Q1 2024 Genuine Parts Co Earnings Call

Unknown Speaker: Thank you, and good morning, everyone. Welcome to the Genuine Parts Company's first quarter, 2024. Good day, ladies and gentlemen, welcome to the Genuine Parts Company's first quarter 2024 earnings.

And good morning, everyone welcome to genuine parts company first quarter 2024.

Speaker Change: Good day, ladies and gentlemen, and welcome to the genuine parts first quarter 2024 earnings conference call. At this time all lines are in listen only mode. Following the presentation, we will conduct a question and answer session.

Unknown Speaker: Good day, ladies and gentlemen. Welcome to the Genuine Parts First Quarter 2024 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, April 18, 2024. At this time, I would like to turn the conference over to Tim Walsh, Senior Director, Investor Relations. Please go ahead, sir.

Speaker Change: If at any time during the call you require immediate assistance. Please press star zero for the operator. This call is being recorded on Wednesday April 18 2024.

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

Tim Walsh: Thank you and good morning everyone. Welcome to Genuine Parts Company's first quarter 2024 earnings call. Joining us on the call today are Paul Donahue, Chairman and Chief Executive Officer; Will Stengel, President and Chief Operating Officer; and Burt Napier, Executive Vice President and Chief Financial Officer.

Tim Walsh: Thank you and good morning, everyone welcome to genuine parts company first quarter 2024 earnings call.

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

Single: Single, President and Chief operating Officer.

Single: And Burton Executive Vice President and Chief Financial Officer.

Tim Walsh: 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 also 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, April 18, 2024. If we're unable to get to your questions, please contact our investor relations department.

Tim Walsh: In addition to this morning's press release supplemental slide presentation can be found on the investors page of the genuine parts company web site.

Tim Walsh: Today's call is being webcast and a replay will also be made available on the company's website after the call.

Tim Walsh: Following our prepared remarks, the call will be opened for questions. The responses to which will reflect management's views as of today April 18th 2024.

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

Tim Walsh: Please be advised that 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 may also 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 describing 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 this call. Now, I will turn the call over to Paul.

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.

Tim Walsh: Reconciliation of these measures is provided in the earnings press release.

Tim Walsh: Today's call May also involve forward looking statements regarding the company and its businesses as defined in the private Securities Litigation Reform Act of 1095.

Tim Walsh: The companys 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.

Tim Walsh: The company assumes no obligation to update any forward looking statements made during this call now.

Tim Walsh: Now, let me turn the call over to Paul.

Paul D. Donahue: Thank you, Tim, and good morning. Welcome to our first quarter 2024 earnings conference call. We are pleased to report our first quarter results for Genuine Parts Company, and we are encouraged by the start to 2024. Particularly when compared to our strong performance in the first quarter of 2023, our results in the quarter reflect and highlight the value of our business mix, paired with our geographic diversity. Our team delivered results that exceeded our expectations.

Paul D. Donahue: Thank you Tim and good morning, welcome to our first quarter 2024 earnings Conference call.

Paul D. Donahue: We are pleased to report our first quarter results for genuine parts company and we are encouraged by the start to 2024.

Paul D. Donahue: Particularly when compared to our strong performance in the first quarter of 2023.

Paul D. Donahue: Our results in the quarter reflect and highlight the value of our business mix.

Paul D. Donahue: Paired with our geographic diversity.

Paul D. Donahue: Our teams delivered results that exceeded our expectations.

Paul D. Donahue: While they stayed laser focused on our strategic initiatives to enhance our businesses and drive profitable growth, this strong start to the year, along with the continued execution of our initiatives, gives us confidence to raise our outlook for adjusted earnings per share in 2024. Bert will provide additional details in his remarks.

Paul D. Donahue: They stayed laser focused on our strategic initiatives to enhance our businesses and drive profitable growth.

Paul D. Donahue: This strong start to the year, along with the continued execution of our initiatives.

Paul D. Donahue: Gives us confidence to raise our outlook for adjusted earnings per share in 2024.

Paul D. Donahue: Barrett will provide additional details in his remarks.

Paul D. Donahue: A few highlights of the first quarter include total GPC sales of 5.8 billion increased slightly versus the same period in the prior year, which produced nearly double-digit growth. Total company segment margin increased 30 basis points as continued operating discipline in motion and solid momentum and the actions implemented at our US auto business improved our profitability. And lastly, we delivered mid single-digit adjusted earnings per share growth from the same period last year.

Paul D. Donahue: A few highlights of the first quarter included.

Paul D. Donahue: Total GPC sales of five 8 billion increased slightly versus the same period in the prior year, which produced nearly double digit growth.

Paul D. Donahue: Total company segment margin increased 30 basis points as continued operating discipline that motion.

Paul D. Donahue: And solid momentum in the actions implemented at our U S auto business.

Paul D. Donahue: Proved our profitability.

Paul D. Donahue: And lastly, we delivered mid single digit adjusted earnings per share growth from the same period last year.

Paul D. Donahue: As we look to the broader macroeconomic environment, the start to 2024 continues to present a mix of challenges and opportunities; higher interest rates and persistent cost inflation are pressuring businesses and consumers alike. Fortunately, our businesses enjoy supportive industry fundamentals, providing a positive backdrop for growth. However, within our global automotive business, we continue to see an increase in the number of miles driven, the fleet continues to age, and new and used car pricing remains elevated, particularly for financing costs.

Paul D. Donahue: As we look to the broader macroeconomic environment. The start to 2024 continues to present, a mix of challenges and opportunities.

Paul D. Donahue: Higher interest rates and persistent cost inflation.

Paul D. Donahue: Our pressure in businesses and consumers alike.

Paul D. Donahue: Fortunately our businesses enjoy supportive industry fundamentals, providing a positive backdrop for growth.

Paul D. Donahue: Within our global automotive business, we continue to see an increase in the number of miles driven.

Paul D. Donahue: The fleet continues to age.

Paul D. Donahue: New and used car pricing remains elevated particularly with financing costs.

Paul D. Donahue: On the industrial side of our business, we have recently begun to see positive movement with key industry metrics. This further supports our positive outlook on motion business for the balance of the year. Our motion business benefits from a highly diverse portfolio of customers and end markets. Motion serves nearly all aspects of the industrial and manufacturing economy and is not overindexed to any one market or customer. In addition, we continue to expand into new areas of opportunities, such as semiconductor technology.

Paul D. Donahue: On the industrial side of our business, we have recently begun to see positive movement with key industry metrics.

Paul D. Donahue: This further supports our positive outlook for motion business for the balance of the year.

Paul D. Donahue: Our motion business benefits from a highly diverse portfolio of customers and end markets.

Paul D. Donahue: Motion serves nearly all aspects of the industrial and manufacturing economy, and it's not over indexed to any one end market or customer.

Paul D. Donahue: In addition, we continue to expand into new areas of opportunities.

Paul D. Donahue: Such as semiconductor technology.

Paul D. Donahue: Longer-term trends around reassurance present a significant opportunity for motion, and the team is well positioned to capitalize on those as they materialize. As we expected, sales were challenged in the first quarter as the team posted a slight year-over-year sales decline.

Paul D. Donahue: Longer term trends around reassuring present, a significant opportunity for motion.

Paul D. Donahue: And the team is well positioned to capitalize on those as they materialize.

Paul D. Donahue: As we expected sales were challenged in the first quarter as the team posted a slight year over year sales decline.

Paul D. Donahue: Despite the more challenging top line environment, the motion team delivered exceptional profit conversion. We are pleased with the progress with our supply chain initiatives and enhanced data analytics, which are driving inventory productivity, lower costs, and higher customer service levels. We expect the motion business to accelerate through the year, particularly in the second half of 2024. During the quarter, we were pleased to announce the promotion of James Howe to President of Motion North America.

Paul D. Donahue: Despite the more challenging topline environment the motion team delivered exceptional profit conversion.

Paul D. Donahue: We are pleased with the progress with our supply chain initiatives and enhanced data analytics, which are driving inventory productivity lower costs and higher customer service levels.

Paul D. Donahue: We expect motion business to accelerate through the year.

Paul D. Donahue: Particularly in the second half of 2024.

Paul D. Donahue: During the quarter, we were pleased to announce the promotion of James how to president of motion in North America.

Paul D. Donahue: James has nearly three decades of service to the company and most recently served as EVP and chief commercial and technology officer. His leadership in overseeing e-commerce, strategic pricing, sales excellence, and corporate accounts has been instrumental in driving the company's recent success. James is supported by a deep bench of talent, both in the field and amongst its leadership team. Last week, we had the chance to visit our Mohsen team at their Birmingham headquarters and tour their new Learning Development Center.

Paul D. Donahue: James has nearly three decades of service to the company and.

Paul D. Donahue: And most recently served as EVP and Chief commercial and Technology Officer.

Paul D. Donahue: His leadership in overseeing e-commerce strategic pricing sales excellence and corporate accounts.

Paul D. Donahue: Been instrumental in driving the company's recent success.

Paul D. Donahue: James is supported by a deep bench of talent, both in the field and amongst its leadership team.

Paul D. Donahue: Last week, we had the chance to visit our motion team at their Birmingham headquarters and two are there new learning development Center.

Paul D. Donahue: This is a great example of investing for future success, as we provide intensive training for both our customers as well as our technical field team. Now, moving on to the automotive sector, our teams in Europe and Australasia continue to perform well and grow market share. In addition, our team in the US demonstrated solid sequential improvement from the fourth quarter in both sales and profit after a challenging 2023. The improvement was driven by the continued progress on the decisive actions we took at US Auto over the past several quarters.

Paul D. Donahue: This is a great example of investing for future success.

Paul D. Donahue: We provide intensive training for both our customers as well as our technical field teams.

Paul D. Donahue: So now moving on to automotive our teams in Europe, and Australasia continues to perform well and grow market share.

Paul D. Donahue: In addition, our team in the U S demonstrated solid sequential improvement from the fourth quarter in both sales and profit after a challenging 2023.

Paul D. Donahue: The improvement was driven by the continued progress on the decisive actions we took at U S auto over the past several quarters.

Paul D. Donahue: We're really proud of our leadership team for their focus and execution and are confident they'll continue to drive sequential improvements as we progress through 2024. Looking ahead, we believe the GPC team is well positioned with the right strategic plans, supportive fundamentals, and a strong balance sheet to pursue organic and inorganic growth opportunities, while also returning capital to shareholders through the dividend and share repurchase. Our results in the first quarter reflect the progress our teams around the globe are making on our key investment pillars. And we believe the execution of our strategic initiatives, along with our team's relentless focus on our customers, will drive value for our shareholders both now and for years to come. So in closing, we thank each of our over 60,000 GPC teammates around the globe for taking great care of our customers. And with that, I'll turn the call over to Will. Will it?

Paul D. Donahue: We're really proud of our leadership team for their focus and execution and are confident they will continue to drive sequential improvement.

Paul D. Donahue: As we progressed through 2024.

Paul D. Donahue: Looking ahead, we believe the GPC team is well positioned with the right strategic plan.

Paul D. Donahue: Supportive fundamentals.

Paul D. Donahue: And our strong balance sheet to pursue organic and inorganic growth opportunities. While also returning capital to shareholders through the dividend and share repurchases.

Paul D. Donahue: Our results in the first quarter reflects the progress our teams around the globe are making on our key investment pillars and believe the execution of our strategic initiatives.

Paul D. Donahue: Along with our team's relentless focus on our customers will drive value for our shareholders, both now and for years to come.

Speaker Change: So in closing we thank each of our over 60000 GPC teammates around the globe.

Speaker Change: For taking great care of our customers.

Speaker Change: And with that I'll turn the call over to Wil well.

William P. Stengel: Thank you, Paul. Good morning, everyone.

Wil: Thank you Paul good morning, everyone.

William P. Stengel: I want to start by adding my thanks to the global GPC teams for their ongoing dedication to taking care of our customers. We're pleased with the solid start to the year and our first quarter performance. We truly appreciate your hard work and commitment.

Wil: Want to start by adding my thanks to the global GPC teams for their ongoing dedication to taking care of our customers.

Wil: We're pleased with the solid start to the year and our first quarter performance.

Wil: We truly appreciate your hard work and commitment.

William P. Stengel: As always, we're aligned with global strategic initiatives centered on five key priorities, including talent and culture, sales effectiveness, technology, supply chain, and emerging technology, complemented by disciplined and value-creating acquisitions. Our global focus around these priorities drives efficiency and pace as we work to continuously improve the customer experience and deliver profitable growth. Now, turning to our first quarter results. During the first quarter, total sales for global industrial were 2.2 billion, a decrease of approximately 2%, with comparable sales down 2.6% versus the same period last year.

Wil: As always we're aligned with global strategic initiatives centered on five key priorities, including talent and culture sales effectiveness technology supply chain and emerging technology complemented by a disciplined and value creating acquisitions.

Wil: Our global focus around these priorities drives efficiency and pace as we work to continuously improve the customer experience and deliver profitable growth.

Wil: Now turning to our first quarter results.

Wil: During the first quarter total sales for global industrial were $2 2 billion, a decrease of approximately 2% with comparable sales down two 6% versus the same period last year.

William P. Stengel: These results were in line with our expectations, as we were up against our most difficult comparative period of the year, with first quarter 2023 sales up 12%. From a cadence perspective, average daily sales were flat to slightly down in all three months. With January seeing the most pressure, partially driven by a negative impact from severe winter weather, it caused some customer facilities to close.

Wil: These results were in line with our expectations as we were up against our most difficult comparative period of the year with first quarter 2023 sales up 12%.

Wil: From a cadence perspective average daily sales were flat to slightly down in all three months with January has seen the most pressure partially driven by a negative impact from severe winter weather that caused some customer facilities to close.

William P. Stengel: Motion continues to see mixed results across our various served industrial and market sectors, with strength during the quarter in iron and steel, as well as chemicals and automotive. Equipment and machinery, and lumber and building products were softer in the quarter relative to the average end market. We continue to receive mixed and cautious feedback from our diversified customer base; however, our overall outlook for the year remains positive. Current renewal rates for corporate accounts, which represent approximately 45% of the business, remain at historically high levels, which further validates the current strength of the motion value proposition.

Wil: Motion continues to see mixed results across our various served industrial end markets with strength during the quarter in iron and steel as well as chemicals and automotive.

Wil: Equipment, and machinery and lumber and building products were softer in the quarter relative to the average end market.

Wil: We continue to receive mixed too cautious feedback from our diversified customer base. However, our overall outlook for the year remains positive.

Wil: Current renewal rates for corporate accounts, which represents approximately 45% of the business.

Wil: <unk> historically high levels, which further validates the current strength of the motion value proposition.

William P. Stengel: We're seeing outsized growth in our offering to physically locate motion teammates at customers' facilities to enable an even closer partnership. Motion's highly technical sales expertise and solution-based selling drives deep relationships with our customers and helps to keep our customers' operations moving every day. Over the past 16 months, manufacturing PMI readings have experienced the longest period of contraction, as represented by a PMI index below 50, since the financial crisis in 2009.

Wil: We're seeing outsized growth in our offering to physically locate motion teammates at customers' facilities.

Wil: Enable an even closer partnership.

Wil: Motion is highly technical sales expertise and solution based selling drive deep relationships with our customers and helps to keep our customers' operations moving every day.

Wil: Over the past 16 months manufacturing PMI readings have experienced the longest period of contraction.

Wil: As represented by a PMI index below 50 since the financial crisis in 2009.

William P. Stengel: Despite this, our motion business has outperformed, driven by its customer and end market diversification, business mix, and strategic initiatives. Furthermore, in March 2024, the manufacturing PMI was 50.3, representing an expansionary data point for the first time in 16 months. We obviously appreciate that one month doesn't make a trend, but we remain cautiously optimistic about the rest of the year and the medium-term outlook. Turning to industrial segment profit, which represents now 50% of GPC's total profit. In the first quarter, segment profit was 271 million, up 3% and 12.3% of sales, representing a 70 basis point increase from the same period last year.

Wil: Despite this our motion business has outperformed driven by its customer and end market diversification business mix and strategic initiatives.

Wil: Encouragingly in March 2020 for the manufacturing PMI was 53, representing an expansionary data point for the first time in 16 months.

We obviously appreciate that one month doesn't make a trend, but we remain cautiously optimistic about the rest of the year and the medium term outlook.

Wil: Turning to industrial segment profit, which represents now 50% of Gpt's total profit.

Wil: In the first quarter segment profit was $271 million up 3% and 12, 3% of sales representing a 70 basis point increase from the same period last year.

William P. Stengel: The team continues to execute category management and supply chain productivity initiatives and operate with discipline to deliver operating leverage and margin expansion despite lower sales. Turning to the global automotive segment, sales in the first quarter increased approximately 2% with comparable store sales essentially flat. Our international automotive businesses in Europe and Asia-Pac posted positive sales growth in local currency, while U.S. automotive was flat, and sales in Canada were down low single digits.

Wil: The team continues to execute category management and supply chain productivity initiatives and operate with discipline to deliver operating leverage and margin expansion despite lower sales.

Wil: Turning to the global automotive segment.

Wil: Sales in the first quarter increased approximately 2% with comparable store sales essentially flat.

Wil: Our international automotive businesses in Europe, and Asia Pac posted positive sales growth in local currency.

Wil: While U S automotive was flat and sales in Canada were down low single digits.

William P. Stengel: As expected, global automotive sales inflation moderated to less than 1%, and we expect this to be the case throughout the remainder of the year. Global automotive segment profit in the first quarter was $273 million, up 3% and 7.6% of sales, representing a 10 basis point increase from the same period last year and a meaningful sequential improvement from the fourth quarter. Our first quarter results for the global automotive segment reflect strong operating discipline and a positive initial impact that we're seeing from actions taken at our U.S. automotive business. We are encouraged by the sequential improvement in this segment. Now, let's turn to our automotive business performance by geography.

Wil: As expected global automotive sales inflation moderated to less than 1% and we expect this to be the case throughout the remainder of the year.

Wil: Global automotive segment profit in the first quarter was $273 million up 3% and seven 6% of sales representing a 10 basis point increase from the same period last year and a meaningful sequential improvement from the fourth quarter.

Wil: Our first quarter results for global automotive segment reflects strong operating discipline and a positive initial impact that we're seeing from actions taken at our U S automotive business.

Wil: We are encouraged by the sequential improvement in this segment.

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

William P. Stengel: Starting in Europe, our automotive team delivered another solid quarter with total sales growth of 8% in local currency and comparable sales growth of 1%. The team continues to deliver growth with key accounts, winning higher share of wallet with existing accounts, and the further rollout of NAPA private label products across the region. The ongoing bolt-on acquisition activity continues to have a positive impact and create value. In addition, during the quarter, our new national DFC in France opened. This approximately 500,000 square foot distribution center represents a significant technology and automation upgrade within our local supply chain.

Wil: Starting in Europe, our automotive team delivered another solid quarter with total sales growth of 8% in local currency and comparable sales growth of 1%.

Wil: Our team continues to deliver growth with key accounts, winning higher share of wallet with existing accounts and the further rollout of Napa private label products across the region.

Wil: The ongoing bolt on acquisition activity continues to have a positive impact and create value.

Wil: In addition, during the quarter, our new National DC in France opened.

Wil: This approximately 500000 square foot distribution center represents a significant technology and automation upgrade within our local supply chain.

William P. Stengel: This project is a great example of how we're investing to optimize our network to drive productivity and increase service levels to our customers. A similar project is well underway in the UK, and we're leveraging best practices and technologies to deliver the project efficiently.

Wil: This project is a great example of how we're investing to optimize our network to drive productivity and increased service levels to our customers.

Wil: A similar project is well underway in the U K and we're leveraging best practices and technologies to deliver the project efficiently.

William P. Stengel: In the Asia-Pac automotive business, sales in the first quarter increased 2% in local currency, with comparable sales growth of 1%. Similar to last quarter, this performance compares to strong double-digit growth in the same period last year. Sales for both commercial and retail were up in the first quarter, with retail showing relative strength. Despite a challenging macro environment, the team is executing well to simultaneously deliver growth and expand operating margins. In Canada, sales decreased approximately 1% in local currency during the first quarter, with comparable sales decreasing approximately 3%. Our Canadian team continues to focus on sales growth in excess of the market, despite pressure from a more cautious consumer and an unseasonably mild winter.

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

Wil: Similar to last quarter. This performance compares to strong double digit growth in the same period last year.

Wil: Sales for both commercial and retail were up in the first quarter with retail showing relative strength.

Wil: Despite a challenging macro environment the team is executing well to simultaneously deliver growth and expand operating margins.

Wil: In Canada sales decreased approximately 1% in local currency during the first quarter.

Wil: With comparable sales decreased approximately 3%.

Wil: Our Canadian team continues to focus on sales growth in excess of the market. Despite pressure from a more cautious consumer and an unseasonably mild winter.

William P. Stengel: During the quarter, our automotive business saw positive sales growth in line with our expectations, while our heavy vehicle business was slightly below, driven by softer than expected market demand. In the U.S., automotive sales were essentially flat during the first quarter, with comparable sales increasing approximately 1%.

Wil: During the quarter, our automotive business saw positive sales growth in line with our expectations.

Wil: While our heavy vehicle business was slightly below driven by softer than expected market demand.

Wil: In the U S. Automotive sales were essentially flat during the first quarter with comparable sales increasing approximately 1%.

William P. Stengel: This represents a notable improvement from the fourth quarter in both reported and comparable sales. The first quarter performance was in line with our expectations. As we moved through the quarter, we saw sequential improvement in average daily sales growth each month. During the quarter, we also saw positive buying behavior from our independent owners, a trend that we expect to continue over the course of the year. From a customer segment perspective, sales to commercial customers in the quarter were slightly down, while sales to do-it-yourself customers were approximately flat. For commercial customers, auto care continued to outperform while major accounts underperformed, driven by a cautious end consumer.

Wil: This represents a notable improvement from the fourth quarter in both reported and comparable sales.

Wil: The first quarter performance was in line with our expectations as.

Wil: As we move through the quarter, we saw sequential improvement in average daily sales growth each month.

Wil: During the quarter, we also saw positive buying behaviors from our independent owners.

Wil: A trend that we expect to continue over the course of the year.

Wil: From a customer segment perspective sales to commercial customers in the quarter were slightly down while sales to do it yourself customers were approximately flat.

Wil: For commercial auto care continued to outperform while major accounts underperformed driven by cautious and consumer.

William P. Stengel: We believe the in-flight actions across the business are delivering a positive impact, and we expect the benefits to build throughout the year. Let me provide another quick update on some of the focus areas. First, we experienced further improvement in our inventory fill rates during the first quarter, and as expected, our actions significantly improved our in-stock levels in both our stores and distribution centers. Second, our in-store service levels, as measured by customer service and on-time delivery metrics, improved following the improvements we experienced in the fourth quarter.

We believe the in flight actions across the business are delivering a positive impact and we expect the benefits to build throughout the year.

Speaker Change: Let me provide another quick update on some of the focus areas.

Speaker Change: First we experienced further improvement in our inventory fill rates during the first quarter.

Speaker Change: And as expected our actions significantly improved our in stock levels in both our stores and distribution centers.

Speaker Change: Second our in store service levels as measured by customer service and on time delivery metrics improved following the improvements we experienced in the fourth quarter.

William P. Stengel: Related, to start the second quarter of 2024, we realigned certain field teams to help focus the field on key activities, deliver excellent customer service, and generate sales growth. Our elevated focus on the stores and field operations is having a measurable positive impact on our teammates. The team is energized, and we've seen a notable reduction in employee turnover year over year. Finally, our supply chain teams are making significant operational improvements across our network. We've enhanced processes and procedures in our operations that are driving better safety, accuracy, service levels, and operational efficiency while simultaneously reducing errors and overtime.

Speaker Change: Related to start the second quarter of 2024, we realigned certain field teams to help focus the field on key activities deliver excellent customer service and generate sales growth.

Speaker Change: Our elevated focus on the stores and the field operations is having a measurable positive impact on our teammates.

The team is energized and we've seen a notable reduction in employee turnover year over year.

Speaker Change: Finally, our supply chain teams are making significant operational improvements across our network we have.

Speaker Change: Enhanced processes and procedures and our operations that are driving better safety accuracy service levels and operational efficiency, while simultaneously reducing errors and overtime.

William P. Stengel: During the quarter, we also made progress on medium-term strategic initiatives. For example, we continue to build upon our strategic pricing and sourcing initiatives that are delivering results. Additionally, during the quarter, our newly expanded DC and Indianapolis went live.

Speaker Change: During the quarter. We also made progress on medium term strategic initiatives for.

Speaker Change: For example, we continue to build upon our strategic pricing and sourcing initiatives that are delivering results.

Speaker Change: During the quarter, our newly expanded DC in Indianapolis went live <unk>.

William P. Stengel: This 600,000-square-foot facility will more efficiently service hundreds of independent and company-owned stores in the U.S., utilizing new automation and enhanced technology. We also leveraged our partnership with Google to accelerate enhancements to our search and catalog that remove friction and drive a better customer experience. The feedback on these technological improvements from our customers and teams has been exceptional.

Speaker Change: The 600000 square foot facility will more efficiently service hundreds of independent <unk> company owned stores in the U S utilizing new automation and enhanced technology.

Speaker Change: We also leveraged our partnership with Google to accelerate enhancements to our search and catalog that remove friction and drive a better customer experience.

Speaker Change: The feedback on these technology improvements from our customers and teams has been exceptional and we look forward to building on the momentum in the months and quarters ahead.

William P. Stengel: And finally, as announced on our fourth-quarter call, we're advancing our initiative to evolve our operating model at U.S. Automotive as we're being more intentional about owning more stores in selected priority markets. In parallel, we continue to partner with our existing network of independent owners who play an important role to help us serve our local market. Our current in-flight initiatives are designed to improve growth and operations at both company-owned and independently-owned locations.

Speaker Change: And finally as announced on our fourth quarter call, we're advancing our initiatives to evolve our operating model at U S. Automotive as we're being more intentional about owning more stores in selected priority markets.

Speaker Change: In parallel we continue to partner with our existing network of independent owners, who play an important role to help us serve our local markets.

Speaker Change: Our current inflight initiatives are designed to improve growth and operations at both company owned and independently owned locations.

William P. Stengel: During the first quarter, we made strategic acquisitions of 45 Napa stores from our independent owners, an increase from the 33 Napa stores acquired in the fourth quarter and the 16 acquired in the first quarter of last year.

Speaker Change: During the first quarter, we made strategic acquisitions of 45, Napa stores from our independent owners and increase from the 33 Napa stores acquired in the fourth quarter and the 16 acquired in the first quarter of last year.

William P. Stengel: We're leveraging our disciplined integration playbook as we integrate these stores into our own store base. We expect these trends to continue over the course of the year. Our global teams are executing on our 2024 priorities and are focused on key strategic initiatives across our business. Last quarter, we announced a coordinated global initiative across each of our operations to further simplify and streamline our operations, improve productivity, increase our speed of service, and reduce our cost to serve.

Speaker Change: We're leveraging our disciplined integration playbook as we integrate these stores into our own store base.

Speaker Change: We expect these trends to continue over the course of the year.

Speaker Change: Our global teams are executing on our 2024 priorities and are focused on key strategic initiatives across our business.

Speaker Change: Last quarter, we announced a coordinated global initiatives across each of our operations to further simplify and streamline our operations improve productivity increase our speed of service and reduce our cost to serve.

William P. Stengel: Our efforts are on track, and Bert will go over the restructuring details in a moment. In closing, GPC started 2024 well. We delivered first quarter results that exceeded our expectations. We're cautiously optimistic about a North American industrial recovery, and we're seeing encouraging traction at U.S. Automotive.

Speaker Change: Our efforts are on track and Bert will go over the restructuring details in a moment.

GPC: In closing GPC started 2024 well.

GPC: We delivered first quarter results that exceeded our expectations, we're cautiously optimistic about our North America industrial recovery.

GPC: We're seeing encouraging traction at U S automotive.

William P. Stengel: We're making progress on our long-term strategic initiatives, and we're confident in the revised outlook that we've laid out for 2024. These results can only be achieved with the hard work and dedication of each of our global teammates who take care of our customers, live our GPC values, and focus on delivering performance. We remain 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, and with that, I'll turn the call over to Bert.

GPC: We're making progress on our long term strategic initiatives and.

Bert: And we're confident in the revised outlook that we laid out for 2024.

These results are only achieved with the hard work and dedication of each of our global teammates who take care of our customers live our GPC values and focus to deliver performance.

Bert: We remain 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.

Bert: Thank you again to the entire GPC team and with that I'll turn the call over to Bert.

Herbert C. Nappier: Thank you, Will, and thanks to everyone for joining us today. Our momentum from 2023 carried into the first quarter of 2024, as our teams delivered profit growth against the backdrop of low sales growth. We are pleased with the start to the year, which was ahead of our expectations, particularly as we anticipated this quarter to be the most challenging, given the strong results we delivered in the first quarter of 2023. My comments this morning focus primarily on adjusted results, which exclude non-recurring costs related to our previously announced global restructuring program.

Bert: Thank you will and thanks to everyone for joining us today.

Bert: Our momentum from 2023 carried into the first quarter of 2024 as our teams delivered profit growth against the backdrop of low sales growth.

We are pleased with the start to the year, which was ahead of our expectations, particularly as we anticipated this quarter to be the most challenging given the strong results. We delivered in the first quarter of 2023.

Bert: My comments. This morning focus primarily on adjusted results, which exclude nonrecurring costs related to our previously announced global restructuring program.

Herbert C. Nappier: During the first quarter, we incurred approximately $83 million of costs on a pre-tax basis, in line with our expectations, or $62 million after tax related to our restructuring efforts. As we look at the first quarter, total sales were up slightly versus the prior year, reflecting a 1.9% contribution from acquisitions, offset by a 0.9% decrease in comparable sales, and a 0.7% unfavorable impact of foreign currency and others. During the quarter, the contribution from inflation was less than 1% in both our automotive and industrial segments, in line with our expectations.

During the first quarter, we incurred approximately $83 million of costs on a pre tax basis in line with our expectations or $62 million after tax related to our restructuring efforts.

Bert: As we look at the first quarter total sales were up slightly versus the prior year, reflecting a one 9% contribution from acquisitions offset by a 9% decrease in comparable sales and a 7% unfavorable impact of foreign currency and other.

Bert: During the quarter the contribution from inflation was less than 1% in both our automotive and industrial segments in line with our expectations.

Herbert C. Nappier: Our first quarter sales performance was highlighted by continued growth in Europe and Australasia, offset by slight declines in industrial and Canada. Sales in our U.S. automotive business were flat in the first quarter, and our performance reflects a more than 500 basis point improvement sequentially from the fourth quarter of 2023. During the first quarter, our gross margin expanded by 100 basis points to 35.9%, primarily driven by the ongoing execution of our strategic sourcing and pricing initiatives.

Bert: Our first quarter sales performance was highlighted by the continued growth in Europe, and Australasia offset by slight declines in industrial and Canada.

Bert: Sales in our U S automotive business were flat in the first quarter and our performance reflects a more than 500 basis point improvement sequentially from the fourth quarter of 2023.

Bert: During the first quarter, our gross margin expanded by 100 basis points to 35, 9%, primarily driven by the ongoing execution of our strategic sourcing and pricing initiatives.

Herbert C. Nappier: Our investments in technology and category management capabilities are continuing to be beneficial in driving positive results in our gross margin performance. Adjusting for restructuring expenses, total adjusted operating and non-operating expenses were 28.8% of sales in the first quarter, an increase of approximately 90 basis points from total expenses in the prior year. Our higher operating expenses in the first quarter reflect a negative impact of approximately 20 basis points from planned investments in IT as we continue to invest in modernized technology to run our businesses. Additionally, approximately 25 basis points of negative impact from rent expense, as inflationary pressures are contributing to higher costs as we renew leases.

Bert: Our investments in technology and category management capabilities are continuing to be beneficial in driving positive results and our gross margin performance.

Bert: Adjusting for restructuring expenses total adjusted operating and non operating expenses were 28, 8% of sales in the first quarter, an increase of approximately 90 basis points from total expenses in the prior year.

Bert: Our higher operating expenses in the first quarter reflect a negative impact of approximately 20 basis points from planned investments in it.

Bert: As we continue to invest and modernize technology to run our businesses.

Bert: Approximately 25 basis points of negative impact from rent expense as inflationary pressures are contributing to higher costs as we renew leases.

Herbert C. Nappier: Approximately 70 basis points of negative impact from salaries and wages as we left the final quarter of our previously announced 2023 investments and team members and absorbed continued mandatory increases in minimum wages in certain international markets. These headwinds were partially offset by discipline and other discretionary categories, and looking ahead, our operating expenses will benefit from the actions taken under our global restructuring program. For the quarter, segment profit margin was 9.4%, a 30 basis point improvement year over year. Industrial delivered 70 basis points of margin improvement while sales declined slightly.

Bert: And approximately 70 basis points of negative impact from salaries and wages as we lap the final quarter of our previously announced 2023 investments in team members and.

Bert: And absorb continued mandatory increases in minimum wages in certain international markets.

Bert: These headwinds were partially offset by discipline and other discretionary categories and looking ahead, our operating expenses will benefit from the actions taken under our global restructuring program.

Bert: For the quarter segment profit margin was nine 4%, a 30 basis point improvement year over year <unk>.

Bert: Industrial delivered 70 basis points of margin improvement while sales declined slightly.

Herbert C. Nappier: Our margin expansion in our industrial business is the result of ongoing efforts to improve the efficiency of our operations combined with strong expense discipline. As Will outlined earlier, the actions we've implemented to improve our U.S. automotive business are driving benefits, and we are encouraged by the margin expansion at Global Automotive and expect further improvement throughout the year. Our first quarter adjusted net income, which excludes restructuring expenses of $62 million after tax, or $0.44 per diluted share, was $311 million, or $2.22 per diluted share.

Bert: Our margin expansion in our industrial business as a result of ongoing efforts to improve the efficiency of our operations combined with strong expense discipline.

Bert: As will outlined earlier the actions we've implemented to improve our U S. Automotive business are driving benefits and we are encouraged with the margin expansion that global automotive and expect further improvement throughout the year.

Bert: Our first quarter, adjusted net income, which excludes restructuring expenses of $62 million after tax or <unk> 44 per diluted share was $311 million or $2 22 per diluted share.

Herbert C. Nappier: This compares to net income of $304 million, or $2.14 per diluted share, in 2023, an increase of 3.7%. Turning to our cash flows, for the quarter, we generated $318 million in cash from operations and $203 million in free cash flow. We closed the first quarter with $2.5 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.

Bert: This compares to net income of $304 million or $2 14 per diluted share in 2023, an increase of three 7%.

Bert: Turning to our cash flows for the quarter, we generated $318 million in cash from operations and $203 million in free cash flow.

Bert: We closed the first quarter with $2 5 billion in available liquidity and our debt to adjusted EBITDA ratio was one eight times, which compares to our targeted range of two to two five times.

Herbert C. Nappier: During the first quarter, we invested $116 million back into the business in the form of capital expenditures and another $135 million in the form of strategic acquisitions, including bolt-on acquisitions in the U.S. to support our strategy to own more Napa stores. In addition, we also made a small acquisition for our motion business in North America, which expands our value-added service capabilities like fluid power and repair solutions. In the first quarter, we returned approximately $170 million to our shareholders in the form of dividends and share repurchases.

Bert: During the first quarter, we invested $116 million back into the business in the form of capital expenditures and another $135 million in the form of strategic acquisitions, including bolt on acquisitions in the U S to support our strategy to own more Napa stores.

Bert: In addition, we also made a small acquisition for our motion business in North America.

Bert: Which expands our value added service capabilities like fluid power and repair solutions.

Bert: In the first quarter, we returned approximately $170 million to our shareholders in the form of dividends and share repurchases. This includes $133 million in cash dividends paid to our shareholders and approximately $37 million and cash used to repurchase 261000 shares.

Herbert C. Nappier: This includes $133 million in cash dividends paid to our shareholders and approximately $37 million in cash used to repurchase 261,000 shares. Our global restructuring efforts kicked off in the first quarter as we implemented actions to position us to achieve our long-term targets.

Bert: Our global restructuring efforts kicked off in the first quarter as we implement actions to position us to achieve our long term targets.

Herbert C. Nappier: We continue to expect costs of approximately $100 to $200 million, most of which will be incurred in 2024, and we will report these as non-recurring expenses. Our restructuring efforts are expected to deliver a benefit of $20 to $40 million in 2024 and $45 to $90 million on an annualized basis. We incurred $83 million of costs in the first quarter related to our restructuring program, which can be categorized into two key areas. Cost associated with our Voluntary Retirement Program and Facility Optimization. Approximately 65% of the first quarter restructuring expenses were the costs associated with our voluntary retirement offer.

Bert: We continue to expect costs of approximately $100 million to $200 million, most of which will be incurred in 2024, and we will report these as nonrecurring expenses are.

Bert: Our restructuring efforts are expected to deliver a benefit of $20 million to $40 million in 2024, and 45% to $90 million on an annualized basis.

Bert: We incurred $83 million of costs in the first quarter related to our restructuring program, which can be categorized into two key areas cost associated with our voluntary retirement program and facility optimization.

Bert: Approximately 65% over the first quarter restructuring expenses, where the costs associated with our voluntary retirement offer.

Herbert C. Nappier: The remaining costs are related to facility closures and startup costs associated with new facilities that replaced those that were shut down. Our first quarter restructuring activities, including the voluntary retirement offer, were completed in line with our expectations, and we expect to start realizing benefits in the second quarter. Turning to our guidance, while the macroeconomic backdrop remains dynamic, industry fundamentals remain supportive, and we are confident in our team's ability to drive results.

Bert: The remaining costs are related to facility closures and startup costs associated with new facilities that replaced those that were shut down.

Bert: Our first quarter restructuring activities, including the voluntary retirement offer were completed in line with our expectations and we expect to start realizing benefits in the second quarter.

Speaker Change: Turning to our guidance.

Speaker Change: While the macroeconomic backdrop remains dynamic industry fundamentals remain supportive and we are confident in our team's ability to drive results.

Herbert C. Nappier: With that in mind, we are raising our adjusted diluted earnings per share guidance for 2024 and reaffirming our sales guidance. For the year, we expect total sales growth to be in the range of 3 to 5% with a more moderated first half and stronger second half for both automotive and industrial. Also, included in our outlook is the assumption that the benefit from inflation remains at more normalized levels.

Speaker Change: With that in mind, we are raising our adjusted diluted earnings per share guidance for 2024, and reaffirming our sales guidance.

Speaker Change: For the year, we expect total sales growth to be in the range of 3% to 5% with a more moderated first half and stronger second half for both automotive and industrial.

Speaker Change: 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.

Herbert C. Nappier: Contributing less than 1% for both businesses, For gross margin, we now expect full-year gross margin expansion of 30 to 50 basis points, primarily driven by our continued focus on our strategic sourcing and pricing initiatives. This compares to our previous guidance of 20 to 40 basis points of gross margin expansion. Our outlook assumes that SG&A will de-leverage between 20 and 30 basis points, primarily from further investment in technology. We now expect that diluted earnings per share, which includes the expenses related to our restructuring efforts, will be in the range of $9.05 to $9.20 compared to our previous outlook of $8.95 to $9.15. We now expect adjusted diluted earnings per share to be in the range of $9.80 to $9.95.

Speaker Change: For gross margin, we now expect full year gross margin expansion of 30 to 50 basis points, primarily driven by our continued focus on our strategic sourcing and pricing initiatives.

Speaker Change: This compares to our previous guidance of 20% to 40 basis points of gross margin expansion.

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

Speaker Change: We now expect the diluted earnings per share, which includes the expenses related to our restructuring efforts will be in the range of $9 five to.

Speaker Change: To $9 20.

Speaker Change: Compared to our previous outlook of $8 95 to $9 15.

Speaker Change: We now expect adjusted diluted earnings per share to be in the range of $9 80 to $9 95, an increase of 5% to six 6% from 2023.

Herbert C. Nappier: An increase of 5% to 6.6% from 2023. This compares to our previous outlook of $9.70 to $9.90. By business segment, we are guiding to the following 2 to 4% total sales growth for the automotive segment, with comparable sales growth in the 1 to 3% range. For global automotive segment margin, we continue to 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.

This compares to our previous outlook of $9 70 to $9 90.

Speaker Change: By business segment, we are guiding for the following 2% to 4% total sales growth for the automotive segment with comparable sales growth in the 1% to 3% range.

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

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

Herbert C. Nappier: For 2024, we anticipate global industrial segment margin to expand by approximately 10 to 20 basis points year over year. And finally, we are targeting corporate expense to be approximately 1.5% to 2% of sales. Now, we discuss a few other items of interest.

Speaker Change: For 2024, we anticipate global industrial segment margin to expand by approximately 10 to 20 basis points year over year.

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

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

Herbert C. Nappier: We are confident in the strength of our cash flows in 2024 and continue to 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. In 2024, we will continue our long history of balanced capital allocation with four priorities. Capital Expenditures, M&A, Our Dividend, and Share Repurchases. For CapEx, we continue to expect approximately $500 million, or 2% of revenue.

Speaker Change: We are confident in the strength of our cash flows in 2024 and continue to 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.

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.

Speaker Change: For Capex, we continue to expect approximately $500 million or 2% of revenue.

Speaker Change: As we look at 2020 for growth capital, we are deploying which is approximately 55% of our forecast we will drive the modernization of our supply chain, including new Dcs partnered with technology that enhances our customer experience.

Herbert C. Nappier: 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, including new DCs partnered with technology that enhances our customer experience. As we look at M&A, our global pipeline remains robust, and we will remain disciplined in evaluating opportunities that create value, including continuing to pursue our strategy around stores at our U.S. automotive business. With our strong balance sheet and cash flows, we are well-positioned to take advantage of opportunities that fit with our long-term growth and strategies, regardless of the economic backdrop.

Speaker Change: As we look at M&A, our global pipeline remains robust and we will remain disciplined in evaluating opportunities that create value, including continuing to pursue our strategy around stores at our U S automotive business.

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: Overall, we are pleased and encouraged with our first quarter results as our teams continue to remain agile and deliver in this dynamic environment.

Our outlook for 2024 reflects the ongoing confidence in our teams and the actions we are taking to better align our business. We look forward to updating you on our progress in July.

Herbert C. Nappier: Overall, we are pleased and encouraged with our first quarter results as our teams continue to remain agile and deliver in this dynamic environment. Our outlook for 2024 reflects the ongoing confidence in our teams and the actions we are taking to better align our business. We look forward to updating you on our progress in July. Thank you, and we will now turn it back to the operator for your question. Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press the star.

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'll hear Paul that Johan has been read should you wish to decline from the polling process. Please press star followed by the <unk>.

Speaker Change: Please limit yourself to one question and one follow up.

Speaker Change: If you are using a speakerphone please pick up the handset before pressing <unk> one moment. Please for your first question.

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

Scott: Ali with Truth Securities. Please go ahead.

Unknown Speaker: 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. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two. Please limit yourself to one question and one follow-up. If you are using a speakerphone, please lift the handset before pressing any key. One moment, please for your first question.

Scot Ciccarelli: Good morning, guys Scot Ciccarelli couple.

Scot Ciccarelli: A couple of clarifications, if I may on the U S. Auto did you guys say commercial comps were down a bit and DIY was flat and if I heard that right.

Scot Ciccarelli: You said U S auto comps were up slightly can you just help reconcile that for us.

Speaker Change: Yes, Scott, it's well good morning, Thanks for the question.

Speaker Change: So the way to think about it when we give you our reported numbers both reported total and comp that's the total U S automotive sales environment. So our sales into our owners and then our company owned and independent owned sales out and so those numbers reflect that concept when we start digging into the <unk>.

Scot Ciccarelli: Your first question comes from Scott Ciccarelli with Truist Securities. Please go ahead. Good morning, guys. Scott Ciccarelli.

Speaker Change: Deeper level of detail around customer segment that is just sales out both independent and <unk>.

Scot Ciccarelli: A couple of clarifications.

Speaker Change: Company owned so that would be the distinction.

William P. Stengel: Yeah, Scott, it's Will. Good morning. Thanks for the question. So the way to think about it is when we give you our reported numbers, both reported total and comp, that's the total US automotive sales environment. So our sales go to our owners, and then our company owned and independent owned sales go out. And so those numbers reflect that concept. When we start digging into the deeper level of detail around customer segment, that is just sales out both independent and company owned. So that would be the distinction between the two data points. Okay, understood. And that does or doesn't include that?

Speaker Change: Between the two data points.

Speaker Change: Okay understood and that does or doesn't include that 130 basis point drag you cited in the deck.

Speaker Change: Yes, so Scott on the.

Speaker Change: Another question from Herbert and I will take that one the reported number includes the 130 basis point adjustment.

Speaker Change: But the comp number does not and maybe ill give you a little color on the rebate itself.

Speaker Change: We hate that Theres anything dimension about the whole thing, but it's a new program and it's really good for the business.

Speaker Change: As a reminder, historically these programs were managed by our suppliers and that was handled all outside of our P&L. It was directly between supplier and customer.

Scot Ciccarelli: Yeah, so Scott, that's a question for Bert. And I'll take that one.

Speaker Change: The new arrangement those are managed by the team and that's a good thing for the business.

Herbert C. Nappier: The reported number includes the 130 basis point adjustment, but the comp number does not. And maybe it'll give you a little color on the rebate itself. And look, we hate that there's anything to mention about the whole thing, but it's a new program, and it's really good for the business. As a reminder, historically, these programs were managed by our suppliers, and that was handled all outside of our P&L, and it was directly between supplier and customer.

Speaker Change: The new arrangement, though.

Speaker Change: It has to be accounted for us as a reduction of revenue with a corresponding reduction of cost of goods sold.

Speaker Change: And no impact to growth gross profit.

Speaker Change: The better structure for us when we think about our customers and I think you'd see tangible results in some of the things that will talked about an improvement in the business, particularly with fill rates with our new suppliers for the first quarter as I think we noted in our earnings presentation. Our total reported sales growth was negatively impacted by 130 basis points at <unk>.

Speaker Change: Automotive.

Herbert C. Nappier: The new arrangement, those are managed by the team, and that's a good thing for the business. The new arrangement, though, has to be accounted for by us. It's a reduction in revenue with a corresponding reduction in the cost of goods sold and no impact on gross profit. That's a better structure for us when we think about our customers. And I think it is seeing tangible results in some of the things that we'll talk about and improvements in the business, particularly with fill rates with our new supplier.

Speaker Change: When we think about comp sales is excluded.

Speaker Change: And our approach to comp sales excludes revenue adjustments and this new incentive is a revenue adjustment as the accounting for it and therefore, we reflected it as such and made it consistent with like items from prior years.

Speaker Change: I think the final point I'd make is the new program more than in the prior year and thus we think this is more a more comparable way to present it in our view and really if you were going to make any adjustment it would be to the reported number thats flat that would actually probably have been positive without the drag of the 130 basis points.

Herbert C. Nappier: For the first quarter, as I think we noted in our earnings presentation, our total reported sales growth was negatively impacted by 130 basis points at UF Automotive. When we think about comp sales, it's excluded. And our approach to comp sales excludes revenue adjustments. And this new incentive is a revenue adjustment. That's the accounting for it. And therefore, we've reflected it as such and made it consistent with like items from prior years.

Speaker Change: Okay. Thanks, I'll save my follow up questions for you. Thank you. Thanks.

Speaker Change: Thanks Scott.

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

Chris: Thanks, Good morning, guys. So first a question on motion.

Chris: The down two six organic.

Chris: Youre expecting that to accelerate pretty sharply over there over the balance of the year, obviously ISN ticks up can you talk about how much is your exit of the expectation on the acceleration is just the macro indicators getting better versus <unk>.

Herbert C. Nappier: I think the final point I'd make is that the new program wasn't in the prior year, and thus, we think this is a more comparable way to present it, in our view. And really, if you were going to make any adjustment, it would be to the reported number that's flat. That would actually probably have been positive without the drag of the 130, basically.

Chris: <unk> senior business just versus just looking at the comparisons and then within that I know you said back half much better and motion would you expect Q2, turning to positive or flat.

Christopher Michael Horvers: Your next question comes from Chris Horvers with JP Morgan. Please go ahead.

Christopher Michael Horvers: Thanks, good morning, guys. So first, a question on motion.

Chris: Chris ill start.

Christopher Michael Horvers: You know, the down to six organic, you're expecting that to accelerate pretty sharply over there, over the balance of the year. Obviously, ISM ticks up. Can you talk about how much of your expectation for the acceleration is just the macro indicators getting better versus, you know, something senior business just versus just, you know, looking at the comparisons. And then within that, I know you said back half much better in motion; would you expect, you know, the Q to turn positive or flat?

Chris: Kind of commercially the motion team is doing excellent work and so I think as we think about the recovery of the sales growth.

It's going to come from market, we feel like we're outperforming the market with discrete initiatives and so.

Chris: As you alluded to as that recovery happens through the balance of the year that would be a driver of improvement. The other thing I would just tell you in the first quarter.

Chris: We did call out the commentary around weather that impacted the business.

William P. Stengel: Chris, I'll start just kind of commercially. The motion team is doing excellent work.

Chris: We estimate around 80 basis points of impact to the topline associated with customers that had facilities closed in Q1, we.

William P. Stengel: And so I think as we think about the recovery of sales growth, it's gonna come from the market. We feel like we're outperforming the market with discrete initiatives. And so, as you alluded to, as that recovery happens through the balance of the year, that would be a driver of improvement. The other thing I would just tell you, in the first quarter, we did call out the commentary around whether that impacted the business.

Chris: We don't want to make too big a deal of that the other thing I would call out is the Easter holiday. We had the last date business day of the quarter on good Friday.

Chris: And so we saw some customer order sluggishness associated with the holiday weekend, you put those two together the Easter holiday is probably another 80 basis points. So you've got about 160 basis points of negative impact to the top line and then you marry that together with the macro acceleration through the year and we feel good about the revised guide that we gave everybody.

William P. Stengel: We estimate around 80 basis points of impact to the top line associated with customers that had facilities closed in Q1. But we don't wanna make too big a deal of that. The other thing I would call out is the Easter holiday. We had the last day, business day of the quarter on Good Friday. And so we saw some customer order sluggishness associated with the holiday weekend. You put those two together, and the Easter holiday is probably another 80 basis points. So you got about 160 basis points of negative impact on the top line. And then you marry that together with the macro acceleration through the year.

Speaker Change: And Bert I don't know if you got any additional color, yes look a multistate, Chris when we think about the guidance for the year. We've raised the outlook to 980 to 90 95.

Bert: We really raised and tightened around a solid start to the year. The progress we've seen at U S automotive.

Bert: A little bit better than expectation first quarter results and our restructuring activities being in line with our expectations. So we're making great progress, but we've got more work to do as you noted our guide assumes that U S automotive in motion and accelerate through the year sequentially improve.

William P. Stengel: And we feel good about the revised guide that we gave everybody. And Bert, I don't know if you have any additional color. Yeah, look.

Bert: First half still going to be a bit moderated for all the reasons, we'll just to outline in the second half we think.

Gets better just on the general expectation of an improvement in industrial production and easing interest rates I don't want you guys to think we're being overly precise about the correlation of interest rates in industrial activity and the outlook is not terribly specific it's more like many companies just a general view around our forecast that easing.

Herbert C. Nappier: Yeah, look, I'll just say, Chris, when we think about the guidance for the year, we raised the outlook to 980 to 995. We really raised and tightened around a solid start to the year, the progress we've seen at U. S. Automotive. A little bit better than expected.

Herbert C. Nappier: First quarter results and our restructuring activities are in line with their expectations. So we're making great progress, but we've got more work to do. As you noted, our guide assumes that U. S. automotive and motion accelerate through the year sequentially improve in the first half, although still going to be a bit moderated for all the reasons. We'll just outline in the second half, we think. I don't want you guys to think we're being overly precise about the correlation of interest rates and industrial activity in the outlook. It's not terribly specific.

Bert: <unk> will be more supportive.

Bert: More robust activity for on the industrial side, and we're seeing a little sign of that with.

Bert: March data and no cuts right now so we're bullish on the second half.

Bert: And believe that the environment will get better as we move through the year.

Speaker Change: Understood and then.

Speaker Change: Two quick two quick ones on the margin side. So first on the vendor incentive program.

Speaker Change: How does that rolls Sylvia just change does it benefits grow as.

Christopher Michael Horvers: It's more like many companies just a general view around our forecast that isn't even great. We'll be more supportive of more robust activity on the industrial side, and we're seeing a little sign of that with March data and no cuts right now. So, we're bullish on the second half and believe that the environment will get better as we move through the year.

Speaker Change: The volumes grow so what would that be an accelerating tailwind to gross margin over the air and on.

Speaker Change: On the SG&A side.

Speaker Change: Talked about the restructuring, it's going to be $100 million to $200 million of costs, and you're basically saying, it's only annualized savings slightly less than half of that so why wouldn't it be something I guess.

Christopher Michael Horvers: Understandable. And then two quicks on two quick ones on the margin side. So first on the vendor incentive program. How does that work?

Speaker Change: More in line with our cost to restructure.

Christopher Michael Horvers: So if it just changes, do the benefits grow, as you know, the volumes grow? So what would that be an accelerating tail when the gross margin over the year? And on the SG&A side, you know, you talked about the restructuring, which is going to be 100 to $200 million in costs. And you're basically saying, you know, it's only annualizing savings, slightly less than half of that. So why wouldn't it be something more in line with the cost to restructure?

Speaker Change: The first is half of that rate. Thank you.

Speaker Change: Yeah look on the on the vendor rebate program, we see that as pretty constant it's not something that's going to accelerate through the course of the year. So I think that one is pretty straightforward.

Speaker Change: Looking at the restructuring program when.

Speaker Change: When we think about that.

Speaker Change: It's a nice opportunity for us when you take it net net it's got a two year payback.

Speaker Change: We had some variability in some of our assumptions as we started the year with a voluntary retirement program here in the U S.

Speaker Change: The good news is we're well underway on the restructuring activities just to frame. It again. The overall program is going to cost us about 50% of the cost being on the people side, another 30% or so on facility actions will get about 70% of the benefit we've outlined from people and about 15% from facilities and then the rest is some other categories that probably not worth.

Herbert C. Nappier: Yeah, look at the vendor rebate program. We see that as pretty constant. It's not something that's going to accelerate through the course of the year. So I think that 1 is pretty straightforward.

Herbert C. Nappier: Look at the restructuring program. When we think about that, you know, it's a nice opportunity for us when you take it net net, it's got a 2 year payback. We had some variability and some of our assumptions as we started the year with a voluntary retirement program here in the US. But the good news is we're well underway on the restructuring activities. Just to frame it again, the overall program is going to cost us about 50% of the cost being on the people side.

Speaker Change: Going into too much detail in the first quarter about 65% of the costs, we incur to the $83 million came from people with the remaining being on facility optimization around the globe.

Speaker Change: As we look at the first quarter voluntary retirement program is complete most of the retirees left on March 31.

Speaker Change: We wish them all the best in their new chapter in their lives.

Speaker Change: Largely came in line with our expectations and we will see those benefits start to accrue in Q2 as we move through the rest of the year in terms of sizing Chris.

Herbert C. Nappier: Another 30% or so on facility actions. We'll get about 70% of the benefit we've outlined from people and about 15% from facilities. And then the rest is some other categories that probably aren't worth going into too much detail.

Speaker Change: We gave ourselves a range, we're not done yet we have a lot of work left to do.

Speaker Change: Through the rest of the year. So we've given you a range of 100 to 200 million to give us some variability and where that may land.

Herbert C. Nappier: And in the 1st quarter, about 65% of the cost we incurred for the 83M came from people, with the remaining being on facility optimization around the globe. As we look at the first quarter, you know, the Voluntary Retirement Program is complete. Most of the retirees left on March 31st, and we wish them all the best in their new chapter in their lives. The results largely came in line with our expectations, and we'll see those benefits start to accrue in Q2 as we move through the rest of the year. In terms of sizing, Chris, you know, we gave ourselves a range.

Speaker Change: A big piece of that so far has been the voluntary retirement program, which as I said is finished on the benefit side.

Speaker Change: We're estimating where we're going to be based on the take rate on the <unk> and then some of the additional activities that are yet to come as we move through the rest of the year. Some of those are tied to very specific go live dates with actions around facilities and Dcs in those things and as you know we have an estimate of those things that can be pulled forward and that can move back so until we get a little bit more.

Speaker Change: Given we're just into the first quarter of the year. The fact that we're off to a good start is encouraging to us, but we'd like to give ourselves a little bit of room to work within the range until we get a little bit deeper in the year. So we will give you. We'll keep you guys updated on that.

Herbert C. Nappier: We're not done yet. We have a lot of work left to do through the rest of the year. So we've given you a range of 100 to 200 million to give us some variability of where that may land. The big piece of that so far has been the Voluntary Retirement Program, which, as I said, is finished. On the benefits side, you know, we're estimating where we're going to be based on the take rate on the VRO and then some of the additional activities that are yet to come as we move through the rest of the year. Some of those are tied to very specific go-live dates with actions around facilities and DCs and those things.

Speaker Change: And we'll tighten it up when we can.

Speaker Change: Got it thanks very much thanks.

Speaker Change: Thanks, Chris.

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

Hi, My first question was on inflation I think I heard that it was still.

Gregory Scott Melich: Trending slightly positive and you think it's sort of flat going forward was that true for both industrial and auto.

Gregory Scott Melich: Yes, Greg it's mark so the inflation impact for the quarter was was less than 1% for all GPC both segments were pretty much in line with each other.

Christopher Michael Horvers: And as you know, we have an estimate of those things that can be pulled forward, and they can move back. So, until we get a little bit more color, given we're just into the first quarter of the year, the fact that we're off to a good start is encouraging to us. But we'd like to give ourselves a little bit of room to work within the range until we get a little bit deeper into the year. So we'll keep you guys updated on that.

Mark: Very very slightly positive so when I say less than 1%. It was it was pretty de Minimis and our outlook for the rest of the year is towards the stay at that less than 1% level.

Speaker Change: Got it and then I wanted to go a little deeper I think in the prepared comments.

Speaker Change: Well you mentioned.

Speaker Change: Auto care.

Christopher Michael Horvers: Got it. Thanks very much.

Speaker Change: Outperformed and the major accounts continue to underperform.

Gregory Scott Melich: Your next question comes from Greg Melich with Evercore ISI. Please go ahead.

Speaker Change: Can you sort of give us some more detail around that and how you see that playing out some of the initiatives and how that could change.

Gregory Scott Melich: Hi, my first question was on inflation. I think I heard that it's still trending slightly positive, and you think it's sort of flat going forward? Was that true for both industrial and auto?

Speaker Change: Some of those performances in coming quarters.

Speaker Change: Greg Happy too so auto care, obviously is a super important part of our commercial business and we've been incredibly intentional about making sure we're servicing that customer segment.

Herbert C. Nappier: Yeah, Greg, it's Bert. So the inflation impact for the quarter was less than 1% for all GPC. Both segments were pretty much in line with each other. Very, very slightly positive. So when I say less than 1%, it was pretty de minimis, and our outlook for the rest of the year is for it to stay at that less than 1% level.

Gregory Scott Melich: With a lot of excellence.

Gregory Scott Melich: So making sure that we've got the right sales coverage the.

Gregory Scott Melich: The right economics to motivate those folks to grow and buy from us and so we're seeing very nice traction.

Gregory Scott Melich: In that part of our business and we're encouraged by the trajectory of that.

Gregory Scott Melich: Major accounts as we've talked about before is a pretty diverse book of business for us, it's about 15% to 20% of our commercial business.

Gregory Scott Melich: Got it. And then I wanted to go a little deeper, I think in the prepared comments, you mentioned auto care outperformed, and the major accounts continue to underperform. Could you sort of give us more detail around that and how you see that playing out some of the initiatives and how that could change some of those performances in the coming quarters?

Gregory Scott Melich: And inside that there's four or five different flavors of accounts.

Gregory Scott Melich: We have very specific strategies for each one of those sub segments.

Gregory Scott Melich: Focusing and being disciplined around making sure that our value proposition is.

Gregory Scott Melich: Upheld and intact. So I think as we think about the bigger national accounts.

William P. Stengel: Yeah, Greg, happy to. So, auto care obviously is a super important part of our commercial business. And we've been incredibly intentional about making sure that we're servicing that customer segment with a lot of excellence. So making sure that we've got the right sales coverage, and the right economics to motivate those folks to grow and buy from us. And so we're seeing very nice traction in that part of our business, and we're encouraged by the trajectory of that.

Gregory Scott Melich: Our feeling some sluggishness from a cautious consumer.

Gregory Scott Melich: And so that's on top of the work that we're doing to make sure that we're.

Gregory Scott Melich: Covering the market in the major accounts and each of its segments in the right way with a lot of strategic intent.

Speaker Change: Greg I would just add we had the auto care Advisory Council in here.

Gregory Scott Melich: Very recently the teams that group is energized.

Gregory Scott Melich: We've got a growing auto care base.

William P. Stengel: Major accounts, as we've talked about before, is a pretty diverse book of business. For us, it's about 15 to 20% of our commercial business. And inside that, there are four or five different flavors of accounts. We have very specific strategies for each one of those sub segments, and we focus and are disciplined around making sure that our value proposition is upheld and intact. So I think as we think about the bigger national accounts, they are feeling some sluggishness from a cautious consumer.

The quality of our auto carriers has never been better.

Gregory Scott Melich: And that's a program now.

18000 members strong and growing and.

Gregory Scott Melich: And our goal is just continue to capture more and more of their spend which our team is doing a great job of that.

Gregory Scott Melich: Executing so that's a business that's been a hallmark of Napa for many many years.

Gregory Scott Melich: Certainly we're energized with the direction that group is going.

Speaker Change: Great if I could throw in one more I think last year you bought in over 100 jobbers.

William P. Stengel: And so that's on top of the work that we're doing to make sure that we cover the market in the major accounts and each of its segments in the right way with a lot of strategic intent.

Speaker Change: That was a real dial up I guess is that are you continuing at that pace. This year is that how does that help all of these initiatives.

Paul D. Donahue: Hey Greg, I would just add that we had the Auto Care Advisory Council in here very recently. The team, that group is energized.

Speaker Change: To buy those folks.

Gregory N. Miller: Hello, Greg Asbury.

Gregory N. Miller: We announced in Q1 or the year end call that we were pivoting some strategy there around the independent owner model look that model has been successful for many many years and will continue to be.

William P. Stengel: We've got a growing auto care base. The quality of our auto care has never been better, and that's a program now that's 18,000 members strong and growing, and our goal is just to continue to capture more and more of their spend, which our team is doing a great job of executing. So that's a business that's been a hallmark of NAPA for many, many years, and certainly we're energized with the direction that the group is going in.

Gregory N. Miller: And both models work in our business and they will stay in our business, we've refined the approach a little bit.

Gregory N. Miller: Lean into owning more stores, where we can and see that mix shifting some overtime and thats really around the opportunities we see in target priority markets and so we're going to continue to accelerate the pace. We did so in the first quarter. We had 45 stores acquired from independent owners in the first quarter, that's against 33 stores in the <unk>.

Gregory Scott Melich: If I could throw in one more, I think last year you bought in over 100 jobbers. Um, that was a real dial up, I guess. Are you continuing at that pace this year? How does that help all these initiatives to buy those folks in?

Gregory N. Miller: Fourth quarter, and then that number in the prior year would've been 16. So we're excited about this opportunity and we think it's great for the business.

Herbert C. Nappier: Well, look, Gregory, we announced in Q1 or on the year-end call that we were pivoting some strategy there around the independent owner model. Look, that model has been successful for many, many years and will continue to be. And both models work in our business, and they'll stay in our business.

Gregory N. Miller: It's going to allow Napa to really control more of the transaction the customer experience the strategic priorities and key markets and we think that's a real positive thing for the business.

Gregory N. Miller: Greg It out that also mentioned the acquisition of independent stores is.

Herbert C. Nappier: We've refined the approach a little bit, and we're going to lean into owning more stores where we can and see that mix shifting some over time. And that's really around the opportunities we see in target priority markets. And so we're going to continue to accelerate the pace. We did so in the first quarter. We had 45 stores acquired from independent owners in the first quarter. That's against 33 stores acquired in the fourth quarter.

Gregory N. Miller: Not a new development for genuine parts company, we've been doing that every year for as long as I've been here.

Gregory N. Miller: As Bert mentioned, we see that.

Accelerating.

Gregory N. Miller: In 2024, we starting Q1 and expect that to continue throughout the year, but.

Gregory N. Miller: Our us buying and selling independently owned stores is not a new phenomenon for GPC.

Herbert C. Nappier: And then that number in the prior year would have been 16. So we're excited about this opportunity, and we think it's great for the business. It's going to allow NAPA to really control more of the transaction, the customer experience, the strategic priorities, and key markets. And we think that's a really positive thing for the business.

Speaker Change: That's great guys and good luck.

Thanks, Greg.

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

Speaker Change: Good morning. This is Henry <unk> on for Michael Lasser.

Speaker Change: Wanted to ask.

Henry: I believe you said.

Henry: Been seeing more positive buying behaviors from your independent owners.

Paul D. Donahue: Hey Greg, I'd also mention the acquisition of independent stores is not a new development for Genuine Parts Company. We've been doing that every year for as long as I've been here. As Bert mentioned, we see that accelerating in 2024. We saw that in Q1 and expect that to continue throughout the year. But us buying and selling independently owned stores is not a new phenomenon for GPC.

Henry: Do you think is driving that.

Henry: Yeah.

Speaker Change: Yes, Henry Thanks for the question.

Speaker Change: Look I think.

Henry: I think one of the things that we've been very clear about is.

Henry: All of these initiatives that I detailed in my prepared remarks, those are not just relevant for.

Henry: Our business, but also our independent owners and so.

Henry: We've been very thoughtful and close in our partnership working with them to make sure that they've got the right inventory theyre running their stores in their businesses the right way.

Gregory Scott Melich: That's great, guys, and good luck. Thank you. Your next question comes from Michael Lasser with UBS. Please go ahead. Good morning.

Henry: Operationally and so when we say that we're doing initiatives around Napa is not only company owned stores, but also the independent owners.

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

William P. Stengel: Yeah, Henry, thanks for the question. Look, I think one of the things that we've been very clear about is all these initiatives that I detailed in my prepared remarks. Those are not just relevant for our business but also for our independent owners. And so we've been very thoughtful and close in our partnership, working with them to make sure that they've got the right inventory, they're running their stores and their businesses the right way, operationally. And so when we say that we're doing initiatives around Napa, it's not only company-owned stores but also independent owners. And I think I think those programs are having an effect.

Henry: I think I think those programs are having an effect.

Speaker Change: Hey, Henry I'd, just add to Will's comment I think it's also evident.

Speaker Change: The great job our ops team is doing in.

Henry: An improving availability and improving our overall supply chain for U S auto.

Speaker Change: Thank you very much comes from Bret Jordan with Jefferies. Please go ahead.

Bret David Jordan: Hey, good morning, guys, Hey, Brian.

Bret David Jordan: Could you talk about I guess regional performance for the U S business and then I guess my second question would be.

Bret David Jordan: The cadence of the quarter as far as the progression through the months.

William P. Stengel: Hey, Henry, I just want to add to

William P. Stengel: Hey, Henry, I'd just add to Will's comment. I think it's also evident the great job our operations team is doing and improving availability and improving our overall supply chain for us. Thank you very much comes from Brett Jordan with Jeffries, please.

Bret David Jordan: Yes.

Speaker Change: Yes so.

Speaker Change: I'm, assuming this is a U S. Automotive question the progression the progression through the quarter was sequentially improve starting January February March. So March was a very strong month for us as.

Bret David Jordan: Thank you very much comes from Brett Jordan with Jeffries. Please go ahead. Hey, good morning, guys.

Speaker Change: As we look at regional.

Speaker Change: We had a good quarter in the east mid Atlantic West.

Bret David Jordan: Yeah, so I'm assuming this is a US automotive question. The progression through the quarter was sequentially improved starting January, February, and March. So March was a very strong month for us. As we look at the region, we had a good quarter in the east, mid Atlantic, and west, kind of outperformers. And relative to those three parts of the business, Midwest and Southern were a little bit soft. As you know, we've got five divisions; they're all about equally weighted. So nothing of note, but that's how the quarter played out. Great, thank you.

Speaker Change: Outperformers.

Speaker Change: And relative to those three parts of the business Midwest and southern we're a little bit soft.

Speaker Change: As you know we've got five divisions. They are all about equally weighted so nothing of note, but that's how the quarter played out great.

Speaker Change: Great. Thank you.

Speaker Change: Your next question comes from Jeff.

Jeff: The Sham with Wedbush Company. Please go ahead.

Jeff: Thanks, a lot.

Jeff: Our business if you could just go a little bit deeper on the reorganization of <unk> that you mentioned, how broad is this and what customer segment are you focused on with this release.

Seth Mckain Basham: Your next question comes from Seth Basham with Wedbush Company. Please go ahead.

Seth Mckain Basham: Business. If you could just go a little bit deeper on the organization, the field teams that you mentioned, how broad is this? And what customer segment are you focused on with this?

Speaker Change: Hey, Hey, Seth can you repeat the question you cut out on us.

Seth: The first part of your comment.

Seth: Sorry within U S auto and the realization of the field teams that you mentioned how broad is this across the country and what customer segment are these field teams focused on.

Seth Mckain Basham: Hey, hey, Seth, can you repeat the question you cut out on us with the first part of your comment?

Seth: Yes.

Seth Mckain Basham: Sorry, within U.S. Auto and the reorganization of field teams that you mentioned, how broad is this across the country, and what customer segment are these field teams focused on?

Seth: Sure.

Seth: National programs. So it's having an effect in all parts of the U S automotive business the way to think about it as this is our first pillar around sales effectiveness and the concept is making sure that you've got your selling resources.

William P. Stengel: Yes, Seth, it's a national program, so it's having an effect in all parts of the U.S. automotive business. The way to think about it is this is our first pillar around sales effectiveness, and the concept is making sure that you've got your selling resources focused on the right customers. And so, in particular, as we talked about the auto care segment, making sure that we got the right sales coverage for our auto care customers and then making sure that people in the stores are appropriately resourced and focused on making sure that we're getting parts out of the stores efficiently.

Seth: Focused on the right customers and so in particular as we talked about the auto care segment, making sure that we've got the right sales coverage for our auto care customers.

Seth: And then making sure that people in the stores are appropriately resourced.

Seth: And focused on making sure that we're getting parts out of the stores efficiently. So.

Seth: It's just it's a standard play in distribution to make sure that we're optimizing selling and then you complement all of that with inside sales resources for folks and make sure you got real nice sales coverage across the entire customer base. So it's a broad program.

William P. Stengel: So, it's just, it's a standard play and distribution to make sure that we're optimizing selling, and then you complement all that with inside sales resources for folks and make sure you've got real nice sales coverage across the entire customer base. So, it's a broad program, very common, and excited about what it's going to do for the business.

Seth: Very common and excited about what it can do for the business.

Speaker Change: Got it that's helpful. And then just a little bit more color around the changes in sales incentives.

Seth Mckain Basham: Got it. That's helpful. And then just a little bit more color around the change in sales incentives. Are there changes for the independents that could be pulling forward any sales in the last couple of months?

Speaker Change: Sure.

Speaker Change: Are there changes for the independents that could be pulling forward any sales.

Speaker Change: In the last couple of months.

Speaker Change: We haven't made any meaningful changes to sales incentives for our sellers. We're obviously doing category management work each and every day.

William P. Stengel: We haven't made any meaningful changes to sales incentives for our sellers. We're obviously doing category management work each and every day. That's a cousin of strategic marketing, so thinking about promotion activity, and there's nothing new or different there in the first quarter, unlike any previous year, so we wouldn't expect to pull forward.

Speaker Change: That's a cousin of strategic marketing, so thinking about promotion activity.

Speaker Change: There's nothing new or different there in the first quarter.

Speaker Change: <unk> any other previous year, so we wouldn't expect a pull forward.

Speaker Change: Thanks, Todd and good luck. Thanks Rhonda.

Seth Mckain Basham: Thanks a lot and good luck. Thanks. The next question comes from Aaron Reed with North Coast Research. Please go ahead.

Speaker Change: Next question comes from Erin <unk> with Northcoast Research. Please go ahead.

Aaron Bruce Reed: Next question comes from Aaron Reid with North. Please go ahead. Yeah, thanks for taking my call. I just want to touch on that real quick.

Erin: Yeah. Thanks for taking my call I, just wanted to touch on real quick.

Inflation seems to be slowing it sounds like again its down 1% can you give me a little more insight around what does wage inflation looks like are you seeing that falls well two or kind of where are you in that process.

Herbert C. Nappier: Yeah, Aaron, it's Bert. Look, I mean, when we think about the period from a year ago, with wages and some of the competition around labor, the environment certainly has abated and gotten much softer year over year. We're seeing, in terms of how we think about labor, more in line with historical averages in terms of increases, some of the things we were having to do to invest a little bit more a year ago have abated, and we're not seeing those.

Merit: Yes, Aaron its merit look I mean, I think when we think about the period from a year ago with wages and some of the competition around labor.

Merit: The environment, certainly has abated and gotten much softer year over year.

Merit: We're seeing in terms of how we think about labor more in line with historical averages in terms of increases some of the things we were having to do to invest a little bit more a year ago have.

Merit: Have abated and were not seeing those so I would say year over year much more normalized environment.

Herbert C. Nappier: So, I would say year over year, a much more normalized environment, and we've got that reflected in our outlook for the year. Some of that headwind of investment that we made last year, we saw impact in the quarter, as I mentioned in my prepared remarks. And some of those things where we were investing in our team members with a little higher wage increase and healthcare increases that we didn't pass on last year.

Merit: And we've got that reflected in our outlook for the year some of that headwind of investment that we made last year. We saw impact this quarter as I mentioned in my prepared remarks.

Merit: Some of those things, where we were investing in our team members with a little higher wage increase in health care increases that we didnt pass on last year, while we're seeing that passed by and so I would just say that when we look at labor moving forward.

Herbert C. Nappier: Well, we're seeing that pass by. And so I would just say that when we look at labor moving forward, a less intense and competitive landscape, an easier ability to recruit and gain talent, and a more normalized environment for wage increases. Okay, great. And then just one follow-up question.

Merit: Less intense in competitive landscape easier ability to recruit and game talent and a more normalized environment for wage increases.

Speaker Change: Great and then just one follow up question I'm, hoping I'm actually looking at closely as well as your own brand expansion across Europe. I was wondering if you could just give us an update on that and really how that's progressing.

Aaron Bruce Reed: Yeah, happy to, Aaron, the look, the launch of the Napa brand, which occurred about four years ago; we started in the UK. We anticipated it would be well-received in the UK markets. It exceeded our expectations and actually accelerated our strategy to expand the brand across Europe. And I would tell you, Aaron, we have been, and continue to be, very bullish on the reception the Napa brand has received across Europe. We're in the process of rolling out Spain now, and we expect that this year, we'll cross the 500 million mark in outbound sales of the Napa brand. And we've done that in five years.

Speaker Change: Yes, Im happy to Darren.

Speaker Change: The.

Speaker Change: Launch of the Napa brand, which occurred about four years ago, we started in the UK.

Speaker Change: We anticipated it would be well received in the UK markets it exceeded our expectations and actually.

Darren: We accelerated our strategy to expand the brand across Europe, and and I would tell you.

Darren: Aaron we have and continue to be.

Very bullish on the <unk>.

Darren: Reception the Napa brand has received across Europe, we rolled we're in the process of rolling out <unk>.

Darren: Spain now as we as we speak and.

Darren: We expect that this year, we'll cross the 500 million Mark in outbound sales.

Darren: Napa brand and we've done that in five years. So it's it's gone gone amazingly well.

Paul D. Donahue: So it's, it's gone gone amazingly well. Great, thank you much. You're welcome. Ladies and gentlemen, we have time for one more question. Your next question

Speaker Change: Great. Thank you Youre.

Speaker Change: Youre welcome.

Speaker Change: Ladies and gentlemen, we have time for one more question. Your next question comes from Carolina Jolly with Gabelli. Please go ahead.

Carolina Jolly: Ladies and gentlemen, we have time for one more question. Your next question comes from Carolina Jolly with Good Valley. Please go ahead.

Carolina Jolly: Great. Thanks for taking my question I know you talked about.

Carolina Jolly: Automotives cadence I was wondering if you could touch anything on maybe.

William P. Stengel: Yeah, Carolina. Thanks for the question. Happy to talk about that. From the end markets perspective, given some of the noise that I described with the weather and the March Good Friday, I'm not sure I would over-index or extrapolate some of the comments that I'll share with you. If you remember last call, we shared a little bit more detail about our 14 end markets that we track, and we saw some kind of sequential improvement versus the prior quarter in two of those.

Carolina Jolly: And anything you can.

Carolina Jolly: Talk about in terms of cadence there.

Carolina Jolly: And markets that might have done well in the quarter.

Carolina Jolly: Yes.

Speaker Change: Yes, Caroline Thanks for the question.

Speaker Change: Happy to talk about that.

Speaker Change: The end markets perspective, given some of the noise that I described with the weather and.

Speaker Change: The March good Friday, I'm, not sure I would over index, where extrapolate some of the comments that I'll share with you. If you remember last call, we shared a little bit more detail about our 2014 and markets that we track and we saw sequential improvement versus the prior quarter in two of those.

William P. Stengel: We saw a little bit of a step back in the sequential improvement. So we actually had three or four go the other way this quarter. Again, I wouldn't read too much into that. The short strokes are that it's a mixed story out there. I commented a little bit about some of the areas of strength and weakness in terms of the types of categories.

Speaker Change: <unk>.

Speaker Change: We saw a little bit of step back in the sequential improvement so we actually had.

Speaker Change: Three or four go the other way this quarter again, I wouldn't read too much into that the short strokes are it's a mixed story out there.

Speaker Change: I commented a little bit about some of the areas of strength and weakness in terms of the types of categories.

William P. Stengel: But through the quarter, we saw basically a mixed quarter, largely again driven by some of that weather. The January month was a little bit unusual. And then March was a little bit unusual based on Good Friday. Hey, Carolina, thank you for joining me.

Speaker Change: But through the quarter, we saw basically a mixed quarter largely again driven by some of that weather. The January month was a little bit unusual.

Speaker Change: And then March was a little bit unusual based on good Friday.

Speaker Change: Carolina. Thank you for the question I would comment as well.

Paul D. Donahue: Hey Carolina, thank you for the question. I would also comment on the end markets that you mentioned. Iron and steel performed very well. We also saw good strength in the automotive sector in the quarter. Chemicals was strong, mining was strong, so we saw a good balance across a number of end markets, which really gives us good optimism, especially when you combine it with the positive PMI number that came out in March.

Speaker Change: And markets that you mentioned.

Speaker Change: Iron and steel.

Speaker Change: Formed very well, we also saw a good strength out of the automotive sector in the quarter chemicals was strong mining was strong so.

Speaker Change: We saw a good balance across a number of end markets, which really.

Speaker Change: Gives us.

Speaker Change: Good optimism, especially when you combine it with the positive PMI number that came across in March. It certainly gives us good optimism about our motion business.

Paul D. Donahue: It certainly gives us good optimism about our motion business in the remaining quarters of the year. So all good on that front, and thank you again for the question. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your line.

In the in the remaining quarters of the year. So all good on that front and thank you again for the question.

Speaker Change: Thank you.

Speaker Change: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating not that you. Please disconnect your lines.

Unknown Speaker: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating. Now, please disconnect your line. Copyright 2020, New Thinking Allowed Foundation

Speaker Change: Okay.

Speaker Change: Okay.

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Speaker Change: Okay.

Speaker Change: Yes.