Q4 2023 Genuine Parts Co Earnings Call

Operator: Good day, ladies and gentlemen, welcome to the Genuine Parts Company fourth quarter 2023 earnings conference call. Today's call is being recorded on February 15, 2024. All lines have been placed on mute to prevent any background noise.

Good day, ladies and gentlemen, welcome to the genuine parts company fourth quarter 2023 earnings Conference call. Today's call is being recorded on February 15th 2024.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question. Please press star followed by the Q.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by the number 0. At this time, I would like to turn the conference over to Tim Walsh, Senior Director, Investor Relations. Please go ahead, sir.

At this time I would like to turn the conference over to Tim Walsh Senior Director Investor Relations. Please go ahead Sir.

Tim Walsh: Thank you and good morning, everyone welcome to genuine parts company fourth quarter 2023 earnings call.

Tim Walsh: Thank you and good morning everyone. Welcome to Genuine Parts Company's fourth quarter 2023 earnings call. Joining us on the call today are Paul Donahue, Chairman and Chief Executive Officer, Will Stengel, President and Chief Operating Officer, and Bert Nappier, Executive Vice President and Chief Financial Officer. In addition to this morning's press release, a supplemental slide presentation can be found on the Investors page of the Genuine Parts Company website. Today's call is being webcast, and a replay will be made available on the company's website after the call. Following our prepared remarks, the call will be open to questions, the responses to which will reflect management's views as of today, February 15th, 2024. If we're unable to get to your questions, please contact our vector relations department.

Tim Walsh: Joining us on the call today are Paul Donahue, Chairman and Chief Executive Officer.

Single: Single, President and Chief operating Officer.

Certain: Certain idea executive Vice President and Chief Financial Officer.

In addition to this morning's press release and supplemental slide presentation can be found on the investors page of the genuine parts company website.

Certain: Today's call is being webcast and a replay will be made available when the company's website after the call.

Certain: Following our prepared remarks, the call will be opened for questions and responses to which will reflect management's views as of today February 15 2024.

Certain: If we're unable to get to your questions. Please contact our Investor Relations Department.

Certain: Please be advised this call may include certain non-GAAP financial measures, which may be referred to during today's discussion of our results as reported under generally accepted accounting principles a.

Tim Walsh: Please be advised, this call may include certain non-GAAP financial measures, which may be referred to during today's discussion of our results as reported under generally accepted accounting principles. A reconciliation of these measures is provided in the earnings press release. Today's call also may involve forward-looking statements regarding the company and its businesses as defined in the Private Securities Litigation Reform Act of 1995. However, the company's actual results could differ materially from any forward-looking statements due to several important factors described in the company's latest SEC filings, including this morning's press release. The company assumes no obligation to update any forward-looking statements made during today's call. With that, I will turn the call over to Paul. Thank you, Tim. And good morning.

Certain: A reconciliation of these measures is provided in the earnings press release.

Certain: Today's call also may involve forward looking statements regarding the company and its businesses.

Find in the private Securities Litigation Reform Act of $19 95.

Certain: The company's actual results could differ materially from any forward looking statements due to several important factors described in the company's latest SEC filings, including this morning's press release.

Certain: The company assumes no obligation to update any forward looking statements made during today's call.

With that let me turn the call over to Paul.

Paul D. Donahue: Thank you Tim and good morning, welcome to our fourth quarter and full year 2023 earnings conference call.

Paul D. Donahue: Welcome to our fourth quarter and full year 2023 earnings conference call. We are pleased to report that Genuine Parts Company delivered on our financial commitments in 2023 and finished the year with a solid fourth quarter. Will and Bert will cover our results in more detail, but I'd like to share a few highlights.

Paul D. Donahue: We are pleased to report that genuine parts company delivered on our financial commitments in 2023.

Paul D. Donahue: And finish to the year with a solid fourth quarter.

Paul D. Donahue: Well, then Bert will cover our results in more detail, but I'd like to share a few highlights.

Paul D. Donahue: During 2023, total GPC sales topped $23 billion, an increase of nearly a billion dollars from the prior year and in line with our expectations. We improved our total company segment profit margins by 50 basis points to nearly double digits, and we had our third consecutive year of double-digit earnings growth. Notably, we returned $788 million to our shareholders this year, and today we announced that our board approved the 68th consecutive annual increase in the dividend. Our teams around the globe delivered a strong performance while remaining focused on our long-term strategic initiatives to profitably grow our business and deliver value for our customers. I want to take this opportunity to thank our more than 60,000 GPC teammates across the world for their dedication and hard work.

Paul D. Donahue: During 2023 total GPC sales top 23 billion, an increase of nearly a $1 billion from the prior year and in line with our expectations.

Bert: We improved our total company segment profit margins by 50 basis points to nearly double digits and we had our third consecutive year of double digit earnings growth.

Bert: And notably we returned $788 million to our shareholders. This year.

Speaker Change: And today, we announced that our board approved a 68 consecutive annual increase to the dividend.

Speaker Change: Our teams around the globe delivered a strong performance while remaining focused on our long term strategic initiatives.

Speaker Change: <unk> grow our business and deliver value for our customers.

Speaker Change: I want to take this opportunity to thank our more than 60000 GPC teammates across the world.

Speaker Change: For their dedication and hard work.

Paul D. Donahue: Our fourth quarter and full year results again demonstrate the value of our complementary business mix paired with our geographic diversity. At our Investor Day back in March of 2023, we showcased our strategic initiatives and announced long-term financial targets for the first time in our history, all focused on delivering for our customers and delivering shareholder value. Clearly, this past year had its share of challenges and opportunities, but our performance in 2023 was a good start to achieve our three-year goals, highlighted by the following. Our motion team completed the integration of the command distribution group.

Speaker Change: Our fourth quarter and full year results again demonstrate the value of our complementary business mix paired with our geographic diversity.

Speaker Change: At our Investor day back in March of 2023, we showcased our strategic initiatives and announced long term financial targets for the first time in our history.

Speaker Change: All focused on delivering for our customers and delivering shareholder value.

Speaker Change: Clearly this past year had its share of challenges and opportunities about our performance in 2023 with a good start to achieve our three year goals highlighted by the following.

Speaker Change: Our motion team completed the integration of command distribution group.

Paul D. Donahue: And we exceeded our synergy target a full year ahead of plan. As an integrated business, Motion is a clear leader in its space, providing industrial aftermarket solutions with a compelling value proposition to more than 200,000 customers around the world. In addition, during 2023, Motion continued to roll out their Fulfillment Centers Strategy, which is driving cost efficiencies, inventory productivity, and improved customer service levels. During the fourth quarter, I had a chance to visit our fulfillment center in Lakeland, Florida.

Speaker Change: And we exceeded our synergy target a full year ahead of plan.

Speaker Change: As an integrated business motion is a clear leader in their space, providing industrial aftermarket solutions with a compelling value proposition to more than 200000 customers around the world.

Speaker Change: In addition, during 2023 motions continued to roll out their fulfillment center strategy.

Speaker Change: Which is driving cost efficiencies inventory productivity and improved customer service levels.

Speaker Change: During the fourth quarter I had a chance to visit our fulfillment center in Lakeland, Florida.

Paul D. Donahue: And I can't say enough positive things about the team and their dedication to serving our customers. We're excited about the rollout of these facilities in 2024 and 2025. Within the automotive industry, our international automotive businesses outperformed our expectations in 2023. Our European team continues to expand its presence and gain market share through both strategic acquisitions and organic growth. In 2023, we expanded our presence in Spain, Europe's fifth largest car market, with the acquisition of Gaudi, securing our position as the leader in this strategic market.

Speaker Change: I can't say enough positive things about the team and their dedication to serving our customers.

Speaker Change: We're excited about the rollout of these facilities in 2024 and 2025.

Speaker Change: Within automotive our international automotive businesses outperformed our expectations in 2023.

Speaker Change: Our European team continues to expand their presence and gain market share through both strategic acquisitions and organic growth.

Speaker Change: In 2023, we expanded our present presence in Spain.

Speaker Change: <unk> fifth largest car part with the acquisition of Goudy.

Speaker Change: Securing our position as the leader in this strategic market.

Paul D. Donahue: And finally, the rollout of NAPA branded products in the European market has continued to surpass our expectations, a testament to the strength of the Napa brand. In Australasia, our team is profitably growing market share with their fourth consecutive year of double-digit profit growth on top of industry-leading sales growth. Our supply chain and investments in the region have improved the customer experience while driving productivity in our business. In North America, while results fell short of our expectations, we remain focused on our strategic initiatives and continue to make solid progress. We have undertaken a comprehensive review of the NAPA business to identify key issues, and we have taken action to improve the performance at NAPA.

Speaker Change: And finally, the rollout of Napa branded product in the European market has continued to surpass our expectations.

Speaker Change: A testament to the strength of the Napa brand.

Speaker Change: In Australasia, our team is profitably growing market share with their fourth consecutive year of double digit profit growth on top of industry, leading sales growth.

Speaker Change: Our supply chain investments in the region have improved the customer experience.

Speaker Change: Driving productivity in our business.

Speaker Change: In North America, while our results fell short of our expectations. We remain focused on our strategic initiatives and continue to make solid progress.

Speaker Change: We've undertaken a comprehensive review of the Napa business to identify key issues and we have taken action to improve the performance at Napa.

Paul D. Donahue: We are confident we are focused on the right initiatives to positively impact our performance in the quarters ahead. These initiatives, along with plans for long-term investments, were rolled out to our field leadership teams and across our independent owner group in December. The team's competitive drive and energy were on full display.

Speaker Change: We are confident we are focused on the right initiatives to positively impact our performance in the quarters ahead.

Speaker Change: These initiatives along with plans for long term investments were rolled out to our field leadership teams.

Speaker Change: And across our independent owner group in December.

Speaker Change: The team's competitive drive and energy were on full display and we know that the best days for Napa or in front of us.

Paul D. Donahue: And we know that the best days for Napa are in front of us. And finally, as part of our long-term growth strategy, our teams continue to expand our footprint through bolt-on acquisitions. During the year, our global automotive store count expanded by 173 net new stores, up approximately 2% from 2022. We remain disciplined in our playbook for acquisitions and are confident in our ability to continue seamlessly integrating future businesses across all our segments and geographies to create value for our shareholders. As we look ahead to 2024, we are seeing supportive industry fundamentals in both the automotive and industrial land market. Within our global automotive business, we continue to see an increase in miles driven by an aging and complex vehicle fleet, as well as High Vehicle Prices and Financing Costs, all supportive of the automotive aftermarket. And we remain uniquely positioned in this space with our global footprint.

Speaker Change: And finally as part of our long term growth strategy. Our teams continue to expand our footprint through bolt on acquisitions.

Speaker Change: During the year, our global automotive store count expanded by 173, net new stores up approximately 2% from 2022.

Speaker Change: We remain disciplined on our playbook for acquisitions and are confident in our ability to continue seamlessly integrating future businesses.

Speaker Change: Across all our segments and geographies to create value for our shareholders.

Speaker Change: As we look ahead to 2024, and we are seeing supportive industry fundamentals in both the automotive and industrial end markets.

Speaker Change: Within our global automotive business, we continue to see an increase in miles driven and.

Speaker Change: In aging and complex vehicle fleet.

Speaker Change: Hi vehicle prices and financing cost all supportive for the automotive aftermarket and.

We remain uniquely positioned in this space with our global footprint.

Paul D. Donahue: Within our industrial business, macro indicators like industrial production and the Purchasing Managers Index continue to show improvement after 15 months of contraction. We stand to benefit from a highly diversified portfolio of customers and end markets. And we are well positioned now and in the future to capitalize on reshore interest. However, while industry fundamentals remain supportive, broader macroeconomic factors like high interest rates and persistent inflation in everyday purchases are pressuring the consumer and businesses alike. That said, the vast majority of parts and solutions we provide across both businesses are break, fix, and non-discretionary in nature.

Speaker Change: Within our industrial business macro indicators like industrial production and the purchasing managers index continue to show improvement after 15 months of contraction.

Speaker Change: We stand to benefit from our highly diversified portfolio of customers and end markets.

Speaker Change: And we are well positioned now and in the future to capitalize on reassuring trends.

Speaker Change: While industry fundamentals remain supportive broader macroeconomic factors like high interest rates and persistent inflation in everyday purchases are pressuring the consumer and businesses alike.

Speaker Change: That said the vast majority of parts and solutions, we provide across both businesses are break fix and non discretionary in nature.

Paul D. Donahue: In our business, parts availability is paramount, and we are leveraging our enhanced data analytics and science to have the right part in the right place at the right time. As we continue to navigate the environment in 2024, it is imperative that we remain agile and move forward with a sense of urgency. Given current market conditions, we need to continuously take action to position our business for long-term success. This morning, we announced a global restructuring initiative to further simplify and streamline our business.

And our business parts availability is paramount and we are leveraging our enhanced data analytics and science to have the right part in the right place at the right time.

Speaker Change: As we continue to navigate the environment in 2024. It is imperative that we remain agile and move forward with a sense of urgency.

Speaker Change: Given current market conditions, we need to continuously take action to position our business for long term success.

Speaker Change: This morning, we announced a global restructuring initiatives to further simplify and streamline our business.

Will Stengel: Will and Bert will share more about the specific actions we are taking, along with the financial implications. So, in closing, we are proud to have delivered on our financial commitments for 2023. We accomplished this while taking decisive actions to improve our NEPA business in the US and, at the same time, investing in our strategic priorities to drive profitable growth. We believe the execution of our strategic initiatives, along with our team's relentless focus on our customers, will drive value for our customers and our shareholders both now and for years to come. So with that, I'll turn the call over to Will. Thank you, Paul. Good morning, everyone.

Speaker Change: And Bert will share more about the specific actions were taken.

Bert: With the financial implications.

Bert: So in closing we are proud to have delivered on our financial commitments for 2023.

Bert: We accomplished this while taking decisive actions to improve our Napa business in the U S.

Bert: While at the same time investing in our strategic priorities to drive profitable growth.

Bert: We believe the execution of our strategic initiatives, along with our team's relentless focus on our customers, we will drive value for our customers and our shareholders, both now and for years to come.

Bert: So with that I'll turn the call over to will.

Will: Thank you Paul Good morning, everyone I want to start by adding my thanks to the global GPC team for another great year and for their ongoing dedication to serving our customers.

Will Stengel: I want to start by adding my thanks to the GlobalGPC team for another great year and for their ongoing dedication to serving our customers. In addition to delivering solid financial results for the year, we also made significant progress on our strategic initiatives, many of which we shared at our Investor Day last March. Globally, we align our strategic initiatives around five foundational priorities, which include talent and culture, sales effectiveness, technology, supply chain, and emerging technology, complemented by disciplines and value-creating M&A. Our focus on these priorities drives global team alignment as we continuously improve the customer experience and deliver profitable growth. Turning to our Results by Business segment, during the fourth quarter, total sales for global industrial were $2.1 billion, an increase of 2% with comparable sales growth of 1% versus the same period last year and 18% on a two-year basis. Average daily sales were essentially flat in October, with low single-digit growth in both November and December.

Will: In addition to delivering solid financial results for the year. We also made significant progress on our strategic initiatives many of which we shared at our Investor Day last March.

Will: Globally, we align our strategic initiatives around five foundational priorities, which include talent and culture sales effectiveness technology supply chain and emerging technology complemented by disciplined and value creating M&A.

Will: Our focus around these priorities drives global team alignment as we continuously improve the customer experience and deliver profitable growth.

Will: Turning to our results by business segment during the fourth quarter total sales for global industrial were $2 1 billion, an increase of 2% with comparable sales growth of 1% versus the same period last year and 18% on a two year basis.

Will: Average daily sales were essentially flat in October with low single digit growth in both November and December.

Will Stengel: Motion saw mixed results across its various end markets, similar to last quarter, with particular strength in iron and steel, chemicals, and mining. However, categories like equipment and machinery and oil and gas were underperformers relative to the fourth quarter average. Motion continues to make excellent progress with initiatives including sales excellence, pricing, e-commerce, technology, and supply chain strategies that are helping to win profitable market share and improve productivity. For the full year, Motion sales grew 414 million, or 5%, with comparable sales of 5% and 22% on a two-year basis. I'd like to take a quick moment to highlight our motion team in Asia-Pacific, who delivered a fantastic year. Sales and profit were up double digits in 2023, and the team continues to outperform our expectations. Industrial segment profit in the fourth quarter was $275 million, up 19% and 12.9% of sales, representing a 190 basis point increase from the same period last year.

Will: Motion saw mixed results across its various end markets similar to last quarter with particular strength in iron and steel chemicals and mining.

Will: Categories, like equipment, and machinery and oil and gas were underperformers relative to the fourth quarter average.

Motion continues to make excellent progress with initiatives, including sales excellence pricing E Commerce technology and supply chain strategies that are helping to win profitable market share and improve productivity.

Will: For the full year motion sales grew $414 million or 5% with comparable sales of 5% and 22% on a two year basis.

Speaker Change: I'd like to take a quick moment to highlight our motion team in Asia Pacific, who delivered a fantastic year.

Sales and profit were up double digits in 2023, and the team continues to outperform our expectations.

Speaker Change: Industrial segment profit in the fourth quarter was $275 million up 19% and 12, 9% of sales representing a 190 basis point increase from the same period last year for the full year industrial segment profit was $1 1 billion.

Will Stengel: For the full year, industrial segment profit was $1.1 billion, up 24% and 12.5% of sales, representing a 200 basis point increase from the same period last year and exceeding the 2025 target that we set at our investor day. Bert will take you through more detail on our outlook for the industrial segment margin, but we're confident that our strategic initiatives can continue to deliver margin expansion. Throughout 2023, the profit improvement in industrial was primarily driven by strategic pricing, excellent operating discipline, the execution of our productivity initiatives, and the accelerated integration of KDG. When we announced the acquisition of KDG in December of 2021, we set a target of approximately 50 million synergies to be accomplished over a three-year period. We're proud to say that the integration of KDG is complete, and we've realized 70 million in synergies a full year ahead of schedule.

Speaker Change: Up 24% and 12, 5% of sales representing a 200 basis point increase from the same period last year and exceeding the 2025 target that we set at our Investor day.

Speaker Change: Bert will take you through more detail on our outlook for the industrial segment margin, but we're confident that our strategic initiatives can continue to deliver margin expansion.

Speaker Change: Throughout 2023, the profit improvement in industrial was primarily driven by strategic pricing excellent operating discipline and the execution of our productivity initiatives and the accelerated integration of KCG.

Speaker Change: When we announced the acquisition of <unk> in December of 2021, we set a target of approximately $50 million of synergies to be accomplished over a three year period.

We're proud to say that the integration of <unk> is complete and we've realized 70 million of synergies a full year ahead of schedule.

Will Stengel: Turning to the global automotive segment, during the fourth quarter, our international automotive businesses posted positive sales growth in local currencies while sales declined at U.S. Automotive.

Speaker Change: Turning to the global automotive segment.

Speaker Change: During the fourth quarter, our international automotive businesses posted positive sales growth in local currency, while sales declined at U S automotive.

Will Stengel: Total sales for Global Automotive increased approximately 1% for the quarter, with comparable store sales decreasing 3%. For the full year, total sales for the global automotive segment increased 4%, with comparable store sales increasing 2%, in line with our guidance. The moderation in the sales benefit from inflation continues to be a factor in our year-over-year comparisons. As expected, global automotive sales inflation moderated throughout the year and ended the year in the low single-digit range compared to a high single-digit range in the fourth quarter of 2022. Global automotive segment profit in the fourth quarter was $259 million, and segment operating margin was 7.5%, down 110 basis points. In the fourth quarter, all of our international geographies delivered margin expansion, although global automotive segment margin was negatively impacted by the performance at U.S. Automotive

Speaker Change: Total sales for global automotive increased approximately 1% for the quarter with comparable store sales decreasing 3%.

Speaker Change: For the full year total sales for the global automotive segment increased 4% with comparable store sales increasing 2% in line with our guidance.

Speaker Change: The moderation in the sales benefit from inflation continues to be a factor in our year over year comparisons.

Speaker Change: As expected global automotive sales inflation moderated throughout the year.

Speaker Change: <unk> ended the year in the low single digit range compared to a high single digit range in the fourth quarter of 2022.

Speaker Change: Global automotive segment profit in the fourth quarter was 259 million and segment operating margin was seven 5% down 110 basis points.

Speaker Change: In the fourth quarter all of our international geographies delivered margin expansion, although global automotive segment margin was negatively impacted by the performance at U S automotive.

Will Stengel: For the full year, automotive segment profit decreased approximately 1% versus the same period last year, and segment operating margin was 8.2%, down 50 basis points year over year. Now, let's turn to our automotive business performance by geography. Starting in Europe, our automotive team delivered another strong quarter, with total sales growth of 10% in local currency and comparable sales growth of 4%. For the year, total sales growth was 16% in local currency, with comparable sales growth of 8%.

Speaker Change: For the full year automotive segment profit decreased approximately 1% versus the same period last year and segment operating margin was eight 2% down 50 basis points year over year.

Speaker Change: Now, let's turn to our automotive business performance by geography.

Speaker Change: Starting in Europe, our automotive team delivered another strong quarter with total sales growth of 10% in local currency and comparable sales growth of 4%.

Speaker Change: For the year total sales growth was 16% in local currency with comparable sales growth of 8% where.

Will Stengel: We're winning profitable market share gains across our European markets due to the ongoing execution of our initiatives and strategic value-creating acquisitions. During the fourth quarter, we saw low single-digit to double-digit growth across each of our geographies. And for the year, we delivered mid-single-digit to double-digit growth across each of our markets. This was driven by continued wins with key accounts, winning higher share of wallet with existing accounts, and expanding the Napa brand, generating over 400 million euros in the region, which exceeds our internal target for 2023. Congratulations to the entire AAG team for another outstanding year.

Speaker Change: We're winning profitable market share gains across our European markets due to the ongoing execution of our initiatives and strategic value creating acquisitions.

Speaker Change: During the fourth quarter, we saw low single digit to double digit growth across each of our geographies and for the year, we delivered mid single digit to double digit growth across each of our markets.

Speaker Change: This was driven by continued wins with key accounts, winning higher share of wallet with existing accounts and expanding the Napa brand generating over 400 million euro in the region, which exceeds our internal target for 2023.

Speaker Change: Congratulations to the entire <unk> team for another outstanding year.

Will Stengel: In the Asia-Pacific automotive business, sales in the fourth quarter increased 2% in local currency, with comparable sales growth of 1%. This compares to strong double-digit growth in the comparable period last year. Sales for both commercial and retail were up in the fourth quarter. The team is executing well, converting the sales momentum in the quarter into strong operating margin expansion. For the year, sales increased 7% in local currency, and comparable sales increased 6%.

In the Asia Pac automotive business sales in the fourth quarter increased 2% in local currency with comparable sales growth of 1%.

Speaker Change: This compares to strong double digit growth in the comparable period last year.

Speaker Change: Sales for both commercial and retail were up in the fourth quarter.

Speaker Change: The team is executing well converting the sales momentum in the quarter into strong operating margin expansion.

Speaker Change: For the year sales increased 7% in local currency and comparable sales increased 6%.

Will Stengel: Sales for both commercial and retail were up in the year, with commercial growth up mid-single digits and retail growth up high single digits. Our Asia-Pacific team had another fantastic year and their fourth consecutive year of double-digit profit growth. They continue to drive market share gains, deliver strong operating leverage, and strategically invest for long-term success. Congratulations again to the Asia-Pacific team on another great year.

Speaker Change: Sales for both commercial and retail were up in the year with commercial growth up mid single digits and retail growth up high single digits.

Speaker Change: Our Asia Pacific team had another fantastic year and their fourth consecutive year of double digit profit growth.

Speaker Change: They continue to drive market share gains and deliver strong operating leverage and strategically invest for long term success.

Speaker Change: Congratulations again to the Asia Pacific team on another great year.

Will Stengel: In Canada, sales grew approximately 1% in local currency during the fourth quarter, with comparable sales decreasing approximately 1%. For the year, total sales grew 5% in local currency, with comparable sales increasing 4%. We're pleased with the Canadian team's growth this year and the execution of their strategic initiatives, despite a softer macroeconomic backdrop and a more cautious consumer in Canada. In the U.S., automotive sales declined 5.6% during the fourth quarter, with comparable sales down 6.1%.

Speaker Change: In Canada sales grew approximately 1% in local currency during the fourth quarter with comparable sales decreased approximately 1%.

Speaker Change: For the year total sales grew 5% in local currency with comparable sales increasing 4%.

Speaker Change: We're pleased with the Canadian teams growth this year and the execution of the strategic initiatives. Despite a softer macroeconomic backdrop and a more cautious consumer in Canada.

Speaker Change: In the U S automotive sales declined five 6% during the fourth quarter with comparable sales down six 1%.

Will Stengel: A reminder that our comparable sales figure includes same-store sales out of our company-owned stores, as well as same-store sales into our independent-owned stores. In the quarter, sales to commercial customers were down low single digits, while sales to DIY customers were down mid-single digits. For commercial, Napa Auto Care saw low single-digit growth while major account sales were down mid-single digits. Let me provide an update on the priority actions we're taking at NAPA that we explained on our third quarter call. We detailed three key areas to improve, including operational rigor in our stores, addressing fill rates in key product categories, and working with our commercial teams to address growth opportunities in the field. First, we completed changes to certain key suppliers to improve fill rates.

Speaker Change: A reminder, that our comparable sales figure includes same store sales out from our company owned stores as well as same store sales into our independent owned stores.

Speaker Change: In the quarter sales to commercial customers were down low single digits, while sales to DIY customers were down mid single digits for.

Speaker Change: For commercial Napa auto care saw low single digit growth, while major account sales were down mid single digits.

Speaker Change: Let me provide an update on the priority actions were taken at Napa that we explained on our third quarter call.

Speaker Change: We detailed three key areas to improve including operational rigor in our stores.

Speaker Change: Dressing fill rates in key product categories, and working with our commercial teams to address growth opportunities in the field.

Speaker Change: First we completed changes to certain key suppliers to improve fill rates the.

Will Stengel: The changes improved category trends in the fourth quarter and were encouraged by the positive momentum. Second, our in-store service levels, measured by on-time delivery to customers, have significantly improved as a result of an increased focus on last-mile operating disciplines. Lastly, our commercial efforts are ongoing and were highlighted by the appointment of Tom Scove to a newly created role of EVP of sales and store operations for NAPA. Previously serving as a division vice president in the West, Tom has over 20 years of field sales and operations experience with NAPA.

Speaker Change: The changes have improved category trends in the fourth quarter and we're encouraged by the positive momentum.

Speaker Change: Second our in store service levels measured by on time delivery to customers have significantly improved <unk>.

Speaker Change: As a result of increased focused on last mile operating disciplines.

Speaker Change: Lastly, our commercial efforts are ongoing and were highlighted by the appointment of Commscope to a newly created role of EVP sales and store operations for Napa.

Speaker Change: Previously serving as a division Vice President in the West Tom has over 20 years of field sales and operations experience with Napa.

Will Stengel: He's an automotive parts expert and has a deep understanding of our customers, field sales, and store operations. We're excited for the strong leadership Tom will bring to our sales and store operations field team. However, as we mentioned previously, the fourth quarter and December, in particular, were difficult year-over-year sales comparisons for Napa.

Speaker Change: He is an automotive parts expert and has a deep understanding of our customers field sales and store operations.

Speaker Change: We're excited for the strong leadership, Tom will bring to our sales and store operations field teams.

Speaker Change: While these actions drove encouraging improvements the fourth quarter results of map is still missed our expectations.

Speaker Change: As we mentioned previously the fourth quarter and December in particular were difficult year over year sales comparisons for Napa.

Speaker Change: Our average daily sales growth for Napa in the fourth quarter of 2022 was 10%, which.

Will Stengel: Our average daily sales growth for Napa in the fourth quarter of 2022 was 10%, which included approximately 8% benefit from inflation, with December 2022 sales up 13% As expected, the benefit from inflation did not repeat in the fourth quarter of 2023. Further, December 2022 included the benefits of extreme winter weather for most of the U.S. With that in mind, as we look within the current fourth quarter for the U.S. Automotive. The first two months of the quarter were in line with our outlook that we shared last quarter. December performance, however, was well below our expectations, driven by unseasonably warm weather and moderated purchases from our independent owners.

Speaker Change: Which included approximately 8% benefit from inflation.

Speaker Change: With December 2022 sales up 13%.

Speaker Change: As expected the benefit from inflation did not repeat in the fourth quarter of 2023.

Speaker Change: Further December 2022 included the benefits of extreme winter weather for most of the U S.

Speaker Change: With that context, as we look within the current fourth quarter for U S. Automotive. The first two months of the quarter were in line with our outlook that we shared last quarter.

Speaker Change: December performance, however was well below our expectations driven by unseasonably warm weather and moderated purchases from our independent owners.

Speaker Change: We have the opportunity to be with many of our largest owners at a week long meeting in December.

Will Stengel: We had the opportunity to be with many of our largest owners at a week-long meeting in December. It was a productive series of discussions with high energy and good engagement. The outlook for the market fundamentals remains positive. We reviewed areas of commercial focus and detailed key initiatives to deliver profitable growth together. The Napa competitive spirit is certainly high.

Speaker Change: It was a productive series of discussions with high energy and good engagement.

Speaker Change: The outlook for the market fundamentals remains positive.

Speaker Change: We reviewed areas of commercial focus and detailed key initiatives to deliver profitable growth together.

Speaker Change: The Napa competitive spirit certainly high.

Speaker Change: A theme from the owners feedback highlighted ongoing efforts to manage their purchases as they balance of operating costs in the current environment.

Will Stengel: A theme from the owner's feedback highlighted ongoing efforts to manage their purchases as they balance operating costs in the current environment. Based on the session feedback, however, we remain optimistic that owners' purchasing behaviors will return to more normal patterns in 2024, and we're encouraged by the performance in January, albeit it's only one month. As we reflect on 2023 and move forward, we will continue to evolve our operating model at U.S. Automotive.

Speaker Change: Based on this session feedback however, we remain optimistic that owners purchasing behaviors returned to more normal patterns in 2024, and we are encouraged by the performance in January, albeit it's only one month.

Speaker Change: As we reflect on 2023 and move forward, we will continue to evolve our operating model at U S automotive.

Will Stengel: We will be more intentional about owning more stores. A higher mix of company-owned stores in targeted priority markets enables us to service our repair shop and commercial customers more consistently and completely. We are also working actively to better align incentives with our independent owners to partner and grow together. We have current and future opportunities to create value in both our owned and independent locations. As an example, during the fourth quarter, we made strategic acquisitions of 33 Napa stores from our independent owners.

Speaker Change: We will be more intentional about owning more stores.

Speaker Change: A higher mix of company owned stores in targeted priority markets enables us to service, our repair shop and commercial customers more consistently and completely.

Speaker Change: We are also working actively to better align incentives with our independent owners to partner and grow together.

Speaker Change: We have current and future opportunities to create value in both our owned and independent owned locations.

Speaker Change: As an example during the fourth quarter, we made strategic acquisitions of 33, Napa stores from our independent owners.

Will Stengel: Ending the year with approximately 1,560 company-owned stores, up 20% versus 2021. While owner acquisitions have been a longstanding aspect of the business, these trends accelerated in the fourth quarter and second half of 2023. And we would expect these accelerated trends to continue into 2024. The Napa business navigated unexpected challenges in 2023, but the team adjusted and took decisive action to step up our operational intensity, simplify our priorities, and improve service to our customers. As we look back on the year, here are a few highlights.

Speaker Change: Ending the year with approximately 1560 company owned stores up 20% versus 2021.

Speaker Change: While owner acquisitions have been a longstanding aspect of the business. These trends accelerated in the fourth quarter and second half of 2023.

Speaker Change: And we would expect these accelerated trends to continue into 2024.

Speaker Change: The Napa business navigated unexpected challenges in 2023, but the team adjusted and took decisive action to step up our operational intensity simplify our priorities and improve service to our customers.

Speaker Change: As we look back during the year a few highlights.

Will Stengel: We brought in new leadership, with Randy Brough now leading the team and a proven internal leader as the new CFO. These seasoned executives got to work quickly, identifying opportunities, and improving our business clarity and priorities. We quickly assessed costs and took action to increase productivity and efficiency.

Speaker Change: We brought in new leadership with Randy Breaux, now, leading the team and a proven internal leader as the new CFO.

Speaker Change: These seasoned executives got to work quickly identifying opportunities and improved our business clarity and priorities.

Speaker Change: We quickly assess cost and took action to increase productivity and efficiency.

Will Stengel: We partnered with new suppliers to address poor fill rates in select key categories and surgically invested in inventory breadth and depth. We identified opportunities within our stores and DCs to improve our processes to ensure that we're delivering our customer commitments and executing locally. We accelerated progress on foundational talent, technology, and supply chain investments, including, as one example, a strategic global partnership with Google for analytics and search. And we're encouraged by some recent wins, including a structured inside sales program, the planned introduction of new product lines, and recent traction with loyalty programs with key customers. In 2024, we believe that supportive industry fundamentals, combined with clear priorities and urgent action, position NAPA to deliver success. For GPC overall, our global teams are already actively executing 2024 priorities focused on our key strategic initiatives across our business. We know evolving market environments require us to continuously evolve with them. And to that end, as Paul mentioned, we announced a coordinated restructuring program across each of our global geographies. The primary objective of the global program is to continue to simplify and streamline our operations, consistent with our overall business strategy. When we simplify, we increase the speed of local service.

Speaker Change: We partnered with new suppliers to address for fill rates in select key categories and surgically invested in inventory breadth and depth.

We identified opportunities within our stores and Dcs to improve our processes to ensure that we're delivering on our customer commitments and executing locally.

Speaker Change: We accelerated progress on foundational talent technology and supply chain investments, including as one example, a strategic global partnership with Google for analytics and search.

Speaker Change: And we're encouraged by some recent wins, including a structured inside sales program planned introduction of new product lines and recent traction with loyalty programs with key customers.

Speaker Change: In 2024, we believe that supportive industry fundamentals combined with clear priorities and urgent action positioned Napa to deliver success.

Speaker Change: For GPC overall, our global teams are already actively executing 2024 priorities focused on our key strategic initiatives across our businesses.

Speaker Change: We know evolving market environments require us to continuously evolve with them and to that end as Paul mentioned, we announced a coordinated restructuring program across each of our global geographies.

Speaker Change: The primary objective of the global program is to continue to simplify and streamline our operations consistent with our overall business strategy.

Speaker Change: When we simplify we increased the speed of local service.

Will Stengel: Deliver operational productivity, improve the efficiency of our teams, and reduce our overall cost to serve. This program is a similar playbook to our previous GPC program implemented in fall 2019 that delivered positive results. Aspects of the restructuring are already in place, and some will take place in the months ahead.

Speaker Change: Deliver operational productivity improve the efficiency of our teams and reduce our overall cost to serve this program is a similar playbook to our previous GPC program implemented in fall 2019 that delivered positive results.

Speaker Change: Aspects of the restructuring are already in flight and some will take place in the months ahead.

Herbert C. Nappier: Bert will go over the financial details of our restructuring and his remarks and update you on how it's reflected in our 2024 outlook. In closing, GPC delivered solid fourth-quarter and full-year results, and we achieved the plan we laid out for 2023. This was driven by the benefit of our strategic business mix and global geographic diversification. But most importantly, it was driven by an incredible effort from our global teammates to take care of our customers, live our GPC values every day, and deliver performance. We're committed to our plans for long-term growth, and we're confident our teams are focused on the right strategic initiatives that will deliver solutions for our customers and create value. Thank you again to the entire GPC team for another great year, and with that, I'll turn the call over to Bert. Thank you, Will. And thanks to everyone for joining us today.

Speaker Change: It will go over the financial details of our restructuring in his remarks and update you on how it is reflected in our 2020 for outlook.

Speaker Change: In closing GPC delivered solid fourth quarter and full year results and we achieved the plan we laid out for 2023.

Speaker Change: This was driven by the benefit of our strategic business mix and global geographic diversification.

Speaker Change: Most importantly, it was driven by incredible effort from our global teammates to take care of our customers.

Our GPC values every day and deliver performance.

Speaker Change: We're committed to our plans for long term growth and we're confident in our teams are focused on the right strategic initiatives that will deliver solutions for our customers and create value.

Speaker Change: Thank you again to the entire GPC team for another great year, and with that I'll turn the call over to Bert.

Bert: Thank you will and thanks to everyone for joining us today, our performance in the fourth quarter and full year continues to demonstrate our long history of delivering earnings and cash flow growth, while maintaining a strong balance sheet.

Herbert C. Nappier: Our performance in the fourth quarter and full year continues to demonstrate our long history of delivering earnings and cash flow growth while maintaining a strong balance sheet. Our results, which include double-digit earnings growth in the fourth quarter and for 2023, were achieved while navigating through a dynamic and challenging year. Before I walk you through the key highlights of our fourth quarter and full year performance, I would like to note that we had no non-recurring items in the fourth quarter and 12 months of 2023. Our comparisons to the prior year, however, exclude non-recurring items in 2022, primarily related to the integration of KDG, and an adjustment in the fourth quarter related to a remeasurement of our product viability reserves. As we look at 2023, sales totaled $23.1 billion, up 4.5% from 2022 and consistent with our guidance. In the fourth quarter, sales increased 1.1%, with a 2% contribution from acquisitions and a 0.3% favorable impact of foreign currency and other. However, these items were partially upset by a 1.2% decrease in comparable sales. During the quarter, we experienced low single-digit levels of inflation in both our automotive and industrial segments, in line with our expectations.

Bert: Our results, which include double digit earnings growth in the fourth quarter and for 2023 were achieved while navigating through a dynamic and challenging year.

Bert: Before I walk you through the key highlights of our fourth quarter and full year performance I would like to note that we had no nonrecurring items in the fourth quarter and 12 months of 2023 or.

Bert: Our comparisons to prior year, however, exclude nonrecurring items in 2022, primarily related to the integration of KCG and an adjustment in the fourth quarter related to a re measurement of our product liability reserve.

Bert: As we look at 2023 sales totaled $23 1 billion up four 5% from 2022 and consistent with our guidance.

Bert: In the fourth quarter sales increased one 1% with a 2% contribution from acquisitions and a 3% favorable impact of foreign currency and other.

Bert: These items were partially offset by one 2% decrease in comparable sales during.

Bert: During the quarter, we experienced low single digit levels of inflation in both our automotive and industrial segments in line with our expectations.

Herbert C. Nappier: As Will outlined, our fourth quarter sales performance was highlighted by growth in Europe, Australasia, and industrial, offset by the decline in U.S. automotive. During the fourth quarter, our gross margin expanded by approximately 70 basis points, and for the year, our gross margin was 35.9%, an 80 basis point improvement from our adjusted gross margin in 2022. Our gross margin expansion was primarily driven by the execution of our strategic pricing and sourcing initiatives through investments in technology that enabled us to leverage data and analytics to ensure we have the right inventory for our customers to meet their needs. Total operating and non-operating expenses were 28.9% of sales in the fourth quarter, an increase of approximately 20 basis points from total adjusted expenses in the prior year.

Bert: As we will outline our fourth quarter sales performance was highlighted by the growth in Europe, Australasia and industrial offset by the decline in U S automotive.

Bert: During the fourth quarter, our gross margin expanded by approximately 70 basis points and for the year. Our gross margin was 35, 9% an 80 basis point improvement from our adjusted gross margin in 2022 or.

Bert: Our gross margin expansion was primarily driven by the execution of our strategic pricing and sourcing initiatives through investments in technology that enabled us to leverage data and analytics to ensure we have the right inventory for our customers to meet their needs.

Bert: It'll operating and non operating expenses were 28, 9% of sales in the fourth quarter.

Bert: An increase of approximately 20 basis points from total adjusted expenses in the prior year.

Herbert C. Nappier: For the year, total expenses were 28.4% of sales, a 50 basis point increase from adjusted expenses in 2022. During 2023, we anticipated 60 basis points of deleverage related to our planned investments and team members and increased spending and technology, both of which came in line with our expectations. These investments were partially offset by cost actions throughout the year, particularly at U.S. Automotive.

Bert: For the year total expenses were 28, 4% of sales a 50 basis point increase from adjusted expenses in 2022.

Bert: During 2023, we anticipated 60 basis points of deleverage related to our planned investments in team members and increased spending in technology, both of which came in line with our expectations.

These investments were partially offset by cost actions throughout the year, particularly at U S automotive.

Herbert C. Nappier: Despite the deleverage in SG&A, our fourth quarter gross margin expansion drove segment profit margin up 10 basis points to 9.6%. For the year, segment profit margin was 9.9%, a notable 50 basis point increase from 2022, highlighted by our team at Motion, driving an impressive 200 basis points of margin expansion on mid-single-digit sales growth, with Industrial now representing approximately 50% of GPC's profit pool. Our fourth-quarter earnings were $2.26 per diluted share compared to $2.05 per adjusted diluted share in the same period last year, an increase of 10.2%. For the full year, earnings were $9.33 per diluted share compared to $8.34 per adjusted diluted share in 2022, an increase of 11.9%. Turning to our cash flows for the year, we generated $1.4 billion in cash from operations and over $900 million in free cash flow, both in line with our guidance. During the quarter, we issued $800 million of senior unsecured notes and used $250 million of the proceeds to repay debt that matured in December 2023.

Bert: Despite the deleverage in SG&A, our fourth quarter gross margin expansion drove segment profit margin up 10 basis points to nine 6%.

Bert: For the year segment profit margin was nine 9% a notable 50 basis point increase from 2022 highlighted by our team at motion driving an impressive 200 basis points of margin expansion on mid single digit sales growth with industrial now representing approximately 50%.

Bert: Of Gtc's profit pool.

Bert: Our fourth quarter earnings were $2 26 per diluted share compared to $2 five per adjusted diluted share in the same period last year, an increase of 10, 2%.

Bert: For the full year earnings were $9 33 per diluted share compared to $8 34 per adjusted diluted share in 2022, an increase of 11, 9%.

Bert: Turning to our cash flows for the year, we generated $1 4 billion in cash from operations and over $900 million in free cash flow both in line with our guidance.

Bert: During the quarter, we issued $800 million of senior unsecured notes and used $250 million of the proceeds to repay debt that matured in December 2023.

Herbert C. Nappier: We closed the year with $2.6 billion in available liquidity, and our debt-to-adjusted EBITDA ratio was 1.8 times, which compares to our targeted range of 2 to 2.5 times. Our capital expenditures in 2023, which totaled approximately $500 million, or 2.2% of revenue, were focused on driving the strategic initiatives we showcased at our March 2023 Investor Day. For 2023, 60% of our CapEx was growth capital centered on technology and supply chain capabilities, including projects related to distribution center expansion and modernization, fulfillment centers in motion, and using technology to enhance our catalog and payment platform. While modestly above our original expectations, the areas where we are investing are delivering good returns well above our cost of capital. We continue to make progress on the M&A front in 2023, a longstanding aspect of our growth strategy. During the year, we completed approximately 90 transactions, investing $309 million, with virtually all of these transactions in the automotive segment.

Bert: We closed the year with $2 6 billion in available liquidity and our debt to adjusted EBITDA ratio was one eight times.

Bert: Which compares to our targeted range of two to two five times.

Bert: Our capital expenditures in 2023, which totaled approximately 500 million or two 2% of revenue we're focused on driving the strategic initiatives. We showcased at our March 2023 Investor day.

Bert: For 2023, 60% of our Capex was growth capital.

Bert: Centered on technology and supply chain capabilities, including projects related to distribution center expansion and modernization fulfillment centers that motion and using technology to enhance our catalog and payment platforms.

Bert: Modestly above our original expectations that areas, where we are investing are delivering good returns well above our cost of capital.

Bert: We continue to make progress on the M&A front in 2023, a long standing aspect of our growth strategy.

Bert: During the year, we completed approximately 90 transactions investing $309 million with virtually all of these transactions in the automotive segment.

Herbert C. Nappier: The blended EBITDA rate of the businesses acquired was over 9% on a pre-synergy basis, and it's accretive to our overall automotive segment margin, demonstrating the discipline we have in the space. In 2023, we returned approximately $788 million, or 55% of our operating cash flows, to our shareholders in the form of dividends and share repurchases. This includes $527 million in cash dividends paid to our shareholders and $261 million in cash used to repurchase 1.8 million shares.

Bert: The blended EBITDA rate of the business is acquired was over 9% on a pre synergy basis and is accretive to our overall automotive segment margin.

Bert: Demonstrating the discipline, we have in this space.

Bert: In 2023, we returned approximately $788 million or 55% of our operating cash flows to our shareholders in the form of dividends and share repurchases.

Bert: This includes $527 million in cash dividends paid to our shareholders and $261 million in cash used to repurchase one 8 million shares.

Herbert C. Nappier: Before we turn to our outlook for 2024, as you heard earlier from Paul and Will, this morning, we announced a global restructuring designed to reduce our SG&A costs, improve efficiency, and accelerate investment. In 2024, we expect to incur costs of approximately $100 to $200 million related to our restructuring efforts, and we will report this as a non-recurring expense. Through these efforts, we anticipate a benefit of $20 to $40 million in 2024 and $45 to $90 million on an annualized basis. Our current restructuring activities reflect our discipline to continuously refine and improve our business and ensure we are taking the necessary actions to position us to achieve our long-term targets. As we turn to 2024, we are balancing solid industry fundamentals, which remain supportive of long-term growth across our businesses, against a backdrop of mixed economic conditions, driven by high interest rates and persistent cost inflation.

Bert: Before we turn to our outlook for 2024 as you heard earlier from Paul and will this morning, we announced a global restructuring designed to reduce our SG&A cost improve efficiency and accelerate investments and.

Bert: In 2024, we expect to incur costs of approximately $100 million to $200 million.

Bert: Related to our restructuring efforts and we will report this is a nonrecurring expense through.

Through these efforts, we anticipate a benefit of $20 million to $40 million in 2024, and $45 million to $90 million on an annualized basis.

Bert: Our current restructuring activities reflect our discipline to continuously refine and improve our business and ensure we are taking the necessary actions to position us to achieve our long term targets.

Bert: As we turn to 2024, we are balancing solid industry fundamentals, which remain supportive for long term growth across our businesses against the backdrop of mixed economic conditions, driven by high interest rates and persistent cost inflation.

Herbert C. Nappier: Despite this, we remain confident in the execution of our strategic initiatives and the benefits we expect to realize. For the year, we expect total sales growth to be in a range of 3 to 5 percent. We anticipate a more moderated first half and a stronger second half in 2024 for both automotive and industrial. Also included in our outlook is the assumption that the benefit from inflation remains at more normalized levels, contributing less than 1% for both business segments. We are targeting full-year gross margin expansion of approximately 20 to 40 basis points, primarily driven by our continued focus on our strategic sourcing and pricing initiatives. Additionally, our outlook assumes that SG&A will deleverage between 20 and 30 basis points from further investments in technology. Our technology investments are key to enabling our strategic initiatives. We expect diluted earnings per share to be in the range of $8.95 to $9.15 and adjusted diluted earnings per share to be in the range of $9.70 to $9.90, which represents an increase of 4 to 6% from last year.

Bert: Despite this we remain confident in the execution of our strategic initiatives and the benefits we expect to realize.

Bert: For the year, we expect total sales growth to be in a range of 3% to 5%.

Bert: We anticipate a more moderated first half and stronger second half in 2024 for both automotive and industrial.

Bert: Included in our outlook is the assumption that they benefit from inflation remains at more normalized levels contributing less than 1% for both business segments.

Bert: We are targeting full year gross margin expansion of approximately 20 to 40 basis points.

Bert: Primarily driven by our continued focus on our strategic sourcing and pricing initiatives.

Bert: Our outlook assumes that SG&A will deleverage between 20, and 30 basis points from further investments in technology.

Bert: Our technology investments are key to enabling our strategic initiatives.

Bert: We expect diluted earnings per share to be in the range of $8 95 to $9 15.

Bert: And adjusted diluted earnings per share to be in the range of $9 70.

Bert: Two $9 90.

Bert: Which represents an increase of 4% to 6% to last year.

Herbert C. Nappier: Our adjusted earnings per share guidance includes approximately $0.10 of EPS benefit related to our restructuring initiatives, which represents about half of the savings we are targeting for 2024. The successful execution of all our restructuring initiatives in 2024 provides an additional $0.05 to $0.10 EPS benefit not included in our guidance. By business segment, we are guiding to the following, 2-4% total sales growth for the automotive segment with comparable sales growth in the 1-3% range. As we consider our sales guidance for the automotive segment, our growth rate will be negatively impacted in 2024 by approximately 100 basis points from new incentive programs associated with changes to certain supplier arrangements we previously announced in the U.S. automotive business. Historically, these programs have been managed by our suppliers. Under the new arrangements, these will be managed by our U.S. automotive team. The new arrangements will be accounted for as a reduction in revenue, but they will have a corresponding reduction in the cost of goods sold, and as a result, have no negative impact on gross profit.

Bert: Our adjusted earnings per share guidance includes approximately <unk> 10 of EPS benefit related to our restructuring initiatives, which represents about half of the savings we are targeting for 2024.

Bert: The successful execution of all our restructuring initiatives in 2024 provides an additional five to 10 EPS benefit not included in our guidance.

Bert: By business segment, we are guiding to the following.

Bert: 2% to 4% total sales growth for the automotive segment with comparable sales growth in the 1% to 3% range.

Bert: As we consider our sales guidance for automotive our growth rate will be negatively impacted in 2024 by approximately 100 basis points from new incentive programs associated with changes to certain supplier arrangements. We previously announced in the U S automotive business historically.

Bert: Historically these programs have been managed by our suppliers.

Bert: Under the new arrangements. These will be managed by our U S automotive team.

Bert: The new arrangements will be accounted for as a reduction of revenue. However have a corresponding reduction of cost of goods sold and as a result have no negative impact to gross profit.

Herbert C. Nappier: For the global automotive segment, we expect 20 to 40 basis points of expansion year over year. For the industrial segment, we expect total sales growth of 3 to 5% with comparable sales growth in the 2 to 4% range. For 2024, we anticipate global industrial segment margin to expand by approximately 10 to 20 basis points year over year after finishing 2023 at 12.5%. Our performance in 2023 exceeded our long-term target of 12%, driven in part by our outstanding work to integrate KDG a year ahead of schedule. We will revisit our long-term target for industrial in the future. Therefore, we see further opportunities for margin expansion in 2024 and beyond. And finally, we are targeting corporate expenses to be approximately 1.5% to 2% of sales.

Bert: For our global automotive segment margin, we expect 20 to 40 basis points of expansion year over year.

Bert: For the industrial segment, we expect total sales growth of 3% to 5% with comparable sales growth in the 2% to 4% range.

Bert: For 2024, we anticipate global industrial segment margin to expand by approximately 10 to 20 basis points year over year after finishing 2023 at 12, 5% our.

Bert: Our performance in 2023 exceeded our long term target of 12% driven in part by our outstanding work to integrate KCG a year ahead of schedule.

Bert: We will revisit our long term target for industrial in the future, but we see further opportunities for margin expansion in 2024 and beyond.

Bert: And finally, we are targeting corporate expense to be approximately one 5% to 2% of sales.

Herbert C. Nappier: Turning to a few other items of interest. With our strong balance sheet and cash flows, we are well positioned to take advantage of opportunities that fit with our long-term growth strategies, regardless of the economic backdrop, and in 2024, we will continue our long history of balanced capital allocation with four priorities: capital expenditures, M&A, our dividend, and share repurchases.

Speaker Change: Turning to a few other items of interest.

Speaker Change: With our strong balance sheet and cash flows we are well positioned to take advantage of opportunities that fit with our long term growth strategies, regardless of the economic backdrop.

Speaker Change: In 2024, we will continue our long history of balanced capital allocation with four priorities capital expenditures M&A, our dividend and share repurchases during.

Herbert C. Nappier: During the fourth quarter, we added a new capability and further flexibility to pursue strategic investments with our commercial paper program launched in December. Our cash flows will remain strong in 2024, as we expect cash from operations to be in a range of $1.3 billion to $1.5 billion, with free cash flow of $800 million to $1 billion. As we outlined at Investor Day, investments in our supply chain and IT capabilities are central to our success. For 2024, we expect CapEx to be approximately $500 million, or 2% of revenue, consistent with 2023. As we look at 2024, the growth capital we are deploying, which is approximately 55% of our forecast, will drive the modernization of our supply chain through automation and new DCs and fulfillment locations that are partnered with technology that enhances our customer experience, like our investments in catalog and search platforms through our partnership with Google.

Speaker Change: During the fourth quarter, we added a new capability and further flexibility to pursue strategic investments with our commercial paper program launched in December.

Speaker Change: Our cash flows will remain strong in 2024, as we expect cash from operations to be in a range of $1 3 billion to $1 5 billion with free cash flow of $800 to $1 billion as we outlined at Investor day investments in our supply chain and it capabilities are central to our success for.

For 2024, we expect capex to be approximately $500 million or 2% of revenue consistent with 2023.

Speaker Change: As we look at 2024 the growth capital, we are deploying which is approximately 55% of our forecast will drive modernization of our supply chain through automation and new Dcs and fulfillment locations that are partnered with technology that enhances our customer experience like our investments in catalog.

Speaker Change: And search platforms through our partnership with Google.

Herbert C. Nappier: As we look at M&A, our global pipeline remains robust, and we continue to remain disciplined in pursuing opportunities that create value. Our strong track record of success, combined with our ability to put our balance sheet to work, positions us well to further grow our global scale and footprint. In maintaining our focus on shareholder returns, this morning, our board approved a $4 per share annual dividend for 2024, representing our 68th consecutive increase in our annual dividend.

Speaker Change: As we look at M&A, our global pipeline remains robust and we continue to remain disciplined pursuing opportunities that create value or.

Speaker Change: Our strong track record of success combined with our ability to put our balance sheet to work positions us well to further grow our global scale and footprint.

Speaker Change: And maintaining our focus on shareholder returns. This morning, our board approved a $4 per share annual dividend for 2024, representing our 68th consecutive increase to our annual dividend.

Herbert C. Nappier: This represents a 5.3% increase from the $3.80 per share paid in 2023. In closing, our teams managed the business through a dynamic environment in 2023, including navigating unexpected pressures in our U.S. automotive business while achieving mid-single-digit sales growth, gross margin expansion, segment margin expansion, and double-digit earnings growth. As we look ahead to 2024, we will continue to strategically invest in our business for the long term while taking actions to better align our assets in the near term and maintain our strong balance sheet. We look forward to updating you on our progress as we move throughout the year. Thank you, and we will now turn it back to the operator for your questions. Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by the number on your touchtone phone.

Speaker Change: This represents a five 3% increase from the $3 80 per share paid in 2023.

Speaker Change: In closing our teams manage the business through a dynamic environment in 2023, including navigating unexpected pressures in our U S automotive business, while achieving mid single digit sales growth gross margin expansion.

Speaker Change: Margin expansion and double digit earnings growth.

Speaker Change: As we look ahead to 2024, we will continue to strategically invest in our business for the long term, while taking actions to better align our assets in the near term and maintain our strong balance sheet.

Speaker Change: We look forward to updating you on our progress as we move throughout the year.

Speaker Change: Thank you and we will now turn it back to the operator for your questions.

Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your Touchtone phone you will hear a three.

Operator: You will hear a three to a prompt that you that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the. If you are using a speaker phone, please lift the handset before pressing the button.

Speaker Change: Thank you.

Speaker Change: Thank you Han has been raised should you wish to decline from the polling process. Please press star followed by the Q. If you are using a speaker phone. Please lift the handset before pressing any Keith please limit yourself to one question and one follow up one moment. Please for your first question.

Operator: Please limit yourself to one question and one follow-up. One moment, please, for your first question. Your first question comes from Chris Horvers with J.P. Morgan. Go ahead.

Speaker Change: Your first question comes from Chris <unk> with.

Chris: J P Morgan.

Chris: Please go ahead.

Chris: Thanks, Good morning, guys.

Chris Horvers: Thanks. Good morning, guys. So my first question is regarding independent versus company operated stores. Can you talk at a high level about what the comp would look like between those two segments? And, you know, more importantly, you give a sense of what POS is versus inventory at those independents. Presumably, the deferral can only last so long. Would you expect that catch up to happen relatively quickly? Morning, Chris.

Chris: My first question is regarding the independent versus company operated stores can you talk at a high level what.

Chris: The comp looked like between those two segments and more importantly.

Chris: Do you have a sense of what.

Chris: POS is versus inventory at those independent presumably.

Chris: <unk> can can only last so long.

Chris: Would you expect that cap catch up to happen relatively quickly.

Will Stengel: Thanks for the question. I'll take your first part there to start. The independent owners and company-owned stores for Napa through the quarter were relatively similar with the exception of December, where we saw a tail-off, as we noted in our prepared remarks, from independent owner purchases.

Speaker Change: Good morning, Chris Thanks for the question.

Speaker Change: Take that your first part there.

Speaker Change: To start the independent owners in company owned stores for Napa through the quarter were relatively similar.

Speaker Change: With the exception of December where we saw a tail off as we noted in our prepared remarks from the independent owner purchases. So I would say large largely similar through the quarter with the exception of December.

Will Stengel: So I would say largely similar through the quarter with the exception of December. On inventory levels and purchasing relative to sales out, we did see a positive inflection as we went through the quarter towards the end of the year. And so we are encouraged that as we come into 2024, those inventory levels will better reflect sales out activity.

Speaker Change: On the inventory levels and purchasing relative to sales out.

Speaker Change: We did see a positive inflection as we went through the quarter towards the end of the year and so we are encouraged that as we come into 2024.

Speaker Change: Inventory levels will better reflect the sales out activity.

Speaker Change: Got it and then I guess.

Herbert C. Nappier: And then I guess, you know, follow up and thinking about that, yeah, there was bad weather in December and good weather in January. So, and you had the destock and restock. So I guess, in light of that, can you talk about how you're thinking about the trend of the business? You know, what's January?

Speaker Change: Follow up and thinking about that yet there was bad weather in December good weather in January so and you had to destock restock.

Speaker Change: Yes.

Speaker Change: Light of that can you talk about how youre thinking about the trend of the business Whats January should we look at those two months together and how does that inform the cadence of U S. Napa.

Herbert C. Nappier: Should we look at those two months together? And how does that inform the cadence of US Napa over the year? Hey, Chris, it's Bert.

Herbert C. Nappier: Good morning. I'll take that one a little bit and maybe pull it up a little bit first before I talk specifically about January and get into 24, but in terms of guidance, as you heard in my prepared remarks, we're looking for 970 to 990 for the full year, 5% at the midpoint. Just to give you a little bit more color, we think the first half is a bit more moderated in both segments than the second half. The second half, we think, will be a bit stronger. And that's really around how we're thinking about the interest rate environment, perhaps what could happen there in the second half, and rebounding and improving industrial activity in the second half as well as for business. Beyond that, you know, the macro environment is pretty choppy.

Speaker Change: Over the year.

Speaker Change: Hey, Chris Good morning, I'll take that one a little bit and maybe pull it up first before I talk specifically about about January and getting into 'twenty four but in terms of guidance as you heard in my prepared remarks, we're looking for 970 to 90 90 for the full year, 5% at the midpoint just.

Speaker Change: Just to give you a little bit more color. We think the first half is a bit more moderated on both segments in the second half.

Speaker Change: Have we think it'll be a bit stronger and that's really around how we're thinking about the interest rate environment, perhaps what could happen there in the second half and rebounding and improving industrial activity in the second half as well for the for the motion business.

Speaker Change: Beyond that you know the macro environment is pretty choppy, we've got high interest rates stubborn inflation, we've got a lot of geopolitical considerations, we're looking at putting in an election year here in the U S.

Herbert C. Nappier: We've got high interest rates, stubborn inflation. We've got a lot of geopolitical considerations we're looking at, including an election here in the US. On the other side, we've got some of our own headwinds with some interest rate expense headwind for the year, and we'll be normalizing, as I said in my prepared remarks on inflation benefits against 23. Looking at the cadence of the quarters, I don't want to give quarterly guidance. But as I just talked about, a moderated first half, a stronger second half, and a few things specifically for Q1.

Speaker Change: On the other side, we've got some of our own headwinds with some interest rate expense headwind for the year and will be normalizing as I've said in my prepared remarks on inflation benefits against 23.

Speaker Change: And looking at the cadence of the quarters I don't want to give quarterly guidance.

Speaker Change: But as I, just talked about moderated first half stronger second half.

Speaker Change: And a few things specifically for Q1, we will have some interest rate headwind interest expense headwind excuse me and a difficult comp promotion. They comped at 12% last year still strong industrial production queue.

Herbert C. Nappier: We'll have some interest rate headwinds, interest expense headwinds, excuse me, and a difficult comp for motion. They compiled at 12% last year, still strong industrial production, Q1 of 2023. We'll come up against that here in the first quarter of 24.

Speaker Change: Q1 of 2023 will come up against that here in the first quarter of 'twenty four and for the Napa U S auto business will be looking at a comp against some high single digit inflation from Q1, a year ago.

Speaker Change: Taking all of that together long answer here, but taking all that together, we do expect the Napa business to improve sequentially from Q4 on a reported basis.

Herbert C. Nappier: And for the Napa U.S. auto business, we'll be looking at a comp against some high single-digit inflation from Q1 a year ago. Taking all that together, the long answer here, but taking all that together, we do expect the NASA business to improve sequentially from Q4 on a reported basis, even with that headwind from inflation, and we're encouraged, as Will said, with what's happening in January. We really feel like we're off to a good start, and we met our expectations for what we were looking for in January. But as you also look at the cadence of the year, I still expect Q1 to be our weakest earnings quarter of 2024, but I remain very confident in our full-year guidance. Just a finer point on that, so do you expect both Motion and Industrial and U.S. NAPA to be negative than 1Q on an organic comp basis? Well, look, I don't want to get into giving you intra-quarter guidance since I'm not going to give you quarterly guidance.

Speaker Change: Even with that headwind from inflation and we're encouraged as <unk> said with what's happening in January.

Speaker Change: We really feel like we're off to a good start met our expectations for what we were looking for in January but as you also look at the cadence of the year I still expect Q1 to be our weakest earnings quarter of 2024, but remain very confident in our full year guidance.

Speaker Change: And just a final point on that so would you expect both motion and <unk>.

Speaker Change: Industrial in the U S Napa to be negative from <unk> on an organic comp basis.

Speaker Change: Well look I don't want to get into giving you intra quarter guidance since I'm not going to give you a quarterly guidance I'll just kind of stick with where we are not focused on one month since one month doesn't make a quarter, but we're encouraged by January particularly on the Napa business and improved sequentially from December and better expectations to start the quarter.

Speaker Change: Okay.

Herbert C. Nappier: I'll just kind of stick with where we are, not focus on one month since one month doesn't make a quarter, but we're encouraged by January, particularly in the NAPA business. It improves sequentially from December and has better expectations to start the quarter. Got it. Thanks very much.

Speaker Change: Got it thanks very much.

Chris.

Speaker Change: Your next question comes from Scott.

Scot Ciccarelli: Ceccarelli with true. Please go ahead.

Speaker Change: Hey, Good morning, this is Josh on for Scott.

Josh: So if we look at the performance of the U S Auto business why do you guys think youre, losing so much share there and what do you need to do to gain back share in <unk>, but it's typically pretty difficult.

Chris Horvers: Thanks, Chris. Your next question comes from Scott. Ciccarelli with Truist.

Josh: Drive meaningful share shifts in the industry.

Operator: Please go ahead. Hey, good morning. This is Josh coming on for Scott.

Speaker Change: Yes, thanks for the question.

Speaker Change: Listen I think we've shared both last quarter and this quarter a lot of specificity about the work that we're doing.

Josh: So if we look at the performance of the US auto industry, now, why do you guys think you're losing so much share there? And what do you need to do to gain back share given that it's typically pretty difficult to drive meaningful share shifts in this industry? Yeah, thanks for the question.

Speaker Change: Im proud of the progress that we're making the script laid out a lot of the actions that we've taken specifically.

Speaker Change: Around operational intensity inventory.

Speaker Change: Technology investments field leadership store operations, the big body of work.

Speaker Change: We're highly confident that the team is going to turn it around as we move forward. So there's a lot to life we.

Will Stengel: Listen, I think we've shared a lot of specificity about the work that we're doing. Proud of the progress that we're making. The script laid out a lot of the actions that we've taken specifically around operational intensity, inventory, technology investments, field leadership, store operations, the big body of work, and we're highly confident that the team's going to turn it around as we move forward. So there's a lot to life.

Speaker Change: We know we've got opportunities to get better and we've got a lot of confidence in the team.

Speaker Change: Josh I would just.

Speaker Change: Tag onto what will said.

Speaker Change: Look we own our results for 2003.

Speaker Change: We've touched on that's now behind us.

Speaker Change: We've got new leadership at Napa, We've got an improved supply chain, we've got improved search capabilities, new sales structure in the field and we're confident that business as I think I've said in my prepared remarks, our best days are in front of us so.

Paul D. Donahue: We know we've got opportunities to get better, and we've got a lot of confidence in the team. Hey, Josh, I would just add to what Will said. You know, we look, we own our results for 23. We've touched on that. It's now behind us.

Speaker Change: We're encouraged as Bert said by the early days and early weeks of 2024 and again looking for better days ahead.

Speaker Change: Yes, that's helpful. And then just one on margins. So we think about the targets you outlined last year, obviously, you're running above that on industrial and Youre talking about expansion for next year, but given what we've seen in auto for 'twenty. Three how are you thinking about the target you laid out there.

Paul D. Donahue: We've got new leadership at NAPA. We've got an improved supply chain. We've got improved surge capabilities, a new sales structure in the field, and we're confident that business, as I think I said in my prepared remarks, our best days are in front of us. So we're encouraged, as Bert said, by the early days and early weeks of 2024. And again, looking for better days ahead. Yeah, that's helpful. And then just one on the margin.

Speaker Change: Yeah on the automotive segment margin that we're guiding to 20 to 40 basis points of improvement for the coming year. Our building off of a continued strength in Europe and Australasia, We've got great businesses, there with great share.

Speaker Change: And good growth opportunities and it will outlined we're optimistic about both of those businesses are headed when we turn back to the U S. We've got a lot of actions in flight and we're bullish on the things that are happening with outlined all of those so I don't want to be repetitive.

Will Stengel: So we think about the target through outline last year, you know, obviously, you're running above that on industrial, and you're talking about expansion for next year. But given what we've seen in auto for 23, how are you thinking about the target you laid out there? Yeah, on the automotive segment margin, we're guiding to 20 to 40 basis points of improvement for the coming year. We're building off of continued strength in Europe and Australasia. We've got great businesses there with great shares and good growth opportunities. And, as Will outlined, we're optimistic about where both of those businesses are headed. When we turn back to the US, we've got a lot of actions in flight, and we're bullish on the things that are happening. Will's outlined all of those, so I don't want to be repetitive, but January is off to a good start for Napa.

Speaker Change: But January is off to a good start for Napa were encouraged by the results there.

Speaker Change: And we think that business improves as I said as we move throughout 2024 hour couple that with our restructuring our restructuring activities that we announced this morning, our intended to streamline the business and improve our efficiency and we expect to get good benefits there as well.

Speaker Change: Got it that's helpful. Thanks, guys.

Speaker Change: Your next question comes from Michael Lasser with UBS Securities. Please go ahead.

Michael David Montani: Good morning. Thank you so much for taking my question.

Michael David Montani: On the industrial segment.

Herbert C. Nappier: We're encouraged by the result there, and we think that business will improve, as I said, as we move throughout 2024. I would couple that with our restructuring. Our restructuring activities that we announced this morning are intended to streamline the business and improve our efficiency, and we expect to get good benefits there as well. Yeah, that's helpful.

Michael David Montani: Do you think margins can go now that you've experienced significant growth over the last few years and is there any reason to believe that.

Speaker Change: You should give some of the growth back in the coming years.

Speaker Change: Thanks, Michael Good morning.

Speaker Change: Look we guided to 10 to 20 basis points of margin expansion for industrial in 2024 coming off of 12, 5% in 2023, and 200 basis points of improvement. This past year I would just say the last two years.

Josh: Thank you. Your next question comes from Michael Lasser with UBS. Go ahead. Good morning.

Michael David Montani: Thank you so much for taking my question. On the industrial segment, where do you think margins can go now that you've experienced such significant growth over the last few years? And is there any reason to believe that you should give some of the growth back in the coming years? Hey, Michael. Good morning.

Michael David Montani: Delivered exceptional margin expansion for that business.

Michael David Montani: We've got good product industrial production over that period and most importantly, we had an outstanding execution of the integration of KCG, we got that a year earlier than we expected and at a higher level of synergies than we expected so that helped.

Herbert C. Nappier: Look, we got it to 10 to 20 basis points of margin expansion for industrial in 2024, coming off of 12.5% in 2023 and 200 basis points of improvement this past year. I would just say the last two years have delivered exceptional margin expansion for that business. We had good industrial production over that period.

Michael David Montani: The result in 2023, I'll be a little bit outsized versus probably what's a normal run rate for the business as we look at 2024, we will operate in a little tighter economic environment will have a little less top line in the first half than we did a year ago in the first half and we're also going to be lapping those same PTT benefits that I just mentioned a moment.

Michael David Montani: Ago.

Michael David Montani: So 2024, we see a little bit of a recalibration for industrial back to what would be more historical for GPC in terms of growth always committed to that 10 to 20 basis points of improvement but.

Herbert C. Nappier: And most importantly, we had an outstanding execution of the integration of KDG. We got that a year earlier than we expected and at a higher level of synergy than we expected. So, that helped the result in 2023.

Michael David Montani: But having said all of that we see a long runway here. The industrial business is something we love that team is just executing at a very high level will mentioned their operating discipline. They are focused on gross margin and we expect that to continue which is why we've guided to more improvement this year and we'll see that as we move into 2024 and beyond.

Herbert C. Nappier: I'd be a little bit outside versus probably what's a normal run rate for the business. As we look at 2024, we'll operate in a little tighter economic environment, we'll have a little less top line in the first half than we did a year ago in the first half, and we're also going to be lapping those same KDG benefits that I just mentioned a moment ago. So, 2024, we see a little bit of a recalibration for industrial back to what would be more historical for GPC in terms of growth, always committing to that 10 to 20 basis points of improvement. But having said all that, we see a long runway here. The industrial business is something we love. That team is just executing at a very high level.

Speaker Change: And Michael I would just I would just tag on to what.

Speaker Change: What Bert said.

Speaker Change: We've been able to accomplish this while while in the midst of the longest contraction on.

Speaker Change: The PMI numbers.

Speaker Change: I think since about <unk>. So we fully expect well we're encouraged by.

Speaker Change: The move in the right direction and the PMI.

Speaker Change: <unk> numbers, we will see industrial production I think today comes out but were expecting that manufacturing.

Speaker Change: To shift.

Speaker Change: Back to a positive.

Speaker Change: Sometime in 'twenty.

Speaker Change: 24, and that just going to benefit the top line, which will benefit the overall business.

Speaker Change: Got you.

Speaker Change: Follow up question.

Herbert C. Nappier: We'll mention their operating discipline. They're focused on gross margin, and we expect that to continue, which is why we've guided to more improvement this year. And we'll see that as we move into 2024 and beyond. Michael, I would just, I would just tag on to what Bert said.

Speaker Change: He is on North American auto.

What have you assumed from a market growth for 2024 within that segment.

Speaker Change: We can get it.

Speaker Change: Sure.

Speaker Change: How you are assuming.

Speaker Change: Assuming your market share will trend in the year ahead and have you made any assumptions around acquisition within your growth.

Paul D. Donahue: We've been able to accomplish this while in the midst of the longest contraction on the PMI numbers, I think since about 2008. So we fully expect, and are encouraged by, the move in the right direction in the PMI numbers. We'll see industrial production, I think, today comes out. But we're expecting that manufacturing to shift back to positive sometime in 2024, and that's just gonna benefit the top line, which will benefit the overall business. I've got you.

Speaker Change: This year. Thank you.

FERC: Yes, Michael its FERC. So we gave comp sales guidance for our global automotive segment of two to four I don't want to get into too much geographic difference, but I will say that the market. When you take all of our geographies together is somewhere between flat to 2% up.

FERC: <unk> already talked about inflation that will be about a point or so and we're assuming that we'll get a point or so from acquisitions as we look at the automotive segment. When we move through 2024. So hopefully that gives you a little bit of color on the breakdown of how were thinking about sales growth.

Michael David Montani: My follow-up question is on North American auto business. What have you assumed for market growth for 2024 within that segment just so we can get a sense for how you're assuming your market share will trend in the year ahead? And have you made any assumptions around acquisitions within your growth expectations? Page. Yeah, Michael, it's Bert.

Speaker Change: Got it alright, thank you very much and good luck.

FERC: Michael.

FERC: Your next question comes from Bret Jordan with Jefferies. Please go ahead.

Bret Jordan: Hey, good morning, guys.

Bret Jordan: Brian could you talk a bit more about the strategy of expanding the Napa company owned store base I mean, it sounds like you've added reasonably substantially to that and are there either sort of profile of the target acquisition by market size.

Bret Jordan: Sort of how do we think about that from a capex and margin impact going forward.

Herbert C. Nappier: So we gave comp sales guidance for the global automotive segment of two to four. I don't want to get into too many geographic differences. But we'll say that the market, when you take all of our geography together, is somewhere between flat to 2% up. We've already talked about inflation; that'll be about a point or so. And we're assuming that we'll get a point or so from acquisitions as we look at the automotive segment when we move through 2024. So hopefully, that gives you a little bit of color on the breakdown of how we're thinking about sales growth. All right, thank you very much, and good luck.

Bret Jordan: Yes.

I'll take the first part and then I'll pass it to look I think in 2023 as we mentioned in our prepared remarks, we reflected deeply on where we've got opportunities in.

Bret Jordan: In the Napa business here in the U S and part of that reflection was.

Speaker Change: The strategic impact of owning more stores relative to independent owners and that was.

Speaker Change: Accelerated as we talked about based on.

Speaker Change: Some of the feedback that we heard from owners as they work through this kind of higher cost inflation and higher interest rate environment and that led us to be very specific and strategic about market prioritization.

Speaker Change: Categorizing specific markets into different categories.

Michael David Montani: Thank you, Michael. Your next question comes from Bret Jordan with Jeffries. Please go ahead.

Speaker Change: And then thinking about our operating model through that prism and so the benefits of that obviously is it takes some variation out of our network.

Bret Jordan: Hey, good morning, guys. We're good. Could you talk a bit more about the strategy of expanding the Napa company on the store base? I mean, it sounds like you've added reasonably substantially to that. And is there any sort of profile of the target acquisition by market or size? And, and sort of how do we think about that from a capex and margin impact going forward? Yeah, I'll take the first part, and then I'll pass it to Bert.

Speaker Change: Simplifies our network when we invest in initiatives the execution of those and next initiatives become easier throughout the network and so I think theres a lot of <unk>.

Speaker Change: Qualitative and quantitative benefits that come from an evolution that evolution will take time obviously.

Speaker Change: But we think it's the right thing for us to do as.

Speaker Change: As we move forward the good news Bret is that even when we look within our independent owner network and our company owned network. We've got great operations out there for us to replicate and so while we will evolve over time the value creation and operational opportunity in front of us is to get on both.

Will Stengel: Look, I think in 2023, as we mentioned in our prepared remarks, we reflected deeply on where we've got opportunities in the NAPA business here in the US. And part of that reflection was the strategic impact of owning more stores relative to independent owners, and that was accelerated as we talked about based on some of the feedback that we heard from owners as they worked through this kind of higher cost inflation and higher interest rate environment. And that led us to be very specific and strategic about market prioritization, categorizing specific markets into different categories and then thinking about our operating model through that prism, and so the benefits of that, obviously It simplifies our network when we invest in initiatives. The execution of those initiatives has become easier throughout the network, and so I think there are a lot of qualitative and quantitative benefits that come from this evolution. The evolution will take time, obviously, but we think it's the right thing for us to do as we move forward.

Speaker Change: Sides of the house the underperforming.

Speaker Change: Stores up to best in class and so thats, a very actionable body of work as it relates to capital allocation I'll ask.

Bret Jordan: Ask Bert to make a few comments.

Bret Jordan: Brian Good morning look on the capital allocation side. This will show up as M&A. These are.

Small acquisitions, and so that won't really be a capex number but more of an M&A number.

Brian: And look they're very attractive to us we have got a great balance sheet.

Speaker Change: A lot of financial strength and flexibility to be able to lean in here and we will have the ability to do that.

Speaker Change: These are attractive in terms of being accretive almost immediately as we recapture some of the margin we were sharing previously with an independent owner.

Speaker Change: We get to reduce some of the structural costs and the way we serve our customers well capture some SG&A synergies.

Will Stengel: The good news, Bret, is that even when we look within our independent owner network and our company-owned network, we've got great operations out there for us to replicate, and so while we will evolve over time, the value creation and operational opportunity in front of us is to get on both sides of the house the underperforming stores up to best in class, and so that's a very actionable body of work. As it relates to capital allocation, I'll ask Bret to make a few comments. Hey Bret,

Speaker Change: Particularly on the it side and with some of the team members and the overhead and back office ranks.

Speaker Change: We will drive some incremental sales as will mentioned, we really have an ability to partner our commercial activities. We're also with the independent owner they may not be fully Napa source will be able to increase that as well.

Speaker Change: These are asset deals.

Speaker Change: Always and generally in high performing markets, so we'd like to lean here and we think Theres a lot to love.

Herbert C. Nappier: Good morning. Look on the capital allocation side. This will show up as M&A, small acquisitions, and so that won't really be a CapEx number but more of an M&A number. And look, they're very attractive to us.

Speaker Change: Great and then you commented that the December in particular, you saw independent volumes.

Speaker Change: Volumes down our purchasing down.

Speaker Change: Is there anything that was that a weather impact was that sort of compounding effect of high rates on their cost of carrying inventory sort of what do you attribute that air pocket in the independents.

Herbert C. Nappier: We have got a great balance sheet, a lot of financial strength and flexibility to be able to lean in, and we'll have the ability to do that. These are attractive in terms of being accretive almost immediately as we capture some of the margin we were sharing previously with an independent owner. We get to reduce some of the structural costs and the way we serve our customers.

Speaker Change: I think you nailed it I think it was a cumulative effect of both of those cumulative effects of rates through the year getting the year ends.

Speaker Change: Closing the books, if you will softer weather and then just getting ready for maybe a more robust 2024. So as we said in our comments we're encouraged by.

Herbert C. Nappier: We'll capture some SG&A synergies, particularly on the IT side and with some of the team members in the overhead and back office ranks, and we'll drive some incremental sales, as Will mentioned. We really have an ability to partner our commercial activities where we also have an independent owner. They may not be fully NAPA-sourced.

Speaker Change: The first three or four weeks of the year here and hoping for a more normal 2024 as we move forward.

Speaker Change: Alright, thank you.

Speaker Change: Thanks Brook.

Speaker Change: Your next question comes from Greg Melick with Evercore. Please go ahead.

Herbert C. Nappier: We'll be able to increase that as well. These are asset deals, and they're always and generally in high-performance markets. So we like to lean in here, and we think there's a lot to love.

Greg Melich: Hi, Thanks, I'd like to.

Greg Melich: Circle back on the restructuring activity. So so far could you help us understand the the $100 million to $200 million of cash noncash whats the portion there and in terms of the synergies what segments do they show up we're always see that in the P&L over time.

Bret Jordan: And then you commented that December in particular you saw independent volumes down or purchasing down. Is there anything, was that a weather impact? Was that a sort of compounding effect of high rates on their cost-of-carrying inventory? Sort of, what do you attribute that air pocket in the independent volume to?

Speaker Change: So I'll start maybe with the second part of that so in terms of where will they show up in the P&L.

Paul D. Donahue: Bret, I think you nailed it. I think it was a cumulative effect of both of those, cumulative effect of rates through the year, getting to year end, you know, closing the books, if you will, softer weather, and then just getting ready for maybe a more robust 2024. So, as we said in our comments, we're encouraged by the first three or four weeks of the year here and hoping for a more normal 2024 as we move forward. Great, thank you. Thanks, bro. Your next question comes from Greg Melich with Evercore. Please go ahead.

Speaker Change: This is a global restructuring so we'll have all the business units participating in terms of breakdown of where you'll see things.

Speaker Change: The biggest part of our SG&A cost is people cost and so youll see the vast majority of the benefit about two third of the two thirds of the benefit we expect to get will come out of the people side it'll be about half of the cost. It starts already so we've announced last week a voluntary retirement program here in the U S.

Speaker Change: That is the preponderance of the activity and Youll see that show up in our U.

Operator: I think some, I'd like to circle back on the restructuring activity. So, Bert, could you help us understand the 100 to 200 million? Is it cash, or non-cash?

Speaker Change: U S business results as we move forward the offer period for that closes here in the first quarter. So we won't expect into Q1 benefit some of that up but youll see those build as we get through.

Herbert C. Nappier: What's the portion there? And in terms of the synergies, in what segments do they show up? Where will we see that in the P&L over time? I'll start maybe with the second part of that. So in terms of where they will show up in the P&L, this is a global restructuring, so we'll have all the business units participating. In terms of the breakdown of where you'll see things, you know, the biggest part of our SG&A cost is people cost. And so you'll see the vast majority of the benefit, about two-thirds of the benefit we expect to get, will come out of the people side. It'll be about half of the cost.

Speaker Change: Second half or last three quarters of the year in terms of cash noncash I would say it's predominantly cash.

Speaker Change: We do have DC and facility consolidation some of that will be a noncash charge, but I would say at this point, particularly.

Speaker Change: Particularly with the voluntary retirement offer in the U S. It's predominantly cash.

And we will report at all at the non.

Nonrecurring expenses as we move forward and to call that out for you guys.

Speaker Change: Got it and I appreciate that and I guess back on the business could you just level set us now.

Herbert C. Nappier: It starts already, so we announced last week a voluntary retirement program here in the U.S. That is the preponderance of the activity, and you'll see that show up in our U.S. business results as we move forward. The offer period for that closes here in the first quarter, so we won't expect any Q1 benefits from that, but you'll see those build as we get through the first quarter, second half, or last three quarters of the year. In terms of cash and non-cash, I would say it's predominantly cash. We do have DC and facility consolidation; some of that will be a non-cash charge. But I would say at this point, particularly with the voluntary retirement offer in the US, it's predominantly cash. And we will record it all at a non-recurring expense as we move forward and call that out for you guys. I got it.

Speaker Change: We're up to the 500 stores that are company owned could you level set us on what isn't.

Speaker Change: Company owned while how many independents are what's company owned and then also the mix of business Thats Napa Auto care.

Speaker Change: Major accounts, and then up and down the street.

Speaker Change: Yes, so today, Greg for the Napa business here in the U S. It's about <unk>.

Speaker Change: 25%, 30% company owned.

Speaker Change: And the balance independent owned.

Speaker Change: We have over 2000 independent owners roughly.

Speaker Change: So that gives you some perspective in total we've got 6000 stores in the U S.

Speaker Change: So that gives you all the math there as you look around the world we have the independent owner model in Europe, Obviously, it's about one third two third company owned to independent one and about that same ratio in our Canadian business and then we're 100% company owned and our.

Herbert C. Nappier: I appreciate that. And I guess back on the business, could you just level set us now? And over up to the 1500 stores that are company owned, could you level set us on what isn't company owned, well, how many independents there are, what's company owned, and also the mix of business, that's Napa Auto Care, major accounts, and then up and down the street. Yeah, so today, Greg, for the Napa business here in the US, it's about 25%, 30% company owned, and The Balance is Independently We have over 2,000 independent owners, roughly. So that gives you some perspective. In total, we've got 6,000 stores in the U.S., so that gives you all the math there.

Speaker Change: Asia Pac business.

Speaker Change: Hey, Greg at this Paul I'll jump in on the second part of your question regarding the.

Greg: Now the business breakdown.

Greg: Major accounts roughly in.

Greg: The high teens, 20%.

Greg: <unk> Napa auto care, which we're.

Paul D. Donahue: Incredibly excited about the progress we're seeing in Napa Auto care, we've we've had a big surge in memberships over the last 90 days, that's about 20% of our overall commercial business.

Will Stengel: As you look around the world, we have the independent owner model. In Europe, obviously, it's about one-third, two-thirds company-owned to independent-owned, and about that same ratio in our Canadian business. And then we're 100% company-owned in our Asia-Pac business. Hey, Greg, it's Paul.

Paul D. Donahue: You mentioned small kind of mom and Pops up and down the street, we've got a program as well in place where we are.

Paul D. Donahue: Focusing now.

Paul D. Donahue: John getting back some of that business, that's about 20% roughly and then you've got government and fleet, which for US Greg That's a significant part of our commercial business and one that.

Paul D. Donahue: I'll jump in on the second part of your question regarding another business breakdown, major accounts, roughly in the high teens, 20% range, Napa Auto Care, which we're incredibly excited about the progress we're seeing at Napa Auto Care. We've had a big surge in memberships over the last 90 days. That's about 20% of our overall commercial business. You mentioned small, you know, kind of mom and pop shops up and down the street.

Paul D. Donahue: We have long been incredibly strong and thats about the balance of your 40% of your commercial business. So I hope I hope that helps.

Speaker Change: It does thanks and good luck guys.

Speaker Change: Correct.

Speaker Change: Your next question comes from Seth Basham with Wedbush. Please go ahead.

Speaker Change: Yes.

Seth M. Basham: Alright, Thanks, a lot and good morning. My question is on sell in versus sell through in the province in 2024, So as we sit here today, our euro this painting a guidance to be pretty equivalent.

Seth M. Basham: I'm not sure I fully follow that run.

Paul D. Donahue: We've got a program as well in place where we're focusing on getting back some of that business. That's about 20% roughly. And then you've got government and fleet, which, you know, for us, Greg, that's a significant part of our commercial business and one that we have long been incredibly strong in. And that's about the balance of your 40% of your commercial business. So I hope that helps. It does.

Speaker Change: Run that biased one more time.

Speaker Change: Sell in versus sell out.

Speaker Change: For your independents, how they finished destocking from your perspective, so that we should key.

Speaker Change: More pressure on comps from that debt.

Speaker Change: Yes, I think we're expecting 2024 to be a more normal year coming off of 2023, which was clearly challenged in different than our expectations.

Speaker Change: Got it and then my follow up is Paul you talked about the up and down the street customer at perhaps that's one area, where you've seen some of the most pressure on your business.

Greg Melich: Thanks, and good luck, guys. Thanks, Greg. Your next question comes from Seth Basham with Wedbush. Please go ahead. Thanks a lot and good morning.

Paul D. Donahue: Either competitive dynamics, there that you didn't anticipate and what are your plans for getting back that business specifically.

Seth M. Basham: My question is on selling versus selling through to independence in 2024. So as we sit here today, are you anticipating your guidance those to be pretty equivalent? Seth, I'm not sure I fully followed that. Say, run that by us one more time.

Paul D. Donahue: So I think we'll mention.

Paul D. Donahue: Seth in his prepared remarks.

Paul D. Donahue: He made some comments about our sales force restructuring.

Paul D. Donahue: <unk> and also taking an opportunity to learn a bit from our industrial team with an inside sales group.

Will Stengel: Sell-in versus sell-out for your independents. Have they finished de-stocking from your perspective so that we should see no more pressure on comps from that effect? Yes, I think we're expecting 2024 to be a more normal year coming off of 2023, which was clearly challenging, different than our expectations. And then my follow-up question is, Paul, you talked about the up and down the street customer. Perhaps that's one area where you've seen some of the most pressure on your business. Are there competitive dynamics there that you didn't anticipate? And what are your plans for getting back that business, specifically?

And that is that is focused on that.

Paul D. Donahue: That type customer there is nothing new in the competitive set look.

Paul D. Donahue: We've got great competitors, and they're tough and they ultimately.

Paul D. Donahue: As the bar on us and make us better and Thats exactly how were responding. So we think there is an opportunity to go back and capture some of that business and we've got programs incentives and people in place to make that happen. So again.

Paul D. Donahue: Encouraged six weeks into the year early days, but we are encouraged with what we're seeing.

Speaker Change: Got it thank you thank.

Speaker Change: Thank you.

Speaker Change: Your next question comes from Daniel <unk> with Stephens. Please go ahead.

Paul D. Donahue: So I think we'll mention Seth, in his prepared remarks, he made some comments about our sales force restructuring more of a and also taking an opportunity to learn a bit from our industrial team with an inside sales group that is focused on that type of customer. There is nothing new, and the competitors said, look, we said we've got great competitors and they're tough, and they ultimately raise the bar on us and make us better. And that's exactly how we're responding. So we think there is an opportunity to go back and capture some of that business. And we've got programs, incentives, and people in place to make that happen. So again, encouraged six weeks into the year; early days, but we are encouraged by what we're seeing. I got it.

Daniel: Yeah, Hey, good morning, everybody. Thanks for taking my questions.

Daniel: Good morning, Daniel.

Daniel: Paul I wanted to add on the industrial side I dig a disconnected during Q&A. So apologies. If you said this but obviously industrial growth continues to outperform I think the broader market I guess, what end markets are showing the most relative strength and is that just share gains and then when we look at the monthly cadence. This low single digit is that the right exit rate as we think about <unk>.

Daniel: <unk> and organic growth in the industrial side.

Paul D. Donahue: Hey, Danielle ill take the first part of your question I think.

Paul D. Donahue: Previously we've shared some commentary with you on the end markets that we track here internally there are about 14 of them.

Seth M. Basham: Thank you. Thank you. Your next question comes from Daniel Imbro with Stevens. Please go ahead. Yeah, hey, good morning, everybody.

Paul D. Donahue: And as I said in my prepared remarks.

Danielle: Similar to Q3, it's it's a mix.

Daniel Imbro: Thanks for taking our question, more than you know. Paul, I want to start on the industrial side. I did get disconnected during Q&A, so apologies if you said this.

Danielle: Mosaic as it relates to kind of growth versus <unk>.

Danielle: Contraction, having said that just maybe a few additional data points as we look at the fourth quarter relative to the third quarter across those 14.

Will Stengel: But obviously, industrial growth continues to outperform, I think, the broader market. I guess what end markets are showing the most relative strength? And is that just share gains?

Danielle: In the fourth quarter, we have nine of 14 in growth mode, which is an increase two versus the prior quarter.

Will Stengel: And then when we look at the monthly cadence, you know, this low single-digit number, is that the right exit rate as we think about 1Q and organic growth on the industrial side? Hey, Danny. I'll take the first part of your question. I think, you know, previously we've shared some commentary with you on the end markets that we track here internally. There are about 14 of them. And as I said in my prepared remarks, it's similar to Q3, it's a mix. Mosaic as it relates to the kind of growth versus contraction.

Danielle: And if you did comp that growth, we've got low single digits.

Danielle: In three of our mid single digits in two of them high single digits, and one of them and double digit growth in three of them. So on balance we're encouraged by the sequential improvement versus third quarter.

Danielle: And even in the five of 14 that are declining.

Danielle: We saw three of those Clive improve in the fourth quarter versus the third quarter.

Danielle: So hopefully that gives you a little bit of perspective of call. It the last six months trends on all things end markets and then Daniel Yes about Q1.

Will Stengel: Having said that, just maybe a few additional data points. As we look at the fourth quarter relative to the third quarter across those 14, in the fourth quarter, we have 9 of 14 in growth mode, which is an increase of 2 versus the prior quarter. And if you decompile that growth, we've got low single digits in three of them, mid single digits in two of them, high single digits in one of them, and double digit growth in three of them.

Daniel: No. We don't we don't give out quarterly guidance, what I would tell you Q1 will be our toughest comp.

Daniel: Of the year.

Daniel: Daniel and I think as Bert mentioned in his prepared remarks, we're looking for.

Daniel: Really.

Daniel: <unk> much stronger second half.

But I will tell you. This our industrial team is focused Steve hit it in your question I do believe we're taking share we got the best team in the industry and I have no doubt.

Will Stengel: So on balance, we're encouraged by the sequential improvement versus the third quarter. And even in the five of 14 that are declining, we saw three of those five improve in the fourth quarter versus the third quarter. So hopefully that gives you a little bit of perspective of, you know, call it the last six months' trends on all things NMARC. And then, Daniel, you asked about Q1. As you know, we don't we don't give out quarterly guides, but I would tell you that Q1 will be our toughest comp of the year. Daniel, I think, as Bert mentioned in his prepared remarks, we're looking for a really strong, much stronger second half. But I will tell you this, our industrial team is focused. You hit the nail on the head with your question.

Daniel: They will deliver for us in Q1 as well.

Steve: Great I appreciate that and then from a follow up I wanted to follow up on the restructuring you talked about in the previous question, maybe where we're going to see it in the reported numbers, but I'm curious if we dig into like what kind of jobs or are we actually reducing across the business and how do you weigh that against the risk of service level that feels like some of your auto peers are investing.

Steve: Into stores and into distribution and so curious how you guys think about the competitive dynamics and how you view that risk in 'twenty four as you try to maybe gain back some of the share. Thanks.

Speaker Change: Hey, Daniel Thanks for the question look.

Daniel: I would tell you that the big construct here is to protect the field customer facing selling organization, but it's super important to how we go to market. How we can stay very competitive and so as we look at the voluntary program in the U S, which is as I said earlier the substantial majority of all the activity we are taking.

Will Stengel: I do believe we're taking share; we have the best team in the industry, and I have no doubt they'll deliver for us in Q1 as well. Great, I appreciate that. And then as a follow-up question, I wanted to follow up on the restructuring you talked about in a previous question, maybe where we're going to see it in the reported numbers. But I'm curious if we dig into, like, what kind of jobs are we actually reducing across the business? And how do you weigh that against the risk of service level that feels like some of your auto peers are investing in stores and into distribution?

Daniel: That voluntary program is very thoughtful.

Daniel: <unk> targeted to those that are closer to retirement, which is why it's a <unk>.

Daniel: Ontario retirement offer.

Daniel: And mostly focused on management and back office spans and layers and so I would just say that we feel really good about the thoughtfulness that was put in by our teams of how to make sure that we strike the right balance here between continuing to serve our customers and deliver every single day, but at the same time do the right thing for the business for the long term and streamlined.

Herbert C. Nappier: And so, curious how you guys think about the competitive dynamics and how you view that risk in 24 as you try to, you know, maybe gain back some of the share? Thanks. Hey, Daniel, thanks for the question. Look, I would tell you that, you know, the big construct here is to protect the field, the customer-facing selling organization. That's super important to how we go to market, and how we can stay very competitive. And so, as we look at the voluntary program in the US, which is, as I said earlier, the substantial majority of all the activity we're taking, that voluntary program is very thoughtful. It's targeted at those that are closer to retirement, which is why it's a voluntary retirement offer, and mostly focused on management and back office spans and layers.

Daniel: Some of our costs.

Speaker Change: Thanks, Bart good luck.

Bart: Thanks, Daniel Thank you.

Speaker Change: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.

Yeah.

Speaker Change: Okay.

Speaker Change: Okay.

Herbert C. Nappier: And so, I would just say that we feel really good about the thoughtfulness that was put in by our teams of how to make sure that we strike the right balance here between continuing to serve our customers and deliver every single day, but at the same time, do the right thing for the business for the long term and streamline some of our costs. Thanks, Bert. Good luck, y'all. Thanks, Daniel. Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines, https://www.youtube.com.uk https://www.youtube.com.uk https://www.youtube.com.uk https://www.youtube.com.uk https://www.youtube.com.uk https://www.youtube.com.uk https://www.youtube.com.uk https://www.youtube.com.uk https://www.youtube.com.uk https://www.youtube.com.uk

Speaker Change: Okay.

Speaker Change: Thanks.

Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].