Q3 2020 Advanced Emissions Solutions Inc Earnings Call

That have been launched in the last year and we have a plan to increase that substantially over the next three years. So you know that that's really the plan and its gradual I mean, you're you're talking about you know exiting certain products in certain categories and transitioning them through the supply chain.

So once we do that well see the full benefit of that but you know early early performance in terms of when we get the Carquest skew in there. It's it's often at a more attractive price. It's at a higher margin our customers are choosing that brand and they like that brand as I said earlier, our professional customers are very.

Comfortable at the Carquest brand, we've had a strong brake program for a number of years and it just a matter of extending that into some other categories.

Okay. Thank you.

Your next question is from piece about it lately with Exane BNP Paribas.

Hi, guys. Thanks for taking the questions.

So I guess the first question I had was the most DNA, obviously like very good overall rate improvement, but it's funny the sense for the U.S.J. per square foot or or dollar growth.

Like what we like some of the discrete items that drove the six.

6% or so increase was it just labor matching up with the higher sales productivity was more than just a diehard is more of a Q4 that but were there like diehard startup cost anything you can frame for us they're going to street items that you know and those discrete items continue into Q4 and into first half 2021.

Yeah. It you actually got it right, it's really payroll.

In terms of the dollar investment that we had.

You know just like.

Given excuse me in terms of some of the professional payroll dollars and just getting some of the needed payroll back into the stores. You know we were running very soon in the second quarter and it just wasn't going to be sustainable. So some of that was just payroll that was needed to get back in there to do the normal cleaning forgetful.

For a second but the normal cleaning and restocking and everything else you need to do in the stores. So it was primarily table.

Got you, Okay, and then did I heard seems really cool what's the like what do you think about that any you mentioned earlier, it's like years not months, but like typically for this type of this type of marketing campaign, what's the payback period that you would expect to realize the investment of this type.

Talking bugs quarters weeks like what's typically the sales cadence of you know.

A big launch like this that youve seen historically, if you've ever done nothing.

Nothing to the scale, obviously, but any kind of anyway, you could frame would be helpful. Thank you.

Sure Yeah, I mean first of all we will measure the performance of each discrete elements of the campaign and measure that against our cost per incremental dollar metrics that we have and our marketing investment. This year have proven to be very effective in that regard and much better than our historical rates.

So we'll continue to measure that and when we obviously have that the enough time, Chris to measure the performance against this particular advertising, we'll we'll look at that very clearly.

The reference to years is you know we're talking about you know building up a brand that's over $1 billion. So that that takes you know a sustained investment over time, we're not talking about year on year increases necessarily in marketing in 2021, and 22 were talking about you know a quarterly increase in the fourth quarter to get the Brad.

And launch and being smart about how we spend our marketing dollars next year. So overall you know the profile of this is to create differentiation for our brand to drive traffic to our stores you know to really make sure that people know that we're a destination for diehard batteries.

That requires an investment in a sustained investment.

Yes. That's helpful. Then just one final clarification question.

The Big picture for Diehard is essentially that you're going to just replace your old brand and autographed or whatever it's called so like for every skew that there was an auto.

The other craft brand you're going to have a diehard skew now and then do you foresee like higher pricing power with diehard like for the same skew would you charge more for diehard have you got the same price is it more like a traffic players are also archon plate.

Yeah, It's really both you know I mean, we're looking very carefully at that and have already taken some actions to strengthen the margin profile of our batteries.

Already so there was a couple of things that we're doing there that we're pretty excited about that can drive margin and already have so you're going to continue to see it to see not only top line benefit the gross margin benefit there.

Okay, great. Thanks for the questions appreciate it.

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Your next question isn't set assembly plant base.

Thanks, a lot and good morning.

My first question is just diving a little deeper into cross parents. Punch. Then you guys are seeing some benefit to gross margin from that now on a net basis as we look forward should we be thinking that that net benefit growing as you convert more to cross parents punishment.

Absolutely you know obviously you the more stores you have the better it is the good thing SAP, but this is we were able to identify a new buildings now that can potentially accommodate some of these changes are based on capacity moves and some.

Some of the additional analysis, we've done so we've got the initial savings that we modeled.

You know pretty confident we'll be able to put that in the bank by the end of the third quarter as we said earlier and now there's some additional stores that were going to add beyond that but you know every time, we you know convert a store we take miles out and nurses. We're literally the plan is for for millions of miles to come out of the system and not all.

Must be saves you on a rate basis per mile.

Got it that's helpful. And then secondly, thinking about your store portfolio you guys are reevaluating likely yeah negotiate some rent per store as well on a real estate next quarter, but as we think about the portfolio at large do you think there's going to be material reduction in the number of stores you are operating or are you just saying today.

Whatever Jim Gorilla.

Yes, we're not anticipating a material reduction we you know we closed about 50 stores in the first half of the year you know in the third quarter was a handful 10 or 12, we've taken out most of our nearly all of our structural issues in terms of stores you know stores across the street from each other less than a mile away.

Or just.

Just in the wrong geographic location within a market that's what we've been doing the last several years and so you know the again the real estate is a much broader initiative. We do have some stores that we've recently closed that are are are close, but we're still paying the rent we called dark stores and.

We're getting out of those and really what that does that sets us up for 21, and what you know once you stop paying that rent an immediate benefit and so we're looking at that we're looking at the field offices were looking at our corporate locations and just making sure. We have the correct footprint. So I don't anticipate that have a meaningful impact on our stores were.

Always going to be closing a few stores here and there so we're done with that.

And you know we're going to be looking strategically at stores that we can start to open.

So that's that's sort of the plan going forward and the 21.

Understood just to put some numbers around it Jeff I know, you're not providing guidance, but if you are ever maintain mid single digit comps would you expect to still be able to leverage yesterday. Despite some of these headwinds associated with the advertising as well as the yeah at lease buyouts.

Are you talking specifically in the fourth quarter, yes.

Yeah, I think we could.

Excellent. Thank you very much.

There are no further questions at this time I will now turn the call back to Tom Greco for closing remarks.

Well, thanks to everyone for joining us as you've heard today, we continue to improve execution across advance and we're proud of how our team has responded throughout.

Throughout this unprecedented time.

We believe the next few months for our country will continue to have its challenges, but we're confident that we are taking the necessary steps towards the health safety and well being of our team members and customers well, helping to make a p. even stronger before we conclude the call I want to take a moment to thank all of our veterans from each branch of the military for their service.

Including that thousands of advance team members, who previously served.

We're honored to continue partnering with several organizations to recruit and support current and former service members, including building homes for heroes I personally see any impact that this organization has had on families and I'm proud of the impact and our commitment to continue supporting these important initiatives in the years to come once again, thanks for joining us.

Today, and we look forward to sharing our Q4 results with you in February.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

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