Earnings call transcript Q1 2023

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Operator

Good day, ladies and gentlemen. Welcome to the Genuine Parts Company First Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today's event is being recorded.

would Senior turn Vice I to conference time, Jones, Sid President, this like the to over At Investor Relations. ahead. go Please

Sid Jones

Good Officer. today Operating Bert President Officer; are Will joining Officer; for Donahue, our Parts and XXXX thank our Chief for Chief Paul Conference and and Executive and Earnings me Genuine Quarter Company Vice President us With Nappier, Call. Stengel, Executive Chairman the Financial First morning, today you and Chief

a release, Genuine supplemental presentation addition Note, to press In Investors these the morning's found be of we playing the webcast. Parts slide on through be this can website. the slides will page not Company

advised A the earnings may reported measures results be financial as in call to reconciliation non-GAAP is generally provided of certain measures, be accounting accepted of our Please under which these principles. may during this press include referred today's release. discussion

materially businesses. morning's due to this and actual the forward-looking Today's The results regarding any the described this factors SEC call company company's assumes no differ company during any release. update forward-looking statements statements in latest may call. filings, The company's also made several important from including its press forward-looking involve could obligation to statements

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

Paul Donahue

for businesses good our and quarter. and were earnings conference to pleased our results morning. call. the Sid, you, in first report Thank exceeded We and strength with to Welcome quarter expectations our momentum XXXX the that continued

of growth. and use everyone Company XXXX to Parts share update opportunities just Day, on our hosted share this few see I which Before for many comments our We we bright and our in first profitable the convey past want on long-term my Investor event month. strategy future confidence this a I the Genuine the thoughts from quarter, to we

of which in strategic During several history, expo. the an interactive transformation showcased our rich we highlighted initiatives day, priorities, ongoing course we through the and key

to the synergies our insights share allowed with collaboration and opportunities business specific business unit the global market us across and provide businesses. leaders, and leaders to panel Our discussion our among

including double-digit the outlook XXXX. day hopefully, segment for we three-year attendees leadership a CAGR and for and an community day team profit our targets, a financial financial Finally, informative EBITDA broadly. provided and for all and more a and great margin GPC by It double-digit compelling in was EPS everyone of the productive

it, you the view missed Relations full you Investor If our to presentation we invite website. on

So now let's turn quarter. first to the

sales of proud earnings global by the teammates, with our coming expectations. are GPC We outstanding our and ahead of work in

automotive quarter to how was our international the our example first benefited GPC is segment. and in We diversity distinguishes operations industrial transformation in a of continued our a of performance strong company geographic Our a performances strategic with mix business businesses advantage in and marketplace. the our clear global the and automotive competitive from industrial that

XXth share few basis A EPS segment up $X.X Earnings billion, adjusted growth. quarter XX% XXXX. X% earnings year, sales per from from XX in up points our up year, of the highlights quarter last prior consecutive of of X.X%, include; margin of adjusted quarterly and from the $X.XX, record double-digit

to sales strengthened we focused solid support generating and service capital aligned global GPC The and balance our finally, And driving growth conditions. strategic team and our plan sheet cash our initiatives flow on to executing deliver and customer allocation. outstanding accelerated continued Across continued on earnings while expansion economic is growth, and our businesses, teammates flow cash share gains. market our through dynamic margin strong are

performed in believe to service throughout strong each markets, our quarter which and held trends is offerings and with customer existing new demand well continued due our diversity all end opportunities. the product industrial, first industrial again momentum of growth presenting this quarter. activity trends and the and We In reshoring

solutions, industrial business in capabilities are enhanced and the remain in KDG on to we fluid near-term. competitive including power automation, bullish and proving this differentiators, conveyance and of be acquisition Our

continues Our geographic winter in in our headwinds conditions to the QX. our volatile US global weather and automotive the automotive benefit a diversity helped from business of of warmer to markets, offset business which

from used addition, fleet In automotive which such rising of demand, in the for and trends our all and ongoing the growth aging drivers driven automotive rates are DIFM represents prices segment, interest in XX% the for These global high miles as increase complex aftermarket new is benefiting and sales. vehicle to key ongoing and continued especially and vehicles.

back-to-back year are after strong continue with we years, to profitable XXXX to So we expect record delivering growth. of start another and pleased the solid

plans, confident investment with accretive acquisitive opportunities through is are we balance while shareholders rock-solid and ahead, to that strong well-positioned sheet GPC capital and returning organic share also and strategic Looking fundamentals, pursue the repurchases. right dividends to

So care of world. the our again, we GPC each our thank for taking teammates around customers great of

turn over I'll call now the So to Will.

Will Stengel

for you, also to the strong our work your the start global take team Paul. all everyone. appreciate We the every Thank to care thank of morning, Good year. customers GPC hard like I'd day. to

was As share Investor advantages, at were vision, Paul pride our the month. our Day display unique in market and execute opportunities last initiatives. as referenced we're We on earlier, winning strategic business how our we to excited

a effectiveness, by initiatives all technology, and and M&A supply Our complemented on chain technology, focused sales are disciplined talent strategy. culture, emerging

positions values expertise customer during our team established with customer shared to with shared as with positioned team GPC scaled supplier create work fragmented together global a well We and and infrastructure. shareholder leadership success relationships, value. attractive, global markets partnerships, sessions, the one in As is we technical

XX.X%. segment XX.X% in last year. for business segments. approximately our growth first sales our $XXX Global million versus to Motion's increased of approximately double-digit consecutive marks sales the Turning Comparable growth. the first increase eighth attention in billion, quarter sales or of quarter performance Industrial comparable This quarter an were $X.X two Total

quarter. consistent From March through and two one-year The Motion were the continues profit eclipsed in of previous sales In to industries Motion XXXX. growth with major at the a broad-based be a categories cadence sales product January on most and growth monthly across quarter, the throughout a on perspective, serve. basis, March were basis, double-digit strongest months February sales the XXXX, but two-year relatively record set and

we quarter, the mining such from gas. saw food industries During chemicals, and oil and as products, strength

continues performance XX% driven as grew see with corporate the with not only first Motion quarter. customers from in is also initiatives, these solid relationships. addition, customers corporate In strength existing to sales its but of approximately account The new strategic renewals account

industrial and Motion to team profit In of under leadership progress made quarter. fall on We team in the Pac by business Asia continues Pac, deliver industrial performance. Asia has well and identify the XXXX. action in XX% take opportunities, the its growth for organizing posting business over one momentum our The sales realigned the build impressive of and leadership automotive to

first improvement reflects approximately $XXX sales, a and discipline strong for quarter XX.X% XXX the segment segment Industrial North year. representing on profit Pac. The million point this growth, increase basis continued last of Asia period was or excellent same profit America from in sales the in operating both

North the the to build America addition, KDG from team acquisition continues In synergies the on in year. last

reported million earlier at to of million over end the the Investor $XX we realized achieve our year, in year teamwork in we many, first year, synergies this for over our Motion expect incredible As to $XX in target one thanks synergies than and the total initial our by Day, expectation.

XX% quarter, segment total profit. GPC of For the represented Industrial Global

local were versus in approximately million high Automotive billion, Turning $X.X automotive diversification an to increase X% double-digit Total currency or Global as the first same XXXX. from period single-digit segment. sales of $XXX growth sales the to our Total our posted businesses the benefited quarter. outside global the in US during

single strongest were Europe cadence in On low United March. perspective, Automotive States low a increased growth February a with Asia From through ranging quarter, the to sales comps double-digit basis, automotive in approximately from global Global comparable Pac. the X%, in and sales digits and

will team encouraged As we solid Paul continue industry which and fundamentals growth. mentioned, to we profitable the remain execution, drive believe by

the with Automotive automotive the investments businesses freight million, expense. lower last to quarter wages of Profit the The performance business. and compared US was X.X% a first in sales, Pac segment our to in year essentially Automotive planned start and and partially European, Global business XXXX. Asia elevated profit in to strong US helped margin in flat sluggish X.X% out with was Canadian year on operating impacted segment $XXX was combined offset margins by in our

turn grew approximately let's sales US, our of during overview X% an to business Now, automotive quarter, comparable automotive In the performance sales with geography. approximately the by X%. of growth

XX% represents quarter growth first the the quarter an The year-over-year XXXX. toughest in of of XXXX, with first comparison approximate comp

throughout sales, daily average relatively our at was the quarter. consistent growth Looking

However, milder winter operations. combined product certain weather categories demand and automotive in events with disrupted extreme periodically impacted temperatures

with we all in strength As average. the but as during offset plans Northeast. filters, heating of categories cooling examples, various and which and above and undercar, the broadly, had fluids, sluggish categories positive, were internal US core the of brakes growth sales below quarter, such in in particularly batteries More

regions, our Automotive US west across negative negatively sales quarter. approximately our consistent weather estimate was pronounced except of a Overall, that experienced weather, by our in many temporarily impact impacted which Growth operations. disrupted X% from more the region, for we which

commercial positive, with both retail commercial to mid-single-digit and Sales customers growth were outpacing retail.

strength AutoCare network. business our channel all our fleet sales segments, growth commercial NAPA including government continued and saw and customer with increase mid-single-digit Our across in

year our at the The sales to performance US relative expectations. started Automotive slow

soft of of compared focused will investment in the priorities. be towards its during when April despite actions year. team team acted second the on to delivering the longer-term March XXXX and have of half to weighted the cost the during year. March the Sales improved first a result, address the As while to benefits balancing The the half start remains

currency approximately X%. local grew X% during growth sales with Canada, In of the quarter, sales in approximately first comparable

chassis quarter. several up Canadian double in were performance in categories of growth digits reflects the strong filtration, and first which brakes, all like Our

In total which addition, rate. season. batteries, winter Canadian headwinds pressured like outperformed growth which performance weather-related by the categories a our we in in offset helped milder strong heavy-duty These were certain saw categories business,

share in we growth see Canada, position, We're to the solid and team strong continue compelling long-term pleased execution. initiatives, due for strong fundamentals, our and with to market industry leading opportunities gain quarter

another quarter local currency XX%. growth of and XX% our growth approximately team comparable automotive Europe, delivered approximately In total sales exceptional with in sales of

The across execution to in be strong continue driven market by initiatives. solid share growth gains key Europe of

During existing the each of drive as saw teams wallet our our double-digit geographies region. accounts the and business accounts win the to NAPA with first new share across single-digit brand to higher we of expand quarter, in with key growth continue high

to on approximately grow XXXX from XXXX. sales million branded in €XXX our million We're €XXX in to track NAPA

exceeded into Our has and our Portugal from advantage. benefits scale brand the Spain plans European expectations and XXXX entry value creation and in it NAPA as

our XXX the position will in XXX European EV service approximately XXXX. the team is industry addition, EV In in to locations, NexDrive our team to up shops our offering our from aftermarket. We shops expanding NexDrive growing believe lead

first quarter local continued currency prior approximately in the year, in first In retail the Both XX%. well the sales increased XX% double-digit in comparable at Asia-Pac same with period approximately perform automotive sales business, with commercial from quarter. sales a both the growing in of growth the to rate and

saw accessories. March Repco, sales several record go-to-market channels, addition, profit NAPA, motorcycle In results including our and and across

make its to impressive customer-centric culture initiatives. growth continued on Asia-Pac progress and talent and

with We markets complement organic continue acquisitions fragmented growth and strategic our share to value. create capture in shareholder to

consisting During primarily market small acquisitions, the first geographies. increased quarter, local that store in we automotive density groups completed bolt-on existing several of

pipeline leadership remains to disciplined that long-term will active value. remain create extend acquisition and pursue Our and transactions our

first we environment. the in for delivered the In team confident of the quarter global year GPC balance strong remain the results a despite and outlook dynamic summary,

we initiatives long-term can and near focus and our what control. execute on will We

Our enhance investments our continue technology, tech capabilities customer chain, will in supply leadership emerging to positions. and people, and our solutions,

you the With turn I'll over work GPC performance. to call entire team the and hard again the to that, Thank for Bert.

Bert Nappier

everyone joining to today. you, Thank thanks for and us Will

proud our our through very walk continue performance. navigate are I'm pleased quarter a environment dynamic key as We first highlights of teams to to the and they you of

results, on to our started would we I items like of the I XXXX. that non-recurring note get had Before first details no quarter in the of

related to the comparisons prior non-recurring do year of integration primarily XXXX, in KDG. However, to our items the exclude certain

currency. including a improvement $XXX from million or offset and $X.X the X.X% billion first reflects in a in X.X% levels sales, XXXX. impact unfavorable contribution X.X% increased foreign These inflation X.X% by of mid-single-digit items of comparable sales GPC quarter This acquisitions. to were of an partially Total

Overall, drove diversification total our and balanced strong and start to year. record sales portfolio the global earnings

two The year, first points and XX ongoing was favorable investments XX.X% margin the from initiatives. in gross margin contributed improving XX core and margin last partially initiatives our by our of quarter, by these headwinds. approximately gross Our basis other adjusted primarily improvement. offset driven pricing key basis of These points were impact gains sourcing gross in

the points. to foreign by and related impacted shift second, basis currency, of XX basis impacted First, sales XX also by which in a margin approximately which strength gross our mix gross margin industrial points; business, approximately

As initiatives to our strategic Day, results. continue we strong of gross key highlighted ongoing drive margin at Investor around execution

Our in at XX.X% increase quarter adjusted in X% expenses total operating offset to $X.X up and in and the line with from were non-operating in combination in in wage of inflationary expenses ongoing increased QX discipline prior year spending and in XXXX our the support our to managing in approximately of costs, teams first expenses reflects initiatives. sales. conditions solid investments by technology The planned the billion, core strategic due

Will taken headwinds, in costs first the pressuring we operating to noted, elevated US to business, with these which quarter we into address have in As Automotive our margins anticipate QX. in persist actions March

remainder the ongoing on combined base improvement strategic of in and with actions, productivity initiatives business costs for to broad the of operational and our of across cost GPC. expect drive We our efficiencies further these execution the discipline

the Our segment margin segment quarter and expansion. a quarter year basis segment margin first of point from $XXX of up performance last profit in and our total of XX consecutive generated fifth XX% a improvement profit million, X.X%,

diluted income net was net adjusted increase of $X.XX per to or share. per diluted share an quarter first XX%. million or of income million compares This XXXX, $XXX in Our $XXX $X.XX

growth to our work our adjusted teams is global quarter initiatives double-digit earnings operations. execution XXth across strategic implement of our our Our hard deliver the ability and to of consecutive crisp by indicative

to in in million first from under cash $XXX We our generated of Turning which included compares the last operations This million quarter. year, cash agreement. to million our in $XXX cash sale the sales operations in from flows. receivables $XXX AR

$X.X liquidity. in Free million, with cash we billion flow and was the quarter $XXX available closed first

adjusted X.X X.X is times, to to times. to debt Our our of which compares two range EBITDA targeted

take allocation. that business. and advantage committed well-positioned the to become growth available our We capital of opportunities may We with remain long history are to flexibility financial strength across of disciplined

shareholders unchanged priorities in and and expenditures capital for our through return M&A are dividends share capital our and through allocation key of four capital Our include and repurchases. the business to investment

believe we at around shared In primarily Investor many support These the million in of will quarter, we supply and the initiatives our the moving first $XX technology. forward. expenditures, Day investments modernization drive invested chain business capital of we that

of our $XX invested growth key for a acquisitions, also strategy. We million which remains element

to continue businesses. our As acquisition robust Will mentioned a for pipeline we of earlier, generate targets

This in For our the quarter, cash we and dividends shares. used $XXX dividends the paid cash returned XXX,XXX to $XXX of million includes form million in shareholders of to repurchases. share repurchase shareholders to and $XX million

are effectively our We cash to with business well-positioned the through deploy all capital flow cycles.

our outlook XXXX. to for Turning

We XXrd on updating our XXrd at March reaffirmed previously provided earnings in guidance year our Day. February Investor on full and release are our

our This $X.XX our raising an from for to to are guidance increase to of of previous approximately guidance $X.XX, increase range diluted $X.XX. per of from earnings X% X% XXXX. We share to a a $X.XX $X.XX represents

growth in the XXXX of X%. to expect unchanged, for X% Our continue to and is range sales total to sales guidance we be

growth range. to growth are the X% also the total to the business segment, in comparable sales with X% Automotive segment sales for following; we to X% By X% guiding

modestly. our segment, relative total stronger For second view we growth growth of ongoing X% a year-on-year X% half and sale sales the first increase, also improved XXXX, expecting QX and although of to to Industrial have with to of sales X%, with comparable X% QX assumption half the the are on

few Turning other to a interest. items of

previously. raising from $X.X billion We to $X.X to to cash range increase outlook $X.X our billion billion, from an are operations of a for $X.X billion

million billion. raising are our range [ph] flow an to increase to $XXX our billion, guidance $X from billion outlook cash $XXX $X to of free a previous We for of

for supply full which $XXX plan to for of year, technology in the incremental million $XXX among continue million to includes We investments CapEx and chain, others.

positive In the business. very strong and in pleased to we are with start closing, year our the momentum

build our second a and team solid to Automotive with second of the slow started to our good While start through the a US half expect we've have and had execute, business year, XXXX. momentum sales QX traction quarter

through the economic and global the dynamic value confidence and talent, differentiated and scale, GPC strategic to business the size for unique our with our the initiatives is our execute footprint, outlook environment. plans in execution full ability our Our have proposition. year mix, ongoing reflects we a of our truly

at is targets shared plans our over we deliver to margins our positioned well for to double-digit Day, Investor years double-digit As our team CAGR EPS three next XXXX. execute a the and by

operator And it you. for Thank your turn back will we to the now questions.

Operator

you. Thank

Instructions] session. And Goldman question our go now will We begin ahead. be first question-and-answer Sachs. [Operator from the McShane Kate Please will from

Kate McShane

our for good question. taking Thanks Hi, morning.

one question. Just housekeeping

the little Can exposure during intact. like Just what have to but quarter, or us are a the you it noisy sounds to the was California still remind fundamentals you West? weather

Will Stengel

would breakdown a we it's the equally question. probably region. regions. don't any is automotive exposure Kate, revenue good Yes. The have correct, outsized one the US to across of say I an directionally split

Kate McShane

mentioned Okay. new pivoted January, think talk Thank is? what more will I prepared of second bit in it that little your will you the that start half. you. that comments sluggish in some second the And strategies Can the a the because impact what about think to And then team you do half? impact have in you

Bert Nappier

full I'll color you a a little as -- to give start more Bert. give starting US the point, a and and Yes, a specifically. context little bit then Will bit cost I'll on I'll with it to Kate, QX, just this year. little some you actions outlook about I'll maybe for the about the flip auto talk bit is talk in will

on commented a against first for Motion stronger the our we and think of our these full as view US outlook X.X% back to the two Auto year, end the on recover some headwinds and we've on over performance a QX of That's expectations, did coming really we increase raise quarter the better-than-expected the a $X.XX. about range, When of quarters. top

on about do to with XXXX. in we and going scale, very XXXX. do to had think at to growth X% new on earnings obviously think are against that to to foreign growth targets factors I X% external a strategic start a to want landscape, the prudent size We Investor And exceptional we geopolitical name Inflation moderate capitalize and our great When But and towards business that, everyone year-over-year the perform at The I still Day. being well. of our march we expect We're looking as out We're to in off solid XXXX there. we're continue initiatives. XXXX own bullish balanced that execution and shared remind the our we're against range. we being currency just to very growth that continues few. and levels,

just about off we the line how top in stated you quarter, about color thinking the April, When in place. upcoming Will prepared started And momentum that, rate. as remarks, give on a business into QX. QX within auto some I think the do the good Automotive continued momentum QX, line. We But, we're his to see industrial March. accelerating US is carried started Global there in X% strength good auto with to from month in is expect that has against of global the and in off international April, with normalize again, we about

the into about a we're doing half. of expected US in those in will talk Auto, for on part back we're think, level looking to Those will early cost the moment balance that just of the in second performance and the get to QX Will us pressures what probably, the for quarter I of persist

your growth that year. One is, year, our you as strongest just thing result, it will will our on the earnings year. you, think represented earnings a as -- quarter recall this QX expectation remind XXXX rate QX of for think be too, when last And models, about second our we growth guidance XXXX be that will for of lowest be full our about I'd the

on little just Will, Auto. cost there more and actions US want take fill at in So to from the specific maybe you that bit a

Will Stengel

world to, Bert. around I the incredibly Happy been the have Yes. costs. say, on obviously, Kate, teams focused would

new levers So, or being there's pulled. say, wouldn't I any necessarily actions

and urgency the up Automotive. stepping the US just we're at think focus I

things taking of all to being They're predominantly we're stores around customers, DCs, particular more around and cost with T&E make on rigor time balancing expense. over you care people, our as in would suspect, thoughtful sure in super just that

the some strategies, We've accelerated year. through to also we're the about, But bit business and investments, half term. pulled with, a cost talked medium time the which here near-term long around merchandising freight will long-term actions little right plans doing cost balance sure the and we've second the to for we're of going together of that make as take materialize and over thing

Kate McShane

you. Thank

Operator

be question next Jordan go the ahead. Jefferies. from Bret will Please, And from

Bret Jordan

good guys. Hey, morning,

Paul Donahue

Good morning, Bret.

Will Stengel

Hi, Bret.

Bret Jordan

you On you the think that break plus US comp was I X%. price units versus out in the Auto, Could said number?

Will Stengel

Yes, Brett.

price, mid-single put GPC higher Automotive US total slightly single mid-single low slightly category. that digits. would in that. the So digit. under Industrial, automotive, digit, Global than I

probably mid-single probably is Auto. So digit a good estimate plus for US

Bret Jordan

you then, year? pricing this as benefits And, of there? maybe as industrial so about Plus a price guys Obviously, or Chapter competitive were in so dynamics gone I from looks And margin investing of competition. talked sort but in the and XX, ago, guess, there environment dynamics year about talk has share far Okay. sort market the well, initiatives. pricing out some out you seeing change as there's Auto you you're how as what could auto And and

Will Stengel

in good is the the strategic a Yes. generally our change the Bert. initiatives about dynamic It we're -- we any many question, That's on so US speaking, there. talked in dynamics all focused I say, making and quarters pricing before. a Automotive, haven't seen investments material why It's environment. would we've we're pricing as

rational a choosing Like picking dynamic people But are the and are. is every we like kind executing it and strategies market. but market, industry, in of just

anything on a perspective. think what seen focus different we've going from few what than So, right in is pricing seeing last the strategic We're not we quarters. we're really materially to

rigor a make our in place As we've put intelligence and customers. new around sure lot the collecting for Investor we're talent into at you Day, of right heard investment that to and tools

the plays and role particular, in brand world. strategy also our that assortment and work that sourcing You our around NAPA about in doing are in a all great and teams Europe that, merchants lot the the the heard

this pricing in question. but material that your So, being I environment, developments a very thoughtful change despite some of you say wouldn't noted we're there's the in

Bert Nappier

just our gross this I that Will effectiveness Bret, see just add XX margin -- up with in within here a little points. that. points margin Bert that, expansion in bit is my of And basis you from remarks, activities that mentioned these improvement Nappier. to I'll XX basis And as And prepared QX outlined.

So, but the delivering core is that really performing terms from of margin with all is FX, through well. of We mix had how work some and flowing pleased in really headwinds we're and improvement. gross

Bret Jordan

just on And that sort a of point. follow-up

potential industrial in that segments. you've that and down versus Is sort that the seeing X buying the same traction products portfolio? to for got something leverage Asia-Pac the broader both Now, team. there from auto you're under suppliers sourcing, the better of

Will Stengel

I in wouldn't isolate it Asia-Pac. to down

sides exciting continue all In opportunities. the business on all the where our world fact, will to press in better have and to here on sourcing from aligned both this we more on teammates we where build global Atlanta just had around of momentum geographies our be

sourcing. benefiting say they as that, wouldn't is forward. that's said part thinking are I as that team, So, about business and benefiting a their of together a they from more move they're how Asia-Pac now being on big Having

about the talking whether so you're et design, back-office cost, cetera. organization And

I opportunities for organization. work them one to continue of better think there's lot a to as

Bret Jordan

the it of Asia-Pac, just on you sides about business? the globally? If works overhead of integration more broader both would Would merging in you do think

Will Stengel

make probably we our you mean have an One what do think to Day, scale, the the together of But Investor of GPC. together as around that units, you the work perfect leverage how definition I not. as capturing all we're organization. business we opportunity together by opportunities merged team, a to philosophy importance at global That's a work to the working heard sure

Bret Jordan

Great. Thank you.

Will Stengel

Thanks.

Operator

Scot question Truist ahead. from will Securities. go Please next be the And from Ciccarelli

Josh Young

for Josh Scott. morning. good Hey, This is on

what drivers the basis on with XXX. little segment unpack the segment? margins, quarter, industrial up automotive a you were just Can there down more for So, the in over points XX each

Bert Nappier

is really, planned When of really XX really business the drag it's in SG&A. year-over-year. Josh, outside basis take SG&A some across kind Hey of investments margin US one, gross GPC -- of Auto. on that then at mix I'll in was and we strong the I'll the That's about leverage margin, factors: Bert. inflation, that level. three had for start we're focused we and offset think expansion of points a up business by where

when planned about and the Day, to shared beginning I we talent. from about XX SG&A pressure think that at we those quarter, at year really For the the IT how of would think points the about we had investments elements, say basis Investor in again and

costs see costs. Now, impacted there by quarter some future. talent investment certainly critical we IT, delivery of driven, inflation and Auto, and is as look was thoughtful making the going higher personnel freight we're for the to which talent but be cost very you in the US When at

competitive. So was store. wage side we outbound a that's planned investments made staying to really DC from we're of ensure to a again the The impact freight the

talent is facing that success. long-term our I of think key and everybody is businesses across part all a

our impact we're side, shortages. driver rates thing, same to higher looking to freight due carriers looking from the they're as do of cover the the wages they're On to seeing higher

So those the two on the of part side things automotive were equation.

very other The here coming really None didn't expect. consideration. the just some of December particularly weather say of thing is turn I didn't we But this would had impacts, weather I anticipate we of US off would to you are us those that, terms as Auto. in back weather. in strong anticipate -- that, We forecasters

QX was XXXX. a were So models than to support And we our that run staffing needed we where to probably set little align sales rate level. bit sales to exited a higher softer

Auto of was a all together headwind for that compressed in bit and us. of a US So margin

contributing higher the are shared big of little of We're Day of certainly are a we investments As doing inflationary where doing reducing a to is we driving a in that. that at look ahead, the And can. business efficiency. we and business Investor part is business cost making little again, conditions we're

back they're important that to the So us. while think maybe these why again, about wage of kind talk top and in IT we to and take so two is investments level

of side, month. we're cloud-based year. think I a in to capabilities earlier platforms extensively the certain drag to IT the that do. us in our last basis XX that you We and On Nadeem modernize as cases, costs. changes share those making year, capital many to know, the the point a from And But operating technology. for this as and that's improve the investments pivot space right our for things that about to dynamic are And is shared

competitive On it's a mid-single-digit And with people out a investments making with smart very the our wage increase. market for talent. talent side, we're there

normally think businesses, and made And higher the slightly we here than employees I XXXX. were health through And and the our at from team for us in take rather level with our than of them seeing thing care right for decision the absorb that's costs might what to also line contributions them. some right that's to higher corporate those we the do pass now. most we on

year two XX. things all take little together, a got basis the deleverage we bit XX to are XX of I that So for Those points.

full we we And that the of XX be auto points. And points. with basis QX, XX basis So saw you to expect leveraging up US outside for year we're you business that, to can see now. XX right up really in as were margin

Josh Young

it. Got

inflation and the for what just walk what Okay. year here? us your And expectations the That's through terms quarter in then saw you of the helpful. during could you balance of are

Bert Nappier

as I'll that Yeah, one take well. Sure.

through. around in having quarter. at we That in QX, moderated inflation effect. desired and the we monetary world think As line during was expectations. with look our the policies the are Again, the here time slightly US little take And Auto that high was all inflation single a consistent, digits. digit. again, has industrial, flow GPC very and was total QX But to mid-single sales, digit. low does which single been

Our and range that will that expectation seen. digits the is in to close low for impact consistent at automotive single digit business low shared the Investor GPC to for down continue be in single-digit year that the is mid-single rest single of tick that for high us from our pretty inflation the the to the view single digits is year. Industrial will Obviously, from out just Day. digits. yet to going But translates moderate. I actual stay That's to with low assumption it to

Josh Young

Very you. it. Okay. Got Thank helpful.

Operator

Perhaps Christopher, And ahead. Please next on Horvers question your JPMorgan. end. will line the Christopher is mute line from your go come open. is your from

Christopher Horvers

Thanks. everybody. Good morning

So of a follow-up couple questions.

April? to fair is interpretation were first expecting where it is like fair point First, side? the US running in say weather of for to that the you X% a quarter, out a of you comp business pointed And that considering be NAPA the on a is more

Will Stengel

your The part fair. first question your And is question is the fair. second part of of

Christopher Horvers

Okay.

to And division, the NAPA of to points US about so back expansion. dovetailing basis you talked segment margin XX XX

NAPA you plan original So it the investments? the due is deleverage -- would the that was to margin operating

Bert Nappier

Bert. is this Chris,

the be margin to year. for achieve XX to margin to about in I the to points I into down too So when get talked points But either really that. expecting finely up the parsing of about segments consolidated improvement, either XX XX to between basis elements onion of GPC consolidated. of not declines XX The year-over-year. segment we talking I'm difficult want the would be being for segment two math basis were don't

for year feel start Auto. had auger in it plan we a with softer and for us, time US a we're second taking, quarter. take we looking little the here in a some momentum great half traction We've that. and place to the through really solid good to building there build in cost We're about a and actions Look, but got that will

Christopher Horvers

Got some it's periodic on driver pass-through being prices shortages, your all assuming a freight And there's fuel and understanding just surged out, of I'm then and in March front wage freight last year expense. it. that the cost

second start to freight tailwind before Thank in later long be a a you. some quarter? in to here And the the should So of year? costs turned then the capitalized freight the how maybe tailwind

Bert Nappier

margin Bert ocean in That's expectation. Yeah. of projection cost on goods our My assumes gross a year the and get again. included Thanks, Chris. that half. are of Look, second and that cost the those guidance of for we tailwind the bit of It's our a sold. freight, clearly inbound in our

I think market. with in line that's the

the It slightly of out still cost. freight, into January, in year-over-year the the about turned of fuel was is up and sum for a think, the February the increase teens bit that positive XX%, in fuel outbound in in X.X% The On a started net diesel March. I moderated north just quarter. then in quarter

March the as of And that on of headwind of delivery think actions goes top when a relates that. diesel, the is from will so that, We cost getting expect mentioned some we indicator to had there would DC carriers to the about tick start a from as primary got to bit it benefit component that and be bit us. we the rates and primary to we're -- that, related of fuel it in terms that's fuel to store. that is a a an if that down could Will we've the

and wages. because On cost it's business we're tailwind I and these When get little facing the fuel side, about the pretty of couple undeniably wage bit think out here think quarters. Year-over-year, next labor maps we don't of aspect rates, the that I think doing of and those a sticky, all will the on abate. of higher a though. over But see might higher we carriers, is how

Sorry for long the answer.

Christopher Horvers

very Thanks No, much. it. you much. thank so Got

Will Stengel

you. Thank Okay.

Operator

Liz Please Suzuki question And from America. ahead. Bank the from go next is of

Liz Suzuki

thank you. Hi,

saw an underperforming that acquisition to and an is acquired target? capabilities consider both opportunities. category in Automotive. operations bring to opportunity a business. acquisition that more can where GPC's Just distribution Would But it a about you to if there ever well -- either you've were I guess Industrial in competitors as theoretical are historically, bring mean we that of performing this synergies your core that I question businesses

Will Stengel

performing. We're is great value gets deals they're align business it's Liz, the of the Yes, how yes. capabilities of our a say that answer And pretty in strategy, positions as with going and us create regardless do to that tougher. environment well the our this part would question, I

good and liquidity can value our type we business. the leverage really create challenged they're scale. But if to be think and power we we in, is to that that's our I want sheet our balance a our the of exactly or strategy, position environment whether of so operate a business going can disciplined We're on it makes for sense

Liz Suzuki

And down came interest the on guidance for expense Got just the the then bit. you. a year, little

additional your the your like are opportunities cash but there outside level for take slides. and leverage, in laid just thoughts out current any already that near-term the on plans plans about wanted sounds -- to that get So no in to you near-term debt of it and your on

Bert Nappier

really of less intra-month, the Bert. We've near-term or benefit and it's how expense of had been has the for borrow which to has a a a intentional. against little Interest need Liz, nothing there's year bit balance in us changed revolver thinking. Look, come that the really Hi, our to in terms of has we're bit. a down

that then a of we capital and still don't we The might or horizon allocation on And when we'll to some how as environment of want the Day the that we thing year, think we have. have We to what the we've capital brings than or pretty for no cash closer us and different debt about obviously, got market year. to different anything Investor refinancing think the paying that's at of options shared we get our about it's And uses the the thinking balanced. back end about only plans. the at maturity various be the and is

our disciplined allocation are being no for being surprises to really priorities So as always four and guys. on just you capital we again, faithful

Liz Suzuki

Perfect. Thank you.

Bert Nappier

Yes.

Will Stengel

Thanks, Liz.

Operator

is Evercore next the Please from go question Melich ahead. from ISI. Greg And

Greg Melich

the and Pacific both it that pretty up have I on say Europe was to Auto Auto all in follow-up a the Auto want Industrial. much margins decline like looks were the margin, segment turn business. US to on Asia just to make then I year-on-year? sure it fair Is and

Bert Nappier

say. That's fair to

Greg Melich

Industrial is the And the of it. level rate, business? just the expansion sustainable of the how profitability Is -- gotten there to that also something you've fundamental then industrial? side, the changed in but Got on that the about side

Bert Nappier

of Greg, just the that continued I strong changed anything business there's years. momentum over and wouldn't building this actions that's in Bert. on couple the fundamental is say last than other

business, which on was their margin creating Motion is team that has integration improve core of that You the to -- driving to how allowed and opportunity. That continue and and scale in size synergy, industrial high build level, combination achieved executing team in stellar and very a business. additional transformational us a at KDG that we've

business As at we looking at shared that at a level. we're Investor being Day, XX%

Investor gave this we we're think now of hit the on progression the And obviously, level right that for what at I glimpse as regard. a that that what we're to so, as and of Day quarter And marching you towards we target. a next several And, profitability our see based see track right shared quarters. in on we

Paul Donahue

When during this good past. and is you those I Industrial, Hey, the cap businesses, Paul. would Day. talked bit this Greg, about two Auto both Investor the about it think a about just off we've comments. talked in We and

where Industrial we strategy. hats our and -- classic that back be our I delivered And international really years, We team, our our a quarter And teams few is If multi-year to more not you teams, all QX. this a is laid you, it's of tell would out diversification them. in proud off go paying strategy really dividends. could

Greg Melich

luck. and Congrats well. good guys Very

Paul Donahue

Thank you, Greg.

Will Stengel

Thanks, Greg.

Bert Nappier

Thanks, Greg.

Operator

Wedbush Please, Basham from Securities. from Next question ahead. is Seth go

Seth Basham

first is and Thanks effects morning. on forward. My a just lot weather the question good going

weather you the Given the gyrations do be the a balance through you saw through to the on expect sales drag of year? the winter,

Will Stengel

think Will. forward. not weather Hey, I I'm move are Seth, the us as -- the we Listen, -- of it's don't don't forecasting any I in of business in the

of weather. we no, from in outlook commentary impact So, forward or our haven't modeled any

Paul Donahue

call snowfall. I incredible and of this It yet in were sitting been it degrees, back years. shut here at many with a look country down the XX Atlanta, in was were quarter. was January, a parts our number When crazy, Seth, we crazy of at I've

going level. is we're can in on are at performing point what to this going do we're focus all businesses At our to we time, high really all a And control.

us We expect what Nature balance in that regardless the store has continue in to year. for the of Mother of

Seth Basham

terms the Understood. more side? do-it-for-me on the weather basis drag the the was pronounced And in in points from DIY than it side XXX of quarter,

Will Stengel

DIY and from weather I business between a our make distinction of DIFM mean, don't we can a do-it-for-me. perspective. XX% is Yes, I think

-- no distinction between the So two. but there's

Seth Basham

Thank enough. Fair you.

Paul Donahue

Thanks, Seth.

Will Stengel

Thanks, Seth.

Operator

will go for Daniel from question final our Inc. Stephens come And Please, Imbro today from ahead.

Daniel Imbro

as good expansion, guidepost. margin our about taking morning, really but for kind kind follow-up look I to industrial guys XQ, on of a start you wanted Bert Hey, up XX% strong was double digits. If outlook the Thanks provided. talked Yes. at everybody. questions. I growth the of

maybe about of that understood up industrial is for that Obviously, or midpoint as just year. first the guide expansion sure expectation, just year? less up pace correctly, how to the year-over-year be to for that we the X% make to slow still margins would flows growth to the It's headline through the get calling for your growth think the quarter, you coming than quarters, would

Bert Nappier

model low Industrial I for repeatedly digits but the first as margin want single-digit the with high the half, single-digit low full economic you Well, the tell quarterly with we -- even we're outlook to don't that, think to down its segment, year of you I'll we've growth about said the to that year. into on get second just think talk in moderates got, Even our change. half the segment and That when about the industrial guidance giving second of improve full obviously for for we've the expectation could half. all I single expecting conditions, topline which business, on based a

not is well a overall for expansion to as the which looking still perform GPC we on for why as expect same in know moderated that rate the environment half Will margin will But full No. from year that, full second margin it business we're our and basis, you the that well. a full year year, at that the growth QX? and modeling at margin guidance. be in We're lower expand

Daniel Imbro

you the doing in the think question, Great. automotive but on that the kind dead to it horse, up. to I gone of wage appreciate investment a follow-up the margin, of not mentioned I mentioned And beat has cost then color. business you and

in are inning what's like begin to as that in, comp? the type investments to Just a do on those return to investments we kind what on in making business? planning these and could wage line that and wage when look lap on those low guess, I we we you're terms levering of outlook mid-single-digit of

Bert Nappier

spent cost businesses, XX sold, the Well, impact, think inflation so some goods all in of you camp. starting we of down with unique want tell terms moving or topline and so put I just to in look, P&L the I'll don't us the I that months last

in I some that's the SG&A, think into of the and feel the things. inflation of all lines, businesses are P&L. impact costs, And of to heart starting moving personnel now those freight

is go to the it's the there's has been the here point floor back in It's world. really I that and a I US, is on I'm tough. environment, call little just inning baseball-ready, but raised not say that no that the the just the highly call inning this inflationary to of dad To difficult. business. My to question around in the a was on coach, like on baseball that cost one doing

inflation the that give all And facing on of wages. on a to for estimate are indicator you don't leverage. is right want best with I precise now a what range companies

range. been If to company to I to been that the it's probably it's think historically, talking has the a of X% higher end X%. floating closer X% X%, about

help us. I where we're we and reducing modernizing importance at we're can. operations, we're be and you underscores doubling focused of will on, driving down the investments about going things then to it costs thing these productivity emphasize think leverage But faithful initiatives the our Investor to and always the in and efficiency, and on making and heard Day And

we And the example businesses. business International a of gained this and you Motion leverage Automotive quarter the the that with business in the saw great in

data going on contemplates modeling So, guidance as about how I to a obviously, our great forward. that this my thinking XXXX think that's we're point And targets.

Daniel Imbro

lot much for makes color. Yes, all of a the Thanks sense. so

Bert Nappier

Thanks Daniel.

Operator

to like gentlemen, to session. And turn question-and-answer ladies concludes our closing management and back this I any would remarks. for over conference the

Paul Donahue

we listen, And us all of questions you morning. all and it. the appreciate We joining this Chad. Thanks, appreciate Yes.

and the the GPC we all strong by start be we're year around As I proud hope pleased could work with being not heard, teammates great the done more the world. you've of to incredibly of our

business this we continue with -- momentum is to be We're the excited generating.

So, our heard and our in feel comments. I that that hope in today you

of your you and have are interest in thanks all for listen, day wherever So, great you GPC. a

Operator

you, has sir. now The for And thank conference Thank you presentation. today's attending concluded.

You now disconnect. may

Genuine Parts (GPC) 20 Apr 232023 Q1 Earnings call transcript