Advance Auto Parts (AAP) 18 Feb 202019 Q4 Earnings call transcript

Welcome to the Advanced Auto Parts fourth quarter and full-year 2019 conference call.

Before we begin, Elisabeth Eisleben, Senior Vice President, Communications and Investor Relations, will make a brief statement concerning forward-looking statements that will be discussed on this call

Good morning. And thank you for joining us to discuss our fourth quarter and full-year 2019 results. I'm joined by Tom Greco, our President and Chief Executive Officer, and Jeff Shepherd, our Executive Vice President and Chief Financial Officer.

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

duty please our Litigation advised forward-looking we such differ be Before begin, projected those that XXXX. results defined in the materially from in statements and Commission, with filings the and of Exchange of due statements by to are in comments company's Private Act a risks number forward-looking the the described we Securities to maintain Reform no statements Actual and which may made. as uncertainties, Risk include update Factors section Securities today

comments certain results accompanying GAAP press financial results. more statements today's today complete referenced details reconciliations quarterly Additionally, management for is measures. our a measures additional statements and Please comparable refer our of the how include non-GAAP financial call. and We of these believe these our our most providing today understanding measures release gain consistent regarding the issued financial forward-looking and investors in helps to with non-GAAP financial views measures to

this content by in contained information and be statements. earnings will release The the our related governed financial call of

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

our of results. Thanks, morning. good And to thank full-year and for Elizabeth. joining us all discuss And QX XXXX you

year. want the our AAP recognizing network I to their and and throughout by single team of for member begin thanking every dedication Carquest independents

initiatives delivering throughout focus unrelenting we continue on our on as against we XXXX the and strategic made plan many XXXX. an begin With company we strengthening priority, progress to

prior compared sales to store and growth, consecutive of line net an delivered year. sales to with increase comparable seventh we of billion our the quarter QX, up slightly In $X.X top

the adjusted in basis focused income by earnings XXX XX.X% quarter. to to per margin translated of lower-than-anticipated sales QX. adjusted margin our deliver increase diluted operating an of points expanded with also expansion This share $X.XX, We growth effort rate in

our add we're national industry-leading own brand, In we of the DieHard parts iconic and to acquisition quarter, excited brands, the OE our to which brands. assortment also completed of

to full-year $XXX $X.X free delivered the For flow. XX generated X.X% sales store comparable share adjusted increased and of in earnings basis We expansion points diluted with growth billion, XX.X% of margin million growth of operating cash sales XXXX, our year-over-year, adjusted per net X.X%.

our of growth, cash generation, since well the expansion, increase Following in and and in margin beyond, second cash our quarterly year the to our ongoing approved consecutive sales acquisition. confidence board strong XXXX as as our improvements first XXXX dividend

since the this introduced fact, its quarterly XXXX. AAP increase was In first dividend in

over the expect our to more expansion want margin several financial improvements to initiatives and well on as to year, top this OI new growth in ongoing we enable which and I we XXXX, I adjusted turn line for Jeff the XXXX beyond. as details exciting call for performance, highlight Before in operational planned performance implemented

In QX, led businesses. business independent rate, by our and our Carquest highlighted professional growth our Worldpac, Canada

we and best-in-class to speed roof, to overall our professional continue strengthening assets availability, providing delivery focused our value parts customers. remain under improving and to As bring we our order consistency, on proposition all one

MyAdvance, enroll leverage credit us indicators. rewards to platform, enables and online promotions, customer well program, AdvancePro. improving our the online pro customer while catalog, and This with reconciliation professional promotions visibility to information key engagement, shop product and best-in-class our as experience to drive performance BXB data one-stop to involvement. our improves access improvements to enhancements customer ongoing fully-integrated as includes This to MyAdvance

of representing categories over categories assortment, nearly XX% rollout the included in our X,XXX stores, rolled XX of now expanded we sales. backroom out Additionally, across dynamic the with

right a ensure dynamic assortment the better line data utilizing to part the is demand Once help multiple have availability right points Dynamic improvements improve customer we to assortment and of categories. improve top to the close through right place and stock implemented, understanding fully and rates continuing time. in in key drive at that expect we

said, business, lifting will In in a omnichannel our challenging we back much XXXX, QX, That we north. plan the of particularly momentum resulted XXXX for which DIY year. stronger we a heavy DIY build half throughout did believe in of the the had has terms in the

There loyalty. are four four, primary awareness. focus One, with execute areas launch DieHard. build excellence. Two, of Three, here. drive And

we So, customers the number can the among believe first, in and increased our offering brand and differentiate several the we're stores. drive throughout brand presents customer iconic DieHard network traffic very us excited DieHard all our battery is about launching one Advance with XXXX. ways to retail we

creating differentiated to on strong build proposition. Our its a goal is value DieHard reputation, with

addition for with growth potential DieHard our assortment we're independent and our of the confident customers to industry-leading DIY we omni also channel, to leverage partners. professional incremental DieHard While the Carquest will drive see

the the we for a there's brand other categories DieHard. into excited In our DieHard. future, team question, both Advance expansion believe significant geographic Without very extension Carquest independents and are about also of opportunity and

improving significantly of events. on focused we're Second, awareness

our but improved competitors margin. lags unaided primary wide in still a awareness Our XXXX, by

XXXX preexisting, marketing the source a advertising performing plans which will Advance over brand spend. by time. marketing including from lower in we highlighted confident Our We're a new media, differentiate increase are campaign, new significant this

Blaney. Additionally, with we're our very partnership recently excited driver leverage Penske racing to our Ryan and new announced

know online. digital We'll we drive our also awareness to continue most experience as that start by transactions improving

resulting and in online QX and both transactions, grow year. growth full double-digit DIY the in ecommerce business Our traffic continued to

on customers. expansion frictionless of including Our that addition team a reviews of offerings facilitate walmart.com, the our the is for product also on experience product making progress

Third, new for progress we continued QX. of in on loyalty program, our Perks, about app and excited make Speed DIYers our we're launch to mobile the

app accessible experience more to and Our even mobile customers. Perk loyal our make our will Speed

close Speed This point. Perk at QX were first-party added at XX transactions members, We close our to Perk new XX% In X.X the active QX, to under to we members. X our DIY million Speed million close relaunched transactions mid-year, data at Perks that enables we leverage of to When year finished us offering. to personalize finishing Speed XX%.

to to build continue customers. We'll In addition, Speed the loyalty spending we Perks next. our from behind directly communicating and leveraging saw personalization one increasing graduation by tier rates with

and including per transaction, on units weekend Four, our score. execution continues key field coverage net team to promoter metrics, improve

In improve to and improving both fact online/pickup while the both improve customer The our and us members, of in for frontline XXXX for training in XXXX, the team store. turnover our quality roles XXXX in that buy automotive we experience execution execution overall. helped our has declined customer-facing plan

a QX and on led of terms as we category and alternators brakes, performance, as underperformed by was In to winter-related December, radiators. Due products our starters filters. such well batteries weak as growth

varied, on and both in sales performance compared two-year the to increases a our with and prior regional largest our regions and stack West was one Midwest, mid-single-digit Central growth highly Geographically, QX years. delivering

Mid-Atlantic significantly regions the the geographies over our outperformed geographies top Northeast basis Lakes, in These XXX Great regions points our by average. with trailing weakest on quarter, performing and

and experience To all remain on business. for and pro both the customer focused summarize of our relentlessly We customer our our elevated our DIY on growth differentiating improving focus across businesses. initiatives, we've omnichannel the delighting

build pro across simplify and integrate all continues continue Our to across to customer and we banners key MyAdvance. improve experience AdvancePro and momentum business the platforms to

build loyalty a years, execution. launch increase calendar we of omnichannel omnichannel, DIY terms of have with it on in In remains and DieHard, the activity DIY improve awareness, marketing work progress, plans strongest in our while to

our expanding profit beyond, Moving first our we're XXXX footprint, per improve assets on our includes pillars where underpenetrated, and optimizing This priority key margin sales unproductive is closing store. existing and to of expansion and or where to appropriate. underperforming for

locations. opened largest we professional drive footprint new XX our share XXXX, and to professional with continues branches to Starting to business on growth. our add continuing In Carquest side, team independent the expand new our Worldpac

the addition and of Worldpac product improved and effort growth This Part has continue business. assortment new our the also opportunities, banners Auto to International XXXX. sourcing of across our our productivity started throughout will existing In to team locations our deliver consolidation professional and

average In goal end Carquest we'll addition, confident our end improvements store are the roughly at of $X.X per per has of on $X.X track gradual time. achieve continue and $X.X XXXX and from the this consistent XXXX. increased our million across per to execution million at sales store Advance We're of store million our over growth to and behind stores,

we our ongoing strengthened and includes Separately, to more which address program a stores, of refresh the opportunities continued footprint. within retail our store optimization structural store

taking the both and sales will We DIY actions to improve benefit and profit per store pro. we're expect

expansion is mode execution within full margin our this area in on And now we're second say supply our Our priority to transformation. chain. of I'm critical pleased

and Our footprint supply chain significantly chain. our team our plans has done will a we're enhance now thorough we supply enterprise-wide believe that review entire executing

our clear opportunity a have further rationalize over years. we to today, the centers coming footprint distribution XX With

while so at more customers. service work our have that the part win in optimize imperative improving we'll time, right Importantly, our the It's often. to we DCs the right place network the right to

cross is banner late One chain began major of deploy which initiatives to XXXX. in supply productivity our replenishment, we

by scale markets, we the we're capability turns Once DC expect this throughout be improve cost to Following our lead completed will productivity. significant fully and and expect mid-XXXX. drive we product availability, successful deliver implemented, beginning now to

or In as several to addition, one significant can network, the for Carquest to you systems, and are we WMS Advance in a management across continuing imagine consolidation warehouse short, invest system of undertaking. our is which

along were with our we our is positive WMS high performance are our Not multiple engagement our in processes fees. turnover When systems, trending a scores and turnover R&D chain DCs, we supply extensive with down dealing direction. manual safety significantly began and transformation, only now in and

team and system, before help progress. took right stabilize in it WMS to new to confident place While further right we team operations now I'm build the a we our have transformation the time introduced us

our largest terrific DC that first And new our our recently one Importantly, decrease. platform to to team the is in conversion start. of off completed WMS a

can system, DCs, We new more across coupled implementation optimal better allow turns and a costs. so management common run of product us with inventory the expect will initiative, to this at we our labor availability provide

will supply I'm this on in what agenda, track our XXXX currently beyond. excited We're deliver with chain for and and

Our on focuses category margin expansion third pillar management. of

across brand collaborative a a with material standardized partners. growth to facilitate through Here, we've been own expansion, has This key optimization, pricing. our categories unit approach and profit strategic supplier highly effort and cost implemented

benefit material MCO performance of year. both in in progress QX tariffs terms good on we reduce while the XXXX, unplanned In full cost the and our optimization, made for of

brand resonates professional brand out working to half our ensure branded highest brand We're quality Carquest so outs in back of our in as we with expansion, roll this own For garages. XXXX. began the additional our products strongly to of roll the Carquest

In parallel, for of today. opportunities best with exploring our suppliers, DIY we've this DieHard being been the example brand with own

management ability This to be Finally, store to across new our we centralize platform level, will new capability efficient pricing benefit will provide to deploy our price execution and more mid-year. pricing. this if of down enable the of needed. right single consistent to channels by big expect price A all

performance XXXX as make Finally, SG&A team productivity expansion. margins costs. of rounds our continued out the was to our managing pillar our in our highlight fourth progress a SG&A excellent of

In labor we the leverage we in system lower-than-expected were and the inflation in from including spite rolled largely store costs, sales, improvements labor which level QX. by was as store fourth a wage sales. our quarter, driven This of to able our out new labor-related management of percent

efforts culture benefited diligent and to ingrained claims members is how a liabilities work, our in the our organization, a which leading and in Additionally, expenses build team our safety the of quarter reduction year. becoming to the across

we our LTIR, by the in injury total impressive was represents to compared our incidents, time by or XXXX recordable injury fact, In reduced X% worst XXXX rate, lowered safety XX% and an which rate lost

progress to the make continue on in quarter rent we year. in and Finally, the

roughly leveraged we year, by basis full points. the occupancy our in basement For XX

XXXX. we To we to and in while, across drive progress technology, to up ecommerce enabling supply margin performance, the SG&A good significant at us leverage SG&A expansion, time, lines, made multiple in investments same wrap chain our made

continued expansion, was top for we of In a and progress while AAP registered making long-term year growth investments. summary, XXXX margin another important year of as line

would XXXX In for With some you to keep XXXX, previously terms requirements. investment in additional year in we've that terms of of this to for items our that mind. discussed said, outlook similar be

First, as in the which half experienced the the demand expected of you probably know, is front to history, impact warmest year. in January we've just

loyalty half investment coupon we're front of standpoint, the platform an in expect in XXXX. our we AAP making also elevated to From continue the

side as includes industry increases continued equation, in positive the vehicles as increase years attractive. On well of dynamics in remain greater the the car than very park, an This driven, old. seven miles

and favorable XXXX. the pro demand build top to All we are expect line have Further, projected on to momentum our a impact these also throughout DIY initiatives through year. of

team's our margin progress strategic trajectory in ability expansion I'm deliver Finally, continue in our further objectives our confident against to XXXX. and

are in release of we contemplated All these full in year factors the guidance our morning. this press introduced

potential the about AAP, to excited of tremendous to fully driving the remain enterprise the the ahead improvement several we summary, years. over very opportunity consistent next In and unlock we're committed across

it financial turn over performance. that, our details for on With Jeff to I'll

good Thank compared profit was prior-year fourth the morning, you, million, was gross which adjusted essentially flat And approximately Tom. quarter, In everyone. our the $XXX quarter. to

profit the expected partially XX quarter. These from loyalty points declined by gross in taken Adjusted quarter, as Perks in headwinds as continued were enhanced of offset the primarily program the XX% investment actions Speed well by headwinds our LIFO driven basis pricing margin prior-year X.X. headwinds, from

Our was in adjusted QX million XXXX. approximately SG&A million $XXX in to XXXX approximately QX compared $XXX

As our a XX.X%. percentage adjusted of basis improved to by net sales, expenses SG&A points XXX

with pleased which members' team every quarter. leverage to expenses enabled us throughout control dedication costs I'm XXXX, to our

across expense labor-related the leveraged key In and QX, and again on improvements insurance organization. safety focus claims training our at drove once programs we costs and reduced

nearly XX% to the operating QX improved quarter. was compared Adjusted in prior-year which million, $XXX income

rate basis X.X% OI points to increased the adjusted in margin XXX Our quarter.

$X.XX, for XX.X%. of Adjusted increase was diluted EPS an QX

the XXXX, sales X.X% were X.X%. $X.X sales of compared comp billion, increase and year, net an For full improved to

for gross $X.X to profit year margin profit basis increased Adjusted billion the to adjusted XX%. X.X% points decreased XX and gross

for was a On an which adjusted points the basis, billion. improvement rate flat full-year XX the XX.X%, to SG&A XXXX basis year was of SG&A compared compared Adjusted year. at previous $X.X to was our

operating Adjusted of the XXXX. to the million, was an compared increase year of for end $XXX X% income

Our margin to basis adjusted was which the XXXX. XXXX full-year increased for points operating compared X.X% XX

EPS Adjusted compared at $X.XX the $X.XX to of increased end XXXX. diluted XX.X% to

$XXX negatively million working than was both XXXX, capital our higher-than-expected receivables cash flow, impacting which lower Factors include Moving to expectations. in free our and inventory. increases delivered we in

vendor an carry mix Worldpac Advance shorter realized associated term of well unfavorable year-end driven inventory unfavorable within terms, in at was outflows also within payables. as This modeled. branches, than cash resulted impact factors payment payment We an Carquest These in increase the mix vendor an Worldpac as and previously by opening we which higher payables. with

XXXX, million, spend Consistent with in QX increase full-year year-over-year. CapEx an million, XX.X% increasing $XXX our was to throughout capital spend $XXX the bringing of

information chain concentrated our As more two technology on and critical projects. discussed, previously of we've investments spend capital XX% our focused than was XXXX, on areas. primarily have And these in supply

systems, near completion lack with next integration, XXXX our investment spend one-third I'm in XXXX pleased initiatives office address focused on systems IT footprint. continue continue of to expect store Our beyond. we longstanding of Nearly across and system in in critical which and gen to back IT customer-facing our and upgrade our the of

In which team this ERP addition, create and throughout this I'm will continued across XXXX our on the XXXX, We confident finance diligently of office organization. fiscal release at first worked new our our our initiative systems. live finance our project, rollout integrates our the efficiencies of in system with significant back start went

our network with operations. Advance network the to distribution legacy addition, improved year including and within upgrades DC team enable across our In relentlessly single XXXX, chain rollout our efficiencies and throughout Carquest system warehouse existing the in supply stabilize in continued to We centers. improvements XXXX, worked accuracy management plans invested of for additional and

our million investment – we with financial our and $XXX quarter a maintain grade repurchased priorities of invest line in to business opportunistically to fourth return $XX year. and the stock share of an the current In for Advance approximately during million rating, the shareholders under program, repurchase capital nearly total –

cash meaningful from the ability confident generate we to our Importantly, remain in business.

approach approved $X.XX pleased a our yesterday, quarterly our balanced capital $X.XX important which As to shareholders, our to We're you investments increased we transformation. meaningful returning saw cents. our committed was while to dividend, board to in are announce drive to to has improvement a making from

execution begin objectives and focused to strategic we against priorities. in deliver disciplined our financial on our we our remain As XXXX,

our continued we XXXX flat our a said, million, operating deliver cash be to sales comparable expected IT $XXX XX $X.XX we tax continue this points and to of XX morning, several million. that store our management, for cash of billion; to metrics key $XX.X XX-week free to to supply million disciplined XX%; minimum investments; including approach With net capital on expenditures full-year as XX% of guidance X%; points; to $XXX introduced of is expect margin flow to expansion income billion chain rate adjusted $XXX basis basis of focusing XXXX growth sales and we

XXXX a reminder, a week. XXrd includes As

million today XX $XXX net approximately points financial and sales week provided Our $XXX basis estimated XXrd outlook includes from to an in to basis XX expansion margin million points of the contribution.

partners today In to all for independent to summary, progress want I with members team our effort our began XXXX, their that throughout objectives. which and gratitude continued toward our enabled Tom transformation our reiterate

on ahead in to approach further to capitalize the committed remain improvements our in still XXXX significant disciplined remain AAP. to opportunity for We

open address your questions. to that, call With the Operator? let's

James. Certainly. [Operator with Raymond Instructions]. Matt McClintock

Your open. line is

Good Yes. guidance wondering was about for the morning, I everyone. XXXX. initial Tom,

Just you comp of give December warm us expectation kind how you idea an of factored expectation? from the Can X%. is X% in to that weather into

Matt. morning, Good Sure.

let So, on that. provide me some color

we're First the expansion we're this road. very that the in dedicated we out margin making additional we've line in some laid And being objectives those past, are includes long-term of similar that growth designed top enable that down XXXX somewhat to regard. and and as and all, before, year investments the XXXX strategic to both investments communicated

at other as mild winter we the on least the this looked sales December/January we and is of guide, at a lot factored at So, point impact compared timeframe work an we years. did in of the to what extremely

we're it's very going the sales of half the early sales on this, in December/January. front northern in that's and to about one valued of North have the prudent on warmest You impact XXXX, that really year. the this top year, we've the guys was for America the being the guidance. some history It line And our fact year, footprint, of have the written in XXXX. given Considering

XXXX a excited for sales term lot we're longer and there's front. about very said, on the That

As $XXX seven going from to are addition car the that, cross the years this the you've Miles The about is is demand We're vehicles sweet park industry million others, spot year. continuing increase. in drivers and grow. positive. – vehicles driven heard of And growing. to very to in to the continues greater

So, those whole benefit are the year. all positive impacts that'll and

build Separately, obviously, year, that DIY a pro including number DieHard. initiatives and of of our line the we'll across top we've launch got throughout

margin So, very expansion plans against cash of and robust in flow, continuing we're to them. are terms execute our and

blocks We've went building the that's that XXXX. of years do nicely So, deliver growth We've thinking team a row to a great got in that of margin again in The together. poised sales. that to two was work kind expansion continuing are our the sales plan delivered intend guidance. into to we against and and

as you then, we And going can and plan think How launching Thanks. follow-up DieHard just about we you through the how from should conceptualize how the a it launch? about launch? specifically, on should talk about that benefit

press original as of tremendous Well, to the when rationale Sure. DIY. the inside particularly It and we for behind us within talked there's a of financial release, differentiate opportunity we DieHard. amount issued us strategic really gives

As done we'll the customers. differentiate differentiate DIY we've all DIY customers. you customer that says to work with issue. us that. And be with that able number business really DIY to is And Brands It there. one to our matter enables know, us traffic and DieHard help can

unique build plan DieHard position on with pro capital. out a also We to

And we're excited about that so, also.

plan specific And year working obviously back or needless diligently buildout half. the for right timing to the the more the it'll the of DieHard. communicating but we're As not us now, that think say, any half benefit than like in front very you anything we're launch, launch about to

color. Best the luck. of I appreciate

you. Thank

Seth Sigman is your Suisse, line open. with Credit

taking couple I'm Thanks morning. a ask the to upfront. Good guys. question. Hey, for going

guys that it I'd cadence, was observations seeing seasonally, December your love what it in have challenging. see just prior you were been Just to because better should like, the a to QX seems obviously, place. very

color on how any to performing prior quarter just was So, the December the slowdown?

that points XXXX, as SG&A? you the XX between guidance, gross extra XX the break bit excluding basis the margin just little down points guidance then, more second, to you basis And margin think and about up week, just a can for

the benefits quarter, color past related any be piece, that sustainability just you to the this helpful. of That'd the that SG&A saw of quarter, fourth you. that? on And Thank some

Seth. to morning, Good flip Yeah. I'll question I'll over the Jeff. the second take one. first

slowdown wasn't we of a it level. October, In We in a out November, called see that at was terms marked December, national in December, script. did as the our it difference but different geographically,

in in December, in We in cold necessarily the it the very in all, it Midwest, down get Northeast, got very was of in Central, benefit in geographies. had really And when warmer Mid-Atlantic that as we a First November Lakes. was overall. pulled those our December much October, Great October. that business and strong those geographies, the West, We into in didn't

there the So, wide geographically quarter. The the is was us I headline think distribution difference. in the for quite

top we As basis three. between XXX over said, and points three bottom the

you do the cover off to other? Jeff, want

quarter, guidance sure. marketing related, program improved store with start labor the quarter. in the spend. broad Yeah, I'll at some fourth XXXX. underperforming SG&A for fourth on Three saw labor of that. Fourth McDonell quarter, Seth, comes and categories. in Labor, then some we the XXX and pulled of did work looks points. We basis our leverage the into Jason back in you improvements as some We saw

claims, around assessments. we've quarter and this improvements some favorability in insurance was a And then, in some fourth and for row, our really actuarial seen the of

both into the are of be. the improvements out to year, come valuation are future And your what and to claims an you of going costs the contributors in those to are we've key going slow. throughout actuarial two So, volume the severity down, estimate claims. think what is seen albeit Those to

sorry, – see think We continue can going of believe we're I in safety. sort there. XXXX. leverage improvements labor, Labor, going of just we're to We So, see discussed. areas to continue gets into to what continue Safety, to of the to of we improvements supply that myday.

and about savings also on going Worldpac. integrations talked have back there. the second We've half And We ERP. to We're office. AI see integrating in the we're going

that, get see savings SG&A. we'll So, around synergies as we to continue in

to amount investment. to to the going savings, going in where see have in to think people, supply Similar we investment OpEx we're going guided significant we this chain continue think and a XXXX, in Stepping in year do expansion, we but we're as we're marketing, to we IT. year, also about last of have to see back what

At our and we And the in gross margin that's of improvement more this point, margin. largely by to see think going two driven factors. we're

is for First supply working we've now. we on XXXX. the years supply more said to And see in We're this was to chain. a going time. start couple to been it take And going in chain those improvements

And sit we then, the of going as label the is which the of OpEx material cost pricing. second items, a within as today, and gross combination combination management, think we take SG&A to And on investments SG&A. those optimization, some benefit less margin in private and is we those category more MCO, see here in really of we're

Thank all great. the for it. Okay, you color. Appreciate

Welcome.

Michael is Lasser with UBS, open. your line

taking our This lot for Maheswari a Lasser. for morning. Atul questions. Michael is Thanks on Good

weather is First on commentary. question the

it year? of you for of the half have in XXXX, similar the in weather to winter, the why So, factored the subdued believe only a I kind impacting Back industry had sales mild year. the led we throughout front when

why be this different? So, any would

our did category quarter, the differences. sales. see half actually back impact did We We least the that. the second for in see geography it we by but we geography. We category, an of in by the those years, find Yeah, work, compared not at didn't did

helpful. follow-up flat I'm where trends to for needed the achieve current the of to guidance? back trying are you Basically, the my as question, acceleration the guidance in comp first talk in about you it. very quarter? year? to your understand It's can X% tracking this Got degree better the half to Basically, full And compared

in-quarter obviously, we But, not say warm. on was that did we're Yeah, very January to going performance. comment

our So, guide back in the implied the is half year. in acceleration of

you. Thank

with Gutman line your Stanley, open. Morgan is Simeon

Kessler for taking Hey, Michael Thanks questions. our on Simeon. for guys. This is

potentially to solid about XXXX. wanted the growth guide expansion. you, how even operating guiding margin with the the ask line? And And given relative you not like can just to I for sales expectation First, dependent that, on on get think to confident of especially how still and the top backdrop. really you the given margin, seems wanted regardless are headwinds? composite, margin a gross achieve can comp you ask lower expansion, it a margin just much that is you of It weather fair to comp the growth

about delivered sales Sure. we're we quarter fourth fact our than expansion amid margin quarter, the in were the Well, first excited that, where we lower of a all, expected.

So, we've to got expansion, margins. And We've always have we four on a of sales we've the couple opportunity big working expand been agenda upside a not of for known the dependent. now. that territories for margin years our tremendous majority that is

than out one. the you that's a supply think about which than replenishment, store we're roll chain, a previous going if So, more to banner nothing store essentially is repointing cross the at distribution center closer to

full right rollout now. in that's So,

also sales management standardize throughout supply system just our chain. supply there AI, to chain of Big will enable to not to do our availability has and to Worldpac for offering labor integrating us platform warehouse not But sales the is dependent. management mentioned. nothing That and up standing us with dependency. any our the a but opportunity that as Jeff We're to money, only assortment customers. most save agenda improve We're

down we're Separately, tool at pricing that function. platform up right of It can't standing store price us category we're rolling management, brand own of middle in has pricing and to stood out, XXXX. level will regionally, – inside Jeff we new a – enable got we're a which that platform. up price to We've the our a software do today.

So, necessarily dependent. again, not sales

really performance platforms, those there indirect independent on sales. our back procurement, is of sales but dependent, inside our SG&A, of nothing office just of medical, the Jeff all are things whether going safety And to happen integration then, covered, performance, that's improved of improving

as want be sales it obviously, there, rapidly as as sales is as So, I building to on we possible in might our not other opportunity to key on we expand and companies. think margins remain focused is, point dependent our the grow plans but our

so parts out exposed know a than whether at I we've seeing be distributors what less follow-up, far Appreciate suppliers hearing China are are been could on guidance as major you comment by thanks. DIY disruptions? that any coronavirus. and thus all auto any or that the a to some the with Great, hearing for little your some contingency there's of DIY color. advising seeing of what competitors. But you're we're supply And some that guys of just you're building could into your constrained you

be you from all, coronavirus, any as clear, first much said. from to field. our the playing does contemplate business standpoint, a level It's impact a of Yeah. Well, pretty guide not

the of All But source other players parts our from to in industries, low. industry China. compared auto relatively is erven major

we've at in at sourced of Advance, the from China. past, terms in the products think teens least in I roughly communicated we're

We We've inventory got, have in our that the infrastructure product. in Shanghai. the obviously, We've US. has additional several center depending inventory here a also own on months of got distribution

at moment, and So, XXXX. any supply it situation it's, for we're dynamic monitor very we to monitor we've But going in impact a don't the us got closely. very But closely. to disruption obviously, continue continue to it see in to

thank Right, you.

is Seth Basham open. with Wedbush Securities, your line

chain. making integrating around My lot a chain your of progress, morning. question your you're is Clearly, Good supply progress. supply

that financial give you'd benefits you've of be things types would far, us If really other you're on DC some thus the realizing that from and helpful. converted perspective that

Seth. Sure,

but know, efficiency effectiveness going the chain, only And we well. it's are we're us of it's Again, improve First might doing opportunities not what supply about Slone expand liked. the than chain. as excited of longer is one up of I'm Reuben have inside the biggest his effectiveness, to improving of our as not supply you and availability. margins, really all, only taken team But the

he really think that three big has focused So, on. they're I chapters

leadership driving reducing on focus we is where a of in and in on in to first been DCs, made a XXXX. The execution continue make which number lot upgrades there's progress XXXX. we'll a turnover progress believe those of I on

first make I that's if driving system, the distribution ago. The cross supply again, up, through replenishment, covered banner it exciting. call really optimization, second changing execution our was is better. invest very new chain. that I WMS system. those center we But, actually you the our DC will, physics, a And stood we've WMS minute the to at of

remarks, It'll systems, we go the on of a make across availability As system are single us. better processes. and, is in help huge management going it multiple manual we've which warehouse this warehouse about had actions and to upside us those standardize the separately, to has And Advance/Carquest We in that invest DCs. Worldpac our prepared for management talked entire obviously, lot our a indicated part of improve network chapter. also AI to

automation we working we're projects And And then, in we've DC things got talk on. innovation. about that our like there, third,

So, chain the is supply value of agenda significant. productivity the

chain. at I our supply not the indicated in top within result. but of confident growth to ability availability it's only a our expand improve think to margins, we've there said, I And And right top as drive opportunities improve margins. and very I'm as to expand line

XXXX? year improvement to That's through ramp And you think really follow-up, you from supply year should initiatives, a helpful. also gross the them mean do And that ramp? margin that as financial benefits the would expect over the about just as similarly, the chain

supply in through at gross year the expect case We're point made other of chain throughout margin think a coupon I supply leverage areas. Jeff we've and house. year. And front-half Speed that a on chain to it's pretty the distributed investment of where That's the the of side the mentioned Perks. the investment Yeah. mostly now evenly in inside we

So, uniform that'll in but back through year. half, supply the improve chain relatively the is

much. very you Thank

Scot your Ciccarelli is line RBC, with open.

Gustavo Scot. on actually Gonzalez This is good Hi, for morning.

quick one the on quantify if coupon during to quarter – of from margin know wanted the gross can comp impact redemption. So, a and you the just just sort

we a not to Yeah, what think what the going specifically, out quarter. a break that third in similar but We're is experienced it basis. it about comparable to said we've was on number rate

And had comparable on margin so, it than our in saw net third quarter, a gross sales the impact we

it just Got kind going be the helpful. mentioned of year. go-forward or Is similar be then, what impact And on of going helpful. That's it. to kind would That first on sort decelerating degree? a to – to basis, of half just anything it's

we original with Speed coupons available. said obviously, was no the what are associated – Perks Yeah, that longer the platform

So, they're expired.

basis. It's half of greater did new seeing rate than to the the redemption It this to add making. we in we us we gives saw were a the – But less be is XXXX. at less we're of on us investment than it's still for So, important we But beginning back year. think an members. able

million Speed added As to about we said, members a we Perks.

We so to also are people, leverage first-party number about And people our and net retention the members tiers, in is seeing we're to allows less data. think up we're less – in, losing a that million the quarter. traction, and grow. new continuing then, if you us and graduation, personalize We're attracting graduating about so

with about So, improve loyalty its and our our to Perks very loyal most customers. Speed excited ability

it. guys. Got Thanks,

Imbro Stephens, is Daniel open. your with Inc., line

taking for a Jeff, MCO, one fourth in quarter, helped was on success, the degradation. sounds kind big the for it Thanks you. margin of guys. our limit like, morning, good it Hey, Starting questions. gross

of have the about optimization year you're in that along through today ago, or there? far And XXXX said should savings. a guys material guys through tailwind think XX% capturing I capturing opportunity you cost How are terms about you diminish unlocked we more those savings?

The cost really optimization iterative sure. an Yeah, process. is material

So, of all our been through we categories. have

there. So, it We in the at be year now we've but financing. the maybe significant through, we're costs, packaging, have whether it categories think been aspects, ago, of it through that, all back a a be supply process going looking be certain whether whether already we various chain opportunity we're of still

back ongoing bring enterprise of started, on to first an And focus. We're now as so, first an AAP/CQ Because to basis. looking continue in when at focus enterprise an we're do going that it kind our at level. we going AI Worldpac. was we're And and also to the round,

we're going again, believe benefits and to on We see to So, in to to beyond. going that continue really XXXX iterate that.

Tom, just think systems expansion Helpful. I frame XXXX. savings take full the to gross full or when and and be run we in as cadence a Is the that And new further, then, the cost? step earlier first an systems margin question. there? warehouse the back from the of that time rate But multiple when a rate we maybe see should follow-up half of think and in kind run you should XXXX talked to mentioned of

think inside Daniel. timelines, of different I different right, initiatives, Yeah, have the –

terms in optimization, DC of that's out couple a going over years. So, spread to of

Okay? That's two years. to three

middle replenishment, we XXXX. banner by of cross complete the to of expect terms that In

So, of that now Okay? realize time the of months we'll kind full out. freight process XX in market through We're location that's market frame. right the going we're pointing and essentially by that and stores benefit more at by logical a just

a up XXXX that's the as than that. make got going we've well. We've, going In That's timeframe. building. through by We more stood We're one take to system, longer warehouse terms bit XXXX, ready. little that of to management that like sure got obviously, everything market market

date training We how Part that depends It the with able to XXXX. and haven't landed on Worldpac/Auto final early needs transition we're make integration, these and the go on there. there. everything International to quickly DCs the

get there. supply got you've leverage a will expect benefit. as we to we the year, and So, of full And But then year. chain combination supply next I said, things leverage the this chain

of XXXX, you're into big going think you'll full of – I most the initiatives. the see benefit see to

guys. Thanks, helpful. That's it. Got

ISI, Michael Montani your open. line with is Evercore

a Mike. shift in little want this talk multichannel. bit Antonio to just I Hi, for gears about to filling is actually

can a also breakdown consumer DIY performing? a So, is partnership, the is Thanks. the segment? also, meaningful that, mentioned give you a breakdown strong, are commercial you walmart.com Because you how know, you DIY from – before earlier, seeing can I the to give impact of but

Yeah.

take tap We to all First to – improvements launch we all, We the at year. least the in going half Perks. we're in of put in attribute isolation based to total. back going that we've initiatives that yet I'm in half. on in year place we half the this did part for there that upside much of back in were terms front there, improve so on very XXXX the big Speed but improve There's do of into versus of of the DIY DIY, the did focused us that really the still in we're of where

not been sure initiative great as we and the And to that Walmart continuing is experience What we're with on experiences fulfillment for we've , best-in-class. partner meaningful go yet, number Walmart the a online making the through work focused is with the we're and, they've DIYer each working is well. team. very is to working experience customer got a them, our on ensure obviously, this.

the launch, sure that we before is right when comfortable guess to that. got point. the make we're those feel they feel we've the key categories, and So, those adding customer experience comfortable SKUs categories, with with to different we where ready that And is launch I we're

Is just XXXX, XXXX? be seeing will a long-term it to that. right. example? see Or All benefit initiative realized of this that you're say some And to follow-up more there in is quick a fair that in for of that you'll

a have they when where needs the We'll we going experience we making with sure customer on meet long-term point, is on partnership benefit it have customer center best-in-class. is is do some focused on, we And making that and definitely kind of all experience of to team. sure see everything the we're be. that much the together your the at going XXXX. in multi-year very That's with We're very to that But initiatives Walmart. this with

Thanks, guys. Got it.

your line with is Jefferies, Bret open. Jordan

Hey, morning, guys. good

Bret. morning, Good

you about you're inflation on talk what saw inflation in what quarter you fourth Could and to the impact XXXX be? from expecting

Yeah, sure.

a right pricing In X.X%. we're a terms X% modeling of on inflation pricing saw like-for-like XXXX about And standpoint. about SKU, inflation, around, we for from

the be will lap X% first the sort that And skewed is or evenly half you equated? tariffs that before of to

Yes. Yeah.

So, tariffs that's of including the sort are – same.

question a then, And Okay. optimization. on DC

count? in right do of of buildout might the years, what's in rolling the you require? three got see banner, the of number DC As DCs how And being? the some of see that DCs what you or currently you out many do kind you cross XX you If future you've what start own

Yeah.

there, buildings. specific do number DC First We've we've own our sure the announced of that Bret, all, to cetera. a obviously. got we're thoughtfully. want provide these not We And we those to in going people et make it right way, very closures

by that So, do going us at geographically, New can we of our big challenge. very that ensure at in smoothly. break close stores years DCs a have and out. looking and out that's relevant the York for But, we that inside any repoint how did we're the we We in network. a And of there not and to to rationalize don't service further gone obviously, opportunity sales is Armonk

to we've So, total we've that got in date. up four now to we're closed – down. And I it we've think

that just it's phasing of out matter So, a over time.

So, our we to you'll people about and to when chance hear say speak first. that have our we've something to more had

get to get In terms yeah, to that. owned – – you have back back on versus own Jeff to We'll you of we'll on yeah, on – lease. don't I that,

portfolio. The more the in question what's was

there in what to distribution? you a are If to have three of do your you need XX-DC years, or you need you're out most build rationalize that DCs network going see to

We also do mind, most Worldpac feel out California. we we have have of like in in Keep we need. there places what

the assortment all So, banners, look at as across integrate of to we all of starts the Bob the the company. assets

just and blue, will. if not it's red So, you

Thank you.

back closing call the time. this There now would I over for are remarks. presenters questions turn like at no further to to the

in our morning, gradual Well, to consistent, thanks progress top and meaningful improvements this objectives, you line for journey. including an making and everyone our as for progress expansion heard important morning. ability long-term further beyond. strong Thanks to margin XXXX joining. cash this confident I'm enable joining to generation. year our in growth, in toward we're And XXXX deliver us was team's

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

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