GPC - Earnings call transcript Q4 2020

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Operator

Good day, ladies and gentlemen. Welcome to the Genuine Parts Company Fourth Quarter and Full Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. like Vice the President I’d Sid over time, Senior Jones, of this to conference turn to At Investor Relations. sir. ahead, go Please

Sid Jones

Good newly Chief quarter and and for Genuine you today Vice are conference morning. President today our me appointed Carol And the Chairman Will Yancey, Donahue, for Executive and call. joining With Officer; Parts Officer; full Stengel, Chief and us fourth President. Financial Paul our year Executive XXXX Company thank our

include webcast Company and slide call conference today’s reminder, on Parts a can that Genuine found Investor a be As presentation website. the Relations

Company statements forward-looking The begin advised Today’s issued today’s Accounting Investors website. made this is reconciliation posted of include may from may morning, call our release Company’s reported the release. during several of we differ provided statements could actual any no including Before of measures in businesses. also the important referred Principles. A to in be this involve as please Accepted discussion that this which forward-looking Generally measures financial press materially non-GAAP obligation in be filings, morning, call. morning’s due these our this call earnings may forward-looking The latest described assumes any the results to press Company’s regarding and during Company section is factors the update to which report also SEC certain under this its statements

prior Richards, periods with consistent we’ve presented. for all as S.P. Finally, quarters, for segment, accounted operations Business the two discontinued Products

to Paul Now, for I’ll his over turn the call remarks.

Paul Donahue

call. and safe you well. full quarter Welcome everyone. joining are all us and year today Thank to hope good morning, you you, XXXX conference earnings appreciate fourth and We and staying our Sid,

executed benefit financial COVID-XX. GPC and Our results the to our challenges customer reflect and value, was continued actions, the strong initiatives results. of efficiencies operational despite dynamic deliver team agile conditions The adapting on to of our and fourth strategic ongoing quarter

our have XX,XXX to to commitment grateful which excellence, months. are while their business for unwavering continued to XX associates We conditions, for unprecedented nearly economic responding and

a focus to Our call. January, welcome our operational environment, and safe to Stengel this Will Will we strong talented workforce work further to is now on supporting strengthening culture. promote In President, ensuring we’re and pleased our quarterly

Transformation previous XXXX, As since Will’s as our with talent, helped an cost to savings work tremendous Will initiatives relevant His Chief significant have HD to experience variety business next President. his achieve team. And career Officer of our look a vast units we management make Will excellent and value in skill our and our his XXXX. choice experience in set to added Supply, contributions. leadership Company’s and exceptional proven future strategic forward

both questions. hear then and Will call, from You take Carol in will the and your we’ll later

quarter fourth quarter the to the to for turning of So, results. our $X.X now, Total challenges continued billion, due financial were down X% sales part in COVID-XX.

Asia the grew the in expansion. was While from further quarters. improved quarter. prior and the and XXXX three improved much during relative progressively our of months two Europe gross strong in margin fourth previous of consecutive were XXth stronger the slowed recovery margin, fact, gross of and We quarter sales the to were Automotive America Industrial pace in North final sales Pac, our quarter

In expenses. reduce we year-over-year to addition, took operating successfully our lowering costs, action

permanent our another to cost in $XX we savings temporary quarter, related response and additional million savings realized $XX generated to COVID-XX. the For an in million

the expansion margin. and in segments. margin these and Our in basis-point by areas in Automotive from This supported X.X% XXXX was Industrial fourth operating operating improvement progress XXX total operating increase the an XX% in quarter a margin drove both, profit of

initiatives, to ongoing we drove adjusted cash also per up liquidity debt financing operations earnings and income share quarter sheet, robust balance with billion XX%. million capital from adjusted with ample cash of Our $X.XX, flow the net XXXX. and a strong $X finished $XXX in and Due year operating and performance strong of working in

now consecutive in of fourth profit second margin of was region, sales. well North Pac Group Industrial sales momentum in down Asia Total of revenues and was sales Asia XXXX, by growth Segment sales business were and global comp attributable basis out the year Turning the Automotive XX%. deserves mid-teens exceptional billion, a led Europe XX% were results. X%. By segments. in total of quarter with The represented sales $X.X by and a to from for XX% on quarter increase to sales and Pac were Asia America, their our special Automotive with up Fourth each Pac. driven improvement shout commercial XX% XX% driving operations. our in with Automotive XXX performed all points, quarter in strong retail a continued team X%

Europe Europe, cases to second in results through as UK of for So, COVID in driving improved on that congratulations quarter challenging America, the would Cameron slowed comps down more operations December, through solid overall, sales lockdown November and A despite continued items. in and the In outperform a the flat surge seasonal significantly big to thank led mild team quarter. for Europe well the entire the with We under. conditions you and sales add mobility, sales pressured restrictions and although North activity Automotive of across the weather quarter. Rob gradually our most to

for performance approximately European Europe’s impact second sales were savings Despite operating quarterly America, offset XXX segment operating the our challenging. in a store key These the basis-point the NAPA comp the specialists, team recovery caps active include Through X%. million total sales points. sales decrease, and in XX.X positioning, initiatives program initiatives. XXXX. over margin. sales U.S. our sales our DIY margin X%, improvement declined half sales our stimulus more shifts targeted in generated of declined a driven quarter, initiatives. positive operating the and a by COVID-related retail continued basis-point Automotive than margin while were the the improvement. In XXX behavior to in improved comp This U.S. rewards expectations, pressure, and sales outperform Growth down Canada, customers remained of with DIFM basis our cost consumer strong, to from benefit of team in the stronger produced by operating sales resulting profit promotions and ongoing Additionally, slightly, refreshes, the members, payments, merchandising and and NAPA In North investment sales strong several retail enhanced sales XX

declines build team and strengthening utilizing large suppliers for in more supplier well levels. demand. online improving enhanced category. parts XXXX, positive in fleet as and analytics network, a in across more our continued government by has segment end for number growing we addition, were ensure force NAPA including store relationships, momentum from our global calling In to enabled and our cars pressure programs multiple sales enhancement team XXXX including garages, our sales temperatures as our effectiveness our in our on of professional focused recovery our customers direct-to-customers driven, and shipping the sales mild our down focusing sales several from our to repurposing Pro, from salespeople select pre-pandemic miles slow double omni-channel DIFM capabilities, suppliers AutoCare professional to address ensuring customers our field these initiatives, as on have continued on our maximizing repair availability, professional To and on resources including supply weighed the chain, Auto commercial directly by promotions customers, and doubling of industry-leading inventory volume

focus further supply also initiatives optimizing with and our DC service to to invest gradual our improvement the rollout on and chain build in execute implement BXB and more strategic omni-channel shuttles. brand facilities seeing capabilities, While Australasia. on Europe new increasing and and pricing digital network, global we in will our additional value daily added services, several are to including yet in and of both work there and is search enhance we continue continue done, NAPA consolidation, XXXX, and catalog strategy, BXC finally, automation initiatives, issues, In our be

store These additional are footprint acquisitions, We impact year. to market up with range are supplier and continue positioning see to to to in and January XXXX a expect in for the the more We To pleased daily would were report for add our comp global January. to we strong of in the parts, single automotive customer competitive positive also impact Automotive capture out low changeovers, with Group. in inflation initiatives revenues, our deliver bolt-on double and although we have share. our possibly enhance across FX that Backing full our sales our little we in coming greenfield of up increases in digits new U.S. digits operation. price plans see months to sell value, expand high stores designed that average acquisition and end, start X sales and the to X% sales, global quarters, the more

in improving availability, and business. automotive the North we in gradual America So, and weather the summary, tailwinds Europe, colder for believe are reopening winter economy current of product

us expectations a vehicles due driven and confidence recovery growth aged XX miles to our for In addition, in vehicle years X give in uncertainties in fundamentals, industry increase gradual fleet, ongoing despite favorable growing total the XXXX, to expectation an the COVID-XX. for

a month industrial year. Managers in this discuss to trends in fourth significant overall, the down quarter XX% strongest and down the in the combined initiatives the Comp such from in lower return QX So, with $X.X the North XXXX let’s decrease in and our XX consistent conditions in steady which for segment of Sales growth margin we X% last are recovery since the as the the America. sales decrease profit and sales a the on improvement indicators is our in Total gradual similar resulted saw basis-point last December was sales from sales improvement Industrial with North quarter for were although costs group Group. fourth Australasia Parts and Strengthening the XXXX. billion, industrial economy, in strongest The now, X.X%, the Purchasing global improvement production. showed QX. America half quarterly in X.X% the and drive evident ongoing is Index back quarter of over sales in

trends most all industries improved month-to-month that sales serve. December In key positive addition, product the categories among growth achieved sales virtually in we with

We on these XXXX. expect to favorable trends build in

presence; the initiatives business and omnichannel organic to the business, on margin market enhancing areas forward deliver These and execute include in offering, XXth profitable value Industrial automation; global growing to product while further conveyance and strategies disciplined operational a growth; effectiveness our that productivity value. to rationalization into which drive to solutions excellent as initiatives our excellence, facility optimize pricing Motion website the footprint expand ongoing and repair, in service. team offering enhanced globally; our productivity Motion’s and and services service management As we move sales to network, M&A year customer to strategic deliver improve to and optimizing improve product our capabilities the expertise ensure sales and lower distribution and our products our customer cost, expanding and category the our growth, continue drive will global brand Motion boost of evolves such is and automation building e-commerce sales; XXXX, global out accelerate

on confident are focus our competitive to full optimize markets these key our We industrial the initiatives capacity. positioning will recover as that

We releases on months XXXX, in our and for of were positive are most orders quarters ahead. is see which project activity that throughout a the capital to plant encouraged greater sign of hold

strong, that our our despite items, expected pleased supplier in service to we are extended good meet are position lead are select and times levels demand. growing addition, inventories on In

expect currently in we compares another suppliers, X% which our inflation Finally, to reasonable XXXX. inflation price X% X% to year of of just under from

experienced fourth XXXX sales of the Industrial reported is For to the X% third we momentum a work entire and and sales This the better positive January, than sales additional daily in testament trends is average perspective, month. team. the the great up with by in for done we quarter

to a despite ongoing confident the economy plans and challenges in So, segment are impact our for of the and strong global our look XXXX. markets, uncertain we on Industrial the COVID-XX its forward and

conclude which providing GPC, initiatives. innovate on communities At by in So, embrace environment, ways that our associates we ESG benefit our our to let and in also an operate. we me our update responsibility the

XXXX practices, diversity inclusion ESG management, our including human sustainability are in capital Our report. and discussed corporate and

well adopted Directors of human to the in policy, in expectation rights Board that location communicates and we also as Company’s commitment partners suppliers, our formal which human addition, affiliates every as upholding operate our a In respect rights. human which rights our

more website you Companywide our our GPC about view to integral and strategy. to to corporate Our commitment these documents sustainability our growth learn We is ESG to visit invite initiatives.

So, for I’ll Will it turn with Will? over remarks. to that, his

Will Stengel

Thank you, Paul. everyone. Good morning,

on be an history their want a of Company. I’m Board thank incredibly Company that and it’s Paul GPC vote has be of success, to an to leadership proud The of part and First, to Parts like I’d the honor the say Genuine I impressive to team. for confidence.

in GPC initiatives, Paul joined as HD XXXX I Previously, where held positions My of an Supply, capital win. leverage, portfolio, Company Genuine scale enjoy operating allocation fragmented other markets capital the including conversion, model well attractive allocation the various fits cash businesses late growth, strong Each Facilities I businesses CEO to As within of distribution-related strategy at I’m about of value and Maintenance, as with Parts our GPC’s important of mentioned, are the Transformation in consistent disciplined strategy. excited profitable positions and drivers, President experience executive potential roles. key Chief the GPC business dividend time and capabilities with HD and all strategic and and leadership Company. Officer. operating future with Supply leadership especially part

that accelerated leading work based have The define customer and serves our business navigated ability we and results. reliable of as deliver foundation. and on over and momentum to to pandemic demonstrated the and the as years set relationships, areas. the an a built simplify focus important further global and unique critical quickly And well taken as actions core culture executed global is act XXXX common teams we purpose We transformation an recent brands in value-added values service Strategic based on expertise. our clear longstanding

within businesses deployment built want working looking new forward Our provided our to year, our and my where driving I and we initiatives areas investments growth, align talent look and In in actions our as these as a suppliers. execute XXXX. role, team. capital forward our areas resilient unprecedented and enter profitable team simplification strategic organic through develop productivity increase also for Paul we a we the operations and integration, focus, resources diverse to spending clarity and and as leadership solid challenging build and and customers including to capabilities. operating to our disciplined I’m with momentum in and Despite to proved global value with time deliver focus strategic

In roadmap. and continue refine further addition, we’ll our advance strategic to longer term

emerging present trends potential for that numerous new We’re excited about technologies opportunities the and GPC. could

priorities and it feel leadership Thank to I to look we As well-positioned you. we And benefit working with the Carol the of future, to turn look now stakeholders, all strategic team execute forward for her our our to to comments. results. the to I’ll drive

Carol Yancey

you, Thank Will.

income. reminder, As and inventory, continuing a operations, costs results our and morning adjusted focus primarily from excludes transaction which comments restructuring, other on this

information We XXXX. down financial a were will from sales for XXXX. our with our outlook year fourth and begin full in quarter, then $X.X key review GPC Total the billion provide of X.X%

$XX.X were down down divestitures. full For or year, sales the billion, X.X%, excluding X.X%

improvement compared a the last Our basis-point XX year. adjusted to the XX%, fourth quarter quarter XX.X% for was margin gross in

to basis from improved XX.X% XXXX. full the adjusted XXX margin year, XX.X% points gross in For

has been quarter improved initiatives, number the year margin-enhancing and gross on Company. fourth team quarter XXth full gains focused represent for and consecutive of Xth Our the the consecutive and of year the margin a

operations, Our steady gross in mix shifts progress higher positive and global impact strategic factors, favorable analytics, and shifts, management strategic gross including of margin and expanding advantages mix reflect quarter a to in variety tools year the category the pricing sales initiatives. of the sourcing margin product

also results a in nine impacted addition, gross positive would our environment and inflation offset lower add these was supplier of fourth from XXXX In margins. partially through in and were divestitures, the year full months. acquisitions incentives and the decrease volumes. we assess impact sales purchasing benefited the by margin minimal factors finally, We our as the there price quarter in overall, due pricing And to gross which

As in see the this Paul not plays point any but we’ll to we year. earlier, how in XXXX, mentioned impact inflation out have of had this

billion fourth of and year. sales XX.X% administrative X.X% last down from and year selling, adjusted representing $X.X Our expenses in were other XX.X% compared to quarter, the last

compared sales to the XX.X% cost year and quarter throughout these expenses as XXXX, and the actions For $X.X XXXX. to full discussed. The permanent operating the in of decrease fourth X.X% for year reflect last down billion, expenses favorable of COVID-related impact in year, XX% previously compared our were implemented and

our call, third $XXX mentioned conference schedule. quarter annual we the on As ahead $XXX our accordance in of plan, XXXX with cost savings successfully million achieved million target

fourth savings in report in $XXX to in We million million the incremental and an permanent XXXX. recognized reductions are pleased expense for quarter $XX

impact the fourth savings In initiatives Combined, million in in year. execute the costs, $XX by the government additional to reduced temporary addition, full These cost the as of $XXX during our and COVID-XX. total to approximately and number $XXX travel in continued payroll in approximately savings other contributed COVID. to quarter savings of full million initiatives and facility million subsidies approximately on $XX driven quarter initiatives response reductions a million fourth and response the team we entertainment, furloughs, of savings generated for from year, for transformative in well as temporary and

We expect our operating to and performance. savings our over structure XXXX, cost our to permanent expenses continue improve into manage and further we’ll cost carry to

down total last quarter, fourth XX represents points billion down for from expenses XX.X% adjusted basis operating the year. an non-operating from X.X% XX.X% Our in were $X.X This of and sales, XXXX.

billion, expenses these sales. year, an prior down adjusted from full X% of and XX.X% year the $X.X the were For representing

Our our margin was X% strong million, to in compared up of for last was year XX% and profit the sales basis total X.X% a increase X.X% $XXX on points. profit quarter segment a segment fourth XXX decrease,

expense our billion, segment expense interest fourth full in XXXX, XXXX, net of million profit is the for This was $X.X $XX X% profit was net profit year. margin and X.X% to The rates from which debt million, our since $XX margin which compared was to from In line these prior to currently in in compared million $XX related as For for X.X% $XXX we year and essentially net the the quarter, interest for the We expense in represents lower $XX the corporate XXXX, expect down new agreements million is expect due interest year, strongest quarter, full the in debt XXXX. well fourth million was of fourth up had down $XXX year, We in quarter, XXXX $XX segment levels. be the from in to lower our range expectation expenses as interest the flat our million, segment negotiated XXXX. corporate million to and were to again XXXX, XXXX. $XX million.

tax period. the quarter increase year in for adjusted the Our XX.X%, fourth an prior rate was XX.X% from

year, the For XX.X% was tax and line our in with XXXX. rate adjusted

from are year full We increase. operations $X.XX XXXX $XXX continuing compares for share to XXXX $XXX with range to quarter income which XX.X% net of $X.XX. Adjusted $XXX rate per or XX% for XX.X%. the was million share, in million a a tax per planning $X.XX of income or net earnings per or million share Fourth in was

the share, year, million $XXX $XXX full or adjusted share. income For per reported per net $X.XX was $X.XX income net was million and or

results our now, So, segment. discuss fourth let’s by quarter

year. to profit of results Automotive basis-point XXXX. up fourth and was so our the a of Automotive X% look job for $X.X fourth at $XXX the margin revenue excellent quarter continued XXXX. team, compared progress operating each businesses of X.X% quarter consecutive across X.X% Automotive driven in we quarter, of with increase our to improved second Our billion, the margin operating The in XXX by forward by an up in profit for XX%, Segment the million was from was prior margin

Industrial, the and Our the quarter. significantly from profit up from XXXX Australasian XXXX. ago, for last The gains operating Industrial margin and X.X% profit billion in and industrial strong reflects the quarter, results compared which in X% Segment for points Industrial up a year was businesses declines million improved margin QX year. X.X% sales decrease to second both, North for quarter, from third expect to second and XX $XXX was were basis sales improved in consecutive we the $X.X our X.X% of in American of continue a so to the

So, to the now, our sheet. I will balance comments turn

quarter, receivable, in receivable $XXX closely an to accounts receivables capital payable accounts in position. manage sold million fourth the accounts We improve our inventory for and working continue million agreement. under sold of sales we In XXXX our a $XXX to total

Our XX% XXXX, of total from pleased the accounts down is and with receivable remain quality we our receivables.

XX, XXXX, in our December accounts to XXX% XXXX ratio XXXX. the from increased was inventory inventory year Our XXX% X% payable from up in AP improving X%, and to at prior

operations, We these million are in of chain. is $XXX debt team the was fourth pleased a cash the is from of key total And from working billion total revenues. our $X.X were XX, our making million capital XXXX, XXXX, $X.X We to our repaid in of at of source with debt progress X% in strengthen accounts or the our supply quarter, $XXX down December billion and and XX% XXXX.

$X.X in in debt other and During XXXX, million cash which a quarter, and improved new Through liquidity, robust billion in billion $X position further generated from credit We from the year in the debt favorable XXXX. capacity which billion we efforts revolving agreement $XXX for these from credit provided that up and operations $X.X in is areas, rates. with at public December new fourth we our available XX, expanded a closed with more is up XXXX. our

XXXX. billion, Our increase from free an flow in cash $X.X million $XXX was

our believe cash, we scaled early conserve priorities for for While which back committed were selectively we plans capital cash very we XXXX COVID-XX, serves maximize several deployment to in of shareholder near-term to to value. April through key

share repurchases M&A, the priorities key capital businesses the and in reinvestment our via Our include dividend. expenditures,

capital in $XXX and million CapEx million deployed essential reduced in over years. XX% areas we XXXX. four XXXX, was by which expenditures, these plan $XXX capital the original million $X.X invested In billion in $XXX in from have last across We our down

to and $XXX reinvestments range million for in total the for more expect in are we XXXX, our planning businesses $XXX capital year. For million levels of normal resume of the expenditures our to

activity important used our In to additional segments. XXXX, strategy. M&A We to also on in expect to small cash of back pulled global make in and growth bolt-on strategic although strategic our businesses. acquisitions acquisitions remain XXXX, And million complement several component long-term $XX in Industrial an acquire Automotive XXXX, we we

considered representing of reminder, since increase this dividend the This these million our XXXX, XXXX. for our every a a repurchases XXth amid XXXX any to of The Earlier represents has in cash stock shareholders per share our approved in paid future not pandemic. per XXXX, acquisitions consecutive have public repurchased to outlook. going annual paid our our Company annual a a increase in week, dividend. share In Board in suspending the $X.XX year we $X.XX share shares we the As X% from X.X dividend prior common XXXX.

December of additional to XX.X As repurchases million again up expect we XXXX. repurchase were and XXXX, in we XX, additional opportunistic to shares, authorized to make share

guidance, considered outlook. practice In full guidance. our at and are performance, factors, outlook we for year we plans providing of to global economic recent our reinstating year our growth and the current past arriving several XXXX initiatives, trends strategic XXXX, business full Turning our including

In addition, results. of and potential continued its on COVID-XX our consider impact the we uncertainty

the plus benefit of the plus of relatively X% comp segment, X% we X% an sales rates to to we growth, future These sales total sales to for foreign sales of to X% these By plus plus any X% growth comp for segment, of before, to increase unannounced exclude X% for business, plus growth total currency impact inflation expect as mentioned plus Automotive including a assume total factors in price Industrial minimal the With acquisitions. XXXX plus plus to from the X%. translation, increase a plus be range including plus mind, and in to in sales neutral and guiding are X%. X% X%

XXXX. targeted exceed earnings into diluted share share X% per earnings the compared results and plans represents diluted a forward side, currently the in This deliver adjusted value. to move X% in to XXXX, initiatives earnings expect $X.XX. strategic meet and be confident to to On in increase range of to or per our We we our these $X.XX

believe favorable In fundamentals Automotive to long-term sustained with and are will for that underlying global industry our growth continue Industrial addition, we segments the provide and opportunities. us

So, to in update, it back our improvement now and Thank to And you. reporting I’ll further Paul. financial we XXXX. look financial over on forward our performance that’s throughout turn

Paul Donahue

Thank you, Carol.

Industrial want focused the best. the businesses. global entered and We each year the their customers for the performance. strategic serving are financial growth strong We at thank the dedication to strong portfolio GPC a team Looking agile more cost year, and to stronger, proved back and on our we in actions. commitment presented COVID-XX a on of Automotive XXXX of focus initiatives and proud Automotive The the and and Company, pandemic. continued Industrial the closed executing optimized continued with team for meeting support, members on their our business by team as quarter challenges being our We and our operations GPC streamlined resilient with more a

generate We are strong to strategic plan drive well a flow balance and and value. shareholder stronger positioned growth, sheet with capture profitable cash

global sales and automotive growth improvements. operational recovery off to with year to solid and industrial ongoing We start the are a

of the With from pandemic look COVID-XX a continued and vaccines, rollout a global we the recovery to strengthening forward economy.

these reasons, we GPC move progress For the is all team forward look XXXX. year. the on our about through And reporting to excited we as

in Genuine questions. with your Company. interest back that, thank to your for turn the you Parts operator it for And So, we’ll

Operator

Jefferies. Jordan Thank Instructions] first the line you. from with comes Bret of question Our [Operator

Bret Jordan

up. as versus at U.S. sounded could performance it December I the commentary. quite bit independents guess, think, Hey. you quarter? the you the or stores look in flattish I Company-owned regional NAPA And about talk NAPA When Good It as on clear wasn’t fourth trends, morning, ended guys. little a ended if as December well

Paul Donahue

And, me to independents. the with versus Company so, let do Happy store start Bret. our

reversed independents in the quarter. in already other month-to-month, That’ll flip direction that outperformed slightly We’ve our the Company Our stores January. in seen quarter-to-quarter.

of So, our West. performance is news We seeing. the really consistent Western job been big with was no that and division in we real saw the we’ve kind there. doing. group out proud I’m saw what Regionality, good quarter really of what

quarter. was all Mountain, Mountain little as question in as December to they U.S. of the they saw the cadence year, Montana, Colorado, stretch about And a solid that assuming Our Northeast the just the some We we the In have Texas. Bret, We had I’m started a down okay. relation specifically, well. softness Automotive, softness in and the out to FYI, Bret? way saw question team, all the And quarter quarter your around from Southeast.

Bret Jordan

U.S. was That Yes.

Paul Donahue

saw Yes. and October softness September. pretty softness December as then in started -- out December, in okay, we line We much with saw well. in

first I weather December we warmer a December plus the U.S. resurgence more related some is were And bit especially in up Bret. tough if we of comps. a against than year pretty months big November, in little going you We COVID a bit bit remember, had think ago, a unique, little probably a the -- couple were saw of XXXX. a to

as And we’re well. we strong DIY December But to bouncing for and and impacted commercial rebound here really certainly January, really both NAPA carrying well. look, in good team the that that’s business pleased as a DIFM, is, the us into January. back February a in So, which is had news, Bret, see

Bret Jordan

constraints a the chain. been maybe It there. could should winter, great. this like be to there? mean, any couple on I batteries at? anything if we where mean, supply levels Okay, supply as And were sounded category standout looking is be are great some there a there out call sounds categories Is saying you categories have maybe is I there of question better. stock but it

Paul Donahue

hit the first one, Well, you Bret.

see going our And But have expect this weather, greater heard did has even surge business. have in cold a business. I to -- I We challenge. Europe. to battery that elsewhere. our we’re we’re had a we And think supply Pleased in in seeing been year not and a battery with good you’ve that say,

strong We a across the launched have battery Europe. business. actually We battery just NAPA

labor good look, of business. other shortages are across a over the really shortages that of We couple business have Europe There’s in suppliers And guys be we’re good care raw to call our us. impacting due seeing us But, these of battling out. that battery taking And some COVID, materials. there. the suppliers are would

improvement they challenges, and into see understand hoping we I roll their we’re as ‘XX. to got here So,

Bret Jordan

just I as you sounded the U.S. It January? into bit a third quarter. a the follow-up fourth little both Europe had sequentially if bit and quick said you Europe could But, how trends you saw Europe and there roll on from your little And softened guess, are talk the a maybe comment. through quarter

Paul Donahue

Yes.

Europe, So, out really they started strong.

reversal in As quarter, up a know, third swing October October. due in had as And to they great COVID. mid-double-digit from double-digit down good saw had digits Bret. a They Europe locked you single November, we high We October. increase, big a a were

bounced that saw So, a North we and saw the America, third news, was wind wave bit mid-single-digit. back December sales. a in strong we our our come just November. knocked rebound good again, the team from of much like that January, of European through out kind up But nice softer and

out I more our of So, really, going would we’re really got again, Bret, be of I pretty with They some call couldn’t a our a had severe But, proud encouraged. year, And the team. good UK strong team. of despite UK lockdowns year. the on during course we AAG. things lot

Operator

from Our comes Horvers with next question of Morgan. JP the Chris line

Chris Horvers

a First question. follow-up all, of

year-to-date in far about better. January that talked the U.S., So, do-it-for-me, turn as February? positive the pro mentioned, you getting business Did in the so you and

Paul Donahue

as struggled municipalities, our commercial in weather had see sides pleased where But, XXXX, industry. positive government with our to fleet, saw bit the reopening month most. it and turn saw heavy there the we the a And the of business in resurgence -- a in double-digit It’s DIFM economies in the our to business And out vaccines ‘XX some of think January. most is bit bit and seeing both I of that compared that hopeful, Yes, a like business. in commercial very, really January, again, We the we’ll and the little business. commercial driven, Chris, business in unique Yes. of in miles getting strong, but a we’re was see along did our was with this of -- and on a very some of I’m increase lift we We it in Chris. counter, most DIY absolutely. DIY, we

Chris Horvers

in any strain outlook business, are some think the you following you thinking there’s in on And ‘XX? are there, they about as been then, businesses? how and those that? you the improvement thinking Obviously, sequential governments. seeing negative. about fleet you Presumably, up colleges And, And remain about how are

Paul Donahue

woods any do to a seeing we But, indicator, we’re good Well, the in and think we to business a we’ll in shoots, the pleased stretch, by a solid green overall see in we there’s upheaval January. Look, of ways fleet real that is to improvement see not are out relation COVID. January caused go. ‘XX. And Chris. By are certainly

Chris Horvers

and or did on think, Yes, X% the business I if X% stimulus-driven, X% XXXX. And X% comps then, you’re X% guiding, comps January, in in XXXX, -- it in up understood. to that you business, in Industrial that’s not X% to and down you’re

you’re why that is in So, given expect higher sales that you that COVID? be conservative that provides is the of seeing you’re there just segment, same-store there caution -- something or unknown wouldn’t trying to

Paul Donahue

is a of for that a Chris, those We recovery good in a into seen prospects really Industrial straight look, of few built numbers. there little now Well, months PMI. We’ve feel generally ‘XX. in a trail We metric certainly bit strong months. business by the about eight our conservatism

woods. positive Especially down that we that post QX, when not then So, we’re look Chris, XXXX, X yes, QX, we feel again, of you the conservatism back QX, XX; down and you down to, good. a of January. referred out But, and were at kind X;

shut those We’re plants. raw OE number in of some automotive do business plants still of down seen big We’ve material the the shut couple seeing a weeks. just with shortages. down We to a last

oil Southwest and We’re still pressured gas. with the in

side. we also there but Industrial So, headwinds a feel seeing still yes, we’re -- on the we’re good, just out few

Chris Horvers

Got And against? have and given going well savings lap that how in about Carol, to it. you rate then, SG&A, as big you’re number about gross margin did last question cost you is, talk you’re as COVID XXXX a can thinking

Carol Yancey

to. happy Yes,

with and area. the gross margin we’ve as in far look, pleased As what the margin, team, done we couldn’t gross be more

and you from saw We the impact anniversaried and divestitures. acquisitions have, finally we

So, may initiatives not mix been, continued margin Will our to on make that gross back look certainly, at $XXX as we a and about but roll I’ll and out XXXX. really see global right. in importantly When area and to ahead the be have you our for to gross of sourcing. our it’s continued SG&A, And, savings, core comments expect the then, we’re some we’ve our you’re outlook back talk what to We strategic let before maybe then come but level cost see cost you while say and from in. category to product do improvement million expect more to add temporary going savings we improvement. We initiatives on do called have And pricing did few And in And, expect, that to in go XXXX. levels. SG&A, temporary permanent management in even XXXX for profit, we the pleased we profit working. the those, would look gross of see improvement -- savings when the at QX, XXXX and have our

working having we our there’s things said But that, we’re reduced permanently cost So, will. still have that. you structure, on really if

terms headwinds. And to talk offset Will see those maybe of about to headwinds going We’re a some let things doing payroll maybe and freight. I’ll of we’re in few

Will Stengel

Chris. Yes,

going So, I a move be forward. maybe to us gross focus back for we continue to mean, on just margin. gross margin as is

us remarks, of a category important job out pricing, of move sourcing, forward. kind we we management will that around means. of et the I what laying cetera, But in think, some global for in did details be nice priorities the as terms of prepared

On think SG&A, of really kind there it. two is the to ways about

savings to, importance, out. First of keeping alluded is, Carol as the cost these temporary

work from activity obviously, and functions, initiatives daily from opportunities them ranging spend, the we analyzing converting to that’s in indirect back-office cetera. productivity teams low-cost permanent, then, a here. SG&A, globe for on around with discrete the DCs, that and But et productivity country labor temporary very So, around evaluating

a the that And got actions. tactical very So, we’ve we’re we’ve laundry got. momentum list excited of about

Operator

Our Evercore. [Operator comes the from Montani line with question Michael Instructions] next of

Michael Montani

the wanted I offer to congratulations to promotion. just on also Will

Will Stengel

Thank you, Mike.

Michael Montani

natural Is off. and/or an need would the So, the could there? way on to to but start first organic I I see potential SG&A we that front if -- a X% historically, organic kind you kind get of could leverage update about the just there Carol us the was number off comps growth X% dollar Will, if growth, to year-over-year and think there? think, was to of give

Carol Yancey

certainly looking margin growth that. are organic -- have at expect to with we guiding seen, and have but back we to you Look, was at where to we’re operating X% in We at again, ourselves as a range. greater to X% -- And to growth. the XXXX certainly Yes. and improvement level organic level than that profit margin sales that’s getting a have

with of end low can So, margin certainly talked I think, we see I it’s the the initiatives at X% we the think that have that that of about. some you’ll improvement. And

Michael Montani

if if help you And, comps? wanted then, fourth the the out, there’s the DIY on understand ticket could in DIFM versus NAPA the just parse And on could, great. comp. for if front, and to us share, I quarter, Okay, just just Paul, you traffic any to extra can color split

Paul Donahue

Yes. Thanks, Mike.

first. that latter me part question Let take of the

up I’m across and we’re average in ticket curbside. average not surge we’ve at we real globe, for because both a traffic. saw look ticket quarters Asia size up a we was a been our As the look digital our at surprise Australia seeing seen the ticket down -- we average U.S., now. deliver-to-store, comps our again, has strong the bit trends up, business a number with size Canada, in Pac was in a ticket in which online, and of was Traffic were and we both pleased really traffic. pick up trend U.S.,

trending around then, seen in as up I I was walk much both latter the really saw quarter, question, the And DIY folks stores. should and the with of DIFM January. strong we are reticent had part we other in like think a So, into a bit year, or you -- Mike, was the was year see the DIY, pleased throughout to think What I asked still with in question, quarter. pressured I held mentioned in earlier QX. to DIFM say, the certainly little But up again, in

So, return our we’re see to DIFM growth in XXXX. going solid that cautiously we’re optimistic to

Operator

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

Beth Reed

think And guys. that auto This the any the in U.S. on are on out factors other the business you of main is and seeing January impact for that would quantify just into any a February. call there stimulus Reed had you that you’re of acceleration? kind Hey, Beth Is the Scot. on to acceleration I question way drivers?

Paul Donahue

dominant Yes. DIY not for of XX-plus-percent business, group. we think, business peer a Thanks, stimulus That’s business. at. But, us, the I are our Look, monies but only DIFM Beth. our definitely impacting are

we some They’ve if What’s So, want stimulus years. really Yes, that two couple I power I been the Look, days. region winter factor. this that the seen any, much and think, haven’t we impact, is the year. a are to see without of There it. There normalized on believe Texas we to more seeing point folks I that perhaps a ways weather the early to to business. of don’t no in if is return a a there lift And, Beth, our DIFM just we’re about without lots seeing take of for a we’re in in out few power. are don’t unfortunate, lightly. were

Tennessee, got distribution wish just stores extreme it’s winter. and So, number centers, Texas, that seeing we it closed branches, I a that the throughout Oklahoma, are We’ve quite mind wasn’t impact having. Mississippi, don’t as of Alabama.

long-term So, show to result of of months here see this cold a We’ll the of it parts will toll it’s begin up weather, some definitely as when a cold down winter. brutally the road taken a fail week. really this impact really and

Beth Reed

a Did kind say you clarification. trends And February? of continued just have largely then, right. into January it. All Got quick

Paul Donahue

mentioned, many of we’re our just what DC did. Industrial certainly other number of with But, they Texas seeing and the right across states is were I along now with Well, branches. closures the

our saw I think were had branches the about I XX of number Beth, yesterday, we Industrial closed.

impact it’s to But, days. impact a recover. And a a for that So, bit we’ll little expect an have will our of business. positive couple probably have again, longer-term on going I of

Operator

with Daniel of line the from comes question Imbro next Stephens. Our

Daniel Imbro

Yes. on to Thanks. Good morning, guys. And yes, I’ll congrats my Will. pass

Will Stengel

Dan. Thanks,

Daniel Imbro

with screw to to cutting start Carol, last apologies if the I cost -- the missed slowing. this, wanted maybe some away I year growth organic and of trying

You Obviously, meaningfully. you that million. exceeded targeted $XXX

you think, cuts. said in cost $XXX million I permanent

that in hindsight, maybe may cut where not, isn’t can As have too you the can we and cost, of on reason you share back places, the impacting some possible, you did for the better why it with if detail slowdown? And understand is some that’s so growth service organic deep, look part then, you levels? remove

Carol Yancey

we our service, costs some lower those we was adjust Yes. starting come it in Look, And we response to mean, and that We from America we -- had we positions, savings, needed And travel QX and to impacting volumes. did Europe then, and had early have at QX in. reducing of related to but we volumes those payroll, to to without our back, -- look that looked And And we the looked this again, I facility as done -- actions reductions, taken. on that, we looked saw at there reducing be furloughs, you of in at -- volume deferred had we history. our geographies. at the again, had as to other facility one at it anything very-drastic at North was that with the cost of was was worst did end and the declines at Again, in our costs. as and to everything. looked Company’s costs, looked come quarters entertainment, ever we lease back we

we investments productivity in up on automation. didn’t our let During this also time, and

automation number well. on and improvements, would that with a conveyor as continue rationalize we had systems. facilities us that we in projects where That work to we So, productivity put helped help of automated more us

They nature. temporary we back those of go were subsidies. payroll done. So, to again, Again, largely to that. Those in we that how ones -- The the And government remember, permanent just very were was comfortable ago. temporary $XXX temporary related, savings the a were were were million. part year

XXXX cost keep that fact with we the structure our nonrecurring. base The matter $XX place down. had is and we cost initiatives about into a excitement go million So, about overall have again, the in of to in government lower we are subsidies

Paul Donahue

a Daniel, in before, working Hey that just just U.S., add I comment mentioned to touched the over day. But NAPA across it and call every our our our out, stores with garages sales prepared independent it’s stores on that because here to Company professional professionals remarks. we X,XXX our I’ll between as well business shops and are and my in been have

what we of to ‘XX. so. don’t that ‘XX some in back did So, we the are challenges too believe thought deep, bounce going were I think, in And transitory cut saw again, we

Daniel Imbro

And Got guys to comp ask it. on That’s wanted then, clarifier the that. you said I helpful. a Thank growth you earlier, Carol. for

more help you a So, how much Automotive footprint? Auto, those of within comps X% larger is FX total headwinds roughly X and total to Auto in me with Industrial European amount have said to understand X has when similar basis revs can the of to of tailwind I X guess, I would think, of to the a then business. X% with X think, revs, imply between is a X Most I headwind. to you X. only XXX they segments points FX would

reconcile, to the impact. of trying yes, FX So, magnitude Thanks.

Carol Yancey

Yes.

the of of XXXX. in more sales acquisitions be of to impact Just the the sales guidance total carryover the to clear, gave same-store that from relation is we

we XXXX. acquisitions bolt-on had of three the a late and also automotive had number then Industrial we in So, acquisitions space in

M&A. differential the is the So, X% of carryover

neutral. these currency neutral really for foreign implication we Our And also in numbers. have inflation is

what point. in that mentioned, a today some is know inflation As little carryover see this acquisitions truly expect as bit as far But, plus guidance. from at that’s some we we Paul will growth, we just organic of

Operator

Our next of question comes line from Bellinger Research. the Wolfe with David

David Bellinger

different to but of a follow-up January, want bit context. on a I

So, NAPA up the seems comp at competitors sales accelerating a are indicated January. since its It though this into as double have high comparable sales auto point. digits few parts your of maybe digits, single

it narrow So, mix really of there versus competitors, that the or that’s part peers better is last Is from something that’s few business that them driving helps now? is on anything to changed your delta your the gap versus there the quarters? strategic

Paul Donahue

We’ve a Well, been working a throughout reasonable to are course I I of on beginning question. really XXXX it’s initiatives take hold. David, number the look think of you tell that would

We are towards weighted not the as side. nearly DIY

move not DIY, DIFM. nice the some needle in like even lift seeing we’re going So, though it’s for to us

So, up, what tick COVID, that we’re up. slight to how driven think, opening I the I point markets recovery narrowing from to back we’re would and miles seeing going we’re see is back gap

again, official we’re We spike really, in winter of January. business. yet. haven’t of see any pleased numbers to seen really with But out that month December, to our January the is spike that coupled weather all DIFM some help going And

David Bellinger

Got it.

this ahead of and Are any DIY you now year. year? and getting my commercial, do low expect increases through you And, offset that rate parts then, to the And fully some XXXX? strengthening last price are price both mentioned this pace a to flowing throughout Okay. here, of maybe year, given thinking demand? how about cost inflation you You follow-up benefit a single-digit limited coming

Carol Yancey

are inflation. our suppliers, I increases, Look, shortages, facing Yes. and we cargo mean, mentioned, suppliers our that freight labor Paul as facing, look, they’re ocean just suppliers. early getting are from indication material increases significant labor raw and the our

can through. our to uncertainty a Also make the Again, doing probably side, lot now, certainly probably I that -- to can is will second those sure hearing of stay them these get things they come discussing very And the of price that along. managing ahead but this are weighted. as Industrial be increases, weighted. more do and when believe, trying that get pass We it’s are some teams suppliers you on Automotive, that rational. are they half more that price the right we our pricing, second passed would increases through in will tell of they been half

on especially full you to second X%, of terrific many would in And a pricing. I So, But heard Will so that’s on more about the any of margin but again, the terms year the and just if you in our it, X% numbers. probably X% half. have going X%, thing to not add, initiatives in talk is area, basis, gross will, teams our last

today. lot a we’re more So, agile

more a lot us a pricing have that strategic and We lot as this more help will analytics well. offset initiatives

Operator

like questions for call in the There management further the queue. turn closing are no back remarks. I’d to to

Carol Yancey

and in We’d like participation to QX thank year-end call. you conference our for your

in to you. Company. appreciate we to And day. and results a quarter always, Genuine we look on Thank out And first Parts forward your reporting you interest As great of support have April. our

Operator

you and conclude this for today’s does Thank your teleconference. gentlemen, Ladies participation.

your a wonderful time. You at day. may disconnect lines And have this

Genuine Parts (GPC) 17 Feb 212020 Q4 Earnings call transcript