AAP - Earnings call transcript Q3 2021 | Advance Auto Parts, Inc.

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Operator

Welcome to the Advance Auto Parts Third 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. Please go ahead.

Elisabeth Eisleben

Good morning, and thank you for joining us to discuss our Q3 2021 results that we've highlighted in our earnings release yesterday. I'm joined today by Tom Greco, our President and Chief Executive Officer, and Jeff Shepherd, our Executive Vice President and Chief Financial Officer.

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

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

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

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

Tom Greco

(ph), good Thanks, all Elisabeth of today. and to morning you us joining

earnings your growth, in and a our service families by times. their of these In comp another quarter you that to Their our are of enable to to and over years growth XXXX. expansion, share. and hard We've both top and through team on double-digit our dedication I'd Carquest hope comp outstanding business us we the work multiple increase to always, sales thanking investing to QX, Independent safe. to start challenging and comparable Advance's of top-line sales deliver leverage store this customers adjusted continued Team assets. allowed like Advance better and transform for our perseverance quarterly been helped margin the healthy in us and per strongest As provide

of comp X-year X.X% XX.X% with we while QX. store delivered sustaining stock of growth identical Specifically, compared sales an

to strength and gradual the business by quickly DIY every to seeing needs. highlighted in putting Within office return key by improvement urban the country. like to QX, certain in for we center last been led and rest rest continued return In evolving recovery of urban the channel to at was country geographies By of of able was a We've ongoing professional increasing this made. large professional overall we're markets. decision this pro-customers workers an shift respond of back of the and professional, with expected, stores the our As consumers which up professional DIYers. a to has the the year catches market in

and environment. these Our diversified digital to base the enabled physical in has asset current rapidly channel us respond dynamics changing to

we in our addition, adjusted margin significant In initiatives. category led points, our delivered improvement XXX of rate by gross also basis management

QX lapped as SG&A were unique quarter net a in Our basis the of adjusted XXXX. sales as XXX higher percentage we costs points

margin repeated. not compared diluted of of points Overall, were XXXX. XX.X% XX operating XX% adjusted the past of As normal were This QX our we over was XXXX. mix sales took during and which costs the initial and $X.XX pandemic XXXX. and year basis last Adjusted to actions XX.X% stages to income expansion we discussed the of compared DIY EPS delivered the year, QX we period unusually SG&A much in XXXX an versus than due high of with lower same with increased QX QX

were to XXXX. shareholders to million half $XXX balance several earnings improvements up while are our front quarterly sales in strong through the cash factors Our growth with in of expansion margin with a of combination operational the $XXX with and sheet year-to-date Consistent repurchases QX. contributing dividends. our our million coupled adjusted XX% flow cash share and returning industry-related per XX% compared there year, a record share a approximately to with remains free increase Year-to-date,

skill importantly, and benefits XXXX positive. to XXXX. industry improving sales. and both versus availability This fleet to and shortage aging, grow continue surge discussed that car as most their is of continues a slightly. and the the our More contributing demand used to April versus park As Investor drivers chip our and remains new in broadly, car longer. driven year, impact The the outlook consumers Presentation, perhaps the industry three to vehicles continues improve repairing in is vehicles primary The external maintaining are prior vehicle are miles

As last months the XXXX, behavior industry, we omnichannel the consumer surge led across pandemic all business changed know, our growth the over declined. in which DIY a to while XX in professional

as professional economy reliant the performance versus led quarter. Regional increasing, steadily improved as has XXXX. breaks, filters, with motor pre Southwest our continues categories oil, -pandemic led reopen, growth as consistently West. and business softer the miles driven was miles by driven and by levels, However, discussed exceeded now Category was to last a

We Each of thousands competitive continued a our global planning time, transitioned teams basis. same of as DieHard own well of in stock Engine and battery, the to skews strength as also led these and on At supply challenges the we which diligent X-year between result QX way saw enabling performed merchant chain a a chain categories brand. disruption. strong of we strategically position despite Undercar supply Management in tens experienced the

and stores, expansion. say very Company-owned a independent lapping to helped double-digit were in allow growth tool positions locations. navigated us challenging in as and confident our We've dynamic XXX all customers. in three positioning, position in in positive a chain, growth will we as yes comp significantly year. environment supply we've chain inventory help to put us these assortment of well in periods competitively. Overall, global dynamic slightly to the delivered assortment The high implemented prior positive made the supply favorable over all comp our initiatives U.S. our investments in we professional, professional. tool in-stock QX led omnichannel drive Within sales improved these now Importantly, DIY QX, are are while by future margin

continues Our MyAdvance Advance portal and profit. driving differentiator while online for a catalog Pro embedded to be us

customers. to share first of for sales status in will customers as and Pro. the assortment online professional This to and the fragmented to enable industry-leading to grow of a increase all Our committed us wallet Advance We very strengthen professional our call market. functionality speed we continue help remain providing parts grow

In DieHard to extended we professional addition, customers. our

Trusted America's battery. Most recent its a survey, Following as auto consumer independent claim state DieHard

a multi-year to their Bridgestone centers more During all across during battery locations. agreement we service than provider, battery the system-wide vehicle exclusive replaced QX, we our X,XXX QX, national in U.S. with us roll-out customer, sell supplier across battery With tire DieHard and previous announced this making the Bridgestone

new business, bringing terms our we quarter XX Carquest year. XX independent stores this the independent In total of net new added our net to in

grow for to month. Carquest continue differentiated we announced through our new banner which including program, this our business our We Advance partners, Carquest earlier by independent offerings

and DIY adds DIY relevance by Advance partners independent We've Carquest to Advance our were to in this new further looked new expansion for slightly enrolled business, store and Carquest for Carquest QX. brand Transitioning independents. continue our while comparable both our we out and time providing As partners over positive initiative omnichannel, build to traffic sales to existing strengthen and opportunities. the recently forward margin independent and branded DIY incremental

in omnichannel double-digit As sales business recall, growth strong reported XXXX. QX you all DIY comp our

growth of Perks continue elite the as huge Part by returned DIYers increased offerings a to XX%. due This DIY business our sales growth. Advance spend surge and Speed our significantly year, long-term to XX% continued program Last membership to to members gross in year, In enhance margins. inefficient in our increased services our stores, as discounts, leverage e-commerce market number DIY planned and Day was online We to this launch execute enable grew of in-store sales and Same our expected a of of tier share. led helped customer strategy of our we increase our suite the loyalty QX, highest VIP representing differentiate our which growth. reduction

Turning gross driven category played margin, again increased Like where a to actions margin within adjusted we in operating quarter. income our key expansion, the this QX, role. management our was by margin initiatives

we're we're tools new benefits our First, companies, other inflation. Like strategic experiencing capabilities. realizing higher-than-expected from and pricing

been continued has industry respond environment with vendor able year sales to Behind strong growth. income versus remains However, positive dynamic pricing our the as rapidly previous sourcing, this in strategic rational. was team

margin in productivity inflationary categories. time, growth offset have initiatives. growth our for same rate Carquest and to unit QX price and gross the expanded contributed adjusted brands on supply quarter brand branded the the QX, higher revenue the OEM by lower overall the to as products we Carquest Shifting and chain, the chain. progress a in global from expected. in is than the expansion. much margin more brands outpaced In into documented comp these owned than disruptions double-digit within supply reduced pressure which our the net make new to quarter were Finally, benefits At continue we products, initiatives as comparable growth widely per sales

of across DC's CBR of is our stores did to we We banner As The quarter. savings for quarter. reduction originally or planned the the XX cost group of supply roll-out replenishment, this not through a from completed miles chain leverage in result, a in milestone driving stores. completion the the

of course implementation, the additional added that stores team will Over our over identified time. be our

to our XX% on-hand center continuing productivity. fill-rate, unit we're accuracy, improvements successfully implementation and deliver is as Secondly, Management WMS network Warehouse by new new volume. the WMS. approximately measured further in distribution System or in our of helping to We of This transitioned our

AI, such AI, expenses savings. base. and with track the distribution LMS WMS be behind by of accelerated Shocks Gross by we LMS International, known Autopart consolidation completed expansion, are end discussed brand gross to also As standardization productivity. as XXXX as the and complete and track on and integrate and enabling new which growth, margin April. early our next products, as System the here come drives Worldpac implementations Struts SG&A communicated, is a previously Worldpac WMS to Management This Labor on to owned larger efforts the followed of year. or to customer in Further, We're high-margin expanded margin

Finally, delivery. as to as more West supply and our with DC enable larger capabilities we for shipments will the Coast in addition enhancing rapid of expand This facility a a the we're e-commerce point footprint, chain Western consolidation on San also and modern Bernardino. supplier serve much our U.S. the store

to centers, our X will into a us work be brand-new Greater Toronto better that in to Worldpac, In area. transitioned X and Carquest in facility serve will Ontario distribution DC consolidate growing network to single market. X the allow the addition, we demand began separate

execute store, reduction per SG&A, sales with we of both to and initiatives profit to our along continue Turning corporate SG&A. the

cost inflationary (ph) in QX per delivery minutes. labor store with $X.X store sales profit-per-store by store in per business. track and associated details will of cost-per-hour, unplanned these of million initiative, QX. planned incentive objective sales professional SG&A pressure As the also SG&A both on include and Jeff and versus average costs call, We our recovery including our remain previewed our other our and higher-than-planned compensation, discuss headwinds XXXX. year on a higher with prior few the faced increased we

up XX in branches, branches, and the we X XXX locations opened Carquest we've convert terms including to locations new during In year-to-date, stores, new we're working family. California announced quarters. of net the new net independents locations This new Independent April. at converted locations in the stores, Separately, first XX X Worldpac our puts to and actively XX,

our in confident the costs. focus trajectory. We related began we final is that of benefits converted, earlier to balance delays majority slower XX% realizing remain is are expansion year variant. This area our cost revenue for and functions injury the shift our margin year, to accretive The due incurring stringent for to restructuring a XXXX on news corporate However, our guidelines a to the with Delta to income. we by and while attributable As year. the to prior corporate stores within team construction-related growth planned these realize we the than we surge will primarily other experiencing which be of recordable The much expect more safety. exacerbated our once openings compared permanent of is were from less normal SG&A some saw start-up of In of the the process. store costs with a We rate XXXX reduction in planned into total continued COVID-XX, addition now to good are member than this the of SG&A result, associated announced the savings QX, reducing

improved injury same the Our compared rate XX% last in time period XXXX. with

Our is safety focus only our ESG on team component one of agenda member Advance. at

motion, through the return in time-frame. objective the a last outlined is XXXX shareholder to by vision, deliver top total Our we April demonstrated XXXX in quartile world advancing

While delivering on ESG. goal, focused this also we're

commitment, this of assessment help part As first initiatives. prioritize to materiality launched year this our ESG earlier we

working we incorporated are findings. and be assessment this in completed we QX, During XXXX finalize The the to our expect publish Sustainability Corporate in Report will to mid-XXXX. results which

allows $X.X to members sale. team at even up we that the Jeff, participate to in technology recognize solution their all turning to recent I to Before personally it our our customers round helping help point more I us making contribution call of and for us a year, the want customers organization to over will achieve date. across easier for campaign mission our stores campaign. most This and American family. to Advance record-setting is the million. generous customers I campaign This made turn want Association important to of all this to Jeff new thank for that, our introduced The Heart this of details over And With on for successful everyone performance. it of financial to

Jeff Shepherd

the QX, margin results Tom, customers In team uncertain health prioritizes would unfavorable members and who our the I far possible. partners safety continuing deliver challenging our to team by while exceptional Thanks, and all thanking morning. basis like period we improved with within fellow to which gross mix. channel was members times. and of compared good start our last the supply skew and of In to to partially above strategic the same the with inflationary profit. chain had during the owned our and and inflation brand with where to XX.X%. favorable points products same were Consistent initiatives, approximately by entering quarter, including We're XXX as of headwind our ongoing management our net X.X% was category increased costs gross supplier costs, billion. Year-to-date points well year mitigate margin basis overcome pricing, product gross strategic plans Adjusted offset by result expansion, X.X%, was to as XXXX. sales the adjusted XXX mix. working profit largest improved $X.X the quarter, Primarily, and these sourcing,

QX increased expenses due year. our factors expected, As we in to several the earlier SG&A discussed

basis year. meaningful of percent a compared the costs, hour points, XXX primarily to adjusted sales, net as cost by deleveraged our a per well as which prior by increase, compensation labor As driven SG&A incentive included higher

In addition, of related conversion our approximately same relatively SG&A related and net we [Indiscernible] percent Year-to-date, the locations our costs $XX QX. start-up increasing sales serving flat customers X incurred period to year-over-year. professional is the compared higher million to in basis of delivery XXXX, California expenses to in points

our reduced our by of related $XX year-to-date, and safety and we've to be team top While our continues priority. health costs million members the COVID-XX customers

rate to increased ago. XX year in QX by Our OI points compared XX.X%. $XXX basis, margin to one adjusted our adjusted operating to basis expanded income million $XXX million On a

diluted increased Finally, XX% diluted XXXX. QX XXXX, our adjusted of to earnings per quarter. in in adjusted share XX.X% $X.XX was up compared to with the $X.XX EPS Compared

was flow X driven our in investments XXXX. last ratio, million, was metrics, as of including capital a were cash This increase basis an well increase focus working our as million. continued free capital pillow XXX months our account versus $XXX our which points QX on Our XX% for expanded QX, $XXX the versus income, year for the primarily improvements operating year. of by first Year-to-date

an sufficient We $XXX to we X.X at excess Year-to-date, shareholders the while billion to of through shareholders. shares repurchases million approximately average cash QX, at repurchase nearly liquidity $XXX of returned at Since QX average shares continue $X price we of the average repurchase in share to price $XXX.XX. our to returned of price returning repurchase we million approximately focus million Through shareholders. XXXX, of restarting $XXX. an over on In returned of an our our million maintaining share a approximately program $X.X in $XXX.XX. share

$XX a the we of share million. dividend quarter, paid in per Additionally, totaling cash $X

per meaningful approved from press cash of As ability buybacks. cash cash approach again release expect quarterly our to and shareholders $X and our in excess our a a remain return to generate our Board We in share. our to dividends confident business dividend we yesterday, mentioned in between once balanced

When markets January billion. liquidity SEC, in you to secure included also of As facility in to facility refinancing the five-years. X-year we -pandemic closed took mature saw XXXX. our the overall yesterday's terms, the credit bank with The levels, to for revolving X-K new pre $X.X was This to of another improved returned and recently the our set size increasing facility. filing opportunity pricing we the had while prior

banks. us to found facility relationships flexibility. in our strong future have financial And our filing. X-K can be More We with with commitment secure allows details this our

Turning to full-year our updated outlook.

to related sales costs the sales Coast delivered We start-up an our to million the we what profit with ongoing step line continuing West strength expectations the weeks are X-year increasing strength, guidance the last of our in $XX headwinds, QX, X first quarters. balance inflationary positive guidance XXXX we'll reflect and year-to-date, continued QX in in results in to additional remaining and for in to incorporates top-line year. the up and expansion. Through This X our of

As guidance openings of our discussed, expenditures. environment the and construction Resulting remains challenging. the reduction for in new California capital store in

As in minimum a $XX.X to to margin billion result, new we're billion, year, store $XX.XX million of the XXXX-to-XXXX-time while focused sales of remain frame. delivering X.X% over free XX about operating of a million quartile flow. cash X.X%, income We summary, the net we're updating $XXX of rate to to XX%, of guidance minimum return the very In comparable execution shareholder long-term our total our CapEx top this $XXX stores adjusted X.X% strategy a current on full-year minimum momentum. and of XXXX sales a in of excited

for call the questions. Operator. open let's your Now,

Operator

question for Lasser the pause to first from comes [Operator roster. Instructions] line compile a We'll of Q&A the UBS. from Michael moment just And your

line is open. Your

Michael Lasser

probably with quarter this realized to environment, years lot geographies competitors. were as are than quarter, especially to implied see its that Advance a recover in X DIFM are you than the but leveraged other your steady comp versus the this What going last causing areas? for I to Thanks lower faster morning. stats the Good will question. at this the share taking quarter my lag be

Tom Greco

geography Hey, on smaller. and of West regions. out Southwest, We're good are X share geography out morning, gaining We're but is there, Well, for first which the really our leading about they're performance the all, our Michael. there. smaller excited front, our of

seen the stack would come X-year the Northeast We haven't on back we a at basis. level liked have

So the geography of point. that's kind

go think quartile April, components the top return. we're shared shareholder I And X there's total framework to to that. we to got targeting - just back it in

we sales the X first it's I mean, The the X% comp very important. are market of got comp above and is and and important. sales to very sales grow industry we've want

to Company. our back expand the we've of think substantial cash said we XX% return shareholder we unique about total second in XX% third significantly With EPS to got to of is and margins over The top - quarter. a our is couple And a return deliver the next We amount growth years. a would delivered as shareholders. quartile, to opportunity XX% we the

wish think we couple big that's think that I pretty And will been would quarter. well. really pertain change comp we our the in. a of stock categories So, we thing say to the called [Indiscernible] up a the sales made in to going out that have we higher I in that

those supply our We merchant and think filters. on of chain batteries very brakes on and terms front, strong I quarter terrific the had categories. team in a did sourcing a job and

and the great And where us. we supply steering, was gain. now chain this got for of be short-term the current up were changes think global of engine In skews us I just overall. to made were in We our shape summer. in quality. a and And terms -- transitioned the at quarter, wanted definitely It's just long-term of but move extremely them tens environment, better product. is our Carquest the we much in a challenging. They've it We're for ended thousands given owned the end, love some OE It's quarter, product quarter This the than customers selling And category to well. brand. we not in this pain it's giving huge in management, suspension. in-stocks

obviously are and Our love in-stock improving rates rates. the margin we

be summer return for this XXXX. those to that So, is the move total big drive us in-stocks into margin believe next with shareholder and plan year on a we but we consistent didn't driver highly our categories, like will it the

Michael Lasser

more question the already And margin having been what's target? impact Understood. My XXXX, in margin the more those Should on the and XXXX are less consistent follow-up dynamics some XXXX that path inflection issues an such is having the business? a XXXX operating going are like of in hockey or on? of the they addressed to be expansion pretty are expecting stick that given significantly, or moving you

Tom Greco

one. to forward. week. to better categories. the better be take want where it's I'll at we're think talk and we're I'll those don't much but much cadence first margin would we this we're of improving Jeff I point, in shape say let Sure, on I every expansion in our going shape the

Jeff Shepherd

Yeah, sure.

we margin over overall we'll the about expansion initiatives. our all, of 'XX for consistent first but in the relatively it years, terms thinking of growth provide February here overall, from next guidance are In margin expansion of way couple is

than over are expect aggregate, and others, relatively 'XX if some Now, contributions 'XX. faster but we we evenly

Michael Lasser

much. so you Thank

Operator

comes question Griffin the next James. Bobby Your from Raymond line of from

open. is line Your

Mitch Ingles

everyone. Hi, quarter. Bobby. for is Ingles nice Mitch in another on going Congrats This

rate growth XQ, environment. FY So, outlook and margin your X to current your past impact roughly think XXX the quarters, how performance we that gross basis at should impressive 'XX over about X.X% your in rate How has X.X%? the of either given is points to retail improved correlate which LIFO margin

Jeff Shepherd

overall sure. What line to category was really second first. I'll gross that about. just said management the start half Yeah, margin, the going largely with we've expansion our part with in we by be is initiatives going margin back talked led into those

slight a factor. going either really the slight we've flat SG&A, this contributing So point to to be said at headwind. going be is or that's

challenges our to expansion. benefits owned We're continue with growth we're a with same. the really behind lot up continue strategic the Fourth from think the year we margin. us, this brand is sustain. see gross pricing to all mentioned, as of to we're to quarter largely going power sourcing think in we see the have So, going that and to going the We just is Tom

Mitch Ingles

up, Got is constraints all Thank much in-stock insight what How inventory as be follow it it. And customers here out-of-stock helpful. would at product not you. supply are a the with then rate? sales? product? Or retail. And likely is hurting is levels pressuring simply are Thanks, actually optimal getting the actually across Jeff. Any I'm given conversion of substituting this

Tom Greco

will I one, mean, Bobby. batteries, all, the I take Sure. the that whole good as I breaks, of been time. we've categories, big in shape on first mentioned,

don't fact, we're quarter, In obviously I DIFM back the got everything bounce nicely. we've on categories. you that sale. And where those those and summer able that to that in sure, that pleased others we We're steering categories categories. lost seeing competitively just have in have see and and back for, that's starting are the certain that in. know advantaged for say we as there we're but pick big were liked you've are in in, would an suspension, been we up and back didn't comes I something, making the where as we this where got an And big, we would we there's don't. certainly would have that But start management, coming some -- alternative application to really summer. engine transition cases, occasions that you've And

better much third And I quarter. that think in were the now So, the we story we're early in is, of than the performance. we're our in moral shape seeing

Mitch Ingles

color. the for thanks Eric, thanks Great,

Operator

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

is open. line Your

Unidentified Analyst

It's Chris. Christian Hi, on for good morning.

of to XXXX to had XXX target. in How impact? long-term gross basis points margin On as spoken magnitude thinking XXX you of SG&A outlook, and of you that the your as are about both margin well the the margin mix inflation

Tom Greco

category exceeding in of it the that costs, input would in to form that to we've this That's been you. we short P&L. the looked particular, price at as Certainly, that. source proven pricing combination able the have seeing the we pleased think adding with to transportation, pass we wages, also the inflation we'd costs, offset form now what of be fuel, far. ability be terms it, opportunities go in really But we're across so on I Yeah. has extremely look If more to And our back in have that the to were be the management. and been strategic in we at term, product of of

Unidentified Analyst

Got it. for do trended comments increasing to speak in That's inflation drove monthly acceleration And how any the the the and and me on really terms quarter? then whether of through cadence, helpful. And in DIY through price could an you quarter? it trends

Tom Greco

to consistently some by the well, continuing increased above that DIY, their These positive to which a strength has in going of personal once trends. people on offices that vehicle positive And return But on interesting DIFM that the recover again, to it both resiliency an short created encouraged need overall. has and having DIY answer and again and the consumer terms and are created pandemic, we as of school dynamics wasn't expected, and industry the our also expectations business travel for is the were seen and we but a pro, Sure, We started the to miles-driven by is business. for as performed was we've the our pretty lead throughout surprise. way year. felt people

up that picking hobbies consumers their -- got they're like You've detailing cars.

before. their keeping -- people transit. of cars with people the even there that visit are cars And mass find got because You've seen longer because They're markets, one. with urban longer comfortable never they vehicles in no to some got bought they you've country a recreational have buying can't new parts

by going sticky industry. demand a these we're of But how say robust we're And seeing are DIFM. the It's very that. be. to difficult good across trends it's some time So, and to excited both for DIY

Unidentified Analyst

luck. of that best and for you Thank

Tom Greco

Thanks.

Operator

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

open. Your line is

Jackie Sussman

dollar X% comp around be by if Jackie we're for quarter this I we XX.X so to to And 'XX. guidance is high comp. even X% that EBIT the on level, saw were quicker? stronger? you growth grew much. Does reason X EBIT X% This hit to need to on income of Sussman end grow guess that XX.X margin to the a asking We continue is operating Thanks can Simeon. wondering, Hi. in

Jeff Shepherd

last looking balancing saw all, startup the that fourth We're strength another first also million the related costs with to quarter then weeks. into here, Yeah, we've we would the $XX Coast X quarter top-line the first of West up for incorporated that expansion. just our of inflationary in ongoing to headwinds and continued be

believe we most XXXX. in there I maintained the the We for though full-year that the volatile. fourth quarter results to would upside first is mind be So, our X historically weeks. keep will

So, we're being cautious there.

the take investor margin to get we're with for. well continue Over rates you as on I confident into margin our and We're execute back we're the longer expansion us again event. that us will those XX.X%. that XX.X% will looking it laser-focused April to we that the That very provide would to term, initiatives

Jackie Sussman

Great, costs hitting quick that supply-chain thanks XX.X% just so should EBITDA How high the margin follow-up. we And think targets? the much. in a Does from to context achieving it Thanks XX.X% so about preclude of much. end?

Tom Greco

on play of in Each we're going have our Well, supply chain. to a out to big continuing the taking are supply our unnecessary of chain. we initiatives role execute plans costs

to expected. the all execute years. plans of traffic taking of We're above And in the we going As But our well, plan. freight and seeing we're is over distribution part we our out chain next us basically that's a initiatives. are system. that going execute those continue going are to to stop to Supply what couple highlighted of big from costs in the inflation not executing wages centers, we prepared remarks, in

Jackie Sussman

great Congrats so on a Thanks quarter. much.

Tom Greco

Thanks.

Operator

from comes Wells from line the next Your Zachary Fargo. question Fadem of

is line Your open.

Zachary Fadem

the every morning. to the well can is quarter, DIY trend all, as commentary a broader it as then quarter the in whole, of did good quarter with about is Hey, terms of improved as your basis a turning decelerating? positive in that X-year first include we demand, start DIY and in this say DIY has period that Tom, or but fair on

Tom Greco

see end first that did as our acceleration Through about quarter Well, the cadence all, the consistent. talked was the pretty some prepared of the of remarks, in we we quarter. towards

battery we that pleased DIY. A the the big put within the years, In really perform launch over It's continues the resiliency the in DieHard, of well last terms really, as overall, with in there. a ago, at I really our of mentioned of lot place minute including DIY business initiatives to fun it. couple of of category

Our Speed momentum. is program loyalty Perks gaining

well increased quarter. transactions team really Our is initiatives. percent executing on And DIY of the think field I in the our

to going our drive but specifically, how highlights the resilient it's the been So, to part stock of X-year we're and very very to equation. and important an I'm it's continue comment going we're not on pleased as with going

Zachary Fadem

and well can to the Got you're the competitive a consumer starts of out then seeing you gets your about there, changes consumer be down, or as accelerating of to pricing and trade on there much in landscape, it level impact to is the talk inflation, too volume, mind, behavior, as any it. where push inflation And back?

Tom Greco

very than where economically feel that we point have top To expensive standpoint. a that products obviously, something at national right? products, in transition DIY able some more I do price some into to own options, to an from give branded a exerted The people lower challenged was good you potentially your is particularly purchase cautious Well, as customer, it's brand that offer we've about were we're about thing point. made

terrific that the So, got we've suspension management, if mentioned and engine during I product price in point. lower that got a a change was

And of than customer the that So have have that a margin higher alternatives. much some we honestly, being options, that gives the didn't the before. we advantage

the what's when it. concerned initiatives, that of There's going We're price we're to am be watch to an I get, you transaction the got these to wary when it gives the make customer of on incremental comp We point. might that So, unit very it closely. not products. driving owned otherwise the sure it to about been per an these alternative you gives going down, some customer implication want and But lower a have we're brand that a trades able price on achieve. you

Zachary Fadem

It appreciate time. the I makes sense.

Tom Greco

Thank you.

Operator

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

line Your is open.

Bret Jordan

Hey, good morning, guys.

Tom Greco

morning. Good

Bret Jordan

Xs. being you up How costs first half same through? as a you supply you and price range, of up are cadence are do see the which chain X.X% quarter your picking 'XX? inflation at talk 'XX You're the you into still inflation is fourth maybe X where of skew the to Could passed see peer end inflation, about the low running of

Jeff Shepherd

be going think Yes. the higher Xth going going to it's is quarter. into We definitely and to continue inflation the

will It absolutely We are higher still be out so anticipate be it the in seeing through, quarter. those third called we higher. will that cost increases than X.X coming we the that

with For still comfortable very the 'XX. we're year, we We're out there, X% through the range put that to working X%.

that XXXX. We'll calendar when turns given off but turns February, that don't this to in the We yet. we haven't our do think guidance certainly

So first capabilities we to still continue going have we thoughts certainly, about the it's be that. pricing to But going a we're continue that. through work half think to challenge. to in And

Bret Jordan

like ability your topic, great. And maybe sound in the itself. you chassis tough sounds to have in that the what on chassis out-of-stock any top? quarter, Okay, But quantify impact on did the it resolved it was do was like

Tom Greco

there's unit, per meaningful Yeah. there. is the then sales mentioned. the the Once in-stock dollars can I margin tens And which I per per in again, unit we of and right, but you price as two that There's net absolute is out, Brad, going mean, rate break we're profit of skews we literally the to not profit it's tell lower. elements -- unit was the the attractive, quarter. unit what per just made is very on thousands trade-down, front, the margin

We're to mark TSR supply -- for our we in big able pleased question into So, knew we change. but we going debated margin a this a a pandemic, an a the of big reality to bit, future is middle did. driver we change, little as the important for made was the behind we're that was plans. get expansion chain us be and that we margin us. year, the this year these last It's change we exited that it and put a make time-frame the we're to driver It's this wanted in

Bret Jordan

fill of cadence on rates versus you you and fill guess if rates where through the about the could talk are the versus in-stock now? about right quarter, think your today were I they topic, we target maybe where

Tom Greco

been the that I'm a product. obviously in going to I moved Yeah, gets suppliers better. And middle again, come reiterate, it's steadily new commissioned it terrific we've Since week product. summer, significantly. the up and make the improving. definitely this Every of Carquest is mean, it's

product. the Our customers and our team field loved

So, terms return high, rates lower. of extremely it's the customer in been are receptiveness, much

in when across So, get board, we the we're it in very good shape.

to we evidenced from So, good We feel our to to bit which where now quarter-to-date about it challenged, as when to we a question, now, was want -- go significant into pretty there was a be. of little say, though which with your sales. probably by are it where is the August, most improvement room to get

Bret Jordan

chassis all inventory statement the to to just applies category present? or Okay. That August

Tom Greco

one. It's think chassis engine that's big the also management, really -- and about other

Bret Jordan

-- it. looked Got it general, you said total you in at would if in-stocks? just inventory But you your say is if improving

Tom Greco

Yes.

like strong Our mentioned. categories batteries, inventory on filters, I is brakes, as

relatively versus speaking, the I It very think categories. those this track we're good really we time. where peers that And huge we made about this the feel transition we challenged. all was most categories

Bret Jordan

you. Thank Great.

Operator

Basham comes of from Seth question the line from Wedbush. Your next

open. is line Your

Seth Basham

year implied there operating at driving can to typical And lot. margin time things morning. material in third sequentially? of of -pandemic more is good operating implies any around least margin a a a than quarter the Are step-down Thanks this bit fourth is question the the a to more the from the fourth for are quarter on step-down you basis. pre a that My quarter, point

Tom Greco

in trying we we're just very Overall, approach quarter. of to cautious terms the fourth how be

historically up not we're earlier, in think on the As would to quarter, have fourth be last you know and quarter startup year, to cost is have similar I it's seen to do third the a which what million. could something going we We that volatile. said we saw $XX

that quarter. be we a we're certainly got -- upside. part that we would said, believe we as we off first there now, being fourth and volatility But certainly very of to X certainly the we the would Right given were maintain that to as contemplated of start have that quarter. something just the be maintain So great fourth if weeks, cautious

Seth Basham

out And has you this an over with you called how it it thank about chain capitalized gross margin recent quarter. question some of next the what's driver important quarters, my cost, it think Can metric been you. couple follow-up that and to think I is quarters? Yeah, around insight supply and happening give in into of

Jeff Shepherd

quarter a but out. Sure, small. was really it slight for tailwind, actually nothing It was fairly significant a the call to

but we I in the we saw continue more of to the in quarter. that's expect We'll 'XX February, would something a going that introduction feel control to expect items fourth of quarter out: and that quarter. that real These We the Strategic management strategic the give The into similar insight in lot pricing, brands. owned gross third really driver have category things fourth the is profit We the about over. all it. of sourcing, we good pointed are

Seth Basham

good Great to hear. luck. Thanks and a lot,

Jeff Shepherd

Thanks Seth.

Operator

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

Your line is open.

Michael Montani

comp to quarter being I for X.X suggests X% the Thanks to to the a question. guidance. implied was getting fourth I the to a around for X% just quarter. taking on X maybe ask comp wanted the which rest of

be to have been in Or speaks if you if anything all volatility mentioning? particular, want to it there's mindful the more see should we Just of? that

Jeff Shepherd

it the a volatility finish the harder flow a year. makes bit through. just speaks being to be It's really to of makes quarter. the cautious. want it while start, that to quarter to be into little a our seen And top-line cautious lower like revenue the going we SG&A we it we out the lowest we great to We've cost want so we're said, would And revenue off having so I that fixed got you've fourth we're as and past. when Yes, volatility. we year, respond Like have, cautious in

Michael Montani

as if basically, some quarter comp comp. the follow-up, also And some extra color there and inflation Thanks. Can counts there possible terms all Was or for you DIY for then could impact on in well? what I transaction X-X the X-X as with the the happened Xrd of was give DIFM?

Tom Greco

were of down primarily transactions, Well, which is total transactions our the majority to in quarter DIY, due Michael. our the

If had you remember transaction in last very robust DIY. growth we year,

technology, on be up X-year with And biggest pro account, both the the the goal. accounts share pleased at the sales wallet job transaction was obviously dynamics. growth, the whole strategic more whole our our a loyalty. We're more get vehicle drives There's that channel means side, It The On is the our because and our largest really variables significantly the growing segments look really it of we're to big in are transaction X account customer. customers, basis. of pro if one for customers. to always per our TechNet transactions love to changing go that accounts shifting I double-digits. to with which selling up We of in job lot

focused what the quarter. growing both and that's in dollars we're So, very But happened transaction. transactions per on

Michael Montani

the and taking luck. good Great. Thanks for question

Tom Greco

Thanks, Michael.

Operator

reached Greco, closing over And we Tom to questions. call allotted our I turn for remarks. you the back Mr. time have some for

Tom Greco

incredible take against thanks a strong, grateful Well, the for be long-term execute industry military service service, We're as also fundamentals continuing finish us joining network and our week. last men team like the previously events nation's the to proud Advance heroes excited honor recognize we're team of up members served. moment all and healthy, for. to thousands to And women through we including one our today. our year currently posted to thank strategic plans. these have very are is their to of and or a Advance I'd have who to for lot their

and for take continued our healthy, support happy our As Thanksgiving through including With care, wish members building we organizations And stay continue heroes. and partnership I you safe. helps veterans service to homes that your a with holiday. celebrate that, families

for support XXXX in sharing our grateful we February. results to and your ongoing guidance are look and We Thank forward you. XXXX

Operator

your conference today's Thank participation. concludes for you This call.

You may disconnect. now

Advance Auto Parts (AAP) 16 Nov 212021 Q3 Earnings call transcript