Advance Auto Parts (AAP) 28 Feb 232022 Q4 Earnings call transcript

Hello, and welcome to the Advance Auto Parts Fourth Quarter and Full Year 2022 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.

You may now begin.

Good morning, and thank you for joining us to discuss our Q4 and full year 2022 results. I'm joined by Tom Greco, President and Chief Executive Officer; and Jeff Shepherd, Executive Vice President and Chief Financial Officer.

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

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

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

turn me let Now call Greco. over to Tom the

good Thanks, Elizabeth, everyone. morning, and

results, news year. to Advance's is I'd CEO Board to end for now addressing I the X our the of this that informed deliberation, to at business not chapter, by announced like getting quarter important me, the Before next into XXXX transitioning retire details begin begin succession After family but only of I for plan the I've for year the months morning. that the of and believe my time fourth leadership reasons. and full right the for

to to in successor are play final strategic help a strategy. the multiyear we're as of success ensure our updating next long-term my plan of role in undertake X-year First, the year and our process of will work this the The enable Advance. we timing

both a facilitate committee and will committee conducting and thorough a identify to with succession work leadership be the to that comprehensive candidates smooth Second, search external me timing The successor. the this allow transition. considers and ample for transition internal time of my Board's will

themes our long-term a finding of value. have we that who opportunity me the to our shareholder plan so customers on In drive mind, this on and we our call to you'll cover continue focused the from and today, ensure ahead. With capitalize in meantime, a us. continue trajectory execution the to the 'XX committed lot ensure deliver for on hear will let key significant I'm are can to We Advance candidate provide

not the we of into led First, we in continue half with QX, results the decisive in to took we're happy expect in our that actions latter improved the year XXXX, XXXX. while performance overall and to

Second, initiatives and the majority after improving in us, transformation the time now on resources several of more integration years significant of to able execution. complex investments we're focus behind and with

our includes plan our we on focused leveraging behind TSR drivers. long-term profitable assets accelerate growth value to Third, remain our This sales our channel. differentiated shareholder X and largest professional in to drive sales

We more us market a helped we meet our positive top XXXX not So get leverage members improved increase was expectations. customer DIY results dedication overall and of footprint, year fourth end our and challenging gain our on the note. in the started. expanded and brand let's team results The for a to AAP line Well, work the DieHard hard did delivered quarter share. year as loyalty

and pricing line stronger single the believe to and quarter. important discussed inventory actions to We These to most disciplined to continue we accelerate driver actions we is we availability the parts contributed results, which XXXX, execute top last throughout improve expect growth.

to We and share $XXX our than adjusted finished of in buybacks in returned expanded million also year more form the and margins dividends. the operating with shareholders back cash

DIY sales growth QX and by in mid-single-digit our at performance. omnichannel. store was X.X%, increased comparable increased Looking QX comp Net X.X%. sales led sales

was Our professional quarter. the slightly for business positive

including new XXXX, most and As revenue California branches, stores we opened planned we expand our our continue incremental our are to locations of footprint, locations. In providing XXX new growth.

double-digit strength in sales our in compared increase led QX continued growth to perspective, with by a a category performance was year. last DieHard from QX at batteries Looking behind

points. primarily in driven press XX.X%, from also outlined earnings change note QX, margin mid-Atlantic the diluted the per to our data. omnichannel our and margin It's gained outperformed We of fluids share adjusted benefit operating other Adjusted share important income DIY inclusive increased our basis strength operating we functional a oil. one XXX of in expanded by regions. Florida syndicated based increase motor we In on West, income and the in Regionally, saw the in of release. currency and by subsidiaries quarter

results respectively. sales X.X%, For year, increased X.X% net the full and comp and

margins basis and to income operating earnings Adjusted grew profitability. adjusted and points margin XX Turning expanded share X.X%. diluted per

headwinds significant to was XXXX, throughout California SG&A As one the discussed related expansion. of our faced we we most

were costs above start-up for Jeff initial discuss expectations year, significantly Our for will further. these our stores the which new

a through of gone we've know, you significant transformation complex years spending several As investment.

majority quarter. of performance, effort we're the to on more able operating the this discussed last focus now behind driving opportunities and resources With us, including execution

in-stock in oil. targeted strong were by First, batteries front made to as categories. share rates were investments we DieHard that SKUs to categories Inventory investments the more the and important in room to note closer parts customer. motor sales and hard evidenced growth concentrated for It's within DIY get gains quarter, backroom

supplier balance saw improvements and in-stock levels our categories continuing partners these to continue year. in QX in the we in-stock We're modest of categories. build performance to work the close levels throughout these in across collaboration within ensure and expected, in As QX to with our

on our expansion category continue penetration, strategic strategic margin we and us. management sourcing. focuses strategy execute pricing for strategy, to an important driver own gross brand This Second, of

DieHard the penetration, continue brands and for to year investments. own options. Last of of industry a provide year strength terms dynamics. leverage best as targeted the we also talked made pricing an to surgical and new reviews plans we've we'll better we about good, us quarter, monitor performance, mix, of XX.X% of In our investments, and ended which detailed at be mix closely important points needed price and capabilities make Owned differentiator basis to brand increased adjust Through Carquest. XXX prior given the with and of behind compared

action mention will other value of to XXXX. help believe add I a items growth couple initiatives, drive and we in these Beyond want

of DieHard, We launched recently our and we Climber, appearing Titled the brands and who build this a Marine Diehards and campaign DieHards climber, power. our media help is documentary-style First, attributes reliability, DieHard embodiment Advance's The drive power. on We're campaign and remain campaign this is Choose world-renowned a focused video Ennis, of to both theaters. confident building social Kirstie and on continue Advance. featuring durability Sergeant in former to pages awareness of XX-second pricing distinction debuted will

members, of share We transactions continued to we X with XXXX, DIYers. with year-over-year. grew our our Second, customer active program, of expand increased continue and XXXX. Speed percent performance wallet by to in by points in basis In nearly driver our increase company view XX.X and million XXX Perks, as a we loyalty DIY our members, strong finished this for growth quarter XXXX million contributing to membership the

DIY growth. to capabilities in both BXC Pro. we conversion in invest to we our Third, digital website, continue shopability and improved higher On and drive

by in efficiency continue integrated into professional app, also Speed customers and with more optimize design dashboard to we estimates. procurement We homepage and drives and platform shop user featured Within Advance for a mobile including management professional, This business Perks invest providing promotions. products with the better our Pro of and placement doing new ease delivery for systems. members

in significant In penetration. a increase in addition, digital we improved which experience, our resulted BXB online

start a strategy longer-term of grow speak to professional from our where me let business, to position Now strength. our we

said we behind pure we're company previously, major As the model a play Worldpac. with only professional

more with fully Now serving significantly that integrated have the Autopart we retail International customer to been are dedicated existing professional than Worldpac, traditional SKUs XXX hard has into a locations that store. part

customers a and parts, national hubs broad super needs owned a We professional brands, lineup range of assets XXX on to allow hubs, our also brands serve have the us which and parts. Advance comprehensive need. OE These Pro what customers of nearly the offer focused better of with

strategy and to getting positioning provide business We're generation enterprise-wide place of the the the in now at involve as time. delivery right positioned will entire right our job. customer well ideally profitably one Ultimately, consistent our assortment to close possible, next under this professional right to reliable our roof execute to by the the grow as part the of

example, pleased to an single in into a seeing superior a America. assortment results customer in are believe we As X across Toronto, X with provide the potential in experience We're early this other and centers combined has similar approach North recently the distribution Toronto located we with a in building. markets enterprise our to

disparate For and inventory place in right years, the signal and Worldpac for singular supply has assortment we at so to ensure platforms. a leveraged clear and part the right online demand position a part, window ordering from right the had time. Five consistently technology determine its ago, customers installer gets the to the chain years have delivery, we X provided utilized to

our across connected and better and much our Pro business. take today, from them us systems of Worldpac apply learnings However, are enable to all

superior vision Pro Our leverage a forward of the entirety accelerate is customer on provide look to our here more the experience profitability. to to enterprise next We and within as growth of evolution sharing strategy. our we assets

me I about how about over thinking let to Before Jeff, speak briefly call the turn XXXX. we're

this, and integration broader provide in an metric. rationale exhaustion of integration wind XXXX. see results amortization Jeff costs as the excited but culminating guidance costs down, final to will our to GPI made for decision the amortization the As further shift end our GAAP in we've to we're coming to costs

low-to-middle backdrop, income including surrounding the the consumers. begin cautious we on potential for As year, we pressure macroeconomic ongoing remain the

XXXX second in investments our the guidance inventory drive with XXXX is the remaining of growth strategic drivers began underpinned positive. Further, in However, we half of strength industry we continued help will by expect XXXX. demand the

year guiding In as turn as terms Jeff provide year, outlook income full net for our we're in our and GAAP XXXX. and review operating financials Jeff? for expectations more call in now sales expansion. I'll margin over to to QX of and to growth the our the detail comp well

team Tom, to our year. also for thanking past I Thanks, their good to morning. this start members Advance and would by like commitment

without the to team put our customers continue members was first. challenges, While not year our

$X.X strategic driven openings. and the with was same-SKU compared of expansion. QX was XXXX, sales net channel by This gross X.X%. was compared driven Comparable store of mix $XXX X.X% million new margin quarter, increased slightly XX.X% flat and X.X%. billion, year. Adjusted brand pricing QX, approximately with by inflation prior sales to In own store adjusted with strategic favorability In expanded the cost XX.X%. pricing, profit increased SG&A QX compared

was sales, decrease improved adjusted net points. and SG&A marketing year-over-year by expenses. percent As in incentive This XXX driven compensation of basis primarily a a

of higher marketing efficiencies investments return the quarter to the in by marketing, within In shifting improved mix. terms we

We new benefits also openings and costs of ramp-up incurred store a were our higher store result of the in prior in partially the versus offset start-up costs. labor by inflation lower as California. year These medical

million, was operating of $XXX increase QX an income adjusted Our XX.X%.

per subsidiary share margin The XXX OI XX.X% basis change approximately a adjusted the QX stronger and Our results by to $X.XX adjusted due an earnings $X.XX. increased driven X.X%, currency of in was to operational of increase of rate our diluted improvement functional a points, benefit Taiwan. our EPS and in QX was

For year $XX.X net the full of compared billion increased with X.X% XXXX, prior year. the sales

points adjusted net basis profit for SG&A gross XX.X%. X.X% gross adjusted to margin XXXX to increased adjusted with Our full as basis XXX a XX.X%. of XXX expanded year basis, increased Adjusted profit rate compared percent XXXX. sales X.X% increased and points the SG&A On a expenses

throughout we we As in stores. California-based weeks California weighed SG&A in than expansion sales our permitting XXXX, significantly the resulted fewer for and throughout construction in year. discussed Delays our planned on

out opening, knowledge XXXX. The of early national good the are XX This As less decision now relationships $XX sales stores existing largely represented geographic quarter and news will excess perspective, a you'll behind than last in nearly have ensure but the gaining costs original are XX customer open, have large store costs us our in the for stores we on build every now which tight building we these continue the left professional and vitally it without given We're hire to period, important short, million in year, plan. open. members customers labor Boys our week In to market. we the are DIY in each week. time. The payroll is in California, start-up more helped recall, the Pro and rent needed stores long-term with costs and able in for to Pep share business to made start-up to called and well team over success. stores service We prior approximately we're we by paying

to X% adjusted XXXX basis, year a income full expanded On OI Our adjusted increased margin rate operating XX points $X.X basis to billion. our X.X%.

per earnings diluted increased adjusted share Our $XX.XX of X.X%.

the was openings, This supply previous Our $XXX IT investment $XXX capital business, compared new our XXXX store in were continued year. expenditures primarily related with driven our million chain. and million by the to

cash on plan continue our to to remain for million. continue and objectives customers for we Free deliver we and XXXX, the our unchanged, capital overall for strategic $XXX priorities was year shareholders flow As allocation execute to alike. full

investments we're are Tom strategic mentioned, year. XXXX, this which to making As improve in growth inventory important accelerate availability to

through process to cash process of In $XXX and addition, disputed technology quarterly dividend. In we payables a XXXX, we approximately combination and our efficiently. through repurchases million able more improvements, were returned share

Board approved Our dividend of also cash recently quarterly $X.XX. our

Turning to XXXX guidance.

As we're shifting this in no reporting will for X pertaining measures primary of and decision. Tom be mentioned, XXXX. timing are of GAAP purposes There the to to beginning drivers non-GAAP the longer results guidance

getting are reducing costs transformation our First, impactful, non-GAAP for need adjustments. less the

largely and amortization are our be completed, initiatives integration in will cost largest exhausted XXXX. Our

including on forward. peers, similar basis improve reporting ] a our with of comparability Second, non-GAAP [ moving treatment no LIFO will longer

investors have and forward we change help enhance received. requested many that feedback consistent to our GAAP with intention analysts going our this financial And the transparency prioritize lastly, with we Ultimately, is and reporting metrics. simplify

With LIFO, related were but said, to, costs the with and costs not associated associated transformation-related year, that continue GPI our results, to and acquisition. activities excluded GAAP amortization limited we previously from including, that with highlight this impact will

modest by our highlighted is margin GAAP expansion. net guidance comp XXXX and and in Our growth both sales

a the and remain outlook we given overall XXXX continued From balanced be digits X to pressure primary demand Our by XXXX, on the for the driver's inflation quarter strength of with XXXX as is low standpoint, expect most positive. In macroeconomic the phasing year. cautious middle-income industry guide we underpinned a the challenging QX reasons. cost product throughout expect the year consumers, moderation mid-single of with

costs higher subsequent QX than First, in based on product in we expect GAAP accounting, year-over-year quarters.

to we we year the Second, expect improve sales availability. build momentum as throughout

SG&A higher QX. Third, we transformation expect in costs within

comparable temporarily existing factors, experience guidance operating diluted capital to sales GAAP of $XX.XX to post net expect tax share X.X% of growth includes margin income income of we our of per XX%, XX% to billion, $XX.XX, to factors, store margin these program. these $XX.X flow of under and million, this billion year. X% QX. expenditures sales expansion Given continued to range cash stronger of Considering to and $XXX branch for share year's repurchases $XX.X X.X%, to and X%, rate million a last inventory investments, $XXX in of of store to inventory payable we're minimum million openings. With $XXX investment free a in not the XX higher anticipated payments resulting new time, in year XX at we've paused guiding repurchases this our And full earnings

paying we Importantly, committed dividends. cash remain to quarterly

Over the term, over approach excess it to closing to I'd and balanced committed like allocation remarks. shareholders. With remain cash to back turn that, for long returning we a capital to Tom

growth place company Thanks, believe a for and profitability Since make I and I team beyond. foundation Jeff. in team seen XXXX, progress. this this terrific in both we joined I've have in a strong XXXX sturdy and

we're Operator? growth phone and creation positioned confident behind I'm to heavy the us, now better lifting let's ever lines before. With value that, than integration open questions. the With the of for

first from Instructions] today Morgan Simeon [Operator Our comes for from Gutman Stanley. question

I is was soon, that Tom, I margin. I'm well where well. GAAP on take, percent, My or wishing ago. several The you forget you timing wish sorry, EBIT from years question not business too is margin the give is X-ish this around different again. the and

relative should with is inefficiency to here growth think of gap margin we expansion sales about from some there is is, forward? ratable question the So peers? going Or more

fact through to still We're substantial that. plan 'XX. our grow value. through that therefore going doesn't opportunity strategic GAAP to we've and be EPS margins morning, shareholder see Good 'XX working Simeon. We to moved drive and a The change

is us. transformation that we're down the coming are to about And excited been to the that behind means have that over integration time. One of costs calling the out we've things going be

amortization You've XXXX. in that heard costs The come completely the the prepared down. will by exhausted remarks is integration

impacted for last our the from will and we that but on talked focused We grow fall can here. that delivering So channel, about with confident continue guidance the that to us competitive help landscape the XXXX in we're now, margin obviously Right changes year. Pro we're margins sales expansion.

then by grows that on And and as cash is with well a this purchases both doesn't inventory a working encumbered year's And capital. then CapEx the earnings as number flow. ratably Or reasonable framework, the then I free the this Is repeat? guess, follow-up power of that business.

XXXX, XXXX Yes, of really, you responding what we're of just inventory and landscape early beginning part it's there the it's in regards investment. -- inventory in the said in in the terms investment competitive to with to our that change in in

really This compete So better to we're customers. serve within more and to inventory professional. in investing effectively our going primarily be is our

this SPP would expect a that be And see changes [ through we we on now we 'XX work to we're our and through XXXX for as forward. ] 'XX. working So investment, right going

of question Our JPMorgan next comes from Horvers Chris Chase.

It's Christian Carlino, on for Chris.

how just on quarter, you fourth us the quarter? color could quarter-to-date any sense On some much performance? think weather the give And benefited you of

in DIY. was there. had the We in in year the the We growth in strong previous did really DIY called quarter. northern colder the quarter share obviously talked -- mid-single-digit a out gain it December market. than We was

benefit that. did we So from

I was say, a said, benefit So quarter. the share. would we overall, gained to fourth That in weather us, slight

are more goes making to year comp the we've an we on. this The said that That's year know going us was more specific quarter-to-date to point. good inventory one relative the is we're feel in year going our fully availability full with that that performance weather. But which DIY, that year our comment we've contemplated guide. goes in as about as important to on. results. that, to all our And and investments we warmer So been January was improve but the not benefit move colder. tends December on you expect we sales

margin on then could you primarily in help understand more guidance, you And hit the the expect do capitalized the into headwinds the cost And us SG&A half second should Or of potentially? continued the gross complexion out drag specifically, to margin that versus it. inflation half? Got outlook? still first

second the take I'll Yes, first. of question that part

we've particularly of the first terms a inflation, so modeled a think it inflation, product going more second do internally. of In of it's half way versus that's half, we be here to sort

that but of margin point and more, out for margin laser in contribute XXX margin specifically year haven't the but gross we're do we We Overall, we both the believe the margin contributions expansion, likely to get and terms SG&A. of broken XXX margin SG&A, basis on our focused contribution think controlling gross growing base. gross while will from gross both our we'll cost

Our comes from of America. next today Bank question Suzuki Elizabeth for from

your getting part the to time, and regarding network talked were that right distribution the So Toronto that the customer consolidated and you more about at the there's right opportunity. DCs

of network, or your percentage due an what consolidation/replacement do you at this So distribution is think point? upgrade for

a of very how you strategy. feel the context and on next positioned thinking We of longer-term give Let generation about go-to-market our strategy me growth. bit well we're execute our to

the as uniquely to top growth have the chains to there. In accelerate to DIFM the weren't as We able has Pro, behind disparate That's they is vision our we've experience because continue as here grow We're profitability. DIFM business and supply margin they even sorry, a our us. technology are assets the as improve all really we faster. from were that's of positioned they -- entirety of compete assets all to DIY you're within margins to plenty past, business or a and sales to got be out business. customer platforms. leverage provide And to connected X used today. know line though superior of growing gross just you Our the enterprise than lower I that know

testing direct of your We've we're assortment vision all a We talked question, happening Toronto. to North got We across for about think now. Toronto. but this end-state to this broadly us about got has the think We've look building. that that And more I located in application out, into enterprise feel good enterprise. markets really to entire the So variations in across America. single we replicate what's prove still much

Our Jordan comes of from next Bret Jefferies. question

guess IMC trailing the sort it sort changing label [ of guess, what environment? I sort see Autopart On of the ] that an the talk how traction French little of are you of [ see maybe is Pro you and sort a issue? ] performance, would Is on mean are underperforming peers. you the where that bit availability other against could versus about great. sort slow Worldpac, program? private of competition Could But what major you are be competitors And Pro the impact? I is relatively seeing if as I International, you factors the lay there out business it

the our mean on Really the talked we a -- And of Pro driving taking, year. plan, Bret, and we're the lot couple identify bit little mean, X underperformance. the accelerate about we things. work I I a done call, actions Sure. expect a we've to the to of elements to through what's really there's

And First on that plussing targeted that nodes. distribution breadth and which SKUs, high-velocity that. made we cases, availability and our up to hubs centers adding stores opportunity in-market both to talked of call, our in the in coverage hubs we're and and both super improve about and spans inventory some the investments all, last we've

the to all, one, biggest is opportunity. that's availability first So investments of job improve inventory

enabling you would then leverage and things monitor every to quality actions parts the of our more investments the show intensity, Secondly, we to we've It's week. made by a us close price all and of the done of progress sales a we table. there. performance, is field third, obviously that executing, Pro to And things drive bring expect. the pretty still sales and price lot by margin we're robust surgical in customer competitive all the category line done We talked by We competitive plan top taking account and based really about got are the activation but on account that gap, we've the that customer category, expansion.

the on seeing a parts of that accelerate basis, we the categories through So to year-to-date expect improvement the balance is news are and in our hard year. we good

Okay.

that Carquest label data, say So to your I Pro DIY? internal has fraction equal in private brands would

Sorry, say again?

The equal say It's the penetration DIY its the in penetration. for to you'd private program, as accepted much DIFM customer. label Pro is

absolutely, our I professional love installer the and on a improve has the The are independents name the business. That's is door make installers accepted we're in that Pro. that say heritage it's would out in the The started It absolutely. Yes, more brand for there. priced -- got that sure product. availability We the community. not just will issue. and we grow make the to competitively

Our next Lasser UBS. question Michael comes from from

So number integrating working few steps chain, over the strategic margin last the years, the taken of supply improve of to you've a profile the business, on pricing.

your gotten penetration You've now above private label XX%.

of to going just here? what's Is leveraging expenses? your generating it sales margin function from drive fixed So a and growth growth

we've original I line. laid plan than for we to in the accelerate delivered XXXX mean contemplated we top higher Michael, sure, growth year. our certainly that out got last

I a plan. I mentioned while an Pro, that So on through part actions private given on still opportunity uniquely, of what grow the question earlier of earlier, Pro and accelerate can through the category sales And top we expand grow for continued we're That's margins, margins, doing have sure, we we management. label business line growth. penetration to our need important think, lot to to the

the square stores, game our profit raising and sure, the in on for that expect. you We're category sales would foot per all things management driving

do continue through to expect management. we margin to So drive expansion category

drive growth top supply then SG&A. sales said, you efficiencies. continued through And to leverage to chain line to want as drive expect our it we We

is ISI. from go Please Michael, line is question comes today go open. open. ahead. line Michael next of Our from Montani now your Evercore ahead. Michael, now your Please

any My apologies, audio. receiving we are not

question on Nagel next move from of Oppenheimer. the will Brian to We

retirement. congratulations Tom, the on

first my with just to question, So inflation. regard

have a ease and number So expected to sector inflation, trajectory this half talked in say, about so second or 'XX. your of the you others of in

dynamic, impacts that think we isolate other from impact are should there's we a if But recognizing forthcoming moving a that and a lot about P&L. of margin the both as how likely dynamic, the pieces think what sales with You're there? perspective? your inflation parts to advance we about So

Yes.

I really second be we're think part half, to over to then and break thinking inflation into think it, that's cadence. as continue The going elevated is first important the we're first, first is going a way We the half. in down it time. half come the today seeing to about

You saw QX at LIFO, we hits. product on comes given cost costs sequentially as inflation. incur that inflation on -- us, now those least as improved you down, that as slightly the for And we're

is what steady impactful our more in margin. gross is going inflation saw So that's we QX, to be to

those you As abate, to the year. of over course continue costs the that relief get

So sorry, the really think rest the estimates component inflation, be fairly cadence it'll of I example, static. the P&L, that. wage to we biggest And I cost -- the think driver on guidance is the is for think biggest We've product inflation. got inflationary but

You'll of in see that kind variation that see you'll product cost inflation.

Perfect. This a follow-up. is

the largely price stay base pricing consumer as costs input stores, the in at will the same? even case So the your still that is moderate, that it assumption the

at we very to obviously make Yes. sure We look that competitive. stay We want closely.

obviously can for We that elasticity or price maintain costs category much There's on have seeing costs inflate, the that you're when how we around assumptions come deeply down. matter. those depending

to improve. hopefully, see, we we the on sure And structure category-by-category that cost as we make going basis. at competitive a look we're So start stay to

Our question next from comes David MKM from Partners. Bellinger

you Was And we much still internal a is from sales these top contextualize headwind. How payback us versus Or Tom, external? of congrats to Could that acceleration on QX the the the just announcement. seeing help QX? line the sizable the as shift to in QX parts already? you period? comp label I that out think don't a impact private inventory investments called And are

We're was really the in happy Yes, with largely acceleration DIY. fourth the in quarter. DIY David. our QX of first all, business

very a attention to strong We it's it. know, on had quarter you As business. paid of of a profitable DieHard. part We lot a our

returns build some us. continue is graduating We members. brand. really Perks Speed generate We're our members. added to starting for platform to that We've

long So ability over e-commerce by double-digit us the important to our way, which in business DIY. the through again, really back land term. And is now for drive e-commerce, our is

lot into benefit in get the the a we grow drive we robust didn't very quarter. think Pro, it side in continue investments, way. front. say, And as do in we're on quarter the and unfolds, margin the Pro we We're in lot investments. it's to growth very get fourth didn't of to we right I the to done, see XXXX. will from that, do very And of that we helps as inventory that And to as price a surgical us a We year Pro So got that that can plan on very business We've obviously, but confident in want targeted going growth benefit fashion. drive a investments. the that DIY fourth the from disciplined

Just brand was on was gross the quarter, on margin that a benefit line, the third mix, but it our in consistent rate. the owned top headwind, with particular, to a

relatively consistent we the in quarter. saw with what third So

our out going it less. -- we're It's in grow is base David. specific headwind. why so the now, from it's impact as Yes. calling kind of not to base now, It's a to but here, in That's our we're it continue

it. Got

this share I the your then on And did the repurchases think on of you that's being based cap market year. paused, follow-up X% in Okay. around what

is you the could buy And to repurchases in again? certain So you specific any into beginning where step to would the need again? point stock need there hit? see and metrics a Are what there year back and you back go market to

that, think strong to capital about. that both that the be our have we capital to repurchase be we're I important in really plans investing to dividend. Yes, is said we'll to We take talked And CapEx allocation priorities, it's temporary. -- any don't excited flow. We're share for all, that debt cash repurchase business, the out first out fact point to our a monitoring be think the sure. free We of working we're about very executing we and paying still shares. Having going

And so to we be we're have we we're through on navigate that going best improving focused cash availability. But the very to free flow prioritize laser sure the making year. going as

flow sure the higher have the expectations it. in through that, that we to we if support the be flow, cash of we'll And cash making and back It's work so free as market. a just line top improves than free matter improved

comes Our Zach next Fadem question Wells from from Fargo.

down your XXXX? then bridge the you through could relative your that for DIY industry and do-it-for-me gap the growth talk industry in growth on rate you and versus How to both Pro Tom, So take rate? us the DIY how expectations between breaks

expect Well, kind of industry first full projection. on current year That's a we kind X-ish the basis. all, for of Sure. our of

We expect Pro to outperform DIY.

Now and income that's of lot factors tends low-to-middle which year. to to a you've the macroeconomic consumer, an dynamic Zach, interesting pressure at this shift with DIY. play, some on business uncertainty got Obviously,

DIY in the share XX So we as business Pro said see. numbers through We the from rate we to growth up to time and into the the and digital growth get we half. some industry continue ramp we've in as to by DIY couple the -- year here, grow a we or times today drive that can of over go, to months as making are back above we the and here investments those sit been believe to in with of benefiting particular, get

you transformation when And then and a for equate the what the today? non-GAAP Got your embedding goal walk XX.X%, you're that XX.X% could benefit would to GAAP you your think margin talk on also you basis? XXXX, in LIFO outlook to the of costs through can it. that about historical for And expectations about

but Yes, about really if initiatives ability of and bit primary expand margins there's Thinking And earlier, GAAP it's the sure. you I you here and mentioned on really to term, sort little our a in X as reconciliation, we're the term even apples the as know, whether non-GAAP. don't longer or short don't components. will, change mean Tom of they change. a oranges

You've restructuring got transformation costs. costs, -- your our

then the and GPI have LIFO. with associated We amortization

and XXXX, we a going little that's think as the cost transformation we it's straight The roughly be XXXX -- into move easier. X a are what restructuring First in terms is we to Amortization in from saw standpoint. bit same of line.

take to will with $XXX and that in a out, the LIFO. we were if LIFO, nearly you be that. last back, pointed we expect difficult should you line is The is be which year, XXXX. Xx and same, in started that step we and roughly XXXX, it could So as thought And exhaust million you one, roughly,

that we big moderate inflation, which product giving throughout expect to driver. not What year. is expect we we components. is guide we're LIFO. did cost But other any the say So a There's around

$XXX what but is LIFO going So headwind, be not I to provide don't million beyond that. expect can we're we another to any tell you guidance

QX... in similar Maybe

I'd like to Zach. -- ahead, want go add, add to Zach -- I Zach,

Ask your question.

I just wanted to And to to similar go clarify, would interrupt. QX. sorry QX be then -- ahead, sorry,

will product dependent come supply what Yes. to on a chain at. in be out LIFO and basis. Again, those on we're costs the break going not It quarterly

the on we've and wanted our many that years. on website, I add you'll Zach, out had the to out non-GAAP We've last we've so over questions years GAAP broken Yes. this to see comparison. X broken

You performance versus can see non-GAAP. clearly GAAP the relative

It's it's at on GAAP number. at than of growth the CAGR. see look last what XXXX was years, over adjusted X.Xx. And it you our It's the got more about If you year, EPS basis, a XXXX. this a in similar basically XX% guide double our a midpoint X

We the clear So everyone. excited And [ we're that couple to down And will next years. ]. coming transformation of to make that alone the about they're back the want enable it's through to margins costs, it's there. to over expand all fact sure us that that

next Our Ciccarelli from for Scot Instructions] comes question today from [Operator Truist.

Ciccarelli. Scot

couple the a has versus, price of it, reconcile, think investment call the of big about to, of which optimization kind price thinking be the will, raising the investments we kind over you the Like driver. been relative pricing years, should that we last call mentioned implemented prices you how how margin I are you let's to guys years. efforts few So last over if supposed pretty quarter last gross it, let's

Yes.

of It there. to quarter. worked couple majority away. did talked really of something vast ongoing go that. doesn't That's We in So the discounts. fourth the impact things the a have unprofitable an process. that be significant about through going It's a We've not

we that we're saw giving gap results. it competitive were the through reason. the markets. weekly clearly quarter, seeing We're were terms an and last an away a we're to We back weren't the for and at benefit, Tom the and getting we close we monitoring as word and and because we peak to a look earlier, very the ] we those ], be, surgical pricing that we're -- where we this in customers, in mentioned surgical to slight to still made want use summer, we lose going competitive margin be a meaning fourth into this set, fact, we daily the the [ in investments sales [ improved and and CPI a In and of but didn't very different broadly, unprofitable basis, on testing discount. More we're

for strong going So price, make lose sure on that we're sets going our we think going And to and very we're We're up availability. to to we're improve not a competitive. year. us

That's then in about color the on Jeff, your prepared XQ more being outlook, your more remarks first And quarter any challenging? helpful. comments given

the the drivers. bit meet network under whole going not just called that availability, a for but takes make X May. And lot. get be I mean It's will out. it's And it your distribution we when really inflation, in it obviously, in time anticipate to LIFO. they is get our about that We in, drivers available them into incur QX. some one we April get we it customers. or we're that is we talk to I to we mean are mean a it about, into come get availability. costs some the have sure that we're time the the center, the transformation-related product It's forward network thing I deployed. all costs throughout time the to our do little more really X next We'll be those able need talked the the to as and to whatever

Citigroup. Steven from question next comes from Zaccone Our

step. Tom, next in the Best wishes

on quarter, at be Would Just to actually range? below of will you the the low comps Or just range? that full question. to last first year follow guidance the end up that quarter to clarify slightly full first be expect year they on

going X, first about time around year. say course the sort quarter, X% I the frames quarter, volatile the and mean, is feel not going out December, X% analysis really some to of which, to over spring by point. of and are to the longest We weeks We're It's the to quarter way, selling make January, season. try the X incredibly this our comps. XX-week difficult Yes. to break at these good put that's is our really our

that think just the early or to the we to end premature really least We're Sometimes in QX. is we're on range. comps say be -- it's QX, Raleigh, here sometimes or off will it low it's but an spring, of not high whether

you question the a in What's talk a enough. takes? could Fair I SG&A retail. outlook are about pressure Then leverage more Wages the and Okay. was, across had XXXX? bit second point for puts

to So of drive curious there. as we you to go-forward we GAAP, level about SG&A? basis? a comp on for your input think need should do on the really And What how shift then leverage ability growth

flat. it you be amortization when costs those have They're transformation themselves and are mean going going to to comes SG&A, I relatively Yes. that there. test to

don't we significant So expect any in volatility with those particular.

inflation. you We the modeled wage puts the cognizant the yet which in takeout, cost think again My our that. terms and hours takes, overall opportunities you. some or We've is sorry, sorry, wage -- inflation some have out online and do automated biggest some terms I'm -- term factor, associated the the [ -- In we of Delivery called XXXX. of on getting Thank certainly We're blanking ], the of the of Day payroll for leveraging My [ really yes. The getting ] got hours the revenue. I the of into -- with and I'm

there. number that for been through a of significant we've years. We've opportunities so working some got And

some we that feel we store. So per improvement can what in call get good we sales profit and our do

get XXXX. got to out a than in one open. were go. We've that big start-up open. that costs less XX XX got were Another is California had Good the stores little sizable expansion. And those our those beginning called We've stores we're we we to with news nearly

there, but there's So what be some it we going be start-up won't as to in saw still sizable as XXXX. costs nearly

level combination SG&A the we're those all of So going in 'XX. that us of gives to confidence reasonable leverage a

Barclays. of comes Our from Seth question Sigman next

Tom, everybody. congrats you. to talk to to Nice

Some an what maybe to we margin expectations big just think differences on that of were I does of to some follow-ups, X% those when what basis, are compare your apples-to-apples I how clarify, 'XX, that for 'XX these be? wanted but about and operating could for prior guess,

I non-GAAP are the we obviously and million the biggest between $XXX being -- million $XXX things talked the transformation, Yes. big that the mean, over the had GAAP drivers LIFO We LIFO. again, about, of one.

back factor have the but those that change. have in, So we don't to place initiatives you in

doesn't [ brand our My own So drive change through expansion margins through don't [ costs ] our the Delivery ], change. Day My ability out to take our ability through to

it we that beginning the different. really really to see to given GAAP We items away. seeing any non-GAAP timing we're go is from appropriate, moderate non-GAAP don't think -- those to eventually go So the

that's we to the margin non-GAAP all there in wanted terms to of those change. why for again. are change from make reasons, the our in of underlying no So assumptions going growth And outside

Got you.

follow-ups quick different the That's helpful. channels. And Okay. on X just then

gap business, based ] underperformance? like of Or step the saw underperformance different and speak business, types, whether as [ say that. sort you to curious On et that back the the the may quarter how the sizes, the just just Pro broad maybe customer within you in regions, QX? I'm you did I'm understand DIY look actually then fourth cetera? had quickly that be on just to And is business, you could into different momentum at of that trying continued where

believe spot that Well, good can the grow I we cetera talked DIY on Once believe on things et have effectively of in Speed we we that can the business our in again, all XXXX. business We've about, momentum all, a again, profitability do first based of this nicely we got to sort Perks, discounts very a e-commerce and standpoint. digital dealt used from Sure. business, DIY, with in year. we that the and sustain DieHard, Seth, the have

business that way. right building we're the now So

laugh sustainable some it a where it and through see decisions, side, sure professional making some We reduce cases, that some discounts. those once accounts. was want account. that In very start we the In we On place. smaller want right inventory as we'll do clear we in did the availability term, large accelerated to make that were the we're year, to growth to part as do cases, opportunities But again, on are. unprofitable decisions, last a some said in we to at way. over is Pro. the way right right We which the is long And got our

take kind of that's tail the the there. of So

comes Wedbush. Next Seth question of for Basham today from

Thanks on a a a lower Tom. margin XXXX. I to make lot. Good It follow-up morning, terms improvement guidance seems sure and just understand in best basis wishes, the question My is GAAP of to in think a about like piece right the be of in is start-up step-up going LIFO. it? that that stores. from the there's costs from piece small biggest Is Cali But to way the

expecting. improvement a the cadence we're sure, most see margin. yes, We pointed to led for terms largely in the It gotten that's be we're by definitely still gross of going basis. to being be Yes, the will through majority out. that that on There's we for reasons the the in to some. QX we And we But inflationary challenging LIFO. what think is. why That's clear it. the think of going we've about about think costs be real want right way to LIFO

about We the well, it you have are think but us thinking our other whether initiatives that expansion, We as also to the we it's help have availability. own going brand contribute are opportunities there correctly.

you base. I standpoint? you're you just to goal a or year starting future accelerate guys store of from ago, thinking tell us growth had know a store a store that your growth. stated the base on open, which relative you question doing looking another then to new to California XX have is the guidance still at stores And Ex pretty Great. you're in low of growth. additional right. stores, XX only your XX terms net store how to about the in Can X All

open, openings. lot came a product some from really Sure. and we're geographic dial now talked Well, experienced gaining this we there. market about California strong have We've members we're share for delays year, knowledge knowledge, a lot us Pep And that team Boys got that that last We to market. out that that knowledge we want the really sure year. we of the to completion the make of content

we're have. over of in we alluded new you buildings drive look and earlier, very that XXX really in I plan, We've is business share and XXX hubs. to continue at market our Autopart and stores gains growth hubs over close we year. What this base strategic California International, that doing leveraging our Worldpac would everything our out planned the that tell our asset So entirety super Seth, I drive at grow and got obviously to to a the taking have to Pro we're for -- the want and we

has Pro, So way our to store optimize we about believe we a further asset new on that the how impact there's future. think base in in an openings and

for how plan, in we'll we be future. 'XX, the considering that our So unfolds guided through as But year, for 'XX we the obviously this way we construct guided.

today. That for was the question last

Greco, hand I'll to back So Tom for CEO, any further remarks.

Well, thanks joining for us today.

reflects net the of well our We're Our sales GAAP update so growth as we 'XX can and focus pleased integration and behind margin us guidance in have bulk expansion. execution to comp on strategy. as the

drive per Our the goal you. strong win is shareholder to share and value. Thank and future continue growth earnings in to

Thank call. for today's you joining

You disconnect your lines. may now