, not X% the It And the of you just those over a little we all only that offset believe the our in put was we take are and which sustainable back product in and I of

the channel supply mix. some with by offset those see but essentially of chain headwind did those chain's favorability namely we items, costs, Now, capitalized were supply inventory-related and

margin very in we we're to expect initiatives continue. and how our Gross QX, overall, pleased drove improvement with that So

Simeon Gutman

Okay, helpful. see and wait what to it seen Jeff, Means we as going rates maybe, costs I'm pressure with then Because costs little moving from press and I road? a these going items up, know peak in the getting supply the level we're the have incremental as it just I have of costs and was rates reflected, that's turn inventory we these know, or chain are stick down And freight bit release. mentioned think you these your to container now are capitalized we to

Jeff Shepherd

of balance it really back the balance $X few come anything, sheet, back sheet, Remember, the velocity half overall, come the expect to not the and got come inventory It your off we've way down varies of does of I on does time. would next so in any SKUs. a over see you the by wouldn't sitting through. least back year. Over various at the billion of these But not it get back onto time, in our road, we're anticipating quarters,

Simeon Gutman

question. XX, rule And inflection specifically? not and costs, terms supply of -- of same this combined to is gross higher with points just sand XX, margin maybe related is chain of second related in in to the that some be Does should any first doing my the to line there of business going thumb that XX or draw a the you're where the margin basis magnitude

Jeff Shepherd

of They're the the Yeah, sand best going we're to pleased try go really we a our draw place. with not have We're through manage initiatives specifically. continue, in going to inflation balance to the we're and the line in the to as that absolutely we that year. going

Simeon Gutman

it. Take appreciate Thanks, Okay. care.

Jeff Shepherd

Thanks [Indiscernible]

Operator

comes of of Horvers JP Christopher line next Your Morgan. from question the

Your line is open.

Christopher Horvers

And good guys. morning. Thanks,

August first down DIY If our that question fair quarter. positive the point? on mid-single-digit low last math quarter-to-date, you're then round and is, to compares the going right, you my the Is on sort off end is that of So a were to where low we the eased plus commentary running through part does ease a forward. year, of latter single-digit this the start imply in like of running and sort at that one-year it of double-digit

Jeff Shepherd

Good morning, Chris.

July strong ballpark, set You're August, fall. were through what the very last year, started the to -- in moderate gradually we and and

Christopher Horvers

from second going first so forward. And you Understood. seasonally just a and new we but XX.X%? sort of operating I that side, a the as what's about we sort XX.X% the Makes has on of what's, build it what's asked you understand sustainable in did second not sustainable? fixed differently, X% had quarter leveraged what cost quarters, in point follow-up, maybe quarter are less In think some in light, helicoptering the then margin, Or quarter, a level? sense. the the operating as up, --what's you -- margin.

Tom Greco

take piece, not thing And pleased which as in the the the two-year on to our in is and and of going We've side the have Chris, Yeah. Carquest also and of that's you in kick one-year, in years, been we're of us the has category now. expansion tool regionally has and benefit of own for couple mean, XXXX, the all incentives given couple on know, year of one middle implemented starting going row But the products years. of difficult those with of we margin between initiatives. brand over alternatives improvement premium-owned it's the for There's taken the several of rate to time. last have I know, X in on account, to the category, helped couple starting second by rollout quarter bits. big or P&L. management by is things, brands, the difference you A early XXX to whether time. enabled a our channel, but turns only we that we us we've that's of a there. in a or in those significant as us our growth lot quarters, things. all vendor Last margin to The some sustainable it's we're really that that working be a that in smarter order along, sourcing price, that's had said how and quarters pricing the We've the

the we're second going that So The on initiatives, the And track. with we Again, unknown are is to saw execute. ongoing just clearly, inflationary we supply to management on we're going sustainable dealing category very the the with much we're coming, side confident that be chain to feel to with sustainable that What dealt for quarter, to in industry continue environment. approach the initiatives going continue many very deal gross an That's very execute we're feel them. the initiatives strong and about, successful inflation, years. that's margin we unplanned able we are there's -- over to good take. very been believe and But to it. We we're us. going

Christopher Horvers

XX.X%. was way, nothing said levels, overall guess I unusual and in So the another sales there ex-seasonality

Tom Greco

it said, costs equal was Jeff But out than inventory-related just -- Yeah, chain channel that, we're the we by the the other supply call and offset basically Jeff. fully that mix as headwinds.

Jeff Shepherd

Chris, we're return our that, it as only thing seeing invest. The spend. in the half back That's really we're was invest It know, we've some good marketing, makes going we're -- going of continue back QX a so relatively to see back would you on in is in half. to to got advertising in the half I in but that add further to as sense. to flat long plans marketing, some the just into We're so

Christopher Horvers

much. Got it. very Thanks

Tom Greco

you. Thank

Operator

question comes line of next of Elizabeth of Your the America. Bank from Suzuki

line is Your open.

Jason Hobbs

the moderation sounds morning focus with you're health We to of is curious curious starting [Indiscernible] for or the and question, in some good high I'm the extent. been Do a spending maybe Hobbs see it folk what DIY could think about over business. think do thanks after rates I'm start for while. like say channel run with in wanted to customer. dollars on they've there's out. stimulus that's flush Jason you shifting I just taking that Hey, to that what Do-It-For-Me to know slowdown the this this our in you in same business. thing, those to a you cash

Tom Greco

in anticipated year, last the XXXX, wouldn't we've been Again, DIY do, they had their automotive. pleased happened point performance shift second normally DIY they on with things DIFM, year. doing the people hands, pretty time fully we homes, in that given their of were at quarter they some the Well, what were to this back actually in locked including

do And in environment then that all second for As year, would traveling back of things and get that more do, many of couldn't that period that here games on time the more into the quarter where to people in would it's have held than quarter. on those with if team, whole and a commuting, they DIY it a the and held And of garages advanced we lose And very normalized DIY their a so they're lot we it to We we that. so the we closed the haven't performance last preferred also even professional from customers customers. hasn't has last our car back professional. expected. last pleased really out were of gains on a to get and we've get the up, going see repaired at year. that time, year, likely repaired garage. we're obviously held last the and going they're joined It's came up us are to they by that more -- maintained maintained baseball can they year, the you business given the will, airplanes them

Jason Hobbs

Thanks, improve it's guidance. remaining starting then for related all, the cash I And quarters position, that's I'm curious then and things your the how to free that's feel great here. inventory year. follow of are you did just And some from are your want flow you reported, mentioned challenges, to up hear. chain on at state widely of here out Inventory you been if how the then from a and I getting just sense looks on know that the supply on so And if that to

driver curious Just delayed inventory-related. the store if that's what the opening know impact. present if is, I don't

as Thanks. Just any would that be color helpful on well.

Tom Greco

the question, take over Okay. chain flow Jeff. I'll the Well to I'll supply then flip cash

feel a in our like see them our we'd I DIY. what's the network and are position. in been good on in general, about At the market the lot, I very out not very time, say same we're store in in-stocks competitive I be. competitively. well-positioned we where can I've going think to would DIFM

of merchant experiencing I long-term difficulties the inventory and with proud and very for supply our they've We're to some leveraged to we to going level moving. think back, be Jeff. chain our service But that good there. very of that I'm relationships stores. product the are level we keep everyone we sure inventory have continue competitively. at to partners teams, to our our build them with that work feel make want I of is

Jeff Shepherd

Sure.

free in there's are as On first didn't the X that half much the things impact half. going really back the flow, see us cash that in we to

generate going meaningful from half, cash think going we back of So offset operating still things. we're that's the by first largely do to all, be but X to

still is First compared spend our have We Expenditures. the CapEx be half. as second to Capital elevated will [Indiscernible]

million we saw, there the As XXX year. you held to XXX for our at guidance

working Second new will inventory the first to so of some have and store is related on the that then our will our are the question, half last And a Tom investments as likely half openings, Cares we of we the in have to increase making didn't going well both support that our first what inventory Capital. pressure that half to put see we repay in be Act. couple in-stocks, just expenditures the the thing in back to as we said,

So [Indiscernible] year-end. our fiscal

So those are half. free really lower the drivers flows first the to cash compared for the

Jason Hobbs

Got it. That's helpful. Thank you.

Operator

from Your Steven Sycuan the next question of comes of Citigroup. line

Your open. is line

Steven Sycuan

taking wanted for Thanks the everyone. question. guess inflation. morning, Good I my Great. I to on start parts outlook for

DIY I comps, issues pro X-X% so cost full-year, a the the prior onto or how consumer. environment, thinking the was benefit pricing think full-year really any more broadly the talk passing with that. have about you're And on little you just guess customer expectation about elaborate I bit the you the could on more If then to seen

Jeff Shepherd

take I'll parts the I part, think you inflation. first So mentioned the

quarter, estimating saw As We're inflation that. we X over When little started in there costs we X%. going more We product inflation is I year, a for know it's to the to said, planning we do to the now at X. at think We X. were be X coming.

feel be that range. to range, in So X X to still that going it's like we

Tom Greco

me. And DIFM. confident on on we we've been this pass or a we to it strategic do it's much piece, customer tradition pricing journey to our DIFM. we continue the Pardon tools the be a able to feel able year. we've leverage leverage and been able within the in that's on being We're And lot decision how all that. work whether pass mind, in more successfully. Yeah. in better to DIY on We our industry, that with And do very we'll in pricing.

Steven Sycuan

the industry see Great. Do do of continue guess year? balance second out question half and of like of some I macro back we've used the broader, think you a over on car the the and How in next that's you strength seen this demand the in drivers. a particular, backdrop sales. in year? And here tailwind just the playing

Tom Greco

of definitely We positive, we of we're car do. an contribute which fleet, that's aging to to we driven, contribute so X% do the from miles get XX, more in means do to you growth. to traditional strength. we that to continues it the carpark's a as XX, are see And the turn investor used think presentation, that's a industry of range. important I incremental relatively recovery April mean, believe number And the in them part all seeing continue that so continues very those a parts you growing, drivers that's as to to saw in is going all sales, fleet demand, our believe aging, sales, grow. And so

Elisabeth Eisleben

much, Great. very guys. Thanks

Operator

comes question Goldman of from McShane of line the Kate next Sachs. Your

Your line is open.

Kate McShane

question. Good just morning. wanted to for Hi. my to taking I back wage Thanks piece. go inflation the

wondered wage than DCs about a average you QX. Just could I stores, and little hourly is currently. the it was curious why turnover higher currently versus if expected your talk in bit maybe And at where

Tom Greco

year with was definitely have we -- the mean, second K. a familiar for which in bit situation very Well, you planned It I of little inflation wage labor of quarter. the high all, is are some first challenged and the very level

years. team in called one no our is very our into want and are that. been quarter number store down stock customers. that's can it stores. stores we made we which to team in team, as in And chain keep possible, investments fuel look we provides industry We've low markets to wages. we members, program as on people the has several frontline where we've members get over front line, market-by-market some the in got invested else we investing we our turnover ongoing been work And very our a want million an effort, a that there that situation. at so invested multi-year the best the $XX there. as very challenging with we sure Supply surgical at at to the our got We've a basis. look look We So how we've make in were unique front-line We to and with for

expected. start called and to the we down, seeing benefits, We we some are is you I obviously are as I we applicants more think, off, etc. to and what tell benefits, the would The come source there there, seeing come need. of than peaked to has out, turnover, unemployment people that more inflation as we started the able

difficult to in quarter. I going the is was continue, going it environment the to be second think, challenging, think but it's than less I

Kate McShane

Thank you.

Operator

of of Jefferies. next the question Jordan Your from Bret comes line

Your line is open.

Bret Jordan

morning, Good Hi. guys.

Jeff Shepherd

Bret. morning, Good

Bret Jordan

that any supply having think category the third-party guess, you put your on of are they as in-stocks the on suppliers? you more impact to opposed do own On chain as I initiatives, distributors, plate your

Jeff Shepherd

it's categories, for environment a transitioning were people Getting broader No, think think a sourced we getting variables challenging in it's issue. we've -- general, of I suppliers. really Bret, general our it's in but to China. work, so There's a certain I obviously, got it's in -- lot products there, containers, from

Bret Jordan

you topic, are the you've and stores conversions. zoning out if on [Indiscernible] that getting they having it the going feedback guess performing those those you're the converted, on you're slower? approval I convert, Could or with, on color may to that guess never problem may how I on get they something any how store left just not a us be then give talked for some And it about as Okay. and early you just any of is

Tom Greco

you're 'XX, run DieHard customer about it excited Brett. this Carquest premium We're very opening -- more get bring initiatives, soon. we permitting can. I've that we'll we're we of the of obviously First of they know opportunity we going are this a all, be to I California them couple the starting experienced of meeting quickly market. bring LA been this excited them I team they want quarter the that all our about through to the as fall. products, California and I've like said get by been was members. going to as are unique hear We end we to them know all These are the what converted, batteries, there about all right, But We're team market, our this going that the members, things of got know base. of to stores to so professional market. challenges and in into times. We're going say to construction out quite opportunity, and some and with first

Bret Jordan

I North Years Greco, just accounts to higher we now, there talked are then Inventory target. would 'XXs. guess structural payable that a about the like payable one Worldpac XXX%? prevent your on ago, quick goes number housekeeping of a question, accounts the being in maybe or think this Do headwinds that you

Jeff Shepherd

the driven we AP inventory mentioned the the get the we I in largely can our We've that said think in into 'XXs, that's what investments will versus moderate had some earlier. you're the low by for of balance QX. year, it extent that think past we to seeing and ratio

Bret Jordan

Okay. you. Great. Thank

Operator

comes line next of Your Imbro from of Stephens. question Daniel the

is open. line Your

Daniel Imbro

Good questions. side. start morning, everybody. expense for I the our Thanks on taking want to

up and your I Jeff you've advertising think in mentioned dollars. recent quarters, Tom, taking

you DIY percentage DIY slowing a you've noted in on as think just given frankly forward, sales those you're shifts and planning going far going how as dollars, you're With the how that measuring I towards mix. the and driving sales channel -- talked and smaller advertising business. becoming maybe queued more ROI about DIY

Tom Greco

batteries. the year. We've P&L our has margin whole very Daniel. a Yes. We ability equation refining online to measure are reduced and the dollars span. DieHard gradually morning incremental obviously. been last based We sales DieHard discounts it launched successful But the on we've expansion month. Good at our on in been drive marketing

year-to-date where growing We part basis share Our and benefit gross our gross of unit in quarter batteries is was on to a Repos gross related in we're still gaining margin improvement the margin. batteries significantly. margin

initiatives We picture the extent in that So that's investment entire just the as P&L, such obviously, an which against do total DieHard. are when those look the dollars, how it. marketing and look we shop the drive to not SG&A at SG&A at spent can we we

Daniel Imbro

you the different on on question your a then moving Any to at levels we benefit Is you much there staying customer? to last tiers, loyalty gas what customers Got while, it pullback that margin up up And prices tier -- each frankly seen here seen gross are spending any like That's with about at and customer, just And talked a [Indiscernible]. And haven't DIY higher first, the with DIY from there lower level? helpful. discretionary maybe positive have reward attribute moving in you'd impact? redemption end impact DIY just, is looking in in customers? the year-over-year, a that factor? s

Tom Greco

speed all, it. Well, of on first for

a to we that. seeing nice transactions. on So of share grow increase we what call we're starting Again, pleased, We're saw we're graduation.

So the members. our our members, VIP elite increases increases in in

So -- DIY you're profit when with the of that our short right? answer want you're, gross we more a that, we is discounts higher capture to we obviously And a that, not do that, but happy dollars share factored into make customers. you're, We outcome. that of want are share In very higher are wallet. total, you're wallet with getting

Carquest all cognizant haven't given cognizant yet down. cases, in things. terms it trading in those Daniel, stimulus We premium anything off roll of of [Indiscernible] coming customers given DIY, of on We're your some question, the and as seen though, We're environment at very of to that we

Daniel Imbro

Thanks of so much, luck. guys. Best

Operator

the from of of comes Evercore ISI. line Michael question Montani next Your

open. is line Your

Michael Montani

ask played X.X, if taking color traffic can transaction us for DIFM there? was I sense on versus Tom, and morning incremental I Good just just to how and you could, ticket DIY, wanted in then of the thanks a out the Hey. question. counts, that some terms give much for how for Tom that

Tom Greco

average board. Pro strong lapping down of Strong DIY [Indiscernible] the was Sure. across in was ticket terms growth, transactions, ticket. strong

Michael Montani

was, half, kind thinking back of years this margin the we're we sales trends XXX terms half last double-digit of aggregate And XXX, look 'XX. [Indiscernible] two-year it's back if lifts. back of versus year, at bit EBITDA about productivity in in higher the of half just about talking

there's would the prevent or any benefit that structural that impediment if year? that all you of all last much wondering had retention of Just

Tom Greco

we see, our that guide roughly the of a represents the environment. we that factors. all based back a lot the financial tailwinds half so the I Well, environment But and Headwinds the half, those with in in the weeks quarter, have I in now, key all QX, of pleased had right the we mean, increase time X our in on guide. line two-year we stack, guide metrics looked a XX%. dynamic mean, we obviously the unknowns pretty performance second reflected back sales It's a of that combination there's on did the first third and for through at is we're on

that's of all Michael. So positive,

margins, grow back of we the what our to to nature we're we're cash of believe plan, do So we're excess our going to to of the continue return next dynamic the fast we execute market, and the want to in investors over we and environment. we're of our doing years, going expand to want to couple cognizant capable the continue

Michael Montani

good luck. Makes sense. Thank and you

Operator

Thank this closing you. time. queue call back the Tom Greco no Mr. in at questions remarks. for the I'm showing further I'll to hand

Tom Greco

today. again thanks joining for Well, us

American nearly in family and we're the while customer the grateful XX,XXX we heard campaign keep members annual fight half and first Heart We advanced independently-owned and safe performance Rico. our our important increased of our we as us for stores, can launching members, to morning, American members fundraising proud customers, our for this supporting to you our we're healthy extremely and team mission. against Association year, health serving lives the of As Association continue communities. against senior awareness join in at working you. help confident our of very funds research, our by are in and team who dedicated return in deliver strong our will made U.S. sustainable go hope long-term we're as stores of We're starting to funds our that to committed raise total Carquest and a raising like environment. deliver in to you'll and and for disease our and challenging heart strategy critical that Thank improve of We this initiatives. the Xst to believe also Heart The Puerto ability towards I'd very execute heart strategic to the September stroke. well announce 's shareholder

Operator

participating. Ladies conference and call. you today's this concludes gentlemen, Thank for

may now You disconnect.

Advance Auto Parts (AAP) 24 Aug 212021 Q2 Earnings call transcript