Q1 2025 Advance Auto Parts Inc Earnings Call
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Okay to the advance auto parts first quarter trends 25 earnings conference call I'll now turn it over to <unk>, Vice President of Investor Relations.
Speaker Change: Good morning, and thank you for participating in today's call I'm joined by Shane Kelly, President and Chief Executive Officer, and driving Grimsson Executive Vice President and Chief Financial Officer. During today's call, we will be referencing slides, which are available to view via webcast.
Speaker Change: <unk> has also been posted to our Investor Relations website.
Speaker Change: Before we begin please be advised that management's remarks today will contain forward looking statements. All statements other than statements of historical fact are forward looking statements, including but not limited to statements regarding initiatives plans projections guidance and expectations for the future.
Speaker Change: Actual results could differ materially from those projected or implied by the forward looking statements. Additionally.
Speaker Change: Additional information can be found under forward looking statements in our earnings release and risk factors in our most recent Form 10-K and subsequent filings made with the SEC.
Speaker Change: Shane will begin todays call with an update on the business and our strategic priorities later, Ryan will discuss results for the first quarter and provide an update on 2025 guidance.
Speaker Change: Following managements prepared remarks, we will open the line for questions.
Shayne Kelly: Now, let me turn it with a call to our CEO Shayne Kelly.
Shayne Kelly: Thank you <unk> and good morning, everyone I want to take a moment to express my gratitude for the hard work unwavering commitment and dedication of the advanced team.
Shayne Kelly: I am pleased to report that our team delivered better than expected first quarter results. After a challenging start to the year for the industry. We began to see demand rebound in late February led by our pro business for the quarter Pro grew in the low single digit range, including eight consecutive weeks of positive comparable.
Shayne Kelly: <unk> sales growth in the U S. This positive momentum in pro has continued during the first four weeks of Q2, driven by our focus on providing exceptional customer service.
Shayne Kelly: In addition to better than expected top line results. We also reported stronger profitability with near breakeven adjusted operating margin and we're on track to deliver positive operating margins starting with Q2.
Shayne Kelly: Based on our performance to date and expected progress on our initiatives for the remainder of the year, we are reaffirming our full year 2025 guidance.
Shayne Kelly: Ryan will provide additional details later and I want to note that our guidance also considers the impacts of tariffs currently in effect along with our planned mitigation strategies.
Shayne Kelly: We believe the combination of an aging and growing vehicle fleet in the U S. Coupled with the relatively non discretionary nature of auto parts spending puts advance and the industry in a favorable position to navigate through a volatile environment.
Shayne Kelly: We participate in a disciplined industry that has always operated rationally and we would expect that to continue.
Shayne Kelly: In March we reached a significant strategic milestone with the completion of our store footprint optimization program approximately 75% of our store footprint is now concentrated in markets, where we hold the number one or number two position based on store density. We have also embarked on an ambitious new <unk>.
Shayne Kelly: Phase of store expansion aimed at further strengthening our presence in these regions to capture share in the more than $150 billion total addressable market over.
Shayne Kelly: Over the next three years, we expect to open more than 100, new stores with plans to further accelerate that pace of growth in the future.
Shayne Kelly: Our team is focused on implementing initiatives across the strategic pillars of merchandising supply chain and stores to drive improvements in operational performance. These efforts are designed to strengthen our operational capabilities, while building a robust foundation to deliver sustainable long term profitable growth and enhanced.
Shayne Kelly: For our shareholders next I'll provide an update on each strategic pillar.
Shayne Kelly: Let's begin with merchandising the team has made good progress in expanding parts availability and securing quality products at a competitive cost last quarter, we piloted a new assortment framework and a single designated market area or DMA to improve parts coverage at the store level, we can.
Shayne Kelly: Creating a top down assortment plan for each store hub and market hub in this DMA, which led to the rebalancing of hundreds of skus to align the inventory to market specific needs. The new framework is enabling us to increase coverage and prominent hard parts categories. Many of which are frequently in demand by our pro.
Shayne Kelly: <unk> during Q1, we expanded this framework to 10 additional <unk> and in the first nine weeks. Following the rollout we have observed an estimated uplift of nearly 50 basis points in comparable sales growth within these dma's encouragingly, we are observing increased sales in categories, where additional skus.
Shayne Kelly: <unk> have been introduced while sales in categories with reduced Skus have remained relatively stable looking ahead, we anticipate gradual improvement in sales as increased parts availability translates into higher transaction volume.
Shayne Kelly: Feedback from stores has also been positive which has motivated us to accelerate this program with our recent learnings we are expediting the implementation and are now using technology to automate key processes. As a result, we plan to complete the rollout in the top 50 <unk> by the end of 2025.
Shayne Kelly: With 30 of the 50 markets expected to be live by August this is faster than our prior 12 to 18 month timeline, which stretched into 2026.
Shayne Kelly: While this new assortment framework enables us to align skus to market requirements. We are also prioritizing the improvement of skew depth across all stores. We are measuring this through our store availability Kpis, which is now in the mid 90 percentage range, notably this kpis improved by approximately.
Shayne Kelly: <unk> 200 basis points sequentially and compares to the low 90% range recorded last year strong coverage that is enabling our store teams to sell complete assortment bundles and full application job quantities, which is critical for our customers and helps create repeatable pro business.
Shayne Kelly: Advance is a leading player in the industry with a 93 year legacy and a growing store footprint that currently spans more than 4000 stores, having the right part at the right place in our network gives us the opportunity to capture our fair share of the market.
Shayne Kelly: Next let's turn to product costs as we have indicated previously the gap in merchandize margin is among the largest drivers of our operating margin gap compared to the industry over the last year. Our team has partnered with vendors to conduct line reviews with the goal of securing high quality products at a competitive cost.
Shayne Kelly: This work is expected to continue through mid 2025 and based on our progress. Thus far we have visibility to greater than 50 basis points of annualized cost reductions that will start to flow in the second half of the year.
Shayne Kelly: We will continue to pursue further cost reduction efforts, while also investing time to develop strategic business plans with our vendors to drive mutual revenue growth our customer first approach and disciplined execution on core retail fundamentals continues to resonate with our vendor partners, giving us optimism.
Shayne Kelly: And our ability to deliver additional future value.
Shayne Kelly: Next supply chain I want to start by acknowledging the tremendous effort of the supply chain team. During Q1. This team played an integral role in successfully completing our asset optimization activity. Despite the complexities involved in the execution. There work included relocating one hundreds of one.
Shayne Kelly: <unk> of dollars of inventory across the network.
Shayne Kelly: Rerouting replenishment routes to align with our revised store and DC footprint and supporting the merchandising team to launch the newest assortment framework intend markets.
Shayne Kelly: Importantly, they achieved this while maintaining high safety standards and smooth day to day operations, having participated in multiple supply chain transformations in my career I can attest that the team's accomplishments were no small feat.
Shayne Kelly: We are on track to close 12 distribution centers. This year with six completed to date, we expect to end the year with 16, Dcs, making our way towards the goal of operating 12 large dcs by the end of 2026 with each averaging approximately 500000 square feet as we can.
Shayne Kelly: The consolidation of these dcs flow higher volume and optimize our inbound and outbound processes, we expect to drive incremental labor productivity. We measure this with product lines per hour, which improved in the low single digit percentage range during Q1 compared to last year.
Shayne Kelly: We are targeting continuous improvement in this metric through the development of fresh operational standards for our Dcs for example, since we started moving more volume through our large Dcs, we are evaluating daily workflows, such as measuring the time to pick apart and comparing that against benchmarks to determine where our process needs to evolve.
Shayne Kelly: Ultimately we are building a foundation to efficiently support over 4000 stores through 12 large size Dcs operating on a single warehouse system versus the previous model of 38 Dcs of varying sizes with disparate systems to do this successfully we are investing resources to upgrade our operations.
Shayne Kelly: Standards to improve productivity.
Shayne Kelly: In conjunction with consolidating Dcs, we plan to drive cost efficiency by optimizing both the routing of replenishment orders from Dcs and the movement of products between hubs in stores to achieve this we plan to implement a new routing framework in stages throughout this year, we anticipate that the combination.
Shayne Kelly: <unk> of improved DC labor productivity and optimized routing will begin delivering cost savings by late 2025 with a larger benefit accruing later.
Shayne Kelly: In May we entered a pivotal phase in the development of our multi echelon supply network with the opening of two greenfield market hubs in the Midwest. We now operate 21 market hubs and continue to target 10 market hub openings. This year, while simultaneously building the pipeline for 2026 and <unk>.
Shayne Kelly: 2027, we remain committed to our goal of establishing 60 market hubs by mid 2027 to strengthen our competitive position.
Shayne Kelly: A market hub with 75000 to 85000 Skus expand same day parts availability for our service area of about 60 to 90 stores based on the aggregate performance of the market hubs in operation through Q1, and the stores being serviced by these hubs we have observed an estimated <unk> <unk>.
Shayne Kelly: Comp uplift of nearly 100 basis points in those markets. These results reinforce our confidence in the path forward, which we expect to further improve as the new assortment framework developed by the merchandising team is fully implemented across the market hubs.
Shayne Kelly: In our stores. The team is focused on improving service levels to drive repeatable business and gain market share. The approach channel led the recovery in comp sales in the second half of Q1. This improvement in the pro was driven primarily by transaction growth, which we view as a leading indicator of our effort to move up the call list with <unk>.
Shayne Kelly: You may recall early this year, we revamped our compensation and incentive structures for our frontline sales team and equip them with additional tools and resources to better serve customers. We are seeing the results of these investments in the pro channel, which makes us optimistic about the opportunity to capture additional wallet share of the <unk>.
Shayne Kelly: Our store team is focused on exceptional customer service and was able to shave off approximately 10 minutes in delivery time compared to last year. This reduction is being achieved through a combination of training enhancements better in stocks and increased accountability in the field. Our goal is to consistently deliver parts within <unk>.
Shayne Kelly: To 40 minutes, ensuring this consistency helps our pros turn their base faster and elevates advances reputation as a dependable and timely provider of parts. We are encouraged by the progress thus far and are confident in the team's ability to deliver on our service commitment to support. This we are also testing a standardized.
Shayne Kelly: Store operating structure to guide our teams on store labor scheduling and to provide an effective mechanism to allocate resources such as delivery trucks and driver hours. This test is now live in about 10% of our stores learnings from this test will inform our view on the standardized structure, which we expect to launch companywide.
Shayne Kelly: Later this year.
Shayne Kelly: Shifting to DIY during the second half of Q1, we saw an improvement in DIY trends, although the weekly volatility continues to remain high maintenance related categories, such as fluids chemicals and oil are performing relatively better suggesting that DIY consumers remain cautious.
Shayne Kelly: And their overall spending as we look ahead, we expect the DIY environment to remain challenged due to the potential for higher broad based consumer goods inflation impacting household budgets. Despite the sales choppiness. We are proactively addressing areas of the business that are within our control. This includes enhanced training programs for.
Shayne Kelly: Our store teams to deepen product knowledge as well as a reallocation of key store roles to better assist customers.
Shayne Kelly: Our efforts to improve the in store experience are beginning to deliver positive proof points. As we are seeing an improvement in units being sold per transaction. This metric has stabilized after declining for most of last year from a DIY communications perspective, we are also strengthening our brand message through our new marketing campaign with the <unk>.
Shayne Kelly: <unk> right around the corner and ready to help this campaign showcases advance as a leading destination for automotive parts that offers convenient store locations strong inventory availability expert advice free services and high quality brands.
Shayne Kelly: I want to underscore our commitment to advancing the turnaround and ensuring accountability, we are making traction on operational improvements for the business and I'm optimistic about the opportunities ahead.
Shayne Kelly: Now, let me hand, the call over to Ryan to discuss our financials Bryan.
Ryan: Thank you Shane and good morning, everyone. I would also like to thank the advance team for their commitment to serving our customers, while continuing to make meaningful strides in our turnaround efforts.
Shayne Kelly: For the first quarter net sales from continuing operations were $2 6 billion.
Shayne Kelly: A 7% decrease compared to last year.
Shayne Kelly: This decline is mainly attributed to the store optimization activity completed in March comparable store sales declined 60 basis points. During the 16 week period in Q1 and excludes locations closed during the quarter, which generated $51 million in liquidation sales.
Shayne Kelly: During Q1 sales started off soft declining in the low single digit range in the first eight weeks.
Shayne Kelly: Demand started to recover in late February aided by less weather volatility normalization of tax refunds and consistent positive performance in our pro business.
Shayne Kelly: Initiatives to improve inventory.
Shayne Kelly: In stocks and service levels for customers led to eight consecutive weeks of positive pro comps in the U S through the end of the quarter.
Shayne Kelly: Separately Q1 also benefited by the shift in timing of Easter into our fiscal Q2, which we estimate at approximately 20 basis points to comps.
Shayne Kelly: In terms of channel performance Pro grew in the low single digit range, which is an acceleration compared to Q4 and outperformed the DIY channel, which declined in the low single digit range.
Shayne Kelly: Our pro comp also accelerated on a two year basis and was positive for the third consecutive quarter.
Shayne Kelly: Transactions declined in the low single digit range during Q1 with pro down only slightly.
Shayne Kelly: Average ticket grew in the low single digit range and was positive in both channels.
Shayne Kelly: From a category perspective, we saw strength in batteries wipers, and fluids and chemicals.
Shayne Kelly: Gross profit from continuing operations was $1 1 billion or 42, 9% of net sales, resulting in gross margin contraction of 50 basis points compared to last year.
Shayne Kelly: The year over year deleverage was largely driven by approximately 90 basis points of margin headwind associated with liquidation sales related to our store optimization activity.
Shayne Kelly: During the quarter gross margin also benefited from favorability on capitalized warehouse costs related to a pull forward of some inventory purchases ahead of tariffs.
Shayne Kelly: We estimate this added approximately 80 basis points of margin and is expected to normalize during the year.
Shayne Kelly: Adjusted SG&A from continuing operations was $1, one 2 billion.
Shayne Kelly: Or 43, 2% of net sales, resulting in deleverage of 180 basis points compared to last year.
Shayne Kelly: A portion of the deleverage was driven by the comparison to a gain on asset sale from last year adjusted.
Shayne Kelly: Adjusting for this SG&A would have deleveraged, approximately 110 basis points, mainly due to higher labor related expenses.
Shayne Kelly: As a result, adjusted operating loss from continuing operations came in at $8 million or negative 30 basis points of net sales.
Shayne Kelly: A healthier top line performance helped us deliver better than expected operating margins with operating losses, narrowing significantly compared to last quarter.
Shayne Kelly: Adjusted diluted loss per share from continuing operations was 22 <unk>.
Shayne Kelly: Compared with earnings per share of 33 in the prior year on a GAAP basis, we reported earnings per share of <unk> 40.
Shayne Kelly: Due to a net discrete tax benefit of $126 million associated with capital loss deductions following the world Pac transaction, which was factored into our forecast for the year.
Shayne Kelly: We ended the quarter with negative free cash flow of $198 million.
Shayne Kelly: Compared with negative $49 million in the prior year.
Shayne Kelly: Free cash flow includes approximately $90 million in cash expenses associated with the store optimization project and approximately $100 million of additional inventory investments, which was planned for later in the year to support the accelerated rollout of our store based assortment framework that Shane referenced.
Shayne Kelly: <unk>.
Shayne Kelly: For fiscal 2025, we have reaffirmed the guidance established in February we remain focused on executing and tracking the progress of our strategic initiatives to develop a strong foundation for the long term.
Shayne Kelly: Before discussing items within the guidance, let me provide a perspective on the current tariff environment and how that is influencing our outlook for the year.
Shayne Kelly: We are collaborating with our vendor partners to address the challenges posed by elevated product costs and evaluating each cost driver before accepting any increases from vendors.
Shayne Kelly: Our approach to navigating tariffs is expected to be measured as we make tariff related price adjustments.
Shayne Kelly: We will continually assess inflation and demand elasticity.
Shayne Kelly: Monitor competitive response, while executing our plan this year.
Shayne Kelly: Within the current tariff landscape, we are planning for a range of scenarios and feel strongly about our ability to navigate through the rising cost environment.
Shayne Kelly: These scenarios are in alignment with our full year guidance reinforcing our expectations for the balance of the year. The complexities of the current economic landscape also want an appropriate sensitivity to financial flexibility through the turnaround.
Shayne Kelly: We will continue to monitor and assess our debt capital structure with the goal of ensuring maximum financial flexibility for the business.
Shayne Kelly: We believe we have the right strategy rooted in core retail fundamentals to achieve our financial objectives and the benefits of our strategic actions is expected to build steadily over the next three years.
Shayne Kelly: Next let's discuss our expectations for this year.
Shayne Kelly: Starting with net sales, we expect net sales in the range of $8 four to $8 6 billion.
Shayne Kelly: Comparable sales is expected to grow in the range of 50 to 150 basis points on a 52 week basis.
Shayne Kelly: We expect sequential improvement in comparable sales during 2025 with stronger growth in the second half supported by our focus on improving parts availability and elevated service levels.
Shayne Kelly: For Q2, we currently estimate flattish comparable sales growth, including the impact of the Easter shift from Q1.
Shayne Kelly: During the quarter, we will also fully cycle through the $100 million of price investments from last year.
Shayne Kelly: Net sales also include contribution from new stores planned to be opened this year and we expect the 50 <unk> week to contribute approximately $100 million to $120 million and two net sales.
Shayne Kelly: Moving to margins adjusted operating income margin is expected in the range of 2% to 3%.
Shayne Kelly: We expect sequential progress in operating margins. This year with Q2 expected to track in line with our full year range and further improvement expected in the second half.
Shayne Kelly: Gross margin is expected to be the primary driver of operating margin. This year driven by a combination of product cost savings.
Shayne Kelly: And supply chain cost leverage with an improvement in sales.
Shayne Kelly: We expect SG&A expenses to be down year over year with margin in the range of flat to slightly down.
Shayne Kelly: SG&A includes the impact of annual wage inflation and other field investments offset by favorability from labor productivity and indirect cost savings.
Shayne Kelly: Additionally, we expect to save approximately $70 million in annual operating costs related to our store and DC optimization activity.
Shayne Kelly: These savings will begin in Q2 and contribute to margin favorability for the balance of the year moving.
Shayne Kelly: Moving to the other items in guidance adjusted.
Shayne Kelly: Adjusted diluted EPS is expected in the range of $1 50.
Shayne Kelly: And $2 50.
Shayne Kelly: We expect free cash flow in the range of negative 85% to negative $25 million at the end of the year.
Shayne Kelly: Our guidance now includes cash expenses of approximately $115 million associated with store and DC optimization activity, which is below our prior estimate of $200 million, reflecting favorability in lease disposition costs.
Shayne Kelly: This benefit was offset by opportunistic inventory purchases ahead of the tariff implementation earlier this year.
Shane Kelly: In summary, we are pleased with our progress thus far and remain resolute in controlling the aspects of our business within our control while navigating a volatile macro environment I will now hand, the call back to Shane Thank you.
Ryan: Thank you Ryan before closing today's call I would like to thank all our team members who are listening on the call today I am incredibly proud of your efforts this quarter our team not only managed to deliver results that exceeded expectations, but also completed the store footprint optimization within an accelerated timeline, while driving progress.
Shane Kelly: <unk> on our strategic priorities. Thank you.
Ryan: With that let's open the call for questions operator.
Speaker Change: Of course, if you'd like to ask a question in the Q&A portion of today's call. Please press star followed by one on your telephone keypad now dependents Osteo question. Please ensure your mute locally.
Speaker Change: Our first question comes from Simeon Gutman from Morgan Stanley Simeon. Your line is open. Please go ahead.
Simeon Gutman: Hey, good morning, maybe.
Simeon Gutman: Maybe my first question, if you think about the 0.5 to one five comp.
Simeon Gutman: You have an implicit mix of DIY versus <unk> performance within that I don't think you've shared with that with us, but can you tell us now that first quarters in the bag can.
Shayne Kelly: Can you tell us what that expectation.
Shayne Kelly: Patient how it has changed do you have any difference in how you think the year will play out based on how it's performing so far and then I have one follow up thanks.
Shayne Kelly: Yes.
Brian: As Brian.
Shayne Kelly: Been here real quick so so far it's played out similar to what we expect we haven't seen any change in trend on DIY and our expectations, but what we have stated is that we expect <unk> to be the driver of our performance.
Shayne Kelly: DIY will still be somewhat pressured I think it's still early in this tariff environment to really understand if that will change going forward.
Shayne Kelly: We did model out different scenarios that are that are reflected in our range of guidance.
Shayne Kelly: But as of right now we expect the trends to our guidance expect the trends to continue with <unk> will lead.
Shayne Kelly: <unk> will still be slightly pressured.
Shayne Kelly: Hey, Jamie it's Shane here, let me, let me build on that so you've seen the pro trend 12 weeks positive comp.
Shayne Kelly: DIY I think the volatility of the situation and you see that in consumer sentiment some of the credit card data default rates suggests there could be some some difficulties for the for the consumer although we're controlling what we can control and we are putting effort against making sure were.
Shayne Kelly: Relevant for the DIY customer that includes the availability efforts that includes awareness around our marketing campaign.
Shayne Kelly: Promotions fewer bigger better leveraging our loyalty program, we have 16 million speed perks member members training for the stores in terms of of how to present products and greet. So so we will look to do things to make sure we're participating with DIY customers.
Shayne Kelly: Thanks, and the follow up if we take the full year guidance and look at the complexion with gross margin and SG&A.
Shayne Kelly: The first quarter was better on grows.
Shayne Kelly: It looks like Youre going to have some tailwind because the liquidation goes away.
Shayne Kelly: Shane about the product cost that should improve throughout the year.
Shayne Kelly: It feels like that was built in to the way you've built your outlook.
Shayne Kelly: And but can you talk about is there more upward pressure than you thought and then on SG&A, even with some of the cost removal.
Shayne Kelly: It doesn't look like there's a lot of upside to the SG&A forecast can you just I don't know I know you are not changing guidance and I'm not trying to.
Shayne Kelly: Put words in your mouth, but it feels like the guidance range still looks relatively appropriate even with some of the upside drivers. It looks like you've kind of captured that in the guidance for the rest of the year.
Shayne Kelly: On that please.
Shayne Kelly: Yes, I mean, yes, the big driver still still remains the same as that our driver of operating income will mainly be driven by gross profit growth and especially in the back half of the year and as James said earlier seeing 50 basis points already annualize on that cost out that's a big one we've got.
Shayne Kelly: The headwinds in margin, specifically that Theyre now tailwind, but what headwinds we faced last year in the back half of the year was about 170 basis points.
Shayne Kelly: So if you think about that build on our Oi.
Shayne Kelly: Then there was about 30 in SG&A SG&A is going to be down year over year, especially with the.
Shayne Kelly: The store closures.
Shayne Kelly: Pulling those out and then the work that the stores team is doing on productivity, we'll see that we're also going to see on supply chain with the work. The team is doing there we're going to be level to leverage on the sales volume so as Shane talked about the lines per hour or the productivity supply chain is driving that is going to allow us to leverage on the sales.
Shayne Kelly: Increase that we'll see in the back half of the year, so, but the big bulk of the growth is going to be on gross margin back half of the year and we like where our merchant team is doing a.
Shayne Kelly: Led by Bruce on our cost out and working with our vendor partners.
Shayne Kelly: We like what we're seeing there just to add that there is a series of puts and takes that goes in to how we came to reaffirming the guidance. Ryan described some of them there no that will run the scenarios and what the tariffs might look like what that volatility might look like with consumers.
Shayne Kelly: Concatenation of that left us to to put guide where it is and keep it there.
Speaker Change: Okay. Thanks, good job guys. Good luck.
Amy: Thanks Amy.
Shayne Kelly: The next question comes from Seth Sigman from Barclays.
Speaker Change: One is open. Please go ahead.
Shayne Kelly: Great. Thanks, good morning, everyone.
Speaker Change: It sounds like progress and a lot of areas I'm trying to figure out with the improvement in comps this quarter how much of that was from closing stores that were previously dragging on the comps maybe you could give us a sense of how much those stores were under Comping. Previously. So we can try to understand the dynamics there and then as we think about the closings. This.
Shayne Kelly: Quarter I assume there is some sales transfer to the remaining stores, particularly on the pro side of the business. So if you can help quantify some of that would be great.
Shayne Kelly: Absolutely so back to the first part was.
Shayne Kelly: The mix of maybe the closing stores. So the comp difference between those closing stores and the remaining stores wasn't material I think we've talked about in the past.
Shayne Kelly: It was just a lower base and the profitability of those so.
Shayne Kelly: Thank you comp on a lower base sales volume.
Shayne Kelly: Actually out west so it didn't really have much of an impact materially on the comp mix. So I wouldn't say that that was a driver of the comp performance in the quarter. We did see some transfer of sales mainly in the pro area and that was planned and expected and we achieved what we expected were really happy with that.
Shayne Kelly: To give a shout out to the protein will work diligently.
Shayne Kelly: To transfer those pro accounts, the new stores and they did a very good job doing that so theres, some and they are not quantifying that but theres. Some in that pro trend, we really like to see I think the comp difference than what we expected was really the first eight weeks the weather volatility the tax refunds.
Shayne Kelly: Trying to understand is there is a pressure on the consumer that's different we saw that bounce back and the final eight weeks of that quarter, we saw that normalize.
Shayne Kelly: And some of the initiatives, we had around pro and improved time to serve coming out of our stores I think really had an impact as well.
Shayne Kelly: Thanks for the question Seth just some contextual flavor.
Shayne Kelly: Flavor to that coming through that process as quickly as we did there are a number of teams we talked about supply chain in the prepared remarks, our stores team led by Jason hand, our real estate team Todd Davenport.
Shayne Kelly: These guys getting that done as quickly as we did there is there is a secondary effect when youre going through these processes. It creates uncertainty in your organization when youre doing it.
Shayne Kelly: And by the way as you think about how customers think about what your longer term trajectory looks like so for us being done with it and now moving our narrative back to focusing on our strategic pillars back to creating value back to growth, that's where we're moving the company now and so we've come through that.
Shayne Kelly: And now driving forward on strategy for the remainder of the year.
Speaker Change: Okay, Great. That's very helpful. And then I did want to ask about the guidance specifically as it relates to tariffs I get that tariffs are manageable in the sector.
Shayne Kelly: What have you embedded here how does it impact your P&L as we move through the year.
Shayne Kelly: How are you thinking about pricing thanks, so much.
Speaker Change: Great question, I'll start and Brian can add to it. So for tariffs is a volatile situation and think about tariffs is you've got the 300 ones. The 230 twos AEP.
Shayne Kelly: And tariff creates.
Shayne Kelly: Variability by product country of origin tariff magnitude.
Shayne Kelly: The way it changes to any of the above.
Shayne Kelly: The stack ability of the tariff, whether it's discrete or combined with others and so as we've looked at that in aggregate across the company our blended tariff rate with what is currently in effect it was about 30%.
Shayne Kelly: And if you think about the applicable to.
Shayne Kelly: <unk> products are.
Shayne Kelly: About 40% of what we source can have some applicability to tariff now some of it might be a sub component of goods. So so before you just take the 30% terms of 40% to say thats the economic impact no that there is there is sub componentry, there, but importantly, before just moving forward with.
Speaker Change: Matt we've done mitigation strategies broadly across a number of dimensions and maybe Brian touched touched on the mitigation, yes ill just touch on how we approach. This so our strategy first as we pushed back on all cost increases and really work with our vendor suppliers. Then we look at alternative sources of supply.
Shayne Kelly: So we'll look for that and I'll touch on that in a second as well and then finally anything we can't mitigate between vendors.
Shayne Kelly: Vendors sources of supply, we're passing that on to price and it's been fairly constructive and we've been able to pass that along.
Shayne Kelly: Ultimately, we think the full value chain should bear some of that whether it's the vendor the supplier the retailer and then ultimately the consumer going to bear some of those.
Shayne Kelly: Impacts.
Shayne Kelly: But to give you an example of supply.
Shayne Kelly: When we think about our China exposure about 10% from China is direct import.
Shayne Kelly: 10% of our overall.
Shayne Kelly: Product is direct imports from China by the end of the year more than 50% of that that were direct importing from China will be sourced from other countries and.
Shayne Kelly: And the teams are already making significant progress on that so we're looking at alternative sources, we are quickly making changes.
Shayne Kelly: Our pricing cost team and our merchants are working diligently around the clock to look at alternative sources and as this dynamic tariff environment shifts, we're shifting and were adjusting to find the best course for us.
Shayne Kelly: Just add that.
Shayne Kelly: We're in a rational industry with rational players aspirational, we would look to hold rate.
Shayne Kelly: As an objective.
Shayne Kelly: If we can hold rate then we're going to look to managing operating profit in terms of how we think about elasticity units and margin.
Shayne Kelly: And we will drive forward with that approach.
Speaker Change: The team led by Bruce Starnes, they're looking at this they look at it broadly across the portfolio and then they look around how we would manage each particular category and product in that analysis and effort I think appropriate given given again as we started the point the volatility of the situation.
Speaker Change: Got it alright, thanks, so much.
Speaker Change: The next question comes from Chris holders from J P. Morgan Chris Your line is open. Please go ahead.
Chris Holders: Thanks, Good morning, everybody.
Chris Holders: So ill.
Speaker Change: I'll take that baton on tariffs and what's going on there.
Chris Holders: At this point.
Chris Holders: How much inflation was did you have on a same SKU basis in the first quarter.
Chris Holders: Is any of that tariff pricing and will that accelerate.
Chris Holders: As you as you as you move forward from here and then historically if I recall.
Chris Holders: LIFO side.
Chris Holders: Prior sort of.
Chris Holders: Methodology was you would actually write up inventory and it would create sort of these these LIFO benefits early in the inflation process. So can you also talk about how that influences the P&L on the gross margin side.
Chris Holders: Yes, absolutely.
Chris Holders: Chris a couple.
Chris Holders: A couple of things so the inflation impact in Q1 was immaterial.
Chris Holders: And from a guidance perspective in a scenario as it played out.
Chris Holders: We're still in low mid single digits on inflation in our scenarios.
Chris Holders: So that range of outcomes that we've put there from a guidance perspective contemplates different scenarios related to tariffs. It's still early and there's still a lot. We're only halfway through the 90 day.
Chris Holders: Pause period, and some of them. So theres still a lot that needs to play out and we'll get more informed as we go but the range of outcomes that we booked at really are contemplated in our range in the guidance.
Chris Holders: From a LIFO standpoint.
Chris Holders: Had a little bit of an impact in Q1 that was part of the 80 basis points that impacted but it wasn't the only that I think about for roughly approximately $4 million.
Chris Holders: LIFO favorability in the quarter, we will see one of the things that we're doing that will impact. This is we're looking at our weeks of supply both for us and what the vendors might have currently in their warehouses here in the U S.
Chris Holders: And we're managing our <unk> based on that so we don't have to cut new pose right away and we can work through the current costs that we've got.
Chris Holders: To minimize the LIFO impact.
Chris Holders: So that should have a benefit we've got decent weeks of supply in some of these categories and we're working through those so that's why we haven't seen much of an impact early on we also talked about we did a forward buy before the tariffs and.
Chris Holders: And that helps with that weeks of supply that we can work through before we see a big impact on LIFO.
Chris Holders: Just say Chris.
Chris Holders: Anecdotally as you think about it the moves companies make in situations like ours, its first you're pushing back.
Chris Holders: The vendor and and you have inventory on hand, and by the way I think the volatility in terms of what's an effect and win for how much.
Speaker Change: All played a part in Brian's depiction of not having an impact in Q1 and he has he is modeling as is the merchant team how that flows in terms of the rest of the year.
Chris Holders: Got it that that that makes that makes a ton of sense in.
Speaker Change: A couple of margin questions. So first on the gross.
Chris Holders: <unk>.
Chris Holders: If I look at sort of like the underlying trend. It seems like we'll be in this mid single digit range as we sorry mid <unk> range as we get towards the end of the year.
Speaker Change: Is there anything that youre seeing or whether it's with tariffs or just the operational side of the business that detours that potential and then on the SG&A front.
Speaker Change: $70 million of cost savings from asset optimization is it right to just take the SG&A from <unk> back out the 70 and that sort of the underlying base that we built from based on seasonality and in top line.
Speaker Change: Thank you.
Speaker Change: Yes, Chris just on the $70 million is not SG&A, that's more cogs related.
Speaker Change: In Q1 is a tough one because.
Speaker Change: From a liquidation it's more sales liquidation impact that $70 million and due to the D. C. D. C is really follow up into our Cogs.
Speaker Change: I would put that more on the gross profit line.
Speaker Change: From a SG&A standpoint, though the rest of the year youre going to see that down year over year as we get through that cost.
Chris Holders: And you will see closer to that mid <unk> margin rate from a tariff standpoint.
Chris Holders: One thing that Shane alluded to earlier is that while we ultimately want to maintain rate.
Chris Holders: As the cost come in we're going to be focused on operating profit improvement as well so managing the elasticity and the flow through on the operating income side, so well when we looked at those range of outcomes in our guidance. We looked at all of those from elasticity, what we can pass on Cogs price.
Chris Holders: And so I think our guidance really contemplates the ranges of outcomes that can happen the rest of the year from what we know today.
Shane Kelly: Shane alluded to the complexities of all the different types of.
Shane Kelly: Tariffs that are in their byproduct category.
Shane Kelly: Great. Thanks, so much have a great rest of the spring.
Chris Holders: Thanks, Chris.
Speaker Change: The next question comes from Michael Lasser of UBS, Michael Your line is open. Please go ahead.
Speaker Change: Yeah.
Michael Lasser: Good morning. Thank you so much for taking my question.
Speaker Change: As you look Michael of your longer term goal.
Speaker Change: Good morning, King as you look towards your longer term goals can advance auto parts achieve the margin expectation implicit in the 2027 guidance.
Speaker Change: If DIY sales per store remained relatively flat over that time, because that seems to be the area, where it's going to be the most difficult to effectuate change.
Speaker Change: <unk> has been the area, where advance has really struggled historically.
Speaker Change: Such that there may be deeper investments needed in that area in order to generate an improvement.
Speaker Change: Yes.
Speaker Change: Let me start on that on the DIY front, because it's certainly the some of your points are irrelevant and we touched on on what the U S consumer might face going forward, but also know that that we recognize our relative position and are putting appropriate effort around.
Speaker Change: Being a participant with the DIY customer and touched on a few of them earlier, but let me add a couple of others that are relevant.
Speaker Change: Vendor partnerships, so we've talked about tegra chips and that relationship with vendors.
Speaker Change: Touching on.
Speaker Change: Strategic pillar of cost out there is a third component of how we're working with our vendors, which is strategic business planning to create mutual revenue growth and thats. Good feedback that we got from the vendors, which is hey don't just approach us.
Speaker Change: On the cost side of tariffs and our contracts.
Shane Kelly: Work with Us and we will work with you on creating growth in DIY is it an area around that and you see that in terms of what we'll be doing the promotions, but you also see that in terms of our marketing campaign around the corner and ready to help the reminder, that as the number one or number two player in 75% of our market.
Shane Kelly: That's where now.
Shane Kelly: More thorough participant where that DIY customer will be closer in proximity.
Shane Kelly: And by the way with our store team members and our services. So so before you've kind of depict our 27 is as not having relevant DIY.
Shane Kelly: Sure in our mill.
Shane Kelly: Mix, we're not we're not seeing it that way and know that these initiatives will help keep us in good stead as to the specifics on the 27th forecast Brian and.
Speaker Change: Michael I'll, just remind you that I think we're looking at low single digit comp growth to get to our 7%. So we're not looking for a large top line growth here and by the way that low single digit.
Shane Kelly: Our growth is really led by <unk>.
Shane Kelly: So we're not expecting a major DIY growth to get to that 7% or even large top line growth.
Shane Kelly: I think thats, probably even below some of the market expectations to get to that 7% that 7% is really built out the things we control.
Shane Kelly: And that's our merch excellent excellence work that we're doing our supply chain productivity in the store productivity that we're driving and so we can get to that 7% with low single digit comp growth in that outlook.
Shane Kelly: Yeah.
Speaker Change: Okay. Thank you very helpful.
Speaker Change: And my follow up question and I apologize for it making in very short term in nature, but you are pointing to a flat comp for the second quarter sounds like the pro side continues to perform well or within your expectations DIY is.
Speaker Change: Volatile do you need to see an acceleration in the overall business in order to hit that.
Speaker Change: Flat for the quarter and as you think about the back half of the year.
Speaker Change: Are there other drivers to get to what would seem.
Speaker Change: Seem to be a low.
Speaker Change: Low single digit overall comp it's embedded in the outlook outside of just lapping some of the price investments.
Speaker Change: Other factors.
Speaker Change: Yes, Mike I'll start and let Shane jump in here, so our exit rate coming out of these four were in line with that into Q2, So were and were in line with our guidance.
Speaker Change: For the quarter, so that flattish is kind of where we're trending today.
Speaker Change: Coming out of.
Speaker Change: <unk> four so so that's where we're at we don't need to see a change necessary we need to continue the momentum we've got today.
Speaker Change: Back half from a.
Speaker Change: The growth there.
Speaker Change: When you see the acceleration in these initiatives. So we've got the DMA work that we're accelerating.
Speaker Change: You see the market hubs that are going.
Speaker Change: But also keep in mind, there's some easier comparisons as well and in Q1 and Q2.
Speaker Change: Change in.
Speaker Change: Trends are the similar trends just remember we're backing out Easter for that so if you just adjust for that it was 20 basis points in Q1, it's a 25 basis point headwind in Q2.
Speaker Change: Yes, just let me illustrate with kind of a story around the initiatives and strategic pillars, it's a turnaround.
Speaker Change: We're going down the long road to get this company back on footing I was in D. C with our DC leaders, Steve <unk> and we look at a vendor that is shipped us individual piece parts and these are small little containers, where it costs more to put the container away than what the value of the product is so Steve goes to the vendor.
Speaker Change: It says Hey, why are you shipping us like this in the vendor says well why are you cutting <unk> like that and so together, we sit down at the table and we say hey, if you could send me fewer bigger.
Speaker Change: <unk>.
Speaker Change: With the right frequency I can put together bigger orders for you by the way we could start doing case pack quantities instead of <unk>.
Speaker Change: And that's a seven digit cost takeout.
Speaker Change: And by the way, we're going sequentially across our vendor base, having those discussions now you can't do that overnight.
Speaker Change: When you start to change pick quantities and things like that but that's just one example of what's going on in supply chain to create lines per hour by the way simultaneously. We're closing Dcs simultaneously were open market market hub simultaneously, we're refreshing the assortment in the DMA. So theres a lot of activity going on in the company that it's a little bit.
Speaker Change: Have a yard at a time that that's what we have as we think about going into the back half of the year and by the way into 'twenty six 'twenty seven.
Speaker Change: Thank you very much Sir that is quite helpful.
Speaker Change: The next question comes from Zacks item from Wells Fargo. Your line is open. Please go ahead.
Speaker Change: Good morning.
Speaker Change: Now store optimization is largely behind US can you walk us through your expectations for non-GAAP adjustments for the rest of the year it looks like about $100 million on SG&A. This quarter. So as you look ahead is there any color you can give on GAAP versus non-GAAP operating margins and EPS expectations for 'twenty.
Speaker Change: Yes.
Speaker Change: No.
Speaker Change: We're not guiding.
Speaker Change: Necessarily gap, but I think in Q1.
Speaker Change: We had the.
Speaker Change: Benefit of the tax.
Speaker Change: The piece that happened in Q1 from a GAAP standpoint.
Speaker Change: From a cash expense standpoint, we had $150 million this year $90 million is already done.
Speaker Change: So.
Speaker Change: That's helpful.
Speaker Change: Okay, and then stepping back on your conversations with vendors is there a consensus out there on where like for like inflation will shake out for the industry. This year, both tariff and non tariff driven.
Speaker Change: And then separately we've talked in the past about opportunities to renegotiate maybe take some vendors off supplier financing and that could result in some margin improvement for you any update there.
Speaker Change: I'll just start on the first part there is lots of scenarios.
Speaker Change: How it plays out with the vendors.
Speaker Change: I'd just go back to the previous year related perspective.
Speaker Change: We've gone through we're going through our mitigation strategies.
Speaker Change: Cases, collectively we don't know what the ending outcome is it's a rational industry will look to act rationally hold rate can hold rate manage operating profit.
Speaker Change: In terms of what our approach looks like.
Speaker Change: So that's the first part.
Speaker Change: On the second piece just on industry specific theres lots of scenarios that play out on tariffs and what that impact would be.
Speaker Change: So we don't have exactly where that's going to land our guidance.
Speaker Change: Has all the different scenarios, we think that will happen and it contemplates those in that range.
Speaker Change: But going in low single digit is probably somewhere where were thinking but that range could obviously change quickly overnight and it's still quite volatile. We're only halfway through the 90 day pause on one of them. So there's a lot that can take place over the next.
Speaker Change: Nine months.
Speaker Change: And on the vendor financing piece.
Speaker Change: Oh, the vendor financing piece.
Speaker Change: Nothing material from a change supply chain finance, we're sitting at $3 5 billion of capacity, we're using at advanced about $3 billion of that.
Speaker Change: And Thats, just an uptick in normal seasonal buys we expect long term to be similar with two 8% to $2 six on that.
Speaker Change: And that's going to obviously fluctuate quarter to quarter as you have buys that go into there and then you run down the payables. So we still use it there is nothing material, where we've had vendors come off and it's a material impact to our costs, but we always evaluate.
Speaker Change: <unk> is a good tool.
Speaker Change: But we evaluate what's the best return for us.
Speaker Change: Got it thanks for the time.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Scot Ciccarelli from Truest Scott. Your line is open. Please go ahead.
Scot Ciccarelli: Good morning, guys. Thanks for the time, so it sounds like you got the benefits from better procurement costs are expected to be relatively modest I think Ryan referenced 50 basis points I guess I would've assumed that procurement cost was going to be your biggest gross margin opportunity and yet youre still expecting gross margins to improve during the course of the year.
Speaker Change: So can you provide any more color on what specifically and kind of the gross margin line.
Speaker Change: It's going to be the driver for the balance of the year is it just supply chain savings or are there other factors in there. Thanks.
Speaker Change: Yes, Thanks Scott.
Speaker Change: So procurement costs of 50, plus keep in mind that those are contracts that we sign.
Speaker Change: And when those contracts go into.
Speaker Change: <unk> has a has a impact on the NIM.
Speaker Change: The amount.
Speaker Change: We are seeing SG&A down we do have some fixed expense that we're leveraging.
Speaker Change: As we get more volume in the back half of the year. So we are getting significant improvement in SG&A year over year. Some of that is coming from the store closures as well. So we look at a drag that those.
Speaker Change: Those had on our business and then the bulk of our.
Speaker Change: Gross margin is going to be coming from Cogs improvement and Thats. Both the first cost work that our vendors are doing and also the leverage on supply chain.
Speaker Change: Is there anything within the gross margin on that procurement procurement side that isn't sustainable or that was onetime ish or is this kind of like an existing run rate here.
Speaker Change: So the 50 bps is going to be an existing run rate I mean, these are contracts, we're signing with our vendors and those will those will continue and that will grow over time as we continue to execute that strategy.
Speaker Change: It will increase in the future got it.
Speaker Change: Got it thanks, a lot guys.
Scott: Thanks Scott.
Speaker Change: The next question is from Stephen So coming from Citigroup. Steven Your line is open. Please go ahead.
Speaker Change: Yeah.
Speaker Change: Great. Good morning, Thanks for taking much for taking my question.
Speaker Change: Hey.
Speaker Change: My question was just on the improvement you've seen in the business.
Speaker Change: Talked about February being choppy and things have improved.
Speaker Change: Typically on the probe side how.
Speaker Change: How much of that do you think the industry seeing some better growth after 2024, probably being a reset year versus maybe your own execution with something a pro initiatives.
Speaker Change: Yeah. So.
Speaker Change: Great question.
Speaker Change: When I look at the business I look at what our teams are doing and I look at the initiatives and they say hey does that makes sense is that what are those fundamentals of auto parts in terms of activities and I absolutely see it in the protein and so we go to market with pro with really.
Speaker Change: Two major bodies.
Speaker Change: The first is our outside sales team, we have hundreds of men and women who visit our customers every day and then we have thousands of team members in our stores called commercial parts pros. If we look at the activities, we're taking and that ranges from making sure. We've got the incentive and compensation plans right that looks in terms of how we recruit and put people into those roles.
Speaker Change: That looks to training that we've re initiated at scale to make sure that they're properly equipped and then in terms of how we do call planning and who they call on and when they see them and then what do they say when they go see a customer and making sure correspondingly that we've been thoughtful about where relative.
Speaker Change: Pricing is for different pros based on what they buy and how much they buy so theres a lot of analysis going in there is there is investment in our people. There is energy we brought our team together for the first time in a decade earlier. This year. So that's certainly having an impact in terms of our ability to.
Speaker Change: Two.
Speaker Change: Get business with pros and I hear it as well because I will go out and visit frozen they'll say Hey, you guys are now more relevant to me as I think about making the call not the least of which by the way is the DMA availability work pros when they have a car on the lift and they make the call. It's like do you have the part we're saying yes more for.
Speaker Change: Frequently than we were in the past and then add to the mix. Then the first question is do you have it yes or no and second is when can I get it we've shaved 10 minutes off the delivery time. So those two components also make a big difference so certainly.
Speaker Change: We are.
Speaker Change: Subject to the market forces up and down but there is internal things that we control that we're improving that are making us more relevant with pro customers.
Speaker Change: Okay.
Speaker Change: Okay, then the follow up I had.
Speaker Change: Drilling down on the second quarter with comps expected to be flattish how should we think about.
Speaker Change: To build a transactions versus ticket in that second quarter.
Stephen So: Yes Stephen.
Stephen So: No not guiding specifically on those but I would say Paul we are expecting the trends in <unk> to continue.
Speaker Change: And I think it's still early and.
Speaker Change: Volatile we are monitoring the demand elasticity, given this tariff environment and understanding.
Speaker Change: Pushes and pulls there as we move price into the market. So.
Speaker Change: Not going to guide to those specific just given the volatile nature of the current environment with tariffs.
Speaker Change: Our confident in.
Speaker Change: And what would put it.
Speaker Change: I just want to say thanks for the question I want to say one other thing on the pro universe that helps us know whether or not we're doing the right things and that's our independent owners, so our independent owners.
Speaker Change: They will give you raw feedback on how well they think youre doing on different dimensions and by the way they basically index entirely towards the pro universe and so we're grateful to have them as part of our network. We think we've got the right number of independence.
Speaker Change: And they're giving us feedback on how we're doing on our availability in terms of getting products to them and I talked to one of our independent owners that hey, I've seen I've seen a noticeable improvement in my ability to get the parts that ultimately I need to take care of customers. So that's another benchmark.
Speaker Change: US sort of calibrate towards.
Speaker Change: Are we on the right track for for working with pros.
Speaker Change: Thank you.
Speaker Change: Our final question today comes from Steven Forbes with Guggenheim Steven Your line is open. Please go ahead.
Speaker Change: Yeah.
Speaker Change: Good morning, Ryan.
Speaker Change: I wanted to touch on.
Speaker Change: The servicing model I think.
Speaker Change: Good you mentioned in the call 10% of stores are alive with labor scheduling.
Speaker Change: Asset allocation models.
Speaker Change: It was one of the few things you didn't comment on sort of what youre seeing in terms of improved performance right within those stores that have that model. So I was wondering if you can maybe first and foremost just expand on sort of what youre doing right in the store what youre seeing in the store and if youre seeing from a visible lift in core kpis in the back of leaning into.
Speaker Change: Servicing model.
Speaker Change: Yes, great question. So there's a number of things that go into the store operating model one of the things that you're you're latching on to is how do we look at the asset allocation of vehicles and driver hours and if you look across our fleet well we found.
Speaker Change: When we first started this project is there would be areas in the company.
Speaker Change: There are store would have four vehicles, but really only used three.
Speaker Change: And there'll be another store that had two vehicles and really wanted a third and usually gm's, we'll hold onto their vehicles.
Speaker Change: If you leave that in their purview because they are optimistic about what they can do in the future. So so we're being smarter about where do we put a vehicle and then making sure a correspondingly if you have a vehicle and you got the demand that you have the hours with the driver to operate the vehicle and so we've been testing multiple parameters and that includes when a vehicle moves.
Speaker Change: Over and then how many hours you get with that vehicle doesn't vehicle come for example, with 35 hours or 40 hours or 45 hours and we're encouraged by the results in that we know there is that as we do this work theres an unlock for the company, we're not ready to put anything out just yet for everybody here because it's early days.
Speaker Change: But let us let us keep working on it and when we've got sort of a crystallized insight.
Speaker Change: Affordable, we'll bring it to you.
Speaker Change: I appreciate that John and then just a quick follow up here.
Speaker Change: The comment <unk>, 75% of stores now and markets, where you are number one or number two in store density.
Speaker Change: Often get asked what does that mean in terms of market share in and not that I expect you to sort of flip that for us, but just just what's the high level sort of view our message you're trying to express what that statement right number one number two and density what sort of a big takeaway that we should leave with today. So we've got a right to participate.
Speaker Change: Paid and win in those markets based on.
Speaker Change: The legacy of our company.
Speaker Change: Commonly the duration that we've been in that market the ability to to service pro customers in terms of proximity the ability to be around the corner for.
Speaker Change: For DIY is the ability for our team members to have to have great careers, the ability for our Dcs to logistically serve them effectively so so.
Speaker Change: In retail and I know I'll add distribution, because that's that's kind of how you think about some of the product flows and customers' density matters.
Speaker Change: And so having that versus we participated in markets, where we were far thinner and it was much more expensive to serve and on a relative basis. There were many more competitive outlets.
Speaker Change: As a tougher trajectory to run as a company versus where in our core markets now executing our pillars with the store framework I mean, we've got we've got in the U S 4100 stores in.
Speaker Change: 750 independence so.
Speaker Change: We're in the market ready to serve.
Speaker Change: Thank you.
Speaker Change: With that I'll hand back to the management team for some closing comments.
Speaker Change: Yeah.
Speaker Change: So I want to thank everybody first and most importantly, the members of advance auto parts continued effort in our turnaround sticking to our pillars and delivering the quarter that we just delivered we will look forward to seeing everybody in August on our next call and thank you for participating today take care Bye bye.
Speaker Change: This concludes today's call. Thank you very much for your attendance you may now disconnect your lines.
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