Advance Auto Parts (AAP) 28 Feb 242023 Q4 Earnings call transcript

Welcome to the Advance Auto Parts Fourth Quarter and Full Year 2023 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 Q4 and full year 2023 results.

I'm joined today by Shane O’'Kelly, our President and Chief Executive Officer; and Ryan Grimsland, our Executive Vice President and Chief Financial Officer.

Following Shane and Ryan's prepared remarks, we will turn our attention to answering your questions.

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

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

to Now let me Shane turn O'Kelly. the call over

Thanks, Elizabeth, and good morning.

during dive commitment helping customers to the quarter, strong thank throughout to meeting travel few XXXX. we and with focus their members I meeting moment from Advance from the entire remain continued a members ethic for distribution work I months, team and continue take our Before details the team team dedication coast-to-coast to into impressed our want our serving centers. our of unwavering I and customers. to on stores our team's the past customers, their

I to new the the serving Ryan lead knowledge in DIY Officer, transformation undoubtedly Chief company team, and want experience will Advanced have vast he and help and our brings on customers. omnichannel Grimsland. We're retail introduce His deep to in today Ryan our space, professional pleased both Financial finance, strategy forward.

to business. decisive turn Now, the have taking around onto the actions been we

We sense profitable to return to the have urgency company continued the act position business to with a and stabilize of growth. to

will selling that focus actions auto are distract us on of from fundamentals help eliminate the to that taking us are we of activities All parts, and we goal. the geared

be me clear. Let

I'm at are disappointing today to delivering. results not all Our what and accustomed

several a understanding last the and change now Advance the we analyzing have here, our of work better trajectory. to months spent how required got have We

Through disciplined and help in the noise our been contributing will we our execution have elements performance. tighten note several which performance. eliminate recent that this and including fundamentals core to reduce to will important poor then atypical items introduce that accountability, financial It's our periods, of one, there to business,

quarter's we On discussed decisive call, our last actions.

through taking the one, our sales while you of business. and reducing Number actions for all investing our as competitive independents. initiating those new savings is the back processes line. company Number take those success. of Number update now as two, And changes Carquest Number activities portion into X decisive today. chain. four, for on remain the introducing you costs Let's assets, five, making Worldpac us well including a Canadian to to number the supply of three, productivity the front organizational actions. consolidation additional position And assessing our significantly

discuss of take these each moment Let's a and decisive further actions.

First, sales Worldpac and processes we initiated separate Canada. for

in underway, occurs. have interest currently to The is more process we pleased received both with look Worldpac conclude We are we process the information Worldpac and are our to sharing and very forward second buyers. actively expect during the quarter We engaging when with that businesses. potential

have business. begun to is internal to relates behind the the this separating it Canadian and we As sequenced the work intentionally process, explore Worldpac,

the QX, support from half well This members reinvesting enhancing our XXXX additional of realize bonus funding in Next, dollars and will team approximately of how with our our roles million improve initiatives our represents our QX and XXXX. eliminating past reductions on which programs, savings warranted commitment of years, the sunsetting by in as the did and dollars company's million discussed business, frontline for of coming we to $XX and frontline, operate. planned focused $XXX fundamentals training. previous growth changes those sales SG&A I our costs wages, during have approximately programs. are the to SG&A we the least outpaced for several We're increase as In that at cost implemented not call, in significant we

these investments turnover several note frontline continue next of are rolling roles. While over months, reduction we the already out key year-over-year seeing we that improvement in we

QX additional indirect initiative an of reductions, an In $XX the on we the are minimum addition with of now cost spend, million a basis. to annualized launching our eliminating on goal focused

will to to prudent cost-conscious be We expense committed a structure, are continue with and our building culture.

customers, to in make, the table. every we to our business and operational core service decision the team help Going if our isn't it it's members frontline forward, off

team us and our reorganized structure to the leadership key positions action, of I that in changes allow mentioned drive upgrade and terms we of to drive structure our third critical had business call areas. parts These decisive collaboration they talent improvements accountability. last management on and In to my our simplify streamlined further in

addition high-performing a Advanced leading robust as track building the function. joined of and In I'm create that will the CFO, a record finance example Elizabeth to she talent Chief Ryan confident outstanding is as us and another team Elizabeth joining accounting of to hired together Controller. high-performing recently Accounting and Officer we've and brings [indiscernible], who teams, Ryan work our

recently processing significantly and Data the our of a hired improve Chief also utilization quality, data. new We Officer, to [indiscernible],

that In just will addition, new a who procurement we've cost also help mentioned. deliver hired the savings against I indirect leader,

organizational changes with to We've our within align also of departments structure better made strategic a goals. number certain our

merchandising. of is part For now example, pricing

new across addition, of parts and to estate merchandising function consolidated now and directly me. They Further, system. the reporting to single directly estate core multiple our real form we team from inventory teams diligently merchandising the me. In working real our company have a been have report inventory implementation enterprise-wide our of to on

the the system enabling systems complete effort processes, and from of transforming new and year. move remainder That to involves capabilities. fulfillment to to the away current our data-driven vendor ordering transitions SKU this us more to expect antiquated We

all action The the in locations. we company, of decisive are company independently productivity improving is today and the Carquest fourth stores which owned including introducing assets

plan existing operations improving driving and open not we in growth. While profitable as do many we on as XXXX, year to we store opened our this XX focus stores

optimize improve of stores, help program. the effort agreements an independently In Carquest we profitability independent business, to recently independent will XXX owned our which overall over terminated Carquest our with Carquest our

In addition our our notable resiliency network improved has POS The allowing system of frontline stores' in to in made and to systems. store our department productivity, serve our customers. is IT reliability the improvement store our better improvements

and announcing our are which we inventory is that We structure our decisive network chain consolidation work needs cost network. availability. supply action, is our and substantial Lastly, fifth to single to know of improve unified a our current inefficient the

from business X ] We have our via stores distinct the and X networks, Advance. long X [ box from blended DC legacy served Carquest

of end step implementation system, or complete completing WMS, only the is our large warehouse remaining, by the the With our DCs management all across this year. of will first X we of The DCs.

market we to assets a in be in X, a as customer. closer Advance with hubs, operating network more today, is DCs as will market where and deploy Step replenishment X, efficiently Carquest DCs our forward the we we that With which smaller are XX the Step functioning to valuable can inventory view parallel leveraged as smaller DCs the node as the conversion conducting of from hub. legacy right

we first greenfielded and a more will conversion move if initiative By hub, our network. DCs, DC effectively network. to we market We current leveraging have become our cost than across key recently faster and new this to utilize the scale we started our learnings a can

improve able We will to of this into help as product Importantly, continue and will productivity. actions we more improve blended ] work, once DCs, we reduce all we order forward to which complete block be these our strategy. sharing to costs fewer inventory look on [

age I to key vehicles, the and as I'm continues at both I Before to projected to average well XX.X touch this drivers which of want to strong. year. capitalize strengthening further environment. that turn include on confident strong topic begin do-it-for-me which can increase the to These of with miles this is it now Advance are over years, macro the industry the is demand, on the industry. as last Ryan, remain of fundamentals Combined the increase of driven, The

our CFO, who release the performance discuss will review guidance Ryan XXXX Now in I'd welcome over morning. to call the turn the like in provided Grimsland, and Ryan? to financial we this our XXXX and

my good of Advance. to for morning. call Shane, earnings as I'm pleased CFO Thanks, be here and first

to would their as Before received our from team. the to team dedication members as like financials, move continued for thank also welcome I I the warm I well the

Since of my transformation there have swift Advance, we at finance our necessary several arrival made are changes for the to function. allow

a I'll and in will disclosed benefit moment. in As recently as financial internal material record control, us appointed Shane our Chief Vice just variety Elizabeth's new remediate weakness to [indiscernible] Officer Controller. as Accounting track impressive in Senior which more detail to we of roles discussed, work previously to leadership speak we a President, related our Elizabeth

connect XX In and leadership I've my we meet will needed as had to with incremental Advance, as hard-working have privilege cohesive ensuring I'm first providing teams. talented organization. and to that best-in-class finance us be the a accounting with our well committed retail the enable resources days to and

rigor, of are a across on sense fundamentals accountability improving and from focused As heard to Shane, business the we discipline you the bring urgency. with

high-performing We have begun to to team. elevating are to become ourselves committed make a changes, and

ERP including Within has system, intended critical needed recently potentially including reconciliations additional time-intensive and systems. fully the work and sunsetting The this legacy filling thorough across we realize as the key of roles, of review, step as review our company. hiring a been processes leaders our finance benefits first certain discovered well to

The operate turnover effective XX accounting of the has finance challenge increased personnel as to past an the months organization. over

varying provide aggressive leadership accounting controls, taken have action around at our in and contractors hiring both to resources to bring levels oversight. internal professionals in-sourcing and We

people early significant we actions, our related in XXXX. material these weakness With to on progress are making remediating identified

results. In we previously in issues addition, with certain release, identified disclosed reported our as financial

prior results XX-K. upcoming and correcting are our in We Form financial earnings period release

an you we expect this are for results to filed we today impacted. do morning, be extension. As We discussing the saw not

financial However, to disclosures. internal we assessment reporting related control need and additional finalize of the over time, our principally

our Our QX the results compare corrected today results periods. and prior the financial to for will full year results discussed XXXX

And net billion results. tougher decreased was lapped primarily the the as QX to X.X%. by our In the but in year. of quarter, quarter, to we X.X% This fourth store sales comparisons last softness particularly, DIY weeks year on sales the in decreased Now driven of with compared throughout X $X.X our the prior XXXX. comparable

growth transactional the we strong our result we performance However, of availability. a to by continue as as encouraged improved quarter in pro in realized be

most in regions, The West impacted by the and they and were the as weather. Mid-Atlantic were top-performing unfavorable quarter, our Midwest were while Northeast our challenged

management. a year issues our quarter. along From the gross perspective, There the with basis XXX engine category heating filters, from we prior profit points declined availability, we to cooling QX, several and performance XX.X% deleverage. contributed that In atypical margin business in of and as improve are saw strength drivers

XXX period. roughly vendor from XXXX, changes points which over Inventory-related of and recover and inventory-related XXX costs. to are capitalization related estimates, basis points external basis to firm of This incentives XXX an a earned items multiyear hired previously points in contributed approximately XXX resulted approximately basis basis points, in identify In deleverage. we

QX Lastly, in points. in $XXX elevated supply SG&A was XX XXXX approximately XXXX. million contributed compared $XXX with costs basis chain QX million

As previously occupancy our costs, labor-related sales, driven discussed The XXX expenses partially store SG&A our actions were was and members a to year-over-year in These in our of taken offset by expenses deleveraged expenses. points by from investments XX.X%. in deleverage percentage a intentional frontline net productivity team new basis QX. increase

of incurred our as well million million $X in expenses related accounting to our Importantly, strengthening to restructuring approximately related as we resources. $X the also

indicative not run we organization. of These are want results how the to

mindset Shane Advance. expenses reducing As we cost-conscious building throughout by a mentioned, are

the Our QX deleveraged quarter. in $X.XX the year income This with compared margin lower well higher was as prior compared driven loss with quarter. prior QX points share per operating by $X.XX basis Diluted interest in expense. XXX earnings was net as income primarily year

comparable year year. sales For compared $XX.X net X.X%. X.X% approximately prior year billion store sales with full increased decreased XXXX, of Full

decreased to gross profit margin profit X.X% basis and Our XX.X%. contracted points year-over-year gross XXX

year XX points. points Cost approximately Inventory-related by decrease. were not the to items contributed increases full price XXX basis approximately basis contributed fully covered

by margins As impacted initiatives incentives earned negatively previously to recover full the basis year points. mentioned XX gross earlier, vendor

chain supply basis contributed Lastly, costs approximately elevated points. XX

XX.X%. full the XXXX. related as to with primarily rate increased compared growing than This percentage count X.X% reductions expenses SG&A was SG&A personnel sales as increased changes. as incremental expenses expense well SG&A an of a net faster to XXXX throughout head by onetime basis, a year for year and driven points sales XX On basis

$XXX earnings XXXX. to end margin XXXX our year rate at of decreased full basis a contracted Our operating the XX.X% XXX basis, income $X.XX points per X%. were compared million. to Full On share $X.XX with OI year

million expenses. $XXX in million Our were The capital compared related XXXX. to IT-related XXXX new primary expenditures openings the fewer and $XXX of capital store expenditures reduced with drivers are

We expect focus supply enhancements primarily XXXX chain will our IT expenditures in on overall that and capital optimization.

that budget capital are to targets. our strategy disciplined hold We and accountable a committed initiatives financial teams high-return allocation on to time,

was Free due full the for lower despite reduction results was spend. $XX cash flow million. year-over-year income capital year to net This lower

Advance, Since the Shane you joined deep expect, as dive and taken I have we have into business. a would

the to improved on the performance, to company While business have and other trajectory we help have quickly put for actions simplify we do. more work to moved a clearly taken

come. for We the particularly into the assets, efforts improving chain factored incremental setting in with deliver and are supply will store year, spend additional begin is our to optimization We to which measures, productivity. guidance XXXX the focusing years believe stage improvements on of our while growth indirect cost-cutting implementing our this

offset continued share considered factors, billion, $X.XX our $XX.X income the full million, to operating of sales inflation. $XXX to of guidance, net Shane and discussed DIFM expenditures X% $X.XX, with minimum sales solid fundamentals earnings X.X%, free in assumptions for $XXX include industry XXXX DIY on per comparable and of improvement are which flow. earlier, the of $XXX coupled to of a store cash year X.X% modest Our includes million consumer, by billion margin pressure million $XX.X These to X%, to diluted XXXX in capital of

I'd over call to Shane. like to With the that, turn back

actions to to proud but and us got am a a team, a with There's delivering . Advance cut fundamentals, coupled return that frontline can comeback. team decisive we've industry growth. powerful committed no we leadership has work in legacy, focused that Ryan. our profitable XXXX, favorable and out Thanks, a doubt a confident our for with reenergized I XX-year team

I'd address up call now like Operator? your to questions. open to the

first at Our from question Instructions] Horvers Chris comes [Operator today JPMorgan.

going then bring first from margin at I'm and a to a to is question try to start going up My perspective. low level to it level higher a

down pressures, year fiscal that, you to help the understand, you incentive estimate, that you sell is. that off us incentive in about think gross a on going when level lower later, Or exactly going change and to is Are what like essentially exist? are what And writing the inventory the you If some vendor side, XQ, in market items, perhaps doesn't it margin be such unclear there? you vendor could the on writing on inventory recapture? there's the totally

now had accrued writing you're to and You vendor what off, for led them and incentives that?

the thanks is things. Yes. X couple Chris, of this Ryan, a and our really for joining us are inventory today. Yes, drivers of big changes. Those

of inventory Some is incentives, vendor to amount calculations. We're is of business approved the with, going able be out then and/or we've of vendor changes we longer we're incentives, recover. businesses some do recovering. sure of some in the to challenges just got right no it of we making believe system, it is obsolete so some that we're it the and And excess on shrinking that

CFO, Chris, methods estimating, at and and in, us we CAO the done keep of success. in looking what's new And to our here. not, it's up and digging exactly in set Shane. [indiscernible] what's that's different Not business, unsurprisingly, occurring and for they're what what's new

that vendor et we a positive the I'll Chris, initiative mentioned, year at that to on there have one on cycling go And this table. incentives, have look that. multiyear and cetera, thing year. more That a back period was over last we're prior a income had over up last We impact year,

Okay.

a that like impact back to basis maybe this going fiscal up, i.e., just So get you year, gross year in next it line not is back, margin laps, clean to get to the clean going basis, -- about a was as you'll and what on affect it the points then terms x of think you're there's are lines? in SG&A it both gross and an because margin year

Chris. Yes,

us year. XXX I cycling expect again of roughly don't anticipate So next that of would points atypical basis kind I those items

perspective So from there, a a rate. -- that's COGS margin

From really, an that's million, severance. related SG&A $XX about to perspective,

to of the weakness the related remediate some our And on expenses side. material SG&A

The from UBS. from Michael question comes Lasser next

margin 'XX right beyond? that what level you working to you're of? is with parts Given all structure business now, moving ongoing XXXX for . off something in do grow operating think an the and the margin the sustainable your Is

Shane, will this. it's and Ryan Michael, to add

that [indiscernible] you color published. an at heard So first, in some from of sat we what we Ryan, terms

You can out can which put a baseline. kind the of year us perspective be that to bit business good go. about. a guide, to our occurring to where look feel we put things this together some give get the of might of year, then for not a later We multiyear And this

today, As get step. that But to better we every and we're around And notably further be as trenches sit day, continue incrementally to that's the first year we'll points. the guidance, journey this looking that look to credibility, in XXXX we Ryan?

question. good Michael, Yes,

So that from XXX that think basis or to lap expect I don't would what points this atypical is year. items again anticipate we

data that's So point. X

we margin guide, expansion decisive that in In earlier call. continue execute to the have about on actions we our modest talked as do rate these we

got we've you can coming margin gross profit. as expansion increase our modest that from OI in some primarily OI see margin. is So -- there, That's primarily

get more And quarter. process Okay. in obviously, the we're the information going sales second on then to

be rate can that. long term you the X on us that's to core financial of holding be peek ongoing give margin sustainable number you'll a impacting related going for on questions over terms the the how so modeling business should one. That's what Can of performance an assessment in to So of get business to? be the we the we

business, need pressure, for the the have flow rating, are of lot And that you resources assets have a agencies maximizing to about thinking of credit are two, your rating balancing receivables and you value under that cash downgraded factored? the improve free with given these how is the

Yes, to there. a unpack lot

with There's It's selling stores. blended urgency a a pro We really So sort a we start the around with strategy sell is sale. business. good and of team customer company. let's This question. box second the your no where model from the a is believe that that success, to Worldpac and isn't good taking route business fire to core DIY members. have we're our

I that of for right Worldpac, so led move which is the the review selling idea to strategic And the think organization.

say, And sell. have there's So maximization, -- process. value we as sale it we to not relates a to why that's potential don't it's

is lot of seen, significant. has or who good breadth have the both ] players interest a the sort players, been depth another. interest. tempo I've us, We're that The expressing the is XX thus Centerview for of seeing are running going far process [ deals at news and it's and done of ] [ one

as get the we And complete that with quarter. working discovery the to buyers, so potential and in look process we'll to second price

do Importantly, started a in them about can And about to though, the with think we have would of what do couple proceeds. have and we I kind think of buckets.

the debt initiatives. what pay I there secondly, then are disposition down, figures we And some funds. with key think into would

decisive additional with You've accelerate proceeds. potentially heard actions our can we that

I our think can consolidation, the So that chain some Worldpac supply be proceeds. amplified with of

could You our think initiatives. IT about

accelerated. got coming heard we've -- system online, that can be our our POS system our You work about inventory new

stores terms up store of either do in our And estate real infrastructure, team, in then looking our openings. new lastly, our at just new or we terms can of what with existing on store sprucing

have remainder like and to not get On titling a ready as without a point. we'll what the that at Co. definitive closer Worldpac. we box, that. what potential if through, that's of But focused out process, do. it going first parts we a feel [ But blended ] and process on we're this of certainly auto that your sale Again, get goes of give we're look a we in selling we company to information, we're a as that's sale provide question, good in depiction we more wake

Gutman Morgan The from Simeon comes next question Stanley. from

fully I in at That's about $XXX million. $XXX the fourth saves, some guess the we a annualize, the about little when which different we way. guidance. may not rate. to tad run get If annualize to cost wanted you them of get add I back -- And Ryan, guidance below quarter look a you EBIT, . then roughly million the back a

partly, reinvestment to and take that there improves of in Chris' get much think couple sort is the like be to of repeat, some of but math? a how a that questions in And you doesn't some seem is what of to may this business the things don't threshold, question savings? So lot of then if the reinvestment, core the there some be just I of higher earlier, you

Simeon. Yes,

do we one we is in So the things the invested of did frontline.

of some took that savings we cost we frontline. the So the reinvested and into back

back that $XXX that was about $XX in. million we million, about So invested of --

I XXX at back think full if coming our SG&A. points, we're think look take we [ plus close EBIT perspective, would on from a XXX that I in the right we an basis -- say, in I ], at year million now, $XX

$XXX get You kind that then take in a to and you normalized SG&A. rate, of million

work to that Now, our going X%. top through. get to guide We're X% line our SG&A in to of inflation on flow manage to the

I we think we to how our guidance. that's So think where got would

Simeon, just second. a welcome couple the of the a follow-up, on cost. just [indiscernible] I quick

on cost So out. cost $XXX that million, out, is the the

the some call, company anymore. team members not never we tough and So with made easy, XXX the

That's [indiscernible] so not we're thinking an in the organization. in And about the number run. of that's terms how

what going on as organization this actual of do, to you the think about street ground, you renewed terms down on pro need emphasis up from heard to points, physical in Ryan's our see And initiatives but you're the and then we year. the

I'm pros, inside and they're CPPs our in members, ] that of the area an the members it's a store [indiscernible] sales to the to But for and our think relative area we had it's our out bit. field, an think the have outside terms are capabilities little also to I after. who the [ we're win team our excited an referring area that's of right eye on where in off a we I go team ball

addressing the diagnosis what is, of business I'm of of your holding intrigued things this back. you're by Shane, kind has follow-up been some the and And the

So if you bit there an or ], supply that? on bunch whether is versus systems mentioned your of it if about supply is you can a Curious take infrastructure, heel Achilles and merchandising chain. a things, elaborate or process [ chain

some team the to I meet culture as So field, in heritage. the see think And good members I you that goes and the is, of focus. it news XX-year

You see sell women want men and who who win. to auto parts

And as to give so that making we if a that on organization, do the need but they'll by a call listening a we're not sure geared inverted the time from company, spend you we my service, headquarter-centric in it organization. be unlock field-first the what to to the what time are feedback takes And and as pyramid, you that successful. customers, it we

If time our that's associates, frontline forward empowering key route a for us. you take

I model. looked a heaven and as didn't paths box. company the put blended it's box the different think, blended in We, emphasis at past on Additionally, to the the

customers works with of demonstrably, works. of It You box works get the industry the the get, in the terms could serve. [indiscernible] where you breadth sales marginal the you see, blended can location. same you in flow-through when in It

where a future. company the really in So as going that's we're

Melich The next ISI. from question comes Evercore from Greg

guess free cetera, the flow a a potential it's you're little sale? just bit. I in is, cash from your to this of et guidance sales, much year, clarify first the businesses question But or I know Worldpac are like coming I'd sale. my how considering

We on company with Co. not is contemplating. remain our today, is we're guide in -- based put this Worldpac it sale. as the [ anything the or there Greg, guidance, Canada ] Yes, the the for We didn't whole [indiscernible]. Ryan. and In is

Yes.

disposition revisit Co. see and remainder our proceeds, midyear breakout [ with proceeds. you'll that then we'll you So the at process ] if through, for the plan goes and of

Worldpac clear, different Co. flow, to for ] whatever -- last free I example? generate did a cash way, the year, -- question the So maybe remainder [ if just be ask was

not we'll about units more come Greg. give We're individual in deals that, business specific time, at back talk to you but going QX on to this

I profit you little the from from up think as terms the talk more the standpoint a . I wanted like that What up from the getting years? is a Shane, and the serving sounds speed? more? couple to taken Is us they're it of narrow is the frontline hear business bit here it gotten need Well, the Fair the bit bit Is it haven't get last and that follow love through. -- went and enough. guess, Advance on down customers. I little What update it country not they of down more to getting It stabilizing toured focus -- product that could I'd in you you then. a street, to little them. to Is actions quality? in or a stocks?

Yes. Great question.

looked start feel been dollars, they're I'll you where that And make frontline. with valued. got at the team sure members. to we'd members if We've So our team like invested it hadn't on the

that capabilities certification and wage goes both what bonus their programs and so to their to of are pride to amplified. rates, And sense training goes goes so programs are, that that that

of So turnover. on we've reduction in we're underway, got a work seeing the significant focused frontline. body And

a been that's key So piece.

to programs fruit. bear goes that Secondarily, in marketing engage as we would were didn't takeout, spent money, the and we that expensive, this SG&A

so the successful with to the And around do being the customers' feedback, as product market pivoting anything availability. customer in we relates we're it

So who hear literally we are but would first stature don't driving you say, else. somebody have I were from you and first, customers of hey, so if to me product, the their call, call you call they

lot a product had work going we've so on availability. And in of

inventory want We terms down, on amount inventory, has team a incremental are that Ryan look if have some basis our notably, tremendous our there's up up customers XXX in-stocks. better sales to We're asking million disposition. aggregate in-stocks [indiscernible] Our pro work our that street this you that for. talked are the it's we of -- of outside there. year. and We capturing points down signals we at and the But of over the those put cover and how a members, demand in so we with to of further $XXX

And this pro different structure, those now, the org bifurcated didn't were touch in within company. efforts our in the parts script, I our solidified. but on are of

so we forward team as pro. go our And we about as think one

-- and might you So different that interactions if a same customer, the the you you outside working it's call with of if team. store you're get our get you're not set

on going that's a So much basis. more definitive

where our supporting also And is our desire strong thrive, vendors, that's can to for vendors, the should we're between talk the we collective around Advance out perspective. feedback that know, a be. that coalition and of frontline, need have buy availability we cost we've customers innovation overwhelmingly The delivery the Advance. merchandising and to us, say, product vendors to I'll just reaching everybody for that to between this as a have But think us. on There from idea positive works prioritization to house both to who the important you from fundamentals hey, last position and thing all working I engaged the ensure a of the need that in we together. vendors, a the to that that side is price right to terms But in touch -- our between got want product, see for is and that

fair? inventory as a expected in as Ryan, there. we I you mentioned or bit stuff get little reinvest think, the that Got and that the the it. X%? part guide, And right in Is of of numbers inflation you X%

Yes.

looking inflation rate Our expecting. we're inflation that at X% and we're a about we're rate seeing right that now is

is question Jefferies. from from next Bret Jordan The

see inventory, been it's by the obviously, while. a chain seems DCs ERP a WMS infrastructure? supply there distribution point like At actually investment done the on the use when year. having this should of an DCs you those end as center for and large you do in what building system? a The forward sort be be On smaller that more cycle initiative, And on will of single

Yes.

Brent. Thank you, question. great So

that On the WMS, we'll be done with year. this

[ WMS Jump is So ] High our system.

have in we'll that will So all what our DCs. replenishment be of

basically But replenishment. had product that industry. The second we DCs a doing as journey, hubs, in one asking had this a this a terms chain. past, creating market you requiring in provide chain, we terms replenishment to the probably of we've in supply full is what definitive function part were the And perform on notes, to in we not to store basically of can see the but creating journey single of cross-banner in a XX to We unified supply and every our product. DCs smaller use had in fashion. elsewhere What model

have And into. for some do some is of that, terms far [indiscernible] many you'd expect XX don't the ship and to to too your DCs capability size products, in [indiscernible] where

idea XX, the you'll companies, large at larger that to sometimes definitively create ready we you footprint. define national is But to you and look not number. We're network -- to X, that XX other XX, national DCs. DCs give So a see can exact of

that the smaller And that, model conversion then -- think market we'll hubs both of works. our additional market I hubs, of flow that add because DCs, beyond the

And some efforts there footprint, so if exact at together more in look that are you additional take terms need the probably and those large our describe "Here's X to undertake, DC and of, we we'll number. that

Here's where we happen today.

is flow months. set coming coming our all flag be of X a where But path, interaction today one." easier work systems, with might ground unified and chain, have the new a us. we that a in That are X Here's we the putting for to in to will key supply the vendors for be an

running I cost running? what consolidating? for you to of guess, Or pretty like been has have your impact you inefficient internally a might supply you have been basis what's as up point feeling, the run to pick [indiscernible] chains, by what Do incremental

and previous if for chains it's everybody you're supply else just I'll anybody us. endeavors just who's path not X the in material, or running chain, forward logistics, say been it's it's supply -- your right? if So X just as

will of system. out you, with there's that the [ as think So come moneys we explain material ] we

the for product customers, And up. better. flows goes importantly, availability The our then

there's there of so a And combo X, we'll a at X date. that kind describe more later

The next from Forbes question of is Guggenheim Partners. Steven

the Shane, maybe a chain. supply follow-up on

of mentioned what mind frame result maybe time flow if cash goal? And in to the is accelerate proceeds scenarios network. change like frame sale migration sort You can in I reach of time I was to occur, a X the to just the that the free that in difference terms proceeds through have you if doesn't sort a near-term the completion there the that unified would here frame occurs, sale time right? of sale to maybe asset the the like the of potentially is the in asset initiative, using single If we that in then curious, think of guess, business?

Yes.

time So chains in supply and my multiyear companies, combining third But this be endeavor. sooner a is rather we to it want than it's later.

I practical of happens. think that's what reality the just

add something that this. will as shave that look a time. which hubs We'll the existing there's larger particular, group in extend 'XX, is done we market do can -- But expect and do Absolutely, to should or efforts of at if into efforts, net DC, new 'XX this take this in DC is Where to those need 'XX. to we we large-scale do into the XX. So the set our we with where we probably And both time be in we'll structure, what proceeds. off? we and have first where put new with

everybody our conversion I And is hub first is journey think, that market the is going thing for here beginning. on.

-- good so going is be really are, And early this for us. a and thing to indications

move will we the customer. for because the we the state creates can as customers We profitability value that the of improve fast know end and as

know is already that to so focused our it. team They're supply more but dedicated. And they're on come, and chain

And Ryan. maybe for just follow-up quick a

And terms margin or in any As around we charge? impact quarter noncash and of implied within benefit sort what's LIFO of color sort LIFO? cash the think fourth through for guide either of of sort margin the on the outlook, XXXX then

Yes.

in in it so in in to XXXX saw XXXX, to So expect And QX, moderate $X.X a moderating we be expectations income LIFO. our of million related we guidance.

Seth question next from Barclays. from The comes Sigman

this the quarter, say noisy quantify anything you to weather, I'm can with just initiatives I it's are in comps a the but follow seeing that on changes, dispersion some to down wider the curious, base? are working? you and X.X%. point implement wanted of as you early to I'm maybe to store started up performance across sure

absolutely. Yes,

did we availability we saw improve, So as see improvement traction. in the pro

good in our that, performance seeing actually availability. we're encouraged We're excited the pro. by about So inventory

pressured. see still We DIY

that offsets former in guide forward. so pro in also of performance that. that's kind going And of the some what's kind of And

availability, see have DIY improvement we pressure in improved to while reducing expect good forward. going as pro We the

Got it.

versus how Okay. follow-up about ] thinking -- us I just and question how the both, but think in we just guide the of guess, the ultimately as profitability some that's outside And I'm of issue/opportunity X-wall to is you'll my of maybe then what map And is much your at contemplate here? that from How maybe volume about gap you sales-driven, profitability driven peers, [ much gap inefficiency some the it's profit that is of stores? curious road versus point.

question. good Yes, bit it's both. little It a of a is

So also obviously some heavier as about benefit supply an that margin product of and we that factor, and it bit little DIY, a talked some than as generate impact us pro flow has is to our how the of well. gap the far being -- will mix conversion, well. for mix of as type chain as that in There's a mix

talked we cetera. for where focus on areas merch excellence. Shane other about need line reviews, to et also there's Yes, improving

keep one we're completely, from closing chain here, is there and I opportunity, is go some biggest obviously, work big have mix us there's will why on which close and impact is it We're around some think that into one But we the supply conversion. So to that's gap. to de-comping all the that not focused but of areas do that, but opportunity the specifics there. going

exactly money if [ to and box, is X of about way focused look level, drops $XXX,XXX, an fixed you the X, us larger So think a costs bottom per one you've [ at revenue line the illustrate, folks $XXX,XXX, ] covered. store, on right. at incrementally you as store, have who And revenue can right? look to a got you kind you blended your why ] and higher X to a other When And Ryan numbers. X, at we're add $XXX,XXX, that

a us. So key for that's

both, your is, the path I we other don't as is at say, We guys. both. And that, good benchmark forward success. So question think And to where sit we hey, now need we do do look the Seth. as let's a to see off Advance continued one, we and

better after a to our be to seen a that and incremental, members. organization an is this care last provide team year take we'll a organization, then perspective other on that look and as to from recipe years. incrementally us, for what look every of I've be in goal look for fact, might couple industries, our in after And day, customers, for movie before success. my in And Our that's like later look this us of

Bottiglieri Chris next from The from Paribas. comes BNB question

seeing some inventory adjustments. of Sort [indiscernible] these of

not changes will subsequent sure understood and reversed be possible? these inventory question. sell these I'm -- in in period permanent changes? fully Chris to Horvers Like are that write-downs likely wanted you Just not I it? Or estimates it when is Is

I -- anticipate reversing Yes. would No, making estimates that changes any and expect that to we vendor time. This wouldn't as went reverse point I at don't process. -- we it. in was these don't through that receivables

X Got you.

hoping It divested. you've was first Is then question an margin XXX. like you the you -- And talk looks is you this just DCs down up immediate Carquest -- because the shut it's serving -- Okay. these I next you that could actually businesses does to you're more saving take because independent about actually this stop if need anymore Or losing this money them some wouldn't just you to enable of these market? these customers? under you like

start, in. I'll Chris, Chris. Ryan and jump I'll Thanks, yes. So Ryan start, and -- can can

part They ours. geographies The independents are get an can to. can't important the where exceeds could of They we business, end right? depth their of markets serve serve capability

wasn't looked of adding terms a times, working for if we independent and as the us. working In the where, will, independents, of for exiting it it terms wasn't sort independent the trade, benefit were at one at isn't you either. we balance this This of arena. cases, play is party, So to the exuberant of in each in some around

us so And XXX folks aggregate a about that make and as we there that, us. end that at looked good day, are that sense the continue to it's we move And for did relationship. the of number, didn't for the at

don't good what are Carquest our in independents and the who received by their representing the a business. about they at independent name they also would lot The a it folks customers expect. the network. in exhibit pride do, what the Ryan it's in of inconsistent well want talk way, They But doing with can manner and been impact.

So we're the that have. we been it's happy a adjustment, independence well-received and with

we'll add on that, lose $X the $X I'll that actually operating but well, Chris, going some to million to profitability, gain million. sales and roughly line we're Yes, just on bottom

for us. So it's net positive definitely a

from from Seth comes question next The Wedbush. Basham

that sale play My sheet And of inventory do few vendor leverage around to any you over quarters, forward. expect out program? implications Carquest? post How going next is the for financing question including the balance the

a good question. it's Yes,

the at of some the with if said do thing about is the get the do one That's we it. talked we'll sale, and it, Shane first those of look sales, to sheet balance with proceeds. proceeds our as from we we'll So things one work delever

first delever the But a business, going balance cash we flow, flow, cash business to forward, the good generating invest place. that that but think also sheet. will going is in get I work to better to and leverage the part as of continue into target We're

transformation, beyond to but should you we 'XX helpful. the early, That's And rise obviously, from with CapEx expect Okay. supply 'XX, look chain guide? as

in The supply we're chain that the actions. and investing We're put we focus out we're going decisive on be that focused on in things actions our we drive contemplates taking more and business then our to sure of expenditures CapEx much conversion. these guide right capital making

and capital we supply is focused IT as said chain earlier, really So the now. on right

Yes, a in jump transformation just supply chain I'll one. there. big is The

accelerate where can either able accelerate as previous the to the the just again, do I 'XX. raise And exactly feel back we the or think wherever and we Ryan's for we'll we'll can got 'XX. from chain more, guide questions, could better our Worldpac to it. should We be business performed we're if or it consolidation, deploy it supply proceeds through in

D.A. from Davidson. Baker Michael from comes question Next

what are up in in know a distribution breakdown. to talked to [ smaller the -- XX and how are Just us, tell used which I case, to sense you're What How XX just going follow about the to DCs, you a Okay. DC? annual big and you of just on want are consider that? I'm get the can't your talk everything, ], looking can past, what -- that terms find I and I of many you past the of about. to reports may go DCs, added what to trying you Any many with in the is centers these PDQs bigger? need bigger but do forward be Great. in smaller? DCs,

Yes.

Carquest So XX hard is DC XX. approach know to with I the the network. and Advance XX, it's

So I think include well. in total, well XX, about the which would as Worldpac

about we're about Advance the So when XX, talk and talking that's specifically we Carquest -- DC network.

to all the the So months, be the we keeping Obviously, we've complete I'm market to you, sure of that in breakout abreast we'll little a if in give them coming facilities. converted through we're want is reticent plan, And their members got going more a into staying these of hub be specific. team as in loop. a to we DC go make DCs.

break differences. the out we'll So

model, smaller market the Advance hub a more from that are the footprint DCs DCs general, [indiscernible] In conversion the Carquest, that appropriate -- substantial the are size difference. there's for larger

may Again, need. what We bit of in we we think that like. we that that a footprint the little have refine large terms DC largely network national might look

of large you're somewhere clarify question XX that XX guy, between the number So had want network, to already that you I the saying think or is those just a old the to couple? Advance, other give previous on from you have said a to take, X And that. Advance based earlier the XX you to right to DCs.

questions X to on lived. right? to what setting answers that's That's together. want XX and distribution work life, I the tell that's a firms and that experience to do good say, seen, the infrastructures, of some I've network." national have hired I've XX, my the what If past some up going "Hey, nationwide The in job And that's threading what you and they're Michael, to Yes, we you.

And we think think got that's for the I yes, facilities range largely us. appropriate we've And today. so an

-- we current need. have think we current assets our the leveraging assets, assets create that right? leveraging network We're We're our that the we to we have

to an terms we'll up was United Yes. better and overall said, model DC to and can trying do the in to and exchange takes. might hey, is go. foot you square to X If the the efficiency have. the put right of the located come hour way trade-offs which XX have new the quickly DCs the say, we be of both And those speed long that's way on efficiently for national a guys drag. if out using little how States, you we in make, a marginally that got But we do this to cost and the in came what way." cost XXX this or more buildings We're math that bit to the million might you effectiveness, minor That's and "Gosh, it facilities

other makes just That clarify. could the sense. Yes. -- I if One beginning call, from of the

. You an found talked that incremental year-over-year $XX sunsetting frontline you another netted about, And $XX from -- a on things. is What million to guess I million investment? that that? to somewhere? from get is Or basis, employees is

Yes.

amount, course. of out that So an goes in from And make math to million our ordinary double $XXX I'll We and comes for The "Hey, the took and roughly training." million that, said, are it some we're of wages, take going then the -- incremental $XXX that, million. we $XX bonuses is There's it frontline, out. easy.

there But our we the spend it on, some So directed got towards comes that year. money weren't some We frontline. the sunsetting. of we've merit that HR had programs for plan out from

just canceled do train. and dollars we're and we bonuses and putting those So those programs

no it's So the that no were right it's the we company. putting funds of better drag incremental net It's a place. to in -- use

from Oppenheimer. comes Nagel next Brian from The question

So for supply But Advance the teams, followed fair, us heard we've chain off, a of I in so past, discussed guess those in fixes. couple think prior I but of a we've both first not management maybe while, questions. -- nature. really maybe who philosophical basically Shane, for with

what I So do differences that a you here evaluating perspective, chain has business, what the for look supply the at a and about talking the been a view the from lot business. -- you done key What's to I in your of are different? here? guess, as plan component key the if past, we're mean, here really what of

do balance you then [indiscernible] think really you've Because -- on couple You And How how a within near here have in second of fragmented question. a share? very sector, a term. have lot a or you got my do sector. But going that competitors. really about strong market you the

these you about share the maintaining So market business? how amid near-term all think type do efforts within

day. We'll every day. But share. some who of so we got -- plenty parts on our start have we've companies are every lots there And we auto There's of keep earn with smaller the played compete that some to with second there out question people good have market There's examples. notable of that lots sell you companies. know

steam. our guide. engine, We've get our put think that's out as turnaround, take full head we'll this to We a minute And restarted of we that know modest. we with a

disciplined to good. industry. is runway it's very are the way, occurs By naturally. there a even with the big room is fundamentals still the This industry an that and the By players, there's growth way, grow. that But just industry

I share. to we're And taker, so mean -- be first that we and be of but shareholder, in step a a share won't market is terms

got So what to thing that's with what X the thinking. Any about we're going the do. spend is together, looking don't do time you you you day think infrastructure? to the put are companies first to logistics we And

the had so going exist with to X to got the about X national -- network. for first a let together, thing that's then time the we're is to we're answer a what to single Any get models and do distribution long you you is doing. solution. time put for think we companies have you one is today what auto infrastructure the parts what and And are logistics telling market of sort And right different patch

won't Advanced identify able facilities you that's we Carquest network. will a Parts, a of terms so red We're blue Auto in and versus EG have national And distribution to versus Advance. be

get a idea probably. using closer hub. it's the think evolution. function I to market a good more -- bit the is closer customer you And a an think of that's SKUs to to It's I that And that's to see the The responsive. this be way second thing of think -- I more product

and that in color. time the customers' of have all want terms be to a think happen. participated market expectations short what in me makes can I that, increased I in We that appreciate frame. you get the

Scott Ciccarelli is next The question Truist from Scott. from

where pretty that, have you factored about can you're talked you theory, a there were short XXX people Like big more now of the in sales? provide some of in least gone, you that, number So negative to Like, take of some cost are factored $XXX impact expenses color period on there on theory, sales? but people negative something in sort structure. to of at have related in out time. And doing on in impact your sort teammates able semi-productive? from million the a you related that to It's

So the cost takeout was broad-based.

the need a that be with field to in comment, pyramid, needs So to be functional a up sits running approach infrastructure. you in had who and the back in to your we corporate if idea be And to first, be the field. And that, we Corporate I corporate needs to exact. corporate inverted needs supporting business. headquarters-centric believe the go a everybody seat lean. think low I bit I of was earlier to no area an with end

areas. And functional so we went the across

an in because think I invested where than were a area cuts other programs marketing marketing in areas didn't we that significant the there yield. notably, was more have

the and dollars a the And the going front -- supported processes some feel booked energy, takedown turnover in and team way so dampen not in as empowering got necessary, We as inefficient, were bureaucracy. put but they're like only as line those that we view wasn't didn't out if at front we're And that and and occurring. cleared opposite sales take I and anything, we've heard members we one our reduce line. we that create cost out think it that

Okay.

can restatements came XX before the think marketing new thoughtful on one you be some the finance there you Are of results? more you'll in historical team And on reduction on add in? of don't -- So see to other side anything we the should question.

Are you today? actually being is more saying than reported what

Correct.

is today period plan I in We'll what time. of No, in Form the we're out about Yes. XX-K. today It restatements short the are talking shared XX-K to think should that the extension that be Form what we see we've within have order.

Got it.

Okay.

more restated results... So no

from Max. Rakhlenko comes from Cowen. Our next Max question

Great.

your where you mentioned from and where are be want far in-stocks by I how them to away to first, they they've basis So you be? need points. improved think XXX

much timing. that how how just then think about ahead? So we And should room

we you didn't question. one Max, Can say time, get please? more the

your I XXX far from just where need Sorry, is in-stocks think basis mentioned be? you how they point away improvement. to

know? then So we how about how should think just to risk do timing? the much And further have you

Yes.

complete So will this -- comes sits we're inventory doing get And that we system where our online, better real time. as that it from it today.

quarter. feedback pinpoint by I availability. says, to product customers but our has do We material that So been come, I don't better it, want to from that progress your But more but feedback team feel put journey continues. that about put field customer a on get definitive want number members. to noted get "Hey, a but We I

I'll Yes, just add.

broad-based. I Improvement... think

but improvement, to geographically, being get work I centers, there. with the we're work. to the That's different there's just and still do broad-based the are work smaller, system the ability Absolutely XX think distribution to some able new that doing allocate

broadly but do, to improvement. work still there's So significant a

order following latest that conversations some how just the been Pros? the to DIFM then of having in be the where And versus thinking brands about you around need be and are thinking pricing national you label And with whether side competitive? are on to then private you've you Okay.

control. great our private a we've got think an , some premier I the relates we platinum And We label. The business. private dimension is with think, start state. product. to name. Carquest I'll about is So [indiscernible] of brands it label [indiscernible] that as And important think brakes

growth in of portfolio. we've brands So an the important and to private part private we brands seen want be

in in that come in making fully a through quantities is, those suppliers represent had we who what we position as we've past, relates to the our exuberance think our I not have with, done to something it merchant we may sometimes work and we're are getting but and sure teams issues we're getting needs only need. We've are. the our sourcing not it that products high-quality

you've things say a players the how industry. I that's think front, On the And the be in an important, here. I disciplined -- pricing I is conduct need a describe speed something ZIP you've couple We availability we got Pro of customer that is got expeditiously. on. to service. on customers' if focused a you're important price. of them you that a is would the got feedback of get this a but [indiscernible], dimension. to if between car is One, a the needs rational. [indiscernible] important, got But code you've the that And lift, we've know terms is that's a in on we're active -- customers. as to needs to and

service, which demands. it we'll we market relates be sort to is something as we're speed So the price, of measure. that where But on focused of

you to again That day. joining last sharing our for We you covered today May. forward in a decisive look Have with great today. for on more actions we our speak that Thank progress is when we us. question

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

lines. disconnect may your You now