Genuine Parts (GPC) 22 Jul 212021 Q2 Earnings call transcript

Good day, ladies and gentlemen. Welcome to the Genuine Parts Company Second Quarter 2021 Earnings Conference Call. Today's call is being recorded and all lines have been placed on mute. [Operator Instructions] At this time, I would like to turn the conference over to Sid Jones, Senior Vice President of Investor Relations. Please go ahead, sir.

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

described a include of morning, be the today's the which during could A to a our statements of including referred Company Company's Company obligation involve Genuine As during measures include Investor statements and important call the forward-looking Company be today's differ statements certain advised may latest due is this Company's can The which which Relations Generally regarding forward-looking release. release in press Principles. made may call. call conference filings, materially factors measures, as results presentation Accounting reminder, SEC assumes also is Today's earnings posted under actual update Please section this reconciliation discussion businesses. Investors morning's website. Parts may call be reported any The non-GAAP this its webcast website. several to and the any financial slide results to from found our forward-looking these issued provided in no Accepted the in of on this

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

today. second earnings conference XXXX to call. quarter Sid, you you, our morning. appreciate joining good Thank us Welcome and We

quarter to gains, which continued in strategic the improved trends, that gains global financial summary, report and operational pleased market. margin are we sales by by believe share consistent recovery strong was of terrific to gross driven the highlighted quarter priorities drove and the We the improved year execution the market efficiencies ongoing performance led expansion our dividend second In acquisitions, margin and sequentially look record results, plus X% investments, in $X.X billion, from share productivity quarterly for last total and bolt-on the XX% first growth up at were and repurchases. the our and financial a sales quarter. effective deployment Taking capital earnings of from and

additional in QX XXXX. increase, quarter with consecutive perspective, were further our For also XX% of XXth our initiatives. sales quarterly ongoing expense your the second productivity our execution Gross improved was representing strong and margin higher we than

up in result, a income margin points and of automotive and and our to XX the segment the X.X%. billion XXXX million profit year first a the Adjusted were quarter earnings our $X and on As was were year decades. strongest billion, sales up $X.X improved up $XXX On for net segment per which increased in XX% XX%. comp auto global X.X%, two history two a up a sales marks adjusted sales XX% sales basis XXXX were Total from were stack margin $X.XX, share diluted represents from XX% increase exceeding second mark. XX% basis and quarter a our comp XX with record

our include favorable across weather on customers. and increases increase of along focus as quarter market price X.X%, profit expansion Our strong points inflation our supported ability each XXXX driven basis and automotive up This XX the initiatives automotive in to in well XXXX. sales results basis segment XX points operations. of pass recovery year-over-year growth an and tailwinds was consumer comp double-digit demand, as operations. Automotive comp recovery our sales our to strengthening all our margin by second key The operating of improved these several from from were broad reflects trends, the and by economic

driven. which car solid been improving industry Finally, surge fundamentals, further accelerated market and by used have a in miles

chain freight. on the to wages such on disruptions, These and deltacoronavirus ongoing continue and spread potential continued which shortages global its of costs encouraging, we are variant would include tailwinds headwinds, the inflation our as of supply operations market these impact and see the While labor impact also our the closely monitor. global in we economy,

is outperforming sales accounts in highlights, seen for high pandemic Turning XX%. sales the operations both market growth, achieving and it segment mid driven comp service. in with regional contributed in XXXX. commercial and now. substantial key share. total inventory strengthening were June. exceptional sales operating volume growth in team had increased XXX comps outperform. automotive GPC weather strong both as in focus strongest in for key customer headwinds U.S. XX build, momentum and Sales to rollout sales been The retail we the across The expansion well next such UK addition to for locations Each in excellent more have quarters we DIFM significant while in In Pac the brand. ongoing with before than sector growth. now our business average our Australia record Repco for there since brands results the as Asia stores. take amongst began and outperformed our NAPA excellent U.S. are from in to have to account Ontario and customer trends the our segments the several and to and improving first plus partners In Commercial our to were of The DIY up particular, in time, XX% of capturing commercial and and the hold XX% start QX comp where sales with NAPA quarters. in North line business Repco our network we're and reflects teammates to U.S. and on the revenue. strong in sales commercial America, consecutive In by NAPA we market country daily us sales four markets down have continues posted the well sales strong our up sales our continues automotive key and Europe although the positive our now environment conditions to initiatives, growth recovery teen New have in Europe The posted favorable the market Canada XX% sales year, performed as collectively Quebec Zealand U.S. this NAPA of our as lockdowns The for built retail, availability,

product Our category tools include sales brakes, drivers equipment car, and by and under outperformed. all which

the customer consecutive retail last and the quarter In strong for a counts with second traffic commercial second addition, both year. retail remained and really the double-digit positive of so ticket sales on sales trend. segment, increase were growth throughout another low in strong of top quarter quarter, sales healthy By

we investments will create our highs growth. While ongoing the sustainable are optimistic DIY market retail is the XXXX, pulling back from of

team, sales For commercial our amongst to programs chain automotive double-digit posted our initiatives. supply attribute sales, in customers and our the each broad investments of segments we growth, and other our sales recovery which

for since in view in positive as the year-over-year centers. recovery overall This pandemic NAPA pleased of growth quarter, growth our our growth automotive fleet the This with meaningful were lag to as for quarters sales strongest and the was growth AutoCare a the We further account accounts. quarter government partners before first group, indicator also a the our We the this ahead. this with in and sales major was improvement U.S.

retail with opportunities our to As long-term the sales the outpace growth automotive the continues, recovery commercial consistent we for aftermarket outlook expect industry.

parts global and and sell strategy in initiatives We more are customer operations. to automotive for value our deliver more across confident growth cars our our

on our competitive inventory and capabilities to focused expanding our remain chain also store further footprint our our supply investing availability, We our omni-channel positioning. enhancing strengthening while in global in strengthen

levels X% X.X% for sales ongoing Total customer discuss group last both and which now fourth basis reflect and of sales of up XX.X segment majority with is the with Industrial expansion sales, stood improving we Index industries last equipment execution year, XXXX Several this global than across June, in more by up fourth quarter a sales each months including industrial XX The drove our the overall other and have safety our our and we and throughout line their quarter rose from XX% in across in QX the points base. sales industry of the increased Group. and the as aggregate experienced billion, XXX production automotive, the the seen our the sales pandemic. strong Purchasing equipment out $X.X market categories supplies, served increased sales rental gas. extraordinary let's strengthening initiatives and of strong into in product is the the Parts combined oil So XX% much economy X.X% trends of The XXXX. consecutive recovery have sectors increase second due healthy we activity machinery, representing cement, over Likewise, seen of from quarter environment reflecting year. and margin, consecutive A XXXX. add Comp or which the industrial to XXXX industrial trend. in a our XX% increase last operational year, Managers by sales and expansion. trends deeper marrying this from over were measured and Diving of

fits drive of solid To and these fulfillment added and several segment, of experienced several and sales of which the motion.com. In sector with industry industrial expanding with out include growth, strategic focused omnichannel have initiatives, growth logistics services newly needs this the years capabilities remain offering our growth. we products addition, digital broad well customers. found of via on our build past we In tremendous this the our

equipment which center, from established our was see in is The sales further sales of value-add solutions new expansion in inside XXXX, such businesses as growth. room incremental customers and new Motion and for Our we automation. and generating areas conveyance repair, services

several enhance few delivering product strategies productivity, key supply pricing M&A the optimization made enhanced last further we capabilities bolt-on to maximize areas, automation these our in opportunities years, of scale the Over operational chain service. to target while further improve to and acquisitions build management continue network category have to additional customer exceptional and to growth, our profitable and

is by second the in the momentum in and believe encouraged are the to on position. and capitalize quarter industrial industrial see enhance this positioned positive We team performance we overall markets. our strong the Motion momentum leadership financial well market We

did each of we of job exceptional quarter be strong for couldn't an So performance. in QX their proud operating the more summary, and grateful through our and businesses

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

Good Thank everyone. you, morning Paul.

focused impressive team outlined our to remain build results. that and the Paul's and I'd and congratulate quarter. performance to this with cash despite efficiency comments We're the to and emerging operations. supply well. capabilities we the plans the to let simplify our growth. quarter. integrate increase improve hard execute position global GPC global quarter, initiatives strong to reiterate growth, Last Around continue the First, leverage performance. long-term operating include investments execution and for to to speed acknowledge to GPC effectiveness, talent, of operations. momentum chain to sales impact like executed we of pleased The me priorities. the strong against to entire create so teams as our experience, this leveraged defined and pillars includes GPC technologies. our on investments and value strategic the uncertainties continue the performance and globe, work do We global continuous teams strategic near our for profitable This personally flow and the customer The digital, key well winning deliver our We sales

few. category indirect to be and teammates For FedEx. month sales talent, our priority choice. as to pricing, Macy's, digital examples all recent leadership lead people recently strategy. to data We're in execution we an Other Krishna inclusion, with investments performance. local Officer. opportunity we in Chief pace advance our years momentum such and long-term as execution GPC employer with person and Depot, of help services, had is the showcase He mission a include accelerate spend Home that initiatives. our announced and management, of capabilities of and customer and we our Investment examples sourcing, excited the example, more talent as Paul execute diversity-equity the on company than inventory to and Digital always joined experience, to a on and other field companies for of and Naveen our execution, I team the as XX continue examples to winning comes highlight Naveen initiative Information of strategy they digital with our that and initiatives technology will great the welcome technology strategic To European time Target and of build technology last innovate Naveen name experience

plans for of investment For example, we discuss automotive leader growth details the and bolt-on of Winparts online recent parts accessories. a an

XX% Netherlands location We XX that to investments distribution of back initiative. consolidation and years over power investment expect provide by the this local the We to with firsthand received digital one to saw visited on France and service European drive and And accelerate the process increased centers capabilities vision. productivity new past process our approximately automation in in operating the in France a the NAPA update facility costs We and excellence we best-in-class market. national office shared efficiencies. brand an of differentiation the in few

Although we execution these few see in focused of a businesses that our are in select industrial are delivering of Europe, and strategic automotive only examples results. similar examples each

well on creating executed during The is to transactions. also active environment value We acquisition we pursue remain the M&A our and strategy quarter. strategic disciplined and

strategic and For relationships. create various completed capabilities value. and teams geographies acquisitions North acquisitions increase The to we existing key several deliver completed store addition Winparts, add position and example, to customer automotive bolt-on extend in that other in American our European growth,

spares, also of bolt-on data that and markets enter third to and product capabilities. and quarter Asia-Pac and will plans. we leading and leader in a restoration the executed our a recover our rare automotive enhance market niche parts and execute as data team supplier automotive PARts automotive e-commerce industrial accessories our cloud-based strategic strong in platform momentum We with including the acquisitions, Our DB, segment

to as availability. product We our and to analyze labor challenge and inflation, logistics such respond global operations areas that continue daily and COVID-XX,

all delivery global effectively the trends. closely availability levels procurement partner with and and our to example, suppliers For assess teams local of product

in GPC culture our our review look and to in We career address forward next to macro what well-positioned the address these into now we on we work we as labor and and dedicated direct through indirect compelling including to navigate opportunities. to global Asia quarter. data I'll of creative a We place to can the inflation we're We believe create differentiated details. half trends. GPC talent, have Overall, our with to relationships, pay progress over resources turn flexible logistics challenges the to And headwinds. very with utilize processes control sharing our to needs. team's and visibility and analytics financial first performance and attract focus and competitive call with remain continue global agile the backed programs, scale pleased benefits, incentives year, Carol continued

Will. you, were $X.X in GPC Thank sales billion XX%. quarter, up second the Total

adjusted XXX Our XX.X%, increased gross improved of from points to gross year margin up margin basis an XX.X%. from last XX.X% an or

driven supplier was primarily improvement by Our in in gross margin the increase incentives.

in and the margin. we through of and impact inflation this half impact further the to on to mix pricing also inflation automotive pricing year. the price in to shifts, of of to global X% pass a positioned neutral from customers We product increase benefit was for the second strategic quarter, gross inflation. category we were X.X% environment, our estimated was current the with quarter initiatives in continue impact and product positive geographical increases Although management channel mix, sales these significant our second suppliers and including activity onto resulting industrial. In the sourcing Based We expect strategies. cost there

such expenses of lesser operating the in compensation, reflects were and last rising extent, to increase relates the a primarily increase to additional The quarter, we year of from non-operating year-over-year managing. pandemic. we health in freight, approximately million several which wages, the $X.X second areas to last rents variable on sales. benefit And up as of in prior balance and The from billion total $XXX cost billion year are and costs $X incentive the sales. insurance, XX.X% pressures related the the in year factors, experienced savings XX% temporary Our and adjusted including impact

with growth and invested and our initiatives in transformation other drive projects to associated productivity. enhanced We also

with our and gaining remain in and for Paul a as quarter million, heard line was we operate basis, the our on in second segment efficiency year, focused plans to profit Will. a the On continue we XX%. additional quarters overall, up ahead in So you total the strong $XXX from segment

year, a XXXX. points compared X.X% up X.X% to from improvement basis profit year-over-year margin basis point XXX was segment last Our and XX

the segment add years. to several So a profit work last the operations XXXX the of optimize XX year to today to we would operating results and we We from portfolio have full XXXX. our by streamline five points over our strong continue and reflection basis for that our XX basis improve or represent would margin basis points points from margin in XX to basis years. expect XX our points to This strongest done

XX.X% reflects excess in Our higher for last year. rate benefits. the tax on rate XX.X% second offset increase up by basis, stock was from compensation primarily an tax a UK rate, tax partially adjusted The quarter

$X.XX. earnings net income diluted Second per with operations $XXX was of share from million quarter continuing

$X.XX Our to or the or $XXX adjusted prior income net in per increase. compares million XX% share was which $X.XX a million share, $XXX per year,

We the We're conditions team's the second profit and from XXXX. last into of was we results our carry by the our X.X%, up in to $XXX from to the up growth quarter XX% business, a margin increase $X.X will on market and points our gain from operating up balance by segment; to intense XXXX year. automotive execution automotive encouraged billion, our and year. XX margin positive revenue Segment million, was profit basis our attribute the basis positive XX the Turning of initiatives. focus point with XX% improved momentum

Segment sales basis a industrial to margin point XXXX. the $XXX $X.X profit both was and were ago of XXX in Our from XXXX a year increase quarter, XX% X.X%, improved billion profit up and XX% strong XXXX. million up from a from

and post environment So the operating group to year. of results, and through expect this strengthening with excellent industrial sales well balance this improvement, perform continues continued we operational the

is our sale half second in At in due $XXX strong with June commitment is sheet. sales XX%. provide XXth primarily million receivables this the X%. and comments Now the was for additional of let's turn consistent XXXX. accounts inventory balance our Inventory receivable the up payable XX% increased increase, to to our our accounts Despite the up to total availability

to remain inventory improved in our ratio pleased to overall improving AP Our capital position. year. working XXX% We XXX% with our last from progress

$X.X debt billion, quarter liquidity, from in X.X XX, million debt total from of Our times XXXX, year. EBITDA second to total available December $XXX last June has We $X.X XX% our billion with the adjusted XXXX. to is down or million closed times improved $XXX and and down X.X from

improving our excellent last team of has job the over Our done capital structure year. an

We continue second from with $XXX quarter for the million another in to generate six-month. and cash million strong $XXX cash operations in flow the

For capital our working of growth to the full billion. from cash year operations expect and we billion billion earnings X.X $X.X million $XXX drive to X.X cash and free in to flow

for key Our our repurchases. remain reinvestment priorities M&A, businesses capital and dividends expenditures, cash share in the the through

drive million in thus we pick-up year, far investments on $XX execute and in to efficiencies invested growth these the expect we to our operations. further and additional have We in ahead the organic capital in as productivity and improve quarters investments expenditures

mentioned As and for paid acquisitions total approximately annual dividend reflects move continue strong pipeline half bolt-on million cash annual global and dividend. compliment policy, Will our and industrial and represents shareholders XXth strategic dividend this to our forward. increase consecutive per of We've both of in Consistent we $XX the remain through the share of our of segments a component year. XXXX million first as longstanding This cash the our dividend automotive acquisitions than make earlier, acquisitions our to in we cultivate expect $XXX a have to of used more strategic the $X.XX we with months. And long-term also six an growth through important strategy. additional targeted names to

in acquire active to we $XXX repurchase is been expect second authorized million shares. share buybacks of XX remain to shares, up active part share in we company currently with million as quarters the XXXX. ahead. Finally, X.X we since to million repurchase The have program our quarter, this used additional to In program, and the

strategic recent earnings guidance outlook. foreign our updated and our we previously business trends, performance Turning on initiatives, for at considered are and several our provided plans and economic to global In April updating arriving past in the factors growth potential current release guidance exchange for our our full-year XXnd outlook inflation XXXX. of we fluctuations, the XXXX, including

We and our also such consider that consider with the results. potential COVID-XX uncertainties on its disruptions, as due impact market to

our total the With in we increase plus to previous X% for XXXX XX% in of range plus sales guidance plus these factors of to to mind, XX% be expect plus and X%. from

growth four benefit and excludes for plus to for By for we the from any acquisitions. an segment, automotive X% sales to this X% X% plus to the increase plus the plus plus business usual a XX% to increase of As X%. plus the two are future sales X% XX total of plus plus guiding increase unannounced segment, an the industrial total

range the side, these $X.XX on XX% we earnings through enter targeted to focused per guidance to to Paul. increase guidance On now This to over the or $X.XX, our of look our XXXX. $X.XX. back And to up turn an XX% $X.XX it as which adjusted on earnings are financial forward for go our performance we from we of our I'll is represents you. raising from and to diluted a the meet results, share previous exceed Thank to quarter third year. reporting initiatives We

you, Carol. Thank

strong value. with driving are profitable flow our pleased capturing shareholder growth, in We cash generating and progress

strengthening total and businesses. XX% both in a of the industrial economy quarter's reflects benefits environment sales This positive global our growth sales automotive and

recovery us Importantly, GPC, allows scale to significant creates this we which leverage of one the believe dual full value.

margin while further produced our Our XXth consecutive team via our expense executed gross ongoing expansion, also productivity and initiatives. of quarter improving well

enabled focus report and areas global quarterly team to and Our earnings. strong disciplined record results operating us network in these

returning and also all initiatives for in the also executing and We our strategy in further our their thank enhance The exceptional our in GPC, commitment repurchases. the us to to sheet stakeholders. organic focused passion provides share strategic best with dividends and acquisitive and and of balance investments the the and in growth, GPC XXXX performance dedication, each team flexibility and our financial through beyond. thank company's to financial serving shareholders you is teammates for capital the GPC growth operational Our growth pursue while opportunities, remainder be continued interest to of your on

back that, your turn to operator So call let with the the me for questions.

you. with time, line Instructions] from proceed JPMorgan. the comes Christopher be a Please At first session. Thank Our with of question. conducting question-and-answer this we'll [Operator question Horvers your

everybody. morning, Good Thanks.

Good Chris. morning,

Chris. morning, Good

– Motion it side, on it divisions Motion two a fair in like, So to say year looks two of a is in just hold basis. to can to you're year year inhibitor stacks the yet positive the the the for sort you is be balance would What both pause two turn the assuming and related not that positive – comp allow year what's to that going not would basis? on of

I Chris spot Yes, you're think, on.

positive is two think on I not a yet. year stack Motion

are we that encouraged going that encouraged fundamentals business. lag in really by see Paul the activities as We and mentioned We're on. the the by

And think mid-single I but on that are on for two We a mean, automotive for we second flattish comp just I to on them, bit would of the half, you're basis the is side, be spot half second in I on them a year similar a still in digit slightly implying digit, the higher basis. than trend a the U.S. on a think stack sort second again comps on that that mid-single half, the up so – automotive

a but year stack two on year bit U.S. to basis, better again, a digit more normal certainly mid-single in where stack are on automotive. basis now, two so a So we similar

to it Motion. the are I would both accelerating our past to returning you this I recovery alluded operating seeing rates. U.S. in and CapEx, production. at are in that add and plants think run you've to customers higher automotive Chris, full manufacturing, They're We industrial. at When we're look specifically

PMI industrial numbers, at is very all look positive. you production, look at very, the If you

So capital when gaining forward. on steam, very we're our industrial we're moving what seeing bullish business about with couple you very, that projects really

And it. as follow-up, you talked a about volumes. daily average record then Got

bit? within NAPA DIY I can the the month a to there the on is And not a the think is to on momentum referred concerns Maybe you that of you that expand you U.S. I in little think immaterial. business. were business. lot of It DIY, and June XX% of referring out in is there

DIY on could the as U.S. the So you're about seeing what you of well? side the perhaps business talk in

Yeah.

let on numbers, First, Chris. specific just the me comment

QX June a for So, being QX. being we month And us as into we March. the into month that's momentum strongest record up again. strongest, really May, June sales then quarter record to up. and pleased We had in with with carried wrapped July holding say month that a solid our moved a That again

So our strong We're in what raises seeing in we're not really, DIY, in I year really DIY two stack well low and XX%. pullback we're encouraged think seeing to And U.S. up specifically we're a business. automotive. double-digits QX over our by

in what this a So mode as to selling better we've much the we talked than about be you our been. we've in footprint know, ever worked past, to better teams have much – and in we've incredibly hard get believe retail our

back with could of bit pull it the could the stimulus So economy, little be. it lack a in money

business we I think going feel focused more retail forward. good we'll DIY perhaps we some the DIFM and feel our about in that now of see our competitors, but business good,

Understood. Best luck. of

Yes. Thanks, Chris.

you. Thank

the comes line Jefferies. your is Our question Bret line proceed live. with Please question. Mr. Jordan next of Jordan, from your with

Sorry.

next question Kate Our from Goldman of with McShane comes Please the line your question. with Sachs. proceed

product versus how it? tariffs versus you this XXXX inflation labor? good follow-up categorize on bps regards you transportation automotive that my that just to much had mentioned from and the period industrials. XXX XXX And and higher of with in is manage taking about Thanks of in with would seen question. I Hi, and wanted How inflation inflation morning. to that for commentary your to you've of costs the ability

tell look is a as we first inflation. bit at relates and U.S. it if of you I for look, it Yes our to inflation, unique all automotive unprecedented would

a decade, seen we of you the line a the from activity category with the We by labor. at component, the what and freight management cost work said is you trust mentioned, reviews. closely out and And similar very to work teams coming. this haven't with will. raw teams combination to And they're how each And to materials the driven and while commodity break me, as model tariffs tracking is is it's Look, suppliers look – and if much supplier it sort of our a you that. on for specifically, suppliers kind work perspective of it the don't that pace that and

the side, industrial it's more On normal.

you their So definitely I tell would is more normal. inflation

And active than we that half think will so be second do what QX. is more

in two customers our happier couldn't and the and get but could to So the they're those our the able rate to profit margin and be teams gross all with times half, rate. our again, quarter gross greater inflation second dollars, be businesses we much to see as through pass work as second our maintain doing but of

working the So as ahead and that, we'll able do that look on optimistic that are be to again we second in we hard we're definitely half.

Okay. just is question any be follow-up Vietnam dealing global chain. meaningful Could you have area trouble variant supply to Thank you of around now? remind the that having Delta an that's you. And with seems then world the to if us the my right exposure since

Kate, no Vietnam. to exposure material we have

Thank you.

thing. And Kate, I would just add one other

for us. if you our great will, We is diversification, have protection geographic really

geographies Asian have So suppliers, our a protection we have base. to broad European have with have ability the whether suppliers supplier amongst have domestic we diversification suppliers, we we and

Thank you.

Thank you.

Thank back you. Ladies Jordan Bret we'll go gentlemen, with Jefferies. the of line and to

Hi, working is this it time?

Yes, it is.

Bret. you, hear we Yes,

you guess phone against I question, quarter, missed But U.S. give second problems that. today. a a call lot of the us on the comp this have might XXXX NAPA did have I I

digits. U.S. comp year two the is Yes, mid-single stack

what the And on seeing, great. are level? of guess, that transitory, b) increases kind wage inflation then, store seeing at I Okay, you're guess, cost the you and I a) the question and

think ended that SG&A think, mentioned quarter and more X% big this on is the we in being in think did in look hard it's basis inflation up like at for it, and we SG&A some transitory but so in our We And a than with it, that categories. this our product looked and do we when our productivity, don't on again We're about we I inflation, projects again on that us. but side year. But certainly was Will would believe other with freight work necessarily inflation, investments so us QX. And certainly didn't inflation to continue transformation as our in We or do certainly points SG&A. this on seeing the a working we weather, on similar it talk cost. in costs are stays what in bit. our stays wage whether greater hard the it's to Yes, and inflation QX, the XX Bret, that what to we strategic I we're wages about inflation investments all have with this product seeing. have to we're mentioned wages rising a think companies factor in for we and XX going mean,

Okay.

by Hi, very that a it's Bret, job surgical type. add I approach geography, would also by

that we've areas good done that So want a lot the but most hitting the thinking to perspective. really and we're business to sure analytics of share of make that just are impacted,

regional about on as and low market, the the out highlights performance, question in the the auto lights Okay, one you peak then U.S. the comp about sort great. the positives. and weather in I and the valley? spread between a think you And talk of of maybe Could the called

the unprecedented us was the our our leading with across strong impacted Northeast. Bret, saw the double-digit up the pack quarter, most in all this were growth of But year. last they six divisions as we for Yes, guys

in east, it pleased stand West division, deliver. really these reason guys Also going but to out So in the does a the bit, Atlantic. strong to down to performance mountain the though continue

So of across really, strong division spread had we XX% anywhere on XX% all the really the U.S. to – from a sixth the to bottom, the so bottom, and XX% on the the of top end performance top the out sixth,

Okay, you. Thank great.

You're welcome, Bret.

you. Thank

comes question Melich Our line next Please the with proceed from of Greg with your question. ISI. Evercore

Hi, thanks. questions. really two I have

sure that on the The inflation start expect to indeed right. through? of but X% inflation. to areas this with jobbers? there Let's SG&A costs XXX the either just pass product you all a way, offset I'm do COGS, see yourself the or or another then of to guess, also asked what or you're Is X% in benefit getting top-line is inflation getting make sort is it the I

than it's through. will that saving the that But X% have pass automotive. if to work to we less our some to work of because is it's we U.S. of we transformation and – that think you definitely done, more did Look we've Yes. would this cost specific have

again So a automotive. wages sure this is U.S. about it in and and that little we we've want to talked the as even to a make and prevalent honestly product whatnot, inflation same inflation more extent,

with less we leverage it's, our to X% are able than So costs comp. again,

achieved something cost So that that's savings. our we with

lot improvement, improvement. to you we've just our to want margin So again, have in going year operating XX we've year we're full keep place. points remind basis XX still a just operating of to we initiatives though margin the full got I got in

about being year. to So deliver this able we that good feel still

Got then the automotive it. relevant may margin vendor industrial? you more Is or bonuses linked mentioned that And on that to side, helping. to be

gross side. margin that's actually Yes, the on

third was And to additional margin related the we and it's that improvement and purchases. automotive the to revenue and volume quarter, XXX product the directly so gross the a that of had of in bps, both billion our about tied on That's dollars incentives. industrial,

third customer So and initiatives of gross a was talked initiatives. improved we've management product a geographical about mix, it mix, from mix, about incentives, a is then strategic third and of mix, margin third volume from our just category pricing the was

about good feeling again, look So ahead. as gross we margin

I'm if one could. end, going sneak And to I

as was that… is call June, as July said strong You

Greg. sorry, I'm ahead, go – July

the both DIY? in lead that sort on one for is equal taking that? Is of commercial Or and

is back strong you really, Yes, strong. our very has our really and account DIFM which heard, business, very, business, that bounced Greg, goes as major across

lagged and we're has pleased government growth. NAPA our behind really What recovery. business – business, high has AutoCare strong. That back fleet AutoCare is bounced single-digit with with has really AutoCare account major business in our which Our Greg

So DIFM bounced economy as really expected back driven continues to way back carry up. the the began really miles ramp to fully we by load, which as the

there. so out there's pent-up much – Our demand

we Our time. in them garages quite are busy some seen have as as

And think as, strong. is the really to we going have as we continues carry DIFM weight. continue So seen DIFM to in be to years, recent

luck good everyone. Well, one. great. great a That's Have

Greg. Okay. Thanks,

you. Thank

you. Thank

Our from with next Seth proceed Basham Wedbush Please line question your of the question. with comes Securities.

and guess feel because is you my global like morning. Do around like good you're out most supply challenges product of sales that stock and first I certain chain or lot, products you're categories? you a are question missing of Thanks something facing.

Look, chain here's say I dealing would with that issues. what the – we're supply all

are peers as our you of as All said. well-documented

is we second transitory. but that certainly a is carry business of automotive to working anybody even reminder that have back a at even and And just that not incredibly believe of in that ensure overall. we as bit a primary come our probably to primarily industrial It's fully that Seth, and suppliers, it's it's expect we're half as business, believe in you later We believe and very we confident the Our will back of team supply do there, automotive got amount in in business. you it's everything the we a our about transitory. good in could the to They'll aftermarket are, as our getting would could we having a – issue, time doing team that the our they we being get case. tell challenge U.S. and I've it together. that third which sourcing confidence would to sales XXXX. a missing have come is would not hard we're into and international the scale player tremendous know that here remains our We're global they're – can. this size I have, that global think also you,

the That's strong not improvement a thinking us and with reason And Is forward that to that for your your margins in you're helpful limited your margins margin very year. implied incremental be balance as in seems am help outlook operating could of strong improvement outlook. going you the It I for guidance sales color. and like expecting the about understand? there quite

the think we Look, it I the stronger implied the mean, to I expect our are talked the quarter, full the considered we stronger we've the of back go improvement we considered think deliver. what be would on mean, considered two-year margin we'd outlook inflation some top we've is when when And similar. to year, year-over-year our about line. factors it's margin that stronger I last I again, of compared and growth, margin our and year, Yes. having we for rest XXXX, but to you improvement, basis something that have look you as had costs, at the

it's points a but to again ahead, we for for of we little think still on it's XX look a XXXX basis basis basis I So XXXX. points improved two-year and XX as margin bit have cautiousness

you it. much. very Got Thank

Seth. Thanks,

you. Thank

Our Please your next question. of question America. comes proceed from Suzuki with the line Liz with of Bank

you. Thank Great.

a or running that Just now groups you I guess, still regions we've since by are specific were customer last most which do still lapsed impacted year or levels think severely periods the pandemic? negatively below impacted, normalized are being

while other up a tell our Well, our the that high-single I account behind great categories. Liz, government business, segment question. would bit major bounce that out trending business, is some that, in digits mentioned I earlier still of the back [indiscernible] you AutoCare quarter great in

it's they're call that product that would in guess out hard I call that, high-single increase would our to delivering a category. team customer that be one hard that I So out. in But digit when the or it's –

Yes. fair They're group, have pretty same mean, potential industrial normalized Is the in for think I most do still are the customer below what it recovery? are levels. groups you enough. case far – the the of the still room that

Yes.

on I've look putting So tremendous the look in industries the shortage to machinery safety to everyone had come challenges area the looking and going lagging logistics, A that which products. industrial being side chips. on really strong. in the We've as mentioned equipment about we was a automotive all category the I new up that's if type is we're bit back. at – But is across center, and to fulfillment just you that's numbers. strong. some due is where primarily related if really But one distribution the were at going year-over-year OE

and again, in at motion is had an high quarter. all great So performing all our a team incredibly level

you. Thank Great.

welcome. You're

Thank you.

your with Please Daniel proceed with question. from of Inc. Our the question Stephens Imbro line next comes

inflationary related Yes. I of from you of go the relative investments also to that wanted with then on bringing that's keep the get able and for expectations? your some things pace back SG&A Have appreciate any you Carol. question, some specific costs you transformation. you give I the in year leverage but you costs to those I obviously a a what is? accelerating, back been Thanks, provide those I costs think last year more to been How Can of was structural projects has of removed to this touched you lot And in. color on are out? the business. mentioned outlook noted you future

Yes.

it So SG&A couple quarter. when of different the I'll about for a and our at go ways look we

$XXX this our year So last quarter portion costs had the last significant subsidies, payroll was year level cost QX, of comparison in deduction, to was government We delayed over highest million cost temporary savings – furloughs. merit savings. increases, temporary

this our So be on those. would knew quarter we toughest

as increase mentioned, The of increase we costs, the in incremental more in the in dollar half I So that's variable billion mean, about SG&A. honestly sales. increase $X I in have

handle to the So the back volume. projects, small was amount. amount variable important the increase related investments bringing in the then And an but third costs a relatively of to a about

in that Will investments investments, their in automation, industrial So warehouses, our facilities putting digital productivity and we're doing. pricing, improvements and initiatives. business, in in the consolidating of We've mentioned got business some is further automotive our in automation

I year, had million. just growth. savings remaining $XXX dollar roughly cost I of was was that we dollar the the What back target we being bringing these And we the which a then permanent a of last mean, have rising roughly the you X% surge is tell say the, and million increase. had of in amount up the So in $XXX on costs, cost XX% ended And inflation. that would kept increase

the expect thank goodness transformation costs. as was And and And to so inflation, investments did projects you do in have continue some did look we ahead. the really and the see but those we team. costs we we to on bring rising variable didn't again, we What work

by sellers kind given find Are we it bought seem table you little hopefully across now? or That's it. some like the away of geography, results the it elevated like to Obviously on about up talk as like from that coming but what a Got maybe things to And a further right a and last with picking bit Can these the multiples were color. of maybe had M&A. maybe is follow-up weaker. you customers there's reasonable some cellar you pandemic. how helpful looks they're are year, landscape, hard deal automotive multiples actually this

Daniel. question, would very active. I the a through right. market is say that working It's great expectations the Yes. M&A say would you're The of is I environment sellers.

You're are right high. expectations those in pretty thinking that

for the I key us the right discipline have is hear everybody takeaway we think for that to around deal. the doing

So can we look deals values. create of a at right a we ton where lot of ones do do and the to a few

the So you're though, actively working we're right pipeline.

on very to We the the work but pipeline, for disciplined to stay going we're ourselves. continue right doing deals will

and found partner week. Daniel, great selective and to is markets I couple a and more Winparts – Europe Winparts, player in I in online targeted. would out mentioned, European to and that's our last actually very a online in come a were targets think Hey, were want a Netherlands online that we I in across further very were so our it's We presence which that we're that M&A on later. the Will our – called and also – leading

very months, the we in trip with international in impressive first upside and spend future. Our nice a think group this half and XX day

for the automotive related in follow-up. Can multiples these you segment? the assets here's pay disclose And to of kinds you try what typically of quick kind

going time. disclose to that not this at we're Daniel,

lot Okay. Thanks guys. a

Thank you.

you. Thank

Our David from of Please with question. last proceed comes the Bellinger your line Wolfe today question with Research.

here. everybody. the for Hey taking Thanks question

trend give that So older automotive anything sustainable that's there vehicles, be? is stronger really how larger that just on repairs, I side ticket shift else and actually a Just anything believe but you that to ticket to inflation, can due in behind mentioned a consumer used U.S. there out? stands else the

for ticket years. that we've seen David, in nice Yes. watching and up been a our average we've size bounce a of number

these decline go bit ticket where digits. was little in couple of quarters Our count high-single average saw And recent a this we're up both up. is a bit excited about both watching we're really What ticket we concern a of years. quarter were past and of size ticket past count in

as move continued continues So parts we to get as a – the average And expensive. orders that's long-term and up. more order more continue think repair trend repair to

right in So ticket and traffic both pleased up our direction. to – but see the again, up, also we're especially going pleased

follow-up walk you raising right, more constraints maybe some we're seeing earlier stores Then labor All through given and of DCs of you in NAPA you wages Is any can if Are and the the that. talking that what overtime around you're can? about? quantification U.S. here; appreciate upon worker comments us costs just expand there higher now? shortages, my

Yes. yes those are volume. mean, the all things. in contract the stores, there's tirelessly our increases U.S. additional is labor, and David, in whether got you've an and market XX% extremely labor again there's help, to working There everywhere, I is there and delivery tough shortages you it's are answer labor don't overtime, drivers, teams it's it's temp warehouses, have

As in labor across Paul with shortage. mentioned XX%, a volume geographies these XX% increases

properly all doing points when our areas categories. I service we on we're raised team secondary wages component. and make basis some the it we to look freight in can to inflation SG&A. are XX I part certain that was and take roughly Wages off the is being and mentioned, points sure our as our you so we And to XX mean, overall But biggest being think And we it at basis burdens certain customers. raising can

would our to retail roles like the on a it delivery type the seeing to drivers stores, this that clarify it's coming U.S. it's business, that, in are David, that and also under the Hey, side. automotive say just in nor seeing we primarily of and our that pressure industrial I in tag not are much business We're is onto pressure. issue bit international

U.S. our those automotive where of type stores, in and one-third primarily our drivers, feeling – is delivery business, the again So impact retail those we're type roles. the

half year. through best you and as again, Thanks luck helpful. rest go Very Yes. the of Yes.

it. Appreciate you. Thank

Thank you.

concludes and that question-and-answer Thank the any final to floor our comments. management session. for I'll you. turn back gentlemen, Ladies

and for a you We like thank and to you interest we our We'd Parts forward with speaking appreciate your call to look you our for on in Thank support day. great Genuine today. have joining next call of QX. Company,

concludes conference. This Thank today's you.

may You lines Thank you for participation. disconnect time. your your this at