Earnings call transcript Q1 2023

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

Operator

Welcome to the Advance Auto Parts First Quarter 2023 Conference Call.

Before we begin, Elisabeth Eisleben, Senior Vice President of Communications and 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 Q1 2023 results. I'm joined by Tom Greco, President and Chief Executive Officer; and Jeff Shepherd, Executive Vice President and Chief Financial Officer.

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

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

the cause filings factors recent Risk differ Factors commission. our results most can made Forward-Looking be information about actual captions and Additional found XX-K Statements subsequent and Form with that could to under the in

turn me to Greco. let over Now the Tom call

Tom Greco

Thanks, Elisabeth, and good morning everyone.

for relentless our has I'd dedication our on start and of of their by like for grateful The a been to entire ongoing thanking team customers. commitment. company members for their years the focus our hallmark team frontline many serving we're

today an balance of on and I'll update performance first couple the outlook in for review a and year. provide the quarter the themes of our

our we first the First, members in team putting decision every customer we're and make.

the price quarter performance well investments in done, While our work parts is first be across key were improvements expectations resulted financial and below availability and our in to customer-focused indicators. still there competitiveness in relevant results our

our our and the increased drive to executing improvement with price continued by board. We're customers Pro improved highlighted parts in competitive plan sustaining across availability, transactions targets, execution

environment look the Pro outlook as the remain for competitive challenging. the expect to the in Secondly, year, channel we the balance we of very to

are in balance reducing outlook. we based we of annual updated our in the saw our experienced release, As and you shortfall our on QX guidance year

We and performance. drive reduce key made enhance our and top executing against to to our the decision it's line remain believe to to prudent we've we flexibility operational growth committed Additionally, quarterly improve cash dividend. initiatives difficult financial

store terms decreased our X.X%. sales comparable increased QX while line, sales In net X.X%, of top

DIFM, omnichannel business. our contributed growth driven double-digit stores growth slightly outperforming We both net DIY with branches DIFM inclusive to increase XX sales saw net in by in in e-commerce and in the stores opened DIY sales and omnichannel quarter, of the we a QX. New sales

In particularly our our growth business cold a terms some West. our our the geographies. professional perspective, brakes a for that category a regional On we geographies, impacted winter tax sales comp lower in both From some and sales was primarily motor driven sales growth the our of March. led in below net by pressured oil northern our basis, were cadence, of milder category Overall, and weather the quarter, believe way of refunds led expectations as in business. by

to improved the we As improvements in the collaboration supply chain measure our I mentioned, we in In fill KPIs with saw quarter. rates vendor track parts our availability. partners,

XX availability, of on-hand improved points in the by basis our quarter. terms rates In approximately

research, based our the with In followed past talked important competitive make installer in for their by the we've of that delivery on of an terms most relationship. supplier to availability, starts and consistency above criteria choices pricing, part

Pricing has criteria or for installer. third fourth been an historically the

and of across to and categories changing testing business. competitive price-related considerable done to determine price position price Last a relative Pro to as we the competitors within between if investments. the increased dynamics best work different a our price result geographies drive surrounding too We've and However, becomes transactions saw price levels bigger becomes climb Pro unacceptable factor. points year, in wide, a approach our gap growth

helped to competition, competitor work price traditional it category each a distributor. a wholesale targets relative for refine be This us or

more growth quarter. price to competitive by improved less within offset along As a price fourth the quarter. relative selling This the than to to in result of units relative by both saw achieve we improved Pro performance with in year-over-year category, we targets the transactions investments fourth availability, was made average and

realization price competitive price targeted had our less put substantially implant, product in margin sustain order In pressure our rate. in we which to on higher position QX,

than basis realization Our versus XXX rate single points, biggest less being expectations margin shortfall declined within the price product planned with gross margin.

in Separately, headwinds we product margin more than shortly. within also detail experienced mix. Jeff own explain margin, brand we offset gross from will primary These channel mixed headwind two a more saw within the which benefits and both

In gross headwind of resulted of SG&A, terms combination will margin adjustments decline an the SG&A a The with we the deleverage XXX year points further. incurred in prior in associated and Jeff operating discuss quarter. of which basis margin

back the on focused to improvement. look urgently we we're operational XXXX, half As of

On business. growth drive omnichannel strong Perks our DIY Speed of loyalty our behind our the top platform, to continuing e-commerce we're in DieHard, and line, business the strength

improving In heightened terms back-to-basics a focus board. focused is driving the across on dollars. highlighted This profit Pro, gross we're a and and execution approach on of top sales line by

big driver involves of first and improve availability inventory here parts our further on-hand to The optimization rates.

discounted In some we to sell owned transition to to rates cases, through inventory alternatives. plan at higher-margin new

close we The plans targets involves sustain second the driver price competitive ensure our sale. to to

category and our front, within margin in role very a disciplined apply space, of now starting taking determine then the holistic business. the much customer management We latest category updating distribution, We're category sourcing and shelf about strategic and past. each talked insights we've the a pricing, approach On approach, promotion. more to sourcing, the with within

opportunities with of with growth category-by-category engagement here goal involves suppliers and addressing process management XXXX. a our margin and category the of continued year expansion. an We're our planned of into accelerating basis, on sales overarching Our work mutual strategic balance

executed year which a of we will the savings in provide restructuring also first balance corporate SG&A. quarter, within addition, In

pressure In our balance of and consumers. we of mindful be year terms of continue outlook, potential uncertainty to macroeconomic on

modest car demand miles aging in driven primary one remain fleet, increase a the industry, with increase our drivers year ago. compared and and in park positive, of including an For

the top sales Our overarching momentum, year balance channel. remains to professional the of improve particularly operational for goal regain sales to in the execution line

Regaining our has wallet of customers existing share challenging. been with

guidance later focus our factored sustaining what year-to-date, targets this elevating full-year into competitive in revised expect on our than price Jeff will the our competitive given require and price more planned experienced and we by we're availability, investments in call. details field sustaining price execution. But we However, our that parts guide. surrounding category targets, Pro, higher cover will we've improving

over Before our turning Chair, CEO quick briefly Board of Lee, the process. independent newly to provide the the update about Gene on talk I Jeff, search a to want and expanded call role

As improvement the with and we in during transition. CEO to I our to helping business, is seamless time. this management you Interim be leverage as team Executive release to saw to morning, his and while additional will Gene oversight experience and our forward in work deliver operational a continuing this Chair look working Gene ensure to now operational as serving providing support

the very to vetting independent thorough process, assist selection a we've search, work. retained a With CEO this and following leading with respect to search firm

automotive, in the is experience is Our succession exceptionally comprised of committee The committee for members identifying industrial, and with a operations. multi-unit internal fit and candidate to board is committed and external role. evaluating who significant retail, remains candidates

With that, and Jeff call Jeff? outlook provide I'll now in our first more full over turn for our to year. detail to review the the quarter financials

Jeff Shepherd

Tom, good Thanks, morning. and

decreased XXXX. by quarter. want ongoing our profit for team margin new Gross net with reiterate gratitude customers compared difficult sales with was XXXX, Comparable driven XX% $X.X XX.X% putting sales to QX our of X.X% navigating the I compared a billion X.X%. store openings. increased store our while members in QX, commitment QX first In and to

were quarter. the investments, we attained out have were which we product committed competitive gross of important in above headwinds key margin, targets now price to landscape. to price price with to the as we've we categories, to associated the targeted terms current established due remain unable in experienced maintaining that expectations cover In It's point competitive and costs to

were our compared Product up year-over-year realization. with the costs mid-single prior year, which digits price exceeded

and margin supply costs chain In contributed addition, unfavorable to product mix gross increased deleverage. also

which be macroeconomic we conditions influenced by product see weather. routinely of terms and including several can variations, In mix, factors,

This, and As in you lower in a an margin. oil, know, increase on coupled unfavorable which rate sales motor a battery in impacted had which milder with impact carries quarter, an we margin had product wiper the QX. winter

headwinds mix well California and productivity new had from of as chain chain these and owned lower-than-expected than inflationary brand initiatives. benefits. deleverage. costs The in than our offset tailwinds, supply DCs in channel as supply resulted more offset product our Toronto, mix This more we sales in While gains combination

the billion the with previous quarter $X.X $X.X year. compared SG&A in billion was

the year. quarter. We prior As net XXXX higher planned to $XX was due the and than approximately QX line top was in in a softer sales, the percent incurred SG&A of first XX.X% with in million compared XX.X% costs

expensed a As these but years paid to of We've QX. and was concluded years. in adjustment the amounts not we determined those in result in and material management's were these recognize were XXXX correctly costs not prior therefore, review, XXXX, it

expenses. SG&A was also labor our to with deleverage benefit-related associated addition, inflationary In headwinds and due

in reduction store We openings, incurred expansion. partially incurred our to were start-up XXXX we offset a costs related in with California which costs new by associated

million basis, $XX Our with QX per the was the rate previous X.X% previous compared with X% QX compared previous was in with $X.XX in share compared $XXX.X $X.XX year. earnings year. operating Diluted the was in year. million On income a

of million primarily store million QX prior to being previous year. the reduction million year-over-year contributor lower openings an QX $XXX outflow with the $XXX largest the and and compared flow capital year in attributable investments certain branch with of was timing in Free the $XX expenditures new completion in were was The quarter, the the IT-related XXXX. cash from of payables.

decision and as reduce Tom our the As cash to $X.XX made quarter. dividend release you difficult our this in morning mentioned, saw to the this Board

Given to the flexibility. our balance believe outlook, recent it's we retain prudent performance financial of year and

sales are X% operating of sales income billion the XX% to of our to openings. X% to guidance expenditures per rate store $XXX X.X%, and Given $X to store to margin to diluted flow million $XXX million tax include of updating in $XXX XX flat, of comparable $XX.X free of million negative to a factors new discussed, to branch full of year million, GAAP net $X.XX, to cash income earnings capital share $XXX and range billion, $XX.X of XX we XX%,

let's that, it With up questions. open Operator? for

Operator

[Operator you. Bank Elizabeth is our ahead. question from America. please from And go Thank Elizabeth, Instructions] Suzuki of first

open. Your line is

Elizabeth Suzuki

Thank Great. you.

that that are up competitive chains? I the leases in is chain independents as competition Just remain the mostly too you and well? you on getting competitive product more to challenging. the competition they're do you Or more to think smaller large mean, coming supply environment, get able noted expect as from Pro the

Tom Greco

Liz. morning, good Hi,

two. of to but indices also the competitors, price more we strategy broadly. we combination off against we our I the think a of measure measure I pricing predicate against obviously, it industry relative our the industry. the mean, And close-in it's direct

the So It's really, Pro $XXX whole of as us at, billion for the is those a two the business are a because, industry, category, there's you is but thing. so both primary highly at know, we there. lot and fragmented business looked the driver out look

Elizabeth Suzuki

that your remarks didn't talked better to sell prepared the Great. mentioned that the about inventory your replace implication And you to had Tom, features? brand is then your customers And the meet of mean, demands brands pausing I of owned owned you also terms in in owned quality in of or you expansion through some plans there brands? with are product.

Tom Greco

Yes.

that. correct me Let

inventory, that that's another is owned it's paid not brand. essentially brand have transitioning one which about in categories, We're and a talking owned essentially couple inventory to We already what necessarily we're from here. we've for, big of

most we that's out out about brands, our But are higher-margin inventory to of largely essentially is know process confusing. higher-margin a system brands. so actually transitioning and the owned For move owned expediting into moving this part, the that I of is into little

Elizabeth Suzuki

you Thank for it. clarifying Got that.

Operator

Chris Horvers comes next open, ahead. Chris, go line please The from JPMorgan. is from your question

Chris Horvers

Thanks. Good morning.

a this, cut points. you just XXX your operating So basis margin high by narrating level, at

that given difference? is margin, that lower all price SG&A on the that gross on margin And So and driving investment is gross that's within that essentially the then outlook? the line balance XXX

Tom Greco

Yes, Chris.

Let of in sort me let on the about I'll off. tie context the year, of and give we're and how you it what quarter balance thinking then happened some Jeff

In expectations. positive average DIY generally a sales, I comp in the with single down in in posted terms low ticket. generally We up line. in of mid-single We digits digits our were was mean, line transactions,

increase make where price had and targeted. that index to you existing of sure were. where back We was we wallet to drive Pro, invest with share We our We're transactions. was goal the get to in drive want with As our to we inventory want know, our line units. trying in customers to our competitive in

but quarter, last making the good improving were transactions and a getting we low nice progress in we actually at quarter, of we're We're where more from We down digits the were In improved. year, on with single installers. transactions. so was units jobs the in our that end improvement

average far longer taking going not customers. so we issue low though. like, P&L is recover in below forward, we it. that with in that's stay to And enough year. at significantly ticket We're we'd it our We're single so plan That's two-fold. to to the look it yet, than how going big And the The of is faced challenge lift which getting digits, It share is been business. our that this Pro, then terms longer is for was of existing biggest year. taking headwind as up be a wallet we

Jeff it I'll tie So from let out there.

Jeff Shepherd

Yes.

terms the about balance expecting the that's well as as balance for year, there, variability last and in a think of the half. to of on relatively margin bow midpoint kind SG&A second gross the the the back way at some why the it, that, of In year, mean, if most between we put Chris, we're split. the SG&A, split about quarter be guide margin, to of we're you and see both just best there look of deleverage sort deleverage, then of do I improvement we'll thinking be will the think in could And year. the but

Chris Horvers

to good the a that's so, segue And follow-up.

sort availability of So the is did the have are side, inventory. we're any price Then -- is you on of about availability dynamic price investments LIFO and add made And think as there? lot you that? been a there annualizing and you through -- now

not but the availability right where to there of right, figure question we in it? So we the have also it's a just want inventory, is location? trying out, are Or you is

Tom Greco

Well, first start after connect talk. all, Jeff price availability. Sure. a with because can little to want always we're I the on I'll have -- availability, improved bit of But going to

there. good making are progress We

still on our Our stores on-hand our flow the rates up, progress to are rates of terms on-hand are availability there. so fill good improve up, supplier in DCs clearly, up, there, room rates, our the we're to rates are but from improving

I are targeted planned, where we targeted at price less by need as are industry price, your of in with now. versus realization we said price be index It we question, the resulting the earlier but answer we terms there. is than to the And In index directly, have a category. we question to

Jeff Shepherd

a Right. And the we're competitive into so year, planning being of dynamic is through that on revised that factored balance the the guidance.

expecting talked about not being digits. balance In anticipating anything year. there. significant from some the terms the up impact we're of mid-single LIFO, of inflation We We're moderation over

a However, the benefit. slight be LIFO, we think, will

Chris Horvers

Slight benefit the for it but was headwind a year, in XQ?

Jeff Shepherd

benefit a was very XQ, That in small, $X million.

Chris Horvers

Got it.

much. very Okay. Thanks

Tom Greco

Thank you.

Operator

your The from Simeon go Morgan Stanley. Please line open. ahead. comes next Simeon, is question Gutman from

Simeon Gutman

but especially a that remarks, big more, price Good can little the if you way very sounds picture independents? resorted chains? don't the it morning, want described different competitive -- than say a the a matching? the little Is has, price Are competitiveness Can coming everyone. coming a discuss from the from In you of competitors other like seeing it. painted it Is I backdrop. you please? to price-driven prepared commercial any discuss to, Curious war, it it somewhat

Tom Greco

Simeon. morning, Good

of different of of unit it's consistent week and a mean, at terms secure said the we based be strong in in in I we we what pricing. I establishing more levels, where clear to think our how see we targets and on each with very what to would team price very at to we've improvement in unit our earlier. a industry I mean, got that. They look the got were we've every in category, each we react perform strategic I order categories jobs. in lift need and deliver idea

industry that but at targets when move, that each really we of our and drive for -- I a measure think at So so see two. that's in, we it's that of, individual We don't industry close an off category, at pricing the level again, look are they strategy those competitors the level. combination and established we more it's

Simeon Gutman

the investments? for lines the due sense of price network you And some gross much your of how versus out moving of give any impact is margin acceleration can to the

Jeff Shepherd

primarily single mean, It's has I that factor. the investment. biggest the been price

price, cover was far that to with and able inflation driver. by the aren't biggest We

Simeon Gutman

Got it.

Okay. Thank you.

Operator

your Jordan go ahead. next Jefferies. comes Bret, question open. from is line The Bret from Please

Bret Jordan

Hi, good morning, guys.

Tom Greco

Good morning.

Jeff Shepherd

Good morning, Bret.

Bret Jordan

debt funded about require going the what guess, more of repercussions the EBITDAR of now you does level? Could this to sort I inventory to Xx? being Is working goods? to cost And it do talk guess, a at I capital balances and your, of

Jeff Shepherd

working the inventory Yes. We've cash flow. substantial the the I million. we see have capital our mean, to availability. When details, make our right necessary at we're $XXX looking investments quarter, within is the in improvement that. you made free look to first In you'll up ensure

making We think investments be we further this producing It's think that to as believe our by in completed the some closely. to get go, availability watch flow. start and the investments. and cash We those can we we're those transactions, but be cash so we quarter, from confident that of investments we the largely ratios very end have improved our improves that we will the temporary elevated, and

Bret Jordan

Okay.

accounts in of X-plus into percentage Is we of to that number a sort Your EBITDAR lower heading we're I here debt into probably ratio? go the think as this a XXs payable, inventory. as

Jeff Shepherd

that see slight planned sizable course quarter first year. payments had we'll flatten in of No. our out the over over year. the We balance the We improvement will with associated some the start of payables, the so to think some

And so, some improvement. slight we'll see

Bret Jordan

your that national of this calling a you towards then maybe accounts you national to going How then commercial. us RFP did fact one the I investment question pricing be percent And And you. as like from as what that I that could you first an obviously, color in would obviously, commercial price big is think RFPs do to out quarter of accounts? your we phase away on give business that some opposed Okay. some given of mean, a way? that you're took with the maybe that lower think reconcile business

Tom Greco

obviously, you we at look know. the Well, Sure. Bret, within as different Pro, channels

So We mentioned our get just believe very see we'll half our XXXX, our general, our but -- don't of are see we reasons. improvement of the exactly strategic we break variety the the accounts base across back into as in direct majors are, us. how big we'll on RFP there important a account to you national to out for question

far the so has progress down about. Most we've pleased of made come which and up I'm the street,

to secure more down up field we're our increase our to business, the jobs, and of highly got the So is continue execution drive on and street team in still our field playbook. going a pretty share wallet, driving focused

to of make progress our availability wallet. improve share going units, sustain going we CPI. to and on that, and with drive expect And to we're We're transactions,

So as Pro, back the strategic side the we also get the up expect on progress we and improvement on half a down and into continued street.

Bret Jordan

on guess, I fact -- payables and tied cash, bit fund the part A in store and your opening is probably your of given free lower that you the capital, to that or question, flow. guide, at confidence free guess, that puts of working a expense? Okay. we're CapEx cash cash the takes first to guidance I more have look

Jeff Shepherd

number our you'll openings all took expenditures. estimate capital we new store that, Yes, reduced reduce did the look a of see of comprehensive we We've year. this for at planned and

all throughout the going that to been has and to that So continue of year. assess contemplated, we're

Bret Jordan

Okay, you. great. Thank

Operator

your from Greg ahead. from Evercore Please ISI. open. is Melich line comes question Greg, next The go

Greg Melich

inflation, single then cadence more of little rest in and expectation that? a mid-single, low Pro? bit Thanks. the it to sounds both the first It year, what of was for what's just it maybe in I the your wanted and the digit, was on like quantify DIY quarter

Tom Greco

talking about about Or talking - Greg? costs, you You're are

Greg Melich

top line. [indiscernible]

Tom Greco

I Yes. Top yes. that's what line, thought,

and it single we how Pro in. it, average mid-single where DIY we on on the terms so low which of well Pro, of digits yes, saw that's was number in So digits we saw ticket below planned kind came

Greg Melich

go should cadence we the to the rest guidance, then expect the near low flat? that And all to the of single or year, digits for

Jeff Shepherd

near flat. be would Guidance

Tom Greco

of that's anticipating we're the the of in similar making mean, guidance I revision balance Yes. is Pro year, that. the our environment and single why is that the biggest we're driver competitive for

Greg Melich

it. Got

just you're now, I to primary to back be? are back some still back you and way a get is still And X% share. inventory the do back up wants Okay. Is need inventory Or then -- we I inventory follow-up that fill key year-on-year? have to guess, is, know bringing was where Is get it investment? rates

Jeff Shepherd

make in inventory Well, think completed. or completed will investments -- that there. largely we've second bit will the investment we we we more quarter We're largely we got believe to working little think be and a point, have that capital at the we need be

Greg Melich

the how on it. trending? were $XX color just terms you color inflation. then drivers Got in just you a of, you a on us SG&A had more follow-up And know there my other they're little the -- give was those Could the last you I said million, wage little and more up but

Jeff Shepherd

Yes, difficult was so line leverage pretty digits, wage inflation that's the couple biggest again, and top factor, the with there. to that mid-single get

we're moving We see newly stores, costs. where deleverage did phases of last our preopening year's also these opened through in

Now we're sort we get so the preopening costs but we moving stores, we're as open the we where there drivers. build shifting were seeing offset deleverage. those revenue, of was year, that by had deleverage that, it's last big That and still natural into

Greg Melich

and Thanks, luck. it. good Got

Tom Greco

Greg. Thanks,

Operator

comes question next ahead. Please line your from Scot is Truist. The open. go Ciccarelli from Scot,

Scot Ciccarelli

A the balance follow-up Good morning, sheet. on guys. question

performance So I being their the industry you timing issues, some sensitive this customers. vendors but were of know very there for to known in mentioned well are

would or the I had more And bit improve you differences, little a are suggested. ratio are maybe than think different than would terms than some terms your goods? vendors Because AP we just so, starting what branded to is, payment I guess, private the shorter change on guess question your timing I of if or goods

Jeff Shepherd

and anticipated are Really, half to that. timings coming significant in Well, investments the in the we first due we associated changes in the started the back any with there haven't largely terms. those the and invoices quarter, make of been year,

even I the of significant balance in surprise on. we'll as over see to goes ratio it improvement the will us. a and the wasn't year, the And said, AP as out year it So

Scot Ciccarelli

is you to increase expect to AP continue is the inventory on go to increase would if going So than more whatever still happening inventory side? up then

Jeff Shepherd

we and also way to AP Yes. inventory, Well, ratio, that's that yes, help about that think sell start ideally, our it. the through will but to --

Scot Ciccarelli

Understood. Thank you.

Jeff Shepherd

Thanks.

Operator

from question comes Please Steven from next is Forbes Guggenheim Steven, go line Partners. The your open. ahead.

Steven Forbes

Good on a morning. Maybe quick comment. to start follow-up just a prior with

As can second you most you're aware comp expect margin in profile on you EBIT so what's I should think that is be mentioned the quarter, you expand deleverage that the on as just margin it something compares? the of in driving Or there well? that? we cycling Is

Jeff Shepherd

the Yes. half as availability it's wanted is the that. that then we with second I terms the than the availability compared of to And inflation so once we get where more first mean, moderate part half in quarter. sales really that finishing just in of expect half, in in more improvement we're to back in the than up it back dealing we

Steven Forbes

any against business or capital profile supply the impacted in investment that for about the of agenda back Day, progressing any way? then timeline such exhibit, changes has And in just that of quick can just we we're and think forth, follow-up. timeline chain the sort a transformation these talk timeline so you If to the expenditure of the Analyst expansion whether margin or transformation if

Tom Greco

biggest is competitive thing in Sure. lot has and Pro. we the changed presentation, since the environment a made Well, first all, the of day that

Professional vitally largest momentum And company. important in It's that's so, to business. is for our our objective business, our regain the

We've be front the bar going We're We line the pricing foot back where to execution. are availability. and our on getting on top the raising in on got we our to improve on Pro. need to be

we all it are a execute margin to the initiatives So that relative laid and with, going that discussed of to dealing is directly. This dynamic we're out. to we expansion address we there, what continuing new we're

Steven Forbes

of Best you. Thank luck.

Tom Greco

you. Thank

Operator

question line open. next go [Henry comes Henry, from is Please The Coffey] UBS. ahead. from your

Michael Lasser

the you This UBS. Thanks well everything years many question. started needed is so is catalyzed flow And morning. yet, Why seem taking to like that you're internally transformation does a between Michael Tom, now? happening back into taking cash CapEx. ago. that's from Lasser much or it so it Is externally free Good is my guidance, the more you cut step all margins, this generation, something catalyzed? cut for

Tom Greco

Yes.

last I question, to think it's the similar Mike.

think it the dynamic changed on has I I is external. the obviously, mean, side. Pro

years that, for say ongoing and comment. would that's been last that's anyway, You probably a X.X fair here the

addressing that competitive dynamic. We are

I Advance. got think, We've We faced here the resilient a the before, both strong field. we've I've a corporate and great in at team team, very built and office overcome. in adversity

And I our we address to front customers. now, no got that But regaining the share us improvement today. we'll we've face that's of overcome in operational of challenges have and driving doubt right with what's and about Pro wallet

of against will are timelines we've to the execute that the we we part Now things improve to discussed. going that continue were believe continue to our transformation that business

Michael Lasser

the Advance Pro your Worldpac to way a a address you the for Carquest in how quarter? is as challenges question, business the across seeing as legacy Maybe sense you can and both well businesses, are Tom, Worldpac? in give us And that performed

Tom Greco

perform so Worldpac I continue well the to Worldpac. Yes, Worldpac is terrific, very on multiyear at doing mean, stacks we fine. look

isolated Pro business. on challenges the largely Pro Advance Our to are

Michael Lasser

Thank and very much, you good luck.

Tom Greco

Thank you.

Operator

Griffin Raymond James. question from from line go ahead. next Please The Bobby, comes your is Bobby open.

Mitch Ingles

and Hi, everyone. is order in and the challenging competitive rebuild This have option, the in to on passing is for first My do actions strategies if be margin implement the Ingles you gross or your to Mitch is, business? to price through need segment an continues Pro not question what in improve Pro or Bobby. landscape increases

Tom Greco

process. our the morning. good It's category bit management Yes, in -- script we talked a about little about

and looking our category, are the I mutually I be collaboratively all opportunity. pretty remains that both single I from it, comprehensive work opportunity driver. supplier with mean, biggest a an things that proceeds that management important but it's of It the Supply involves that's really profit. chain us biggest of benefit think will space, of part have. sales drive sourcing partners category we're to think would the single at shelf we and where essentially that

is Officer getting his further team. really Chain as Supply Chief new still momentum well. opportunities there There'll be Our with good

Mitch Ingles

you. elaborate subject, about led Thanks, to it. the quarter consolidation forward? headwinds chain And can the on in you what opportunities there? updates on the previously that are And going Got mentioned And on so what last some you the in chain, mitigate taken deleverage? any to steps supply Tom. the Thank of supply the that call were these

Jeff Shepherd

Yes. I that the point for saw mean, the labor inflation in centers. primary was the wage we distribution our deleverage

a there get up we to DCs iterative We of number And that, newer an it get It's its there, also once of number a up capacity, but much had our stores. of ones. the as of are get them we lower so to bit distribution a It online. until we'll bring two you slate those does starts the it process centers get works capacity. better as full some naturally stores improvement serving leverage big at where deleverage a full we'll

consolidation of I'll And to the question. on part the over turn it Tom

Tom Greco

Yes.

superior So what assets of that our a and the we to experience. entirety enterprise for talked provide about is leverage customer Pro is really vision our long-term

our we mix we're DIY the in variations know, margins margins, results might which testing lower the the headwind, of you so pro leverage how are entirety of As enterprise better assets. than natural channel

growth that there. goal in ,while to last our the And the it, to accelerate margins reduce see be expanding about superior more Toronto we we optimize work There's opportunity. simple, Pro there's up inventory, there. come and as customer good experience, We're potential but there, progress believe end-state to call. to so pretty and seeing an talked We is potentially done still go further

Operator

ahead. is from from next line go Seth Sigman question Barclays. Seth, open. The comes your Please

Seth Sigman

good everybody. Hi, morning,

today still question a seem versus gap productivity, I is like to there It my think higher mainly your investing issue. more of So professional a of drive the issue message investments. peers, is biggest sales that's think which a on and I both is does and retail

into still So thinking those could just that to labor, And price, potentially beyond the extend you investments, investment lean other cetera? store about are question from into areas is really incrementally there year? next perspective investments need an et may

Tom Greco

higher our That's significantly obviously that. and their -- right. is And you're Seth. question, availability. talking in I we so inventory we're ownership that, have substantial customer. frontline our biggest so one through our But made. already that big throughput Good field we we've peers that's the difference and get program, the a investment more we've Yes. an single about closer already making parts stock we're in absolutely to sure between made believe making ourselves boxes, investments people mean, of They beyond

for We're ways which drive our to business, look has been going successful. continue to very to e-commerce

our relative business DIY, of performance back got there, store. Pro with our We've get actually and to terms sales performance. profit share there within this we'll of to to it and from needs we're store where obviously, our obviously, And and In per business be. wallet Pro our really per drive pleased

Seth Sigman

your today? some of And you price I follow of how just then the us you. maybe has pricing think service, stock Can what those what years, to the then scope improvements, combined you're And to I you. big prices the the changes? about. the in perhaps changes? to stepping talked performance, you your which on off assortment, frame up understand but the confidence last been sharpened with right, if Thank the the thank changes that of relative at also gives have Okay, in availability, looking that's you confidence investments gives been back, other But ultimately, how gap of depth and help you've two over about the you today guess, make the specifically. some competitors making, of peers already percent the

Tom Greco

We many good back-to-basics in we've competitive of continue of approach our just there, of been is availability, of a we've kind we're what Yes, really to on our our with do a sure on and which talking price about improving taking. many execution. categories making bar seen our are the to call, actions the progress raising and got the stores indices

we just that we're where strong have replicate place So further really, chain. performance, really need and to that the seeing at, across we in

Seth Sigman

the of just you of changes, how the changing? maybe Can you're the looking assortment actually help us scope much with at

Tom Greco

rates not on-hand the our rates. we're we're Well, right? call increasing mean, changing availability, I and We're what assortment improving we assortment. our

into the so designed composition see is we the XX,XXX and significant in go back improving do what want we Parts assortment And of we're that, SKUs back what the store, the to in we in store, in quality So sales. improvement Auto room. a do when an room, our

the you that's by thing driver. need two this from on investments X we sure be of from hear to in we've competitive us, I in we're availability, business, And where so others, of years, over all making mentioned with as last in that year you our most so category. is had price replicate to the happened essentially mean, the the line course, investment important that number of terms that

Operator

Zach, from question Wells Please Zach next line is Fadem open. Fargo. go ahead. The from comes your

Zach Fadem

the the improvement structural thus believe what to to then morning. Tom, having talk drives to structural differences can up comparing just business, the good may versus if the the that on and following higher difference? gap could an you the commercial And your investment? your throughput for or narrow you having be that lower Hi, looking need impact a at extent execution specifically question, last curious peers, curious infrastructure you

Tom Greco

Yes. infrastructure-wise, to we I mean, need the different business, put mean, Pro compete. We've the can all have have I our business. got, of I we've It large got we a large the have we Parts that that given think assets fully we those. integrated. is business. peers, We Worldpac over than obviously, we in, Advance buildings Auto which have of XXX the is

the and enterprise area. much for a assets in improvement of that entirety room better the leveraging So we're still job there's doing

we forward. that continue on the Pro house we the relationships next outsized leverage has strategic of making Cushing are so our that of are we're sales make several we're with sure execution, the continue years, of with terms to to grow Pro the going building terrific the relationships of out to have going that number drive customers. account over that In calls need to with we side we make there. large to to the accounts growth managers rates things our that Bob We're have at a going lot can

Zach Fadem

then, And it. Got Jeff, a two-part question for you.

up QX versus give tracking understand corporate of margin SG&A? help impact doing you And that and magnitude in us the on in one, where on and savings respect the First year? with you there second, any you're for the rest then commentary, expected QX maybe cost gross restructuring QX is today and can to comps guidepost following you mentioned Can QX. the then a productivity us

Jeff Shepherd

relatively Yes, quarter I'll was start with the in so millions, second was one cost first. investment. low. was single-digit not low It a significant it the The

factored the savings out and into something guidance. We we in -- year, the revised the that easily it is It's we of balance haven't but quite sizable, we broken track. the can

And so measuring up we're far, against expectations. our

that feel So good. standpoint, from we pretty

of be second terms to and gross SG&A, a SG&A, In but second the significant margin more will we it it expect than quarter, deleverage margin probably in be in expect quarter. fairly deleverage in do again, gross we both

Zach Fadem

Got you. Appreciate the color guys.

Operator

David go David, The Partners. next question from comes Please Capital Bellinger open. Roth your line from ahead. is

David Bellinger

Hi, good for morning. the Thanks question.

recapture that's other the participants past the Going or those further price changes in are made, been some the going Are order you back price largely now DIFM to gaps, below over so? so to closed the even and direct your year market with you've competitors? gaps versus taking lost share of

Tom Greco

where market market. share influence types we it are by that's target be. standpoint, are. a share first we Those where by full is because low the we need at significantly that from year things high market, David, that's Obviously, we than we general, to price need Well, had in where we planned guide realization into But where need where is market. we so factored market, what's it we are will look to to so lower we -- of of all, be be. And

David Bellinger

talk suppliers. understand to then of, follow-up I this versus per was breakdown customers Maybe QX that it customer regard believe, sales any a customer the There's been general. period? end around concern us shifting Can quarter. Professional within the spend inflation And average in Okay. comp you certain sales occurred in some losses you can about of a flattish light benefit in the Pro help

Tom Greco

growth The not faced to We customers. is now I where customer, we'd recover. at, per last The wallet is are seeing average opportunity spend challenge we're wallet it higher mean like and we we in of to to want customers. growing per of we're year where like which to are be growing it be. biggest be. it share was want customer, because We average we existing share it's not we that with the It's sales but driving good.

David Bellinger

you, Tom. Thank Got it.

Tom Greco

Thank you.

Operator

go next ahead. Wedbush. is question from line Seth your from The Basham Seth, Please open. is

Seth Basham

My the lot. also morning. question And is good environment. Thanks a around pricing

performance balance sales improved the pricing-wise? of you competitive for year, on the anticipating are any forecast you reaction As

Tom Greco

expect below competitive, different to If so We considered which respond. flat be obviously do very our We've essentially mentioned the well Yes. realization, to Seth. changes Jeff or negative, we scenarios, that the plan. price is positive will it on

Seth Basham

roll give because And of direction still private Understood. around having underperformance? are brand products us brands? in performance label back my of Got you're label label that pockets the the question is private performance. you you're overall it. where follow-up to moving some brand on you having color or some private more You that Can new mentioned for of

Tom Greco

over that of to. several I've Carquest of moved like our a in been with I've last the product the the lot branded we've lot of People weeks. customers. stores contrary, On a met quality

the with have and the are terms improve pleased of The we're manufacturers clearly, quality much to the pleased the that. suppliers very But so those availability continuing we're products. and The So in stores got in we return of we've a product itself. are products, OE rates lower. very rates with assortment chosen winner

Jeff Shepherd

product well. because want to P&L And push a rate, benefit to both just of P&L as to the add it's well. and that, dollars from a own executing it's so in terms We to to benefit in through that we're continue seeing the brand

Seth Basham

Thank you.

Operator

is D.A. Baker please Michael, The ahead. Michael next from go from question Davidson.

line open. Your is

Michael Baker

Okay. Thanks.

any by price in So to think even your price? terms the first what, driven said, everyone the or we're, five into in take, because it needed long it's sounds closer as I reacting how in -- price? be industry quarter, least that see to customers like you really trends improvement that sales within in four, at getting of not your the got where you are if you Or at second typically weeks, Did you did quarter. other particularly guys not, an where, all to does to

Tom Greco

Mike. morning, Good Yes.

are. We

seeing are single in low mid-single to were on fourth the in were on we if digits being responding. earlier, is continue We down customers the -- coming and definitely Our mentioned expect transactions I and down improve. ticket moved come we What's digits that as down. quarter. our is quarter, there, offset We first transactions transactions, the sales average we average to units ticket you with we're that comp drive talk continue and to about down

Michael Baker

And you're share not how it least do so now where like more needs others even with the not back is price, unless -- sounds that respond, still coming intend if to you win so then at be? invest going to pricing any you're in down, it think to you

Tom Greco

transactions. We feel we will and seeing we improvement on are back because are -- on, time units share win as goes we

So as the so rate we're improves, year on. as we there, that improvements assortment our do seeing availability continue will and believe goes

Michael Baker

Okay.

Okay. Fair you. enough. Thank

Operator

Please open. from go from line Oppenheimer. Nagel Brian, comes Brian question The next your ahead. is

Unidentified Analyst

Nagel. you on for [William Thank This taking is for Dawson] Brian question. my

you view. of So underpinnings in sector the the mentioned positive your remained that structural

miles the driven. improving aging fleet, an highlighted You

trends changes view near-term all? demand the to your Just at industry of have in there ask, to wanted any been

Tom Greco

the I demand on I new those, that. over primary know mean, been -- you're pressure improve, still to you drivers last to there's of we said, mean so continuing year. see car as look you underlying seeing if industry written Based X% all the growth this I really. sales. I several weeks things X% or on at Not about still mean

that's this You're X% so to longer growth seeing people good X% the for vehicles industry, keeping been our very we typically year. see

Unidentified Analyst

That's bye. you. Thank helpful. Good

Tom Greco

you. Thank

Operator

back hand no any call I'll for remarks. concluding have Greco further the questions, Tom so We to

Tom Greco

this for again us Well, joining thanks morning.

our execution. that in our August. and increasing executing the overcome We our challenges to We to is do, committed We're at challenging expectations. shared and price future we forward improving QX were field to our and there's sustaining sharing on competitive look work ensure call, outset strategy more below targets of the to well for our success. recent know I Advance focused financial was parts long-term As availability, remain results and positioned

Operator

for you very Thank This call. much concludes your today's attendance.

You may now disconnect your lines.

Advance Auto Parts (AAP) 31 May 232023 Q1 Earnings call transcript