Q2 2025 Genuine Parts Co Earnings Call
Unknown Executive: Quarter 2025 Earnings Conference. At this time, all lines are in listen only. Following the presentation, we will conduct a question and answer session.
Unknown Executive: If at any time during this call you require immediate assistance, please press star zero for the opera. Call is being recorded on Tuesday, July 22, 2025.
Tim Walsh: At this time, I would like to turn the conference over to Tim Walsh, Vice President of Investor Relations. Please go ahead, sir. Thank you and good morning everyone.
Good day, ladies and gentlemen, welcome to the genuine parts company. Second quarter 2025 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 me to assistance, please press star zero for the operator. This call is being recorded on Tuesday, July 22nd 2025. At this time, I would like to turn the conference over to Tim Walsh, vice president of investor relations. Please go ahead sir.
William Stengel: Welcome to Genuine Parts Company's second quarter 2025 earnings call.
William Stengel: With me on the call today are Will Stengel, President and Chief Executive Officer, and Burton Napier, Executive Vice President and Chief Financial Officer. In addition to this morning's press release, a supplemental slide presentation can be found on the investors page of the Genuine Parts Company website. Today's call is being webcast and a replay will also be made available on the company's website after the call.
Thank you and good morning, everyone. Welcome to genuine parts companies. Second quarter, 2025 earnings call.
Speaker Change: With me on the call today, are Will stingle President and chief executive officer and Bert, nappier Executive, Vice President, and Chief Financial Officer. In addition to this morning's press release, a supplemental slide presentation can be found on the investors page of the genuine parts company website.
Tim Walsh: Following our prepared remarks, the call will be open for questions. The responses to which will reflect managers' views as of today, July 22, 2025. If we're unable to get to your questions, please contact our investor relations Please be advised this call may include certain non-GAAP financial measures to 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.
Speaker Change: Today's call is being webcast and a replay will also be made available on the company's website after the call.
Speaker Change: Following our prepared remarks, the call will be open for questions the responses to, which will reflect Management's views as of today. July 22nd, 2025, if we're unable to get to your questions, please contact our investor Relations Department.
Speaker Change: Please be advised. This call may include certain non-gaap Financial measures to, which may be referred to during today's discussion of our results. As reported under generally accepted accounting principles.
Tim Walsh: Today's call may also involve forward-looking statements regarding the company and its businesses as defined in the Private Security Litigation Reform Act of 1995. The company's actual results could differ materially from any forward-looking statements due to several important factors described in the company's latest SEC filings, including this morning's press release. The company assumes no obligation to update any forward-looking statements made during this call.
Speaker Change: A Reconciliation of these measures is provided in the earnings press release.
Speaker Change: 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 the company's actual results could differ materially from any forward-looking statements due to several important factors described in the company's latest SEC filings including this morning's press release.
William Stengel: With that, I'll turn it over to Will. Thank you, Tim. Good morning, everyone, and thank you for joining our second quarter 2025 earnings call. As always, I want to start by thanking our over 63,000 GlobalGPC teammates. Our teammates are at the heart of everything we do, and our team's relentless dedication and commitment to serving our customers is the core of our success. Turning to our results for the second quarter, a few highlights include total GPC sales of $6.2 billion, up 3.4% versus the same period in the prior year. Gross margin expansion of 110 basis points versus the same period last year, reflecting our strategic pricing and sourcing initiatives and the ongoing benefits from acquisition.
Speaker Change: The company assumes no obligation to update any forward-looking statements made during this call.
Will Stingle: With that, I'll turn it over to Will.
Will Stingle: Thank you, Tim. Good morning, everyone and thank you for joining our second quarter 2025 earnings call.
Will Stingle: As always, I want to start by thanking our over 63,000 global GPC teammates.
Will Stingle: Our teammates are at the heart of everything we do. And our teams, Relentless dedication and commitment to serving. Our customers is the core of our success.
Will Stingle: Turning to our results. For the second quarter, a few highlights include total GPC sales of 6.2 billion up 3.4% versus the same period in the prior year.
William Stengel: And continued progress with our global cost initiatives, which are helping to manage our SG&A profile in an inflationary environment. Our results for the quarter reflect execution of our strategic initiatives and cost actions, partially offset by ongoing weakness in market conditions and persistent cost inflation. We're operating in an environment that has presented several challenges, including enacted tariffs in the U.S. and ongoing trade uncertainty, along with high interest rates and a cautious end consumer. Despite this, we faced the challenges head on, made prudent changes, and acted with purpose while continuing to progress our strategic priorities to enhance the business.
Will Stingle: Gross margin expansion of 110 basis points versus the same period last year, reflecting our strategic pricing and sourcing initiatives and the ongoing benefits from acquisitions.
Will Stingle: And continued progress with our Global cost initiatives which are helping to manage our sgna profile and an inflationary environment.
Will Stingle: Our results for the quarter, reflect execution of our strategic initiatives and cost actions partially offset by ongoing weakness in market conditions and persistent cost inflation.
Will Stingle: We're operating in an environment that is presented several challenges, including enacted, tariffs in the US and ongoing trade uncertainty along with high interest rates, and a cautious and consumer.
William Stengel: Our diverse geographic mix, ongoing productivity and cost initiatives, along with disciplined investments we're making across the business, allowed us to close out the first half of 2025 with performance in line with our expectations.
Will Stingle: Purpose, while continuing to progress our strategic priorities to enhance the business.
William Stengel: A key theme in 2025 has been the tariffs announced by the U.S. administration. Tariffs did not have a significant impact in our financial results through the end of the second quarter, but we expect to see an impact in the back half of the year if current tariffs remain in place.
Will Stingle: Our diverse Geographic mix ongoing productivity and cost initiatives along with disciplined Investments. We're making across the business. Allowed us to close out the first half of 2025 with performance in line with our expectations
Will Stingle: A key theme in 2025 has been the tariffs announced by the US Administration.
William Stengel: Bert will share more details about the scenarios we considered as we work to provide our latest forward outlook. There's a significant amount of ongoing internal activity associated with managing through the tariff. I'm proud of the way in which the global teams have rallied together to leverage our global relationships and our OneGPC team approach to navigate the environment. We have a global cross-functional command center set up that meets multiple times a week to analyze and manage the changing data. Importantly, our focus in these times is to help support our customers. For example, I recently spent time in the field with motion customers.
Will Stingle: Terrorists did not have a significant impact on our financial results through the end of the second quarter, but we expect to see an impact in the back half of the year. If current tariffs remain in place,
Will Stingle: B will share more details about the scenarios we considered as we work to provide our latest forward Outlook.
Will Stingle: There's a significant amount of ongoing internal activity associated with managing, through the tariffs.
Will Stingle: I'm proud of the way in which the global teams have rallied together to leverage our Global relationships and our 1gp, team approach to navigate the environment.
Will Stingle: We have a global cross-functional Command Center, set up that meets multiple times a week to analyze and manage the changing data.
Will Stingle: Importantly, our focus in these times is to help support our customers.
William Stengel: We were with a customer showcasing a proprietary digital tariff calculator built by our technology teams that helps our customers understand their specific exposure to tariffs and the solutions we can offer to help them problem solve. This level of transparency and support has been very well received. Our capabilities at scale, access to global resources, and relationships with our strategic suppliers makes a difference for our customers in moments such as these.
Will Stingle: for example, I recently spent time in the field with motion customers,
Will Stingle: we were with a customer, showcasing a proprietary, digital tariff calculator built by our technology teams, that helps our customers understand their specific exposure to tariffs, and the solutions we can offer to help them problem solve.
This level of transparency and support has been very well received.
William Stengel: As we discussed during the April call when we offered various guidance scenarios, we'll update you today with our latest perspectives, including how tariffs might impact us through the balance of the year. Our industry demand remains driven by break-fix customer needs, which results in an ability to pass through prices, and the competitive activity in our industries remains rational. The magnitude of where tariffs will ultimately land and how demand will be impacted remains fluid. That said, we remain cautiously optimistic on market improvement in the back half relative to last year, but likely with a slower pacing versus when we first gave our outlook back in February, which requires us to update the outlook.
Will Stingle: our capabilities at scale, access to global resources and relationships with our strategic suppliers, makes a difference for our customers in moments such as these
Will Stingle: as we discussed during the April call. When we offered various guidance scenarios, we'll update you today with our latest perspectives, including how tariffs might impact us through the balance of the year.
Will Stingle: Our industry demand remains driven by break, fix customer needs which results in an ability to pass through prices and the competitive activity in our Industries remains rational.
The magnitude of where tariffs will ultimately land and how demand will be impacted remains fluid.
Will Stingle: that said we remain cautiously optimistic on Market Improvement in the back half relative to last year, but likely with a slower pacing versus when we first gave our Outlook back in February
William Stengel: Despite that, the tone of recent customer discussions has been generally positive as many customers want to cautiously push forward despite the fluid environment. Customers are looking for value from their partners in this environment, and we're well positioned to help with leading product assortment and service solutions.
Will Stingle: which requires us to update the Outlook.
Will Stingle: Despite that the tone of recent customer discussions has been generally positive, as many customers want to cautiously push forward, despite the fluid environment.
William Stengel: As we continue to operate in this dynamic environment, we'll stay focused on controlling what we can control, staying agile to serve our customers while focusing on the basics, investing with discipline, and executing initiatives at pace to enhance our operations and drive long-term value for our stakeholders.
Will Stingle: Customers are looking for Value from their Partners in this environment and we're well positioned to help with leading product, assortment and Service Solutions.
As we continue to operate in this Dynamic environment, will stay focused on controlling what we can control.
Will Stingle: Staying agile to serve our customers, while focusing on the basics. Investing with discipline and executing initiatives at PACE to enhance our operations and drive long-term value for our stakeholders.
William Stengel: Turning to our results by business segment, during the second quarter, total sales for global industrial were $2.3 billion, an approximately 1% increase versus the same period in the prior year, with comparable sales essentially flat. The second quarter represented the first quarter of sales growth for the industrial segment in the last 12 months. Looking at the performance across our end markets, we saw growth in five of our 14 end markets, which is up from three in the first quarter. and with strength in pulp and paper, aggregate and cement, and food products. This growth was offset by softer demand in markets with heavy exposure to global commodities like iron and steel, automotive, and oil and gas.
Turning to our results by business segments.
Will Stingle: During the second quarter, total sales for Global industrial were 2.3 billion in approximately 1% increase versus the same period in the prior year, with comparable sales, essentially flat,
Will Stingle: the second quarter represented, the first quarter of sales growth for the industrial segment, in the last 12 months,
Looking at the performance across our end markets, we saw growth in 5 of our 14 end markets, which is up from 3 in the first quarter.
And with strength in Pulp and Paper Aggregate and cement and food products.
This growth was offset by softer, demand in markets with heavy exposure, to Global Commodities like Iron and Steel automotive, and oil and gas.
William Stengel: Our core MRO and maintenance business, which accounts for approximately 80% of motion sales, was up low single digits during the quarter, with continued strength with our national account customers. The remaining 20% of motion sales, which originates from more capital-intensive projects, including our value-added service offerings like fluid power and automation, was down low single digits during the quarter as customers continue to selectively defer orders. However, our current value added solutions backlog has improved versus last year and has been showing positive momentum year to date. As it relates to other general market data, we were encouraged at the start of the year as industrial activity metrics like industrial production and PMI were trending in the right direction.
Our core mro and maintenance business, which accounts for Approximately 80% of motion, sales was up low. Single digits during the quarter with continued strength with our national account customers
The remaining 20% of motion sales which originates from more Capital intensive projects including our value added service offerings like fluid power and automation with down low single digits during the quarter as customers continue to selectively defer orders.
Will Stingle: However, our current value added Solutions backlog has improved versus last year and has been showing positive momentum year to date.
William Stengel: Unfortunately, as the trade and tariff uncertainty picked up in March through the second quarter, we saw the PMI sentiment metric revert below 50 and stay there for the last four months. As we've shared before, we remain bullish on the outlook for motion once the industrial economy returns, as history shows that the industrial economy experiences sustained periods of growth following a contraction cycle. Despite the sluggish market, new industrial opportunities continue to arise as trade policies evolve, including, for example, data centers, semiconductors, power generation and mining. We're also pleased to see continued progress with returns from our digital investments as we work to create a seamless, embedded, and personalized digital experience for our diverse customer base.
Will Stingle: Real activity metrics, like industrial production, and PMI. We're trending in the right direction.
Will Stingle: Unfortunately it's the trade and tariff uncertainty picked up in March. Through the second quarter, we saw the PMI sentiment metric, revert below 50 and stay there for the last 4 months.
Will Stingle: As we've shared before, we remain bullish on the outlook for motion. Once the industrial economy returns as history shows that the industrial economy experiences sustained periods of growth following a contraction cycle.
Will Stingle: Despite the sluggish Market, New industrial opportunities, continue to arise as trade policies evolve, including, for example, data centers, semiconductors power, generation and Mining.
William Stengel: eCommerce, which mostly represents our customer digital integrations, as well as Motion.com, continues to deliver outsized growth driven by specific data and product enhancements that leverage Gen-AI. Today, e-commerce sales at motion are 40% of sales, up over 10% versus the start of 2024. Switching to industrial profit, during the second quarter, segment EBITDA was approximately $288 million and 12.8% of sales, representing a 10 basis point increase from the same period last year. The Motion Team continues to execute pricing and sourcing initiatives, as well as proactively managing cost with impressive discipline in this low-growth environment. Turning the global automotive segment, sales in the second quarter increased 5.0% with comparable sales growth up approximately half a percent.
Will Stingle: We're also pleased to see continued progress with returns from our digital Investments as we work to create a seamless embedded and personalized digital experience for our diverse customer base.
Will Stingle: E-commerce, which mostly represents our customer digital Integrations as well as motion.com continues to deliver outsized. Growth driven by specific data and product enhancements that leverage Genai.
Will Stingle: Today, e-commerce sales at motion are 40% of sales up over 10% versus the start of 20124.
Will Stingle: Switching to Industrial profit. During the second quarter segment, Evita was approximately 288 million and 12.8% of sales. Representing a 10 basis point increase from the same period last year,
Will Stingle: the motion team continues to execute pricing and sourcing initiatives, as well as proactively managing costs with impressive discipline. In this low growth environment.
William Stengel: Global automotive segment EBITDA on the second quarter was $338 million, which was 8.6% of sales, representing a 110 basis point decrease from the same period last year. Our second quarter results for the global automotive segment reflect inflationary pressures from higher costs in salaries and wages, rent and freight in each of our geographies.
Will Stingle: Turning the Global Automotive segment sales in the second quarter, increased 5.0% with comparable, sales growth up, approximately half a percent.
Global Automotive segment. Evida on the second quarter was 338 million which was 8.6% of sales, representing a 110 basis, point decrease from the same period last year.
Will Stingle: Our second quarter results for the Global Automotive segment, reflect inflationary pressures from higher costs in salaries and wages rent, and Freight in each of our geographies.
William Stengel: Before we turn to our results by geography in our automotive business, we wanted to touch on an important leadership transition we announced during the quarter in our North America automotive business. On behalf of the entire GPC team, we'd like to congratulate Randy Brough on his well-deserved planned retirement. Randy has been a key leader at GPC for 14 years and played a vital role in growing and improving our industrial business before coming over to lead our U.S. automotive business in June of 2023 as part of an expanded role. We sincerely thank Randy for his outstanding contributions and leadership during his tenure at GPC.
Will Stingle: Before we turn to our results by geography and our Automotive business, we wanted to touch on an important leadership transition. We announced during the quarter in our North America Automotive business.
Will Stingle: On behalf of the entire GPC team, we'd like to congratulate Randy, bro, on his well-deserved planned, retirement.
Will Stingle: Randy has been a key leader at GPC for 14 years and played a vital role in growing and improving our industrial business before coming over to lead our Us automotive business in June of 2023 as part of an expanded role.
William Stengel: With Randy's retirement, we also want to congratulate Elaine Moss on his promotion from President of our Canadian Automotive Business to the newly created role of President, North America Automotive, effective August 1st. Elaine brings over 14 years of progressive leadership experience within GPC and a deep understanding of the automotive aftermarket and NAPA operating model. His proven leadership and success in driving performance, combined with his relevant industry experience and established relationships, will help build on the momentum in our North America automotive business.
Will Stingle: We sincerely, thank Randy for his outstanding contributions and Leadership during his tenure at GPC.
With ry's retirement. We also want to congratulate Elaine moss on his promotion from president of our Canadian Automotive business to the newly created role of President North America Automotive effective August 1st
Elaine brings over 14 years of progressive leadership experience, within GPC and a deep understanding of the automotive aftermarket and Napa operating model.
William Stengel: Now let's turn to our automotive business performance by geography. Starting in the U.S., total sales for the second quarter were up 4%, with comparable sales essentially flat. Comparable sales for our company owned stores were up approximately 2% while independent purchases were down low single digit Sentiment with independent owners is showing signs of improvement, but still reflects ongoing pressure many small businesses are feeling from high interest rates and an uncertain macro environment. sales out at both company owned and independently owned stores improved sequentially versus the first quarter. By customer type, total sales to our commercial customers were up low single digits, while sales to our retail customers decreased mid-single digit.
Will Stingle: His proven leadership and success in driving performance combined with his relevant. Industry. Experience in established relationships, will help build on the momentum in our North America Automotive business.
Speaker Change: Now, let's turn to our Automotive business performance by geography.
Speaker Change: Starting in the US total sales for the second quarter were up 4% with comparable sales, essentially flat.
Speaker Change: Comparable sales for our company-owned stores were up approximately 2%, while independent purchases were down, low single digits.
Speaker Change: Sentiment with independent owners is showing signs of improvement but still reflects ongoing pressure. Many small businesses are feeling from high interest rates and an uncertain macro environment.
Speaker Change: Sales out at both company-owned and independently owned stores. Improved sequentially versus the first quarter.
William Stengel: Within commercial, all four of our customer segments were positive, with notable strength and sequential improvement in auto care and major accounts. Looking at our product categories at a high level, we've generally seen consistent performance over the last four quarters, with non-discretionary repair categories being the strongest, and upload them in single digits. Maintenance and service categories, flat to slightly up in the second quarter. This quarter, discretionary categories were flat, improved from last quarter, driven by specific category initiatives in our Tool and Equipment Office.
Speaker Change: By customer type total sales to our commercial customers were upload, single digits while sales to our retail customers, decrease mid single digits.
Speaker Change: Within commercial, All 4 of our customer. Segments, were positive with notable strengths and sequential Improvement in Autocare and major accounts.
Discretionary repair categories being the strongest and upload them in single digits.
Speaker Change: Maintenance and Service categories flat to slightly up in the second quarter.
William Stengel: The U.S. automotive team is actively managing tariffs. Our total purchases exposure to China is approximately 20% at U.S. automotive, which we believe is in line with or slightly below our competitors of scale. Our proactive efforts to strategically diversify our supply chain following the pandemic has served us well. Today, we continue to have active engagement with suppliers, but the number of inbound conversations to discuss tariffs has reduced versus April and May levels, and the magnitude of the cost increases has also moderated. Our scale and analytics positions us well versus smaller competitors to react to and negotiate with a global manufacturing base.
Speaker Change: This quarter discretionary categories, were flat improved from last quarter driven by specific category initiatives in our Tool and Equipment offering.
Speaker Change: The US Automotive team is actively managing tariffs. Our total purchases exposure to China is approximately 20% at Us automotive, which we believe is in line with or slightly below our competitors of scale.
Our proactive efforts to strategically diversify, our supply chain following, the pandemic has served us. Well,
Speaker Change: today we continue to have active engagement with suppliers, but the number of inbound conversations to discuss tariffs has reduced versus April and May levels and the magnitude of the cost increases has also moderated
William Stengel: In fact, we recently hosted a supplier conference in China with all GPC automotive businesses to showcase the diversity and strength of our footprint.
Our scale and analytics positions as well versus smaller competitors to react to and negotiate with a global manufacturing base.
In fact, we recently hosted a supplier conference in China with all GPC Automotive businesses to showcase the diversity and strength of our footprint.
William Stengel: Additionally, during the second quarter, we acquired 32 stores from independent owners and competitors in the U.S. These stores, along with the 44 stores acquired in the first quarter, strengthen our footprint in strategic priority markets. We continue to make great progress with the integration of the stores we acquired last year, including the acquisitions of MPEC and Walker. In May, we hit the one-year anniversary of the MPEC acquisition, and our integration and synergy capture are on track. We've now onboarded 100% of the stores to our systems and are focused on driving growth and operational improvement. MPEC is fully rolled into our comparable sales figure beginning in May and Walker will fully roll into the comparable sales figure in August.
Speaker Change: Additionally, during the second quarter, we acquired 32 stores from independent owners and competitors in the US.
Speaker Change: these stores along with the 44 stores, acquired in the first quarter, strengthen our footprint in strategic priority markets,
Speaker Change: We continue to make great progress with the integration of the stores we acquired last year, including the Acquisitions of Mech and Walker.
Speaker Change: In may we hit the 1 year anniversary of the mech acquisition, and our integration and Synergy capture are on track.
Speaker Change: We've now onboarded a 100% of the stores to our systems and our focused on driving growth and operational improvements.
William Stengel: Our progress with Walker is also on track operationally and financially.
Speaker Change: Mech is fully rolled into our comparable, sales figure, beginning in May and Walker will fully roll into the comparable sales figure in August.
William Stengel: Turning to Canada, total sales increased approximately 5% in local currency versus the same period last year, with comparable sales increasing approximately 4%. Both our automotive and heavy duty businesses are performing well, with heavy duty outperforming in the quarter. In addition, several of our investments in Canada, including a new distribution center in Mississauga and a micro market prioritization initiative are driving results ahead of our expectations. We've seen differentiated growth in the local markets as a result of these targeted investments. Our Canada team is continuing to outperform the market despite an ongoing soft macro environment.
Speaker Change: Our progress with Walker is also on track, operationally and financially.
Turning to Canada, total sales increased approximately 5% in local currency versus the same period last year with comparable sales, increasing approximately 4%.
Speaker Change: Those are automotive and heavy duty businesses are performing well with heavy duty outperforming in the quarter.
Speaker Change: In addition several of our investments in Canada including the new Distribution Center in mississaga and a micro Market prioritization initiative are driving results. Ahead of our expectations.
Speaker Change: We've seen differentiated growth in the local markets, as a result of these targeted Investments.
Our candidate team is continuing to outperform the market despite an ongoing soft macro environment.
William Stengel: In Europe, total sales were flat in local currency, with comparable sales down approximately 1%. The team in Europe is working aggressively to navigate a muted market, payroll and rent inflationary pressures, and a fluid geopolitical backdrop. Despite this, the expansion of the NAPA brand and wins with key accounts continues to perform well and deliver performance in line or better than market. Priority areas of focus in Europe continue to be profitable growth, pricing and sourcing initiatives, cost reduction programs, and the delivery of strategic projects.
In Europe, total sales were flat in local currency with comparable sales down approximately 1%.
Speaker Change: The team in Europe is working aggressively to navigate a muted Market, payroll and rent, inflationary pressures and a fluid geopolitical backdrop.
Speaker Change: Despite this the expansion of the Napa brand and wins with key accounts continues to perform well and deliver performance in line or better than Market.
William Stengel: Rounding out automotive, our team in AsiaPac continues to take market share and delivered another quarter of double-digit growth in local currency, driven by both organic initiatives and contributions from recent acquisitions. Total sales increased approximately 13% with comparable sales growth of approximately 5%. Both our trade and retail businesses put up strong numbers during the quarter, with retail continuing a strong run of standout performance. Retail sales were again up high single digits in the quarter and showing strength relative to the competition in all other local retail segments. Our in-flight initiatives are working well, and the local team is energized to build on the strong momentum.
Priority areas of focus in Europe, continue to be profitable growth pricing and sourcing initiatives, cost reduction programs and the delivery of strategic projects.
Speaker Change: Rounding Out Automotive, our team in Asia, Pac continues to take market share and delivered. Another quarter of double digit growth in local currency, driven by both organic initiatives and contributions from recent acquisitions.
Total sales increased approximately 13% with comparable sales growth of approximately 5%.
Speaker Change: Both our trade and Retail businesses, put up strong numbers during the quarter with retail, continuing a strong run of standout performance.
Speaker Change: Retail sales were again up high single digits in the quarter and showing strength relative to the competition and all other local retail segments.
William Stengel: In summary, our first half results were in line with our expectations despite a dynamic environment. As we start the second half of the year, we're focused on controlling what we can control while proactively navigating the external environment. We're cautiously hopeful, given multiple green shoots of encouraging data points, but are appropriately updating our near-term outlook given the uncertainty.
Speaker Change: Our in-flight initiatives are working well and the local team is energized to build on the strong momentum.
In summary, our first half results were in line with our expectations despite a dynamic environment.
As we start the second half of the Year, we're focused on controlling what we can control while proactively navigating the external environment.
William Stengel: If we take a step back for a moment, we operate in two highly fragmented markets, attractive industries that are break, fix in nature. Our diversified geographic presence and balanced business portfolio provide meaningful differentiation. Our scale and strong global partnerships continue to offer advantages relative to many smaller competitors, as we can offer customers differentiated solutions. The near and long-term fundamentals of our markets are attractive and we remain intensely focused on executing our global strategic priorities to create shareholder value.
Speaker Change: We're cautiously hopeful given multiple green shoots of encouraging data points but are appropriately updating. Our near-term Outlook given the uncertainty.
Speaker Change: Fragmented markets, attractive, industries that are break fix in nature.
Speaker Change: Our Diversified Geographic presence and balanced business portfolio, provide meaningful differentiation.
Our scale and strong Global Partnerships. Continue to offer advantages relative to many smaller competitors as we can offer, customers differentiated Solutions.
William Stengel: In closing, I want to thank our shareholders, customers, and business partners for their trust and ongoing support. And importantly, I extend my appreciation again to our GPC teammates for your hard work and dedication to our customers.
Speaker Change: The near and long-term fundamentals of our markets are attractive and we remain intensely focused on executing our Global strategic priorities to create shareholder value.
Burton Napier: I'll now turn the call over to Bert. Thanks, Will. And thanks to everyone for joining the call. Our second quarter performance was in line with our expectations as we offset continued weakness in market conditions and tariff uncertainty with execution of our strategic initiatives and cost actions. Our discussion of our second quarter performance and outlook will focus primarily on adjusted results, which exclude the non-recurring costs related to our global restructuring program and costs related to the acquisition of MPEC and Walker. During the second quarter, these costs totaled $46 million of pre-tax adjustments or $37 million after tax.
In closing, I want to thank our shareholders customers and business partners for their trust and ongoing support. And importantly, I extend my appreciation again to our GPC, teammates for your hard work and dedication to our customers. I'll now turn the call over to Burton.
Burton: Thanks will and thanks to everyone for joining the call.
Speaker Change: Our second quarter performance was in line with our expectations, as we offset continued, weakness and market conditions and tariff uncertainty with execution of our strategic initiatives and cost actions.
Speaker Change: Our discussion of our second quarter performance and Outlook will focus primarily on adjusted results.
Which exclude the non-recurring costs related to our Global restructuring program and costs related to the acquisition of Mech and Walker?
Burton Napier: As expected, earnings were down in the second quarter as our profitability was negatively impacted by lower pension income and higher depreciation and interest expense, which cumulatively totaled a 29 cent negative EPS impact. As we shared in April, we expected these factors to drive second quarter earnings down by 15 to 20%, and we finished the quarter with an adjusted EPS of $2.10, down 14% to prior year. Our results for the quarter include an immaterial benefit from the impacts of the newly enacted tariff.
Speaker Change: During the second quarter, these costs totaled 46 million of pre-tax adjustments or 37 million after tax.
as expected earnings were down in the second quarter as our profitability was negatively impacted by lower pension income and higher depreciation, and interest expense, which cumulatively totaled, a 29 Cent negative, EPS impact
Speaker Change: As we shared in April, we expected these factors to drive second quarter, earnings down by 15 to 20%. And we finished the quarter with an adjusted EPS of $2.10 down 14% to Prior year.
Burton Napier: I'll provide some additional comments around tariffs in connection with our outlook. Now let's turn to the details of the quarter, starting with sales. Total GPC sales increased 3.4% in the second quarter, which included a benefit from acquisitions of 260 basis points, a 20 basis point improvement and comparable sales, and a foreign currency tailwind of 40 basis points. Inflation and pricing was a little more than 1%, including the impact from tariffs. Notably, while PMI remained in contractionary territory throughout the quarter, industrial segment sales increased approximately 1% year over year. Our gross margin was 37.7% in the second quarter, an increase of 110 basis points from last year.
Our results for the quarter include an immaterial benefit from the impacts of the newly enacted tariffs.
Speaker Change: I'll provide some additional comments around tariffs and connection with our Outlook.
Now, let's turn to the details of the quarter starting with sales.
Speaker Change: Total GPC sales, increase 3.4% in the second quarter, which included a benefit from Acquisitions of 260 basis points, a 20 basis, point Improvement, and comparable sales.
And a foreign currency Tailwind of 40 basis points.
Speaker Change: Inflation. And pricing was a little more than 1% including the impact from tariffs.
Speaker Change: Notably while PMI remained in contractionary territory, throughout the quarter and Industrial segments, sales increased approximately 1% year-over-year.
Burton Napier: The improvement in our gross margin was driven by the ongoing execution of our sourcing and pricing initiatives, along with the continued benefit of acquisitions. Our one year anniversary of the NPEC acquisition occurred on May 1st and we will hit the one year anniversary of the Walker acquisition on August 1st.
Speaker Change: Growth margin was 37.7% in the second quarter and increase of 110 basis points from last year.
Speaker Change: The improvement in our gross margin was driven by the ongoing execution of our sourcing and pricing initiatives along with a continued benefit of acquisitions.
Speaker Change: Our 1 year anniversary of the NPC acquisition occurred on May 1st.
Burton Napier: As a result, we would expect the rate of gross margin expansion in the second half of 2025 to be below what we reported in the first half. Our adjusted SG&A as a percentage of sales for the second quarter was 28.7%, up 150 basis points year over year, with the rate of de-leverage continuing to improve sequentially. On an adjusted basis, SG&A grew in absolute dollars by approximately $145 million, including nearly $85 million in impacts from acquisitions and foreign currency. The SG&A impact of our M&A activity will diminish over time as we anniversary the remaining acquisitions and continue to realize the anticipated synergies from the integration of these businesses.
And we will hit the 1-year anniversary of the Walker, acquisition on August 1st.
Speaker Change: As a result, we would expect the rate of gross margin expansion. In the second half of 2025, to be below what we reported in the first half.
Speaker Change: Our adjusted sgna as a percentage of sales. For the second quarter was 28.7% up 150 basis points year-over-year with the rate of the leverage continuing to improve sequentially.
Speaker Change: On an adjusted basis, sgna grew in absolute dollars by approximately 145 million, including nearly 85 million in impacts from Acquisitions and foreign currency.
Burton Napier: Our core SG&A grew $60 million in the quarter, or approximately 3.5% as we continue to manage the rate of growth in our core expenses. Within our core SG&A, the increase was primarily driven by salaries and wages associated with our annual merit adjustments for our teams, which generally occur on April 1st, as well as higher year-over-year incentive compensation costs as our programs are reinstated to target levels. In addition, increases to rent expense as renewals occur in higher rate environments and higher freight expenses as we improve service to our customers drove core SG&A increases in the quarter.
Speaker Change: The sgna impact of our m&a. Activity will diminish over time as we anniversary, the remaining Acquisitions, and continue to realize the anticipated synergies from the integration of these businesses.
Speaker Change: Our core sgna grew 60 million in the quarter or approximately 3.5%, as we continue to manage the rate of growth in our core expenses.
Speaker Change: Within our core sgna. The increase was primarily driven by salaries and wages associated with our annual Merit adjustments for our teams, which generally occur on April 1st, as well as higher year-over-year incentive compensation costs as our programs are reinstated to Target levels.
Burton Napier: We continue to work to improve our long term cost structure, aligning to market realities, and ultimately getting to our expectation for leverage in SG&A.
Speaker Change: In addition, increases to rent expense as renewals occur in higher rate, environments and higher Freight expenses, as we improve service to our customers, drove core sgna increases in the quarter.
Burton Napier: Our results for the quarter include the benefit of the actions we are taking associated with our restructuring activities. During the quarter, we incurred restructuring costs of $45 million and realized approximately $33 million of cost savings, or a benefit of $0.18 per share. Our global restructuring and cost actions are progressing well, and we remain on track to deliver our 2025 target. For the quarter, total adjusted EBITDA margin was 8.9%, down 60 basis points year over year. While gross margin improved in the quarter, profitability declined due to headwinds from inflation-driven cost increases in salaries and wages, rent, and freight expenses, as our inflation in SG&A continues to outpace the benefit of inflation in our sales by approximately 100 basis points.
Speaker Change: We continue to work to improve our long-term cost structure aligning to Market realities, and ultimately getting to our expectation for leverage in sgna.
Speaker Change: Include the benefit of the actions. We are taking associated with our restructuring activities.
Speaker Change: During the quarter, we incurred restructuring costs of 45 million and realized approximately 33 million of cost savings or a benefit of 18 cents per share.
Speaker Change: Our Global restructuring and cost actions are progressing. Well and we remain on track to deliver our 2025 targets.
Speaker Change: for the quarter total adjusted IBA margin was 8.9% down 60 basis points year-over-year
Burton Napier: Turning to our cash flows. For the first six months of 2025, we generated approximately $170 million in cash from operations. The reduction in our operating cash flows year over year is partially driven by lower earnings in the first half of 2025 and accelerated tax payments versus 2024. The remaining decrease is driven by a tough comparison to the first half of 2024 in connection with the inventory investments we were making at NAPA a year ago, including the associated build of accounts payable. These did not repeat in 2025 as we return to more normal replenishment levels. As you recall, in 2024, we were investing in inventory at Napa following the termination of two key suppliers in late 2023 and an overall program to improve inventory availability.
Speaker Change: While gross margin improved in the quarter. Profitability decline due to headwinds from inflation, driven cost increases in salaries and wages. Rent and Freight expenses as our inflation and sgna continues to outpace the benefit of inflation in our sales by approximately 100 basis points.
Speaker Change: Turning to our cash flows.
Speaker Change: For the first 6 months of 2025, we generated approximately 170 million in cash from operations,
Speaker Change: The reduction in our operating cash. Flows year-over-year is partially driven by lower earnings in the first half of 2025 and accelerated. Tax payments versus 2024.
Speaker Change: The remaining decrease is driven by a tough comparison to the first half of 2024 in connection with the inventory Investments. We were making at Napa a year ago including the associated build of accounts, payable
Speaker Change: He did not repeat in 2025 as we return to more normal replenishment levels.
Speaker Change: As you recall in 2024, we were investing in inventory at Napa following the termination of 2 key suppliers in late 2023, and an overall program to improve inventory of availability.
Burton Napier: In 2025, we have invested approximately $250 million back into the business in the form of capital expenditures as we continue to invest in our supply chain and IT system. In addition, we have invested 112 million years to date in the form of strategic acquisitions. We continue to make good progress on our long-term strategic investment to profitably grow our business with discipline and a strong focus on returns from these investments. And finally, through the first six months of 2025, we have returned $277 million to our shareholders through our dividend.
Speaker Change: 2025 we have invested approximately 250 million dollars back into the business and the form of capital expenditures as we continue to invest in our supply chain and it systems
Speaker Change: In addition, we have invested 112 million years to date in the form of strategic acquisitions.
We continue to make good progress on our long-term, strategic Investments to profitably, grow our business with discipline and a strong focus on returns from these Investments.
Burton Napier: Now turning to our outlook. As we detailed in our press release this morning, we are revising our 2025 outlook to include the impact of tariffs in place, as well as our updated view on market conditions for the second half of the year. For the full year, we expect diluted earnings per share, which includes the expenses related to our restructuring efforts, to be in the range of $6.55 to $7.05, compared to our previous outlook of $6.95 to $7.45. We expect adjusted diluted earnings per share to be in a range of $7.50 to $8 compared to the previous outlook range of $7.75 to $8.25.
Speaker Change: And finally, through the first 6 months of 2025, we have returned 277 million to our shareholders, through our dividend.
Now, turning to our Outlook.
Speaker Change: as we detailed in our press release this morning, we are revising our 2025 Outlook to include the impact of tariffs in place, as well as our updated view on market conditions, for the second half of the year,
Speaker Change: For the full year, we expect diluted earnings per share which includes the expenses related to our restructuring efforts.
Speaker Change: To be in the range of $6.55 to $75 cents compared to our previous Outlook of $6.95 to $745.
Burton Napier: In April, we shared views on potential downsides to our 2025 outlook with respect to the tariff environment, including our view around the timing of the resolution of the 90-day pause announced by the U.S. administration. As a reminder, with respect to the pause, our downside view was anchored on the premise that if the tariff situation was not resolved during the pause, market and customer demand in the quarter would be impacted, and the momentum we needed to drive our expectations for a more robust second half would be negatively impacted. Unfortunately, that downside scenario played out as we outlined and is the principal driver of our revised expectations for 2025.
Speaker Change: We expect adjusted diluted earnings per share to be in a range of $7.50 to $8 compared to the previous Outlook range of $7.75 to $8.25.
In April, we shared views on potential, downsides to our 2025 Outlook with respect to the Tariff environment. Including our view around the timing of the resolution of the 90-day pause announced by the US Administration.
As a reminder, with respect to the pause, our downside view was anchored on the premise that if the Tariff situation was not resolved during the pause market and customer demand in the quarter would be impacted and the momentum. We needed to drive our expectations for a more robust. Second half would be negatively impacted.
Burton Napier: Our revised guidance for 2025 reflects moderated growth expectations for our auto and industrial businesses for the second half, lowering our growth rates in each business by approximately 100 basis points for the year. Our revised view on the growth is further supported by current PMI readings, which began 2025 above 50 and now remain in contractionary territory below 50 as we begin the third quarter. In addition to moderated growth expectations, we've updated our guidance to include our estimate of the impacts of the current tariff environment. For the remainder of 2025, our revenue growth includes a low single-digit pricing benefit, and our cost of goods sold includes a low single-digit cost increase.
Unfortunately, that downside scenario played out as we outlined and it's the principal driver of our revised expectations for 2025.
Speaker Change: Our revised guidance for 2025 reflects moderated growth, expectations for our Auto and Industrial businesses for the second half.
Speaker Change: Lowering our growth rates in each business by approximately 100 basis points for the year.
Speaker Change: Our revised view on the growth is further supported by current PMI readings, which began 2025 of above 50 and now remain in contractionary. Territory below 50, as we begin the third quarter.
Speaker Change: In addition to moderating growth, expectations, we've updated our guidance to include our estimate of the impacts of the current tariff environment.
Burton Napier: In total, our assumptions related to tariffs produced a slight benefit to our expected results for the second half, however, did not offset the revisions we made to our market condition assumptions I just outlined. As we evaluated the numerous implications of the tariffs on our business, we considered the following factors. Impacts to our revenue, including the pace and timing of potential same-skew price adjustments, as well as overall market conditions and fluctuations in underlying demand for parts and services. increases in product costs as we continue to engage with our supplier partners. Adjustments to our supply chains, including operational impacts with inventory availability and suitable substitutes, as well as higher freight costs associated with movement of goods.
Speaker Change: For the remainder of 2025, our Revenue growth includes a low single digit pricing benefit and our cost of goods sold includes a low single-digit cost. Increase.
In total our assumptions related to tariffs, produced a slight benefit to our expected results for the second half.
Speaker Change: However, did not offset the revisions we made to our Market condition assumptions. I just outlined
Speaker Change: Of the tariffs on our business. We consider the following factors.
Speaker Change: Impact to our Revenue, including the pace and timing of potential. Same SKU price adjustments as well as overall market conditions and fluctuations in underlying demand for parts and services.
Speaker Change: Increases in product costs as we continue to engage with our supplier partners.
Burton Napier: Inflationary cost increases in SG&A as the terrorists have the potential to drive higher salaries, wages and rent and interest in foreign currency rates.
Speaker Change: Adjustments to our supply chains, including operational, impacts with inventory, availability and suitable, substitutes as well as higher freight costs associated with movement of goods.
Speaker Change: Inflationary costs increases in sgna, as the tariffs, have the potential to drive higher salaries, wages and rent.
Speaker Change: And interest in foreign currency rates.
Burton Napier: As we await greater clarity on the tariff and trade environment, let me share with you three things that we'll be watching closely as we consider our expectations for the remainder of 2025. First, the breadth and magnitude of tariffs. As evidenced from the news cycle in July, this is still a very fluid environment. We have factored in the tariffs that are currently in place, but any significant changes to the breadth or magnitude could have a further impact on our outlook. Second, any evidence of demand destruction. While we have not seen significant signs of demand destruction at this point, as tariffs continue to auger into the broader economy, we will be watching closely for any change in customer behavior.
Speaker Change: As we await greater Clarity on the Tariff and trade environment. Let me share with you 3 things that we will be watching closely as we consider our expectations for the remainder of 2025.
First, the breadth and magnitude of tariffs.
As evidence from the new cycle in July, this is still a very fluid environment.
We have factored in the tariffs that are currently in place, but any significant changes to the breadth or magnitude could have a further impact on our Outlook.
Burton Napier: And finally, inflation and costs. Through the second quarter, we have not seen a material change in the levels of expected cost inflation. But as tariffs continue to impact the economy more broadly, we will continue to watch inflation in our costs.
Speaker Change: Second any evidence of demand destruction while we have not seen significant signs of demand destruction at this point as tariffs, continue to augur into the broader economy, we will be watching closely for any change in customer Behavior.
Speaker Change: And finally, inflation and costs.
Burton Napier: I'd like to make a few additional comments regarding our outlook, starting with the year over year head. On slide 11 of our earnings presentation, we've included an illustration of some key drivers impacting our 2025 outlook. Recall that our outlook includes an expected headwind from a loss of pension income, as well as higher depreciation and interest expense. Collectively, these headwinds produced approximately $1 of EPS headwind in 2025 when compared to 2024. Our Outlook Assumes Foreign Currency Rates at Current Level Our outlook excludes the previously announced one-time non-cash charge we expect to record when our U.S. pension plan termination settles, expected for late 2025 or early 2026.
Speaker Change: Through the second quarter, we have not seen a material change in the levels of expected cost inflation. But as tariffs continue to impact the economy, more broadly, we will continue to watch inflation in our costs.
I'd like to make a few additional comments, regarding our Outlook starting with the year-over-year headwinds.
On slide 11 of our earnings presentation. We've included an illustration of some key drivers impacting. Our 2025 Outlook,
Recall, that our Outlook includes an expected headwind from a loss of pension income as well as higher depreciation and interest expense.
Speaker Change: collectively these headwinds produce approximately $1 of eps headwind in 2025, when compared to 2024
Our Outlook assumes foreign currency rates at current levels.
Burton Napier: And finally, I would like to provide some color regarding our expectations for the third quarter. July sales trends are off to a solid start, and we have not seen any notable changes in demand to begin the quarter. However, the cumulative effect of broad-based tariffs on demand remains a risk. For the third quarter, we expect adjusted earnings to be up in a range of 5 to 10% relative to prior With that, our revised guidance assumes total GPC sales growth in the range of 1 to 3% for 2025. Our outlook assumes that the market growth will be roughly flat and that the benefit from inflation will be approximately two percent.
Speaker Change: Our Outlook excludes the previously announced 1 time non-cash charge. We expect to record when our us Pension Plan. Termination, settles expected for late, 2025 or early 2026.
And finally, I would like to provide some color regarding our expectations for the third quarter, July sales, Trends are off to a solid start and we have not seen any notable changes in demand to begin the quarter. However, the cumulative effect of broad-based tariffs on demand remains a risk.
For the third quarter, we expect adjusted earnings to be up and a range of 5 to 10% relative to Prior year.
Speaker Change: With that our revised guidance assumes total GPC sales growth in the range of 1 to 3% for 2025.
Burton Napier: It also assumes the benefit of M&A carryover and about a point of growth from our strategic initiative. These benefits are partially offset by the one less day in the first quarter of 2025. Our assumptions for gross margin expansion and SG&AD leverage remain unchanged from our previous guidance. For 2025, we expect to incur restructuring expenses in the range of $180 million to $210 million, up $30 million from the midpoint of our previous outlook as we expand these activities in light of continued market weakness. The additional actions provide a slight improvement to the expected benefits in 2025, up $10 million from the midpoint of our previous expectations and are included in our revised outlook.
Speaker Change: Our Outlook assumes that the market growth will be roughly flat and that the benefit from inflation will be approximately 2%.
Speaker Change: It also assumes the benefit of m&a carryover and about a point of growth from our strategic initiatives.
Speaker Change: These benefits are partially offset by the 1 lesce day in the first quarter of 2025.
Speaker Change: Our assumptions for gross margin expansion and sgna de-lever remain unchanged from our previous guidance.
For 2025, we expect to incur restructuring expenses and the range of 180 million to 210 million up 30 million from the midpoint of our previous Outlook. As we expand these activities in light of continued Market weakness,
Burton Napier: When fully annualized in 2026, we expect our 2024 and 2025 restructuring efforts and cost actions, including the new actions implemented for the second half of 2025, to deliver over 200 million of cost savings. By business segment, we are guiding to the following 1.5 to 3.5 percent total sales growth for the automotive segment, with comparable sales growth flat to slightly positive. We expect the automotive segment EBITDA margin to be flat to slightly down from last year. And for the industrial segment, we expect total sales growth of 1 to 3%, with comparable sales growth in the flat to 2% range.
Speaker Change: The additional actions provide a slight Improvement to the expected benefits in 2025 up, 10 million from the midpoint of our previous. Expectations and are included in our revised Outlook.
When fully annualized in 2026, we expect our 2024 and 2025 restructuring efforts, and cost actions, including the new actions implemented. For the second half of 2025 to deliver over 200 million of cost savings.
Speaker Change: By business segment. We are guiding to the following
1.5 to 3.5% total sales growth for the automotive segment, with comparable sales growth, flat to slightly positive. We expect the automotive segment, yvanna margin to be flat to slightly down from last year.
Burton Napier: We expect global industrial segment EBITDA margin to expand by approximately 20 to 40 basis points year over year. Finally, we now expect to generate cash from operations in a range of $1.1 billion to $1.3 billion and free cash flow of $700 million to $900 million down from our previous outlook. The reduction in our cash flow forecast for 2025 is a result of our revised earnings guidance for the year, as well as the increase in one-time costs associated with our restructuring program, which drives a further benefit in 2025 and 2026.
Speaker Change: And for the industrial segment, we expect total sales, growth of 1, to 3% with comparable sales growth and the flat to 2% range.
Speaker Change: We expect Global industrial segment. EBA margin to expand by approximately 20 to 40 basis points year-over-year.
Speaker Change: 1.3 billion and free cash flow of 700 million to 900 million down from our previous Outlook.
Burton Napier: In closing, the external environment remains complex, with the tariff landscape driving heightened uncertainty across many prisons. Our teams are doing a remarkable job working with our vendors and customers to navigate the tariff environment. We are confident our teams have the capabilities and resources they need to manage the business through these changes. As we look ahead to the remainder of the year, we remain confident in the underlying fundamentals of our businesses and the strategic investments we're making to improve our position for the long term. Our near-term focus remains on operating with agility and discipline while we continue to serve our customers around the world.
Speaker Change: The reduction in our cash flow forecast for 2025, is a result of our revised earnings guidance for the year, as well as the increase in 1-time costs associated with our restructuring program, which drives the further benefit in 2025 and 2026.
Speaker Change: In closing the external environment remains complex with the Tariff. Planscape driving heightened uncertainty, across many prisons.
Speaker Change: Our teams are doing a remarkable job working with our vendors, and customers to navigate the Tariff environment.
Speaker Change: We are confident our teams have the capabilities and resources. They need to manage the business through these changes.
Speaker Change: As we look ahead to the remainder of the year, we remain confident in the underlying fundamentals of our businesses, and the Strategic Investments, we are making to improve our position for the long term.
Unknown Executive: Thank you, and we will now turn it back to the operator for your question. Thank you, ladies and gentlemen.
Speaker Change: Our near-term Focus remains on operating with agility and discipline while we continue to serve our customers around the world.
Speaker Change: Thank you. And we will now turn it back to the operator for your questions.
Unknown Executive: We will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised.
Unknown Executive: If you wish to decline from the polling process, please press star followed by the If you are using a speakerphone, please lift the handset before pressing.
Unknown Executive: We request that our callers limit their questions to one question and one follow-up.
Speaker Change: Thank you, ladies and gentlemen, we will now begin the question and answer session to you have a question please press star followed by the 1 on your touchtone phone, you will hear prompts at your hand has been raised. Should you wish to decline from the polling process? Please press star followed by the 2. If you are using a speaker-phone, please if the handset before pressing any keys
Bret Jordan: Your first question comes from Bret Jordan with Jeffries. Your line is now open. Hey, good morning, guys. Could you talk about sort of what you're seeing on fill rates in the independent Napa stores? Like you said, sell-in was down low single digits, but is that sort of in line with what they're seeing from sell-out and their inventory levels are generally stable? Or are they de-stocking to some extent?
Speaker Change: We request that our callers limit their questions to 1 question and 1 follow-up.
Speaker Change: Your first question comes from Brett, Jordan with Jeffrey's your line is now open.
Hey, good morning, guys.
William Stengel: No, we've seen a really nice improvement actually in the independent owner inventory positions, as we've been working with them closely over the last 12 plus months to make sure that they were in great positions. That correlation between kind of purchases and sales out is as tight as it's been in the last couple years, which is a good indicator. What's also a positive indicator is that the sales out from independent owners line up nicely with what we're seeing in our company owned stores, which is up low single digits.
Speaker Change: Could you talk about sort of what you're seeing on fill rates in the independent, uh, NAPA stores? I think you said, Selen was down low single digits. But is that sort of in line with what they're seeing from sellout? And, uh, their inventory levels are generally stable or are they? The stocking does not extend.
William Stengel: So as we think about the sequential improvement through the first half and where we are today relative to 12 months ago, we're positive.
Bret Jordan: And I guess the follow up question on pricing around the the tariff increases and what you might see in the second half. Are you seeing that you're being able to attach full margin to the inflation? Like you said earlier, the pricing in the market's rational?
Speaker Change: No, we've seen a really nice Improvement actually in the independent owner inventory positions. Um, as we've been working with them closely over the last 12 plus months, to make sure that they were in great positions. Um, that correlation between kind of purchases and sales out is as tight as it's been in the last couple years which is a good indicator. What's also a positive indicator is that the sales out from independent owners line up nicely with what we're seeing in our company-owned stores, which is upload single digits. So um, as we think about the sequential Improvement through the first half and where we are today relative to 12 months ago, um, we're we're we're uh, we're positive
Burton Napier: Are you getting sort of a good pass through on that cost Yeah, Bret, this is Bret. I'd say yes. I don't know that it's a net benefit at this point to gross margin. But I would say that at this point, we're pretty balanced between the cost increase that we're feeling from the supplier side and then what we're able to move into the market from a pricing dynamic.
Speaker Change: And and I guess the follow-up question on pricing around the the the Tariff increases and what you might see in the second half are you seeing that you're being able to attach full margin to the these uh to the inflation? Like you said, earlier the pricing of the Market's? Rational are you getting sort of the a good pass through on that cost increase?
William Stengel: I would just add the complexity. I mean, it's a simple statement, but the complexity to arrive at that result is pretty high. So I just want to take the moment to acknowledge the teams. I mean, we talked about the command center, you know, in both of our big businesses, you've got anywhere from eight to 10 different categories of tariffs. You've got, you know, game. And that's why I think we make the comments about the resources and the tools that you need and the expertise and talent you need to navigate this situation is high. And we feel really good about the work that's being done at the company.
Speaker Change: Yeah, Brett. This is B, I'd say, Yes. Um, I don't know that it's a net benefit at this point to gross margin, but I would say that at this point, we're pretty balanced between the cost increase that we're, uh, feeling from the supplier side and then what we're able to move into the market from a pricing dynamic,
Bret Jordan: And I guess still pretty fluid.
Speaker Change: Okay. And I guess what? I would, just sorry, go ahead. I would just add the complexity. I mean, it's a simple statement, but the complexity to arrive at that result, um, is pretty high. So, I just want to take the moment to acknowledge the teams. I mean, we talked about the command center, you know, in both of our big businesses, you've got anywhere from 8 to 10 different categories of tariffs, you've got, you know, millions of skew combinations multiple vendors. So, um, it's a skew by skew Day by Day game. Uh, and that's why I think we make the comments about the resources and the tools that you need and the expertise and talent you need to navigate. This, uh, situation is is high. And, uh, we feel really good about the work that's being done at the company.
Bret Jordan: But how do you see the cadence of these price tailwinds into the second half? It sounds like we might see a few points of price, but is it really built into the fourth quarter? No, Brett. I mean, I think the cadence accelerates from here. We talked about having an immaterial benefit, both in the first quarter and the second quarter. So I think the cadence really builds from here, as we look to the rest of the year, if I had to wait it, it probably has a little bit more impact here in the third quarter, as we start to see some of those come through.
Speaker Change: And I guess still pretty fluid. But how do you see the Cadence of these this price Tailwind into the second half? It sounds like we might see a few points of price but is it really build into the fourth quarter?
Bret Jordan: And I think levels out to more normalized kind of experiences there in the fourth quarter.
Bret Jordan: Great, really appreciate it, thank you.
Speaker Change: No, Brett. I mean I think the Cadence accelerates from here. Um, we we talked about having an immaterial benefit uh, both in the first quarter and the second quarter. So I think the Cadence really builds from here. As we look to the rest of the year, if I had to wait, it, uh, it probably has a little bit more uh, impact here in the third quarter. As we start to see some of those come through. And I think levels out to more normalized kind of experiences there in the fourth quarter.
Scott Ciccarelli: Yeah, thanks, Bret. Your next question comes from Scott. Ciccarelli with Truist. Your line is now open. Good morning, guys. I guess a little, hi, a little bit of a follow-up and then a primary.
Speaker Change: Great. Really appreciate it. Thank you. Yeah. Thanks Brett.
Speaker Change: Your next question comes from Scott.
Chakari: Chakari with truist, your line is now open.
Scott Ciccarelli: Can you guys just provide a bit more color on your expectations for same-skew inflation in the U.S. business? And it looks like you're assuming a little bit of negative unit elasticity. So if you can provide more color around that, that'd be helpful.
Scott Ciccarelli: And then second, on the margin front, global auto margins are down over 100 basis points from kind of where you were a year ago or two years ago and would have been a pretty steady rate for many years. Just given the puts and takes you've identified, should we assume kind of the rebasing that we've seen is the likely go-forward rate on auto margins? Thanks.
Burton Napier: Yeah, Scott. So, on the first part of your question, I would say that our U.S. assumptions, maybe I'll pull it up just a little bit. Our assumptions around inflation in the second half aren't materially different between the two segments, and they're not materially different between the geographies. And so, when we think about how we've factored in a little higher assumption around the inflation rate, that obviously had a lot to do with the tariff environment. If I had to weight it, I'd weight it a little bit more to the NAPA business versus the industrial business, and I'd weight it more U.S.
Speaker Change: Uh, good morning guys. I guess a little. Hi, a little bit of a, a follow-up and then a primary. Um, can you guys just provide a bit more color on your expectations for same, SKU inflation in the US business and it looks like you're assuming a little bit of negative, you know, elasticity. So if you can provide more color around that, that would be helpful. And then, second on the margin front, uh, Global Auto margins are down over 100 basis points, from kind of where you were a year ago or 2 years ago. And would have been a pretty steady rate for many years. Just give them the puts and takes you've identified. Should we assume kind of the rebasing that we've seen? Is the the likely go forward rate on auto margins. Thanks.
Burton Napier: than I would the other geographies. But we are impacted when we think about the tariff most predominantly between NAPA and the motion business, although Canada will feel some of the impact there as well. So, that's kind of how we're thinking about the inflation part of the rest of the year.
Speaker Change: Yeah, Scott. So, on the first part of your question, I would say that, uh, our us assumptions. I maybe I'll, I'll pull it up just a little bit. Are are assumptions around inflation. In the second half aren't materially different between the 2 segments and they're not materially different between the geographies. And so, when we think about how we've factored in a little higher assumption around uh the inflation rate that obviously had a lot to do with the Tariff environment if I had to wait, it, I'd waited a little bit more to the Napa business versus the industrial business and I'd waited more us than I would the other geographies but we are impacted when we think about the Tariff. Most most predominantly between Napa and the motion business. Although Canada will feel some of the the impact there as well. Uh so that's kind of how we're thinking about the inflation.
Burton Napier: I think on the second part of your question, the key headwind right now for profitability in the automotive business is, or the global automotive segment, is the inflation that we're feeling across the world. So, we're got a little bit upside down correlation between the cost that we're feeling from an inflation perspective in SG&A and the benefit that we're getting in the top line. And this is true for each geography. So, when we think about the U.S., we feel that difference. Inflation is probably running in the three, three and a half percent. It's a little higher actually in Europe and Asia And in every case, we see a delta that, as I said in my prepared remarks, is about 100 basis points between the top line and the SG&A cost impact.
Speaker Change: Part of the rest of the year, I think on the second part of your question, you know?
Burton Napier: So, that's really why we've been thinking about all the work we're doing on the cost front, the restructuring actions we're taking to try to bend the curve. I think we've made a lot of progress on bending the curve, as you heard me talk in my prepared remarks about sequentially improving the deleverage. To the global automotive business, I mean, that's not our objective is to keep it with declining profitability. We're doing all this work and we're taking all these actions to improve the profitability over the long term.
Speaker Change: The key head 1 right now for profitability. Uh, in the automotive business is are the Global Automotive segment is the inflation, uh, that we're feeling across the world. So we're got a little bit upside down correlation between the cost, uh, that we're feeling from an inflation perspective in sgna, and the benefit that we're getting in the top line and this is true for each geography. So, when we think about the US, uh, we feel that different um inflation is probably running in the 3 3, 3 and a half percent. It's a little higher actually in Europe and Asia pack. Uh and in every case we see a Delta that as I said in my prepared, remarks is about a 100 basis points between the Top Line, uh, and the and the sgna cost impact. So that's really why. We've been thinking about all the work we're doing on the cost front. The restructuring actions, we're taking to try to bend the curve, I think we've made a lot of progress on bending the curve. As you heard me talk, in my prepared remarks about sequentially improving, the deleverage to the latter part of your point. I mean,
Burton Napier: In the near term, we've got some very, I think, specific challenges with respect to this higher cost inflation. And as we look into the second half of the year, I think you're going to see, as I also said in my prepared remarks, an improvement in the profitability of the business and we can't get there without an improving global automotive. Got it. Thanks a lot. Very helpful. Yep. Thanks, Scott.
About is this the new Baseline for the Global Automotive business? I mean that's not our objective is to keep it with declining profitability. Uh, we're doing all this work, uh and we're taking all these actions to improve the profitability over the long term in the near term. We've got some very I think specific challenges with respect to this higher cost inflation uh and it was as we look into the second half of the year, I think you're going to see
Speaker Change: See, as I also said in my prepared, remarks and Improvement in the profitability of the business and we can't get there without an improving Global Automotive segment.
Speaker Change: Got it. Thanks a lot, very helpful.
Speaker Change: Yep, thanks Scott.
Christopher Horvers: Your next question comes from Christopher Horvers with J.P. Morgan. Your line is now open. Thanks. Good morning, guys. So first, a question on the on the motion business, the top line. Can you talk about how you how do you think about maybe the cadence of that? Is there an assumption that, you know, that sort of the tariff uncertainty dies down and, you know, that that the organic growth rate accelerates as you proceed through the year? And, you know, qualitatively, is, you know, some of the Improvements at the margin that you're seeing in the business is that is that fueling your view?
Speaker Change: Your next question comes from Christopher Harvard's with JP Morgan. Your line is now open.
Christopher Harvard: Thanks. Good morning guys. Uh, so first a question on the, on the motion business, the Top Line.
Christopher Harvard: Can you talk about how you, how you think about maybe the Cadence of that is? Is there an assumption that, you know, that sort of the Tariff uncertainty dies down? And you know, that that the organic growth rate accelerates as you proceed through the year and you know, qualitatively is, you know some of the
William Stengel: Or is that or is that just sort of provide hope that it might happen in the fourth quarter? And just to clarify, the positive organic motion to start the third quarter? Yes, I think so. Look, I mean, we, like I said, we had a negative growth territory in Q3 and in Q4 last year. And so we're continuing to see positive trends in the motion business, albeit at a little bit moderated pace from then we started the year.
Improvements at the margin that you're seeing in the business. Is that, is that fueling your view or, or is that, or is that just sort of provide hope that it might happen in the fourth quarter?
Christopher Harvard: I, I'll take the second piece first qualitatively. I mean, the improvements in the, the business are real and something that we're really proud about we're doing a lot of work, um, out in the field. Making sure that we're covering our customers with selling resources, the right way. So we've done some restructuring around. Making sure we're bringing our best industry, technical experts to all of our customers in a different way. Um, the intensity around making sure,
Speaker Change: All of the really thoughtful pricing and sourcing initiatives and then cost disciplines. So, um, we are just desperate like everybody else for the End Market to cooperate with us. And when it does, um, we're we're looking forward to much much brighter days ahead. Um, but we're doing a lot of self-help right now to make the best of a challenging market. And Chris, I just add, you know, your point there about are we, are we seeing more or less uncertainty with respect to tariffs? I think we find ourselves at a moment, which is why we added the tariffs into our Guidance, with more clarity. Uh but not full clarity. And I think that's allowed us to to factor in what we see as of the environment of the last 90 days. We have a, a body of work to be able to manage and work with and understand as, as well as outlined our teams are working diligently. Uh, each day to understand that in fact of that end of the business. And I think that gave us some confidence to put some of our initial expectations into the Outlook.
Speaker Change: Um, but look, I think as we look ahead, there's more to come. I mean, we're in another pause here until August 1st and many respects. I think the, the current pause for China's August 10th.
Speaker Change: Uh, and I think as we think about the longer view tariff Clarity, I think would be a positive unlock in many respects, and I think it would give our customers some confidence about how they think about the go forward. Now, having said that the rest of the year for motion, uh we do start the quarter, in an expansionary territory. Um the outlined downside scenario that we gave you all back in April, played out. And that's why we moderated our expectations for motion for the rest of the year. But moderated doesn't mean that we're not still seeing some positive things as well as commented on. Uh, and it gives us the confidence to while lower. It still feel good about the growth for motion in the second half. Some context for that is we do have ease in comparisons as we get into the rest of the year. Um, if you recall a year ago, the reported results in the industrial segment were negative in both the third and the fourth quarters. And so as we look ahead particularly as we exit the second quarter with Positive Growth that motion,
Speaker Change: Despite this continued sluggish PMI backdrop uh and built on the the commentary that we'll shared about customers looking to move forward, despite some of these headwinds, we feel good about the guide, um, it does accelerate Q3 and then it accelerates again in Q4. Uh, but on that 2 year stack, I think what we're expecting is is fairly reasonable.
Speaker Change: I'm and just to clarify the positive organic motion to start the third quarter.
William Stengel: Got it. And then, you know, a follow-up question on the U.S. NAPPA business. You know, as you think about, you know, the independents being down, the core stores being up, I think some people out there believe that, you know, maybe this gross margin expansion is you're taking too much price and that's causing some share shift dynamic, share headwind dynamic. It doesn't look like that in the company-operated stores. So, I guess, what is different about the independents going back to, you know, Bret's question just to kick off the Q&A? Yeah, look, I think we feel really good about how we're positioned from a price perspective in the market.
Speaker Change: Yes. I I think so. Um, look I mean we like I said we had a negative growth territory in Q3 and in Q4 last year. And so we're continuing to see positive Trends in the motion business uh, albeit at a little bit moderated Pace from then we started the year
Speaker Change: Got it. And then, you know, a follow-up question on the US Napa business. You know, as you think about, you know, the the independence being down the core stores being up. Um, I think some people out there believe that, you know, maybe this gross margin expansion is, is you're, you're taking too much price and that's causing some share shift Dynamics, share headwind Dynamic. It doesn't look like that in the company operated store. So I guess, what is different about the independence? Going back to, you know, Brett's question to to kick kick off the Q&A.
William Stengel: There's a lot of science to it. We've got good visibility into where the market is. And as we've talked about before, it's skew by skew, but we study that and feel good about it and have a thoughtful strategy there. I think as it relates to kind of what's different between the independent owner performance and company owned stores is really just the kind of the pace at which they get comfortable with the uncertain world that we live in. And, you know, as a big corporate organization, we work and navigate it centrally here and pull levers and move at pace.
Speaker Change: Yeah, look, I think we feel, um, really good about how we're positioned from a price perspective in the market. Um, there's a lot of science to it, we've got good visibility into where the market is. Um, and as we've talked about before it's skewed by SKU, but, um, we study that and feel good about it, um,
Speaker Change: And have a thoughtful strategy there. Um, I think, as it relates to kind of what's different between the independent owner performance and company-owned stores is
William Stengel: And we have to work with those independent owners of which there's roughly 2,000 to understand what's going on in the market, help them realize what inventory they need to put in, and then partner with them to make sure that it makes sense. And that just takes time. But the most important takeaway is the work that we're doing in the business, whether it's company owned stores or the way in which we're working with independent owners is sequentially improving as designed. And we're going to stay after it and continue to work through them. But that's the value prop that we bring to these really important stakeholders, which is the independent owners.
It's company-owned stores, or the way in which we're working with independent owners is sequentially. Improving, uh, as designed, and we're going to stay after it and continue to work through them, but that's the value prop that we bring to these really important stakeholders, which is the independent owners.
William Stengel: Great, thanks very much. Thank you.
Speaker Change: Great. Thanks very much.
Speaker Change: Thank you.
Greg Malik: Your next question comes from Greg Malik with Evercore.
Speaker Change: Your next question.
Greg Malik: Your line is now open. Hi, thanks, a follow up on inflation margins and then on the cost side. So so first on inflation, I want to make sure I got it right that it's 200 bps for the year for the company. So that's implying the back half is 300 bps after 100 bps in the first half. That's a fair zip code to live in, Greg. Got it. And so I guess is that the main reason why the guidance has margins up in the back half after having fallen in the first half? or is there another thing?
Speaker Change: Greg Malik with.
Speaker Change: Your line is now.
Speaker Change: Hi, thanks. I had a a follow up on inflation margins and then on the cost side. So so first on inflation, I want to make sure I got it right, that it's 200 bips for the year, for the company. So that's implying. The back half is 300 bips after 100 B, in the first half.
so that's a fair fair zip code to live in Greg
Got it. And so I guess is that the the main reason why the guidance has margins up in the back half
after having fallen in the first half,
Burton Napier: No, Greg, I would say, look, I mean, our expectation for the year has always been to have an improving second half. I think part of that is driven by the expectations around a better top line, although we've moderated that to some degree. But the other thing I would point out is that we really have been working very diligently on our cost structure. And when you combine accelerating benefits from cost actions, the full year impact of last year's restructuring work, the additional actions we've just implemented here at the end of the quarter. Gaining on the synergies around many of the acquisitions we executed in 2024, the totality of that body of work helps to.
Speaker Change: or is there other things?
Speaker Change: No Greg. I would say look, I mean our expectation for the year uh, has always been to have an improving second half I think part of that is driven by the expectations around a better Top Line although we've moderated that, that, that to some degree. Um, but the other thing I would point out, uh, is that, we really have been working very diligently on our cost structure. And when you combine accelerating benefits from cost actions, the full year impact of life,
Burton Napier: We drive a better bottom line as we look into the second half of the year, and we've just come off of a quarter in which a sluggish top line wasn't enough to offset some of these headwinds that we had, and we've communicated to everyone. But as we look into the third quarter, as I mentioned in my prepared remarks, we're looking for earnings to be up somewhere between 5% and 10%, and that means the combination of everything within the business, the top line, the cost actions, the continued improvement in gross margin, all of those things in total, I think, give us a better outlook for the second half of the year in terms of how we'll perform from our earnings.
Burton Napier: And what was the incremental $30 million of restructuring expense, what was that spent on? And that $200 million of savings, has that already started to flow in or does that come next year? Well, no, I mean, we've already got the combination of actions we took last year, along with the actions we've implemented in 2025 are already benefiting the current year as we shared for the quarter. We had an eighteen cent benefit in the full year. The two hundred million is what we're looking at as an annualized benefit getting into twenty, twenty six. Obviously, we'll give you a sharper view on that as we give you a twenty, twenty six guide, but we think the way we're tracking at this point allows us to be confident that that will be an over two hundred million dollar annualized benefit.
Speaker Change: Last year's restructuring work, the additional actions. We've just implemented here at the end of the quarter, um, gaining on the synergies around many of the Acquisitions. We executed in 2024, the totality of that body of work, uh, helps to, uh, drive a better bottom line. As we look into to the second half of the year. And we've just come off of a quarter in which a sluggish Topline wasn't enough to offset some of these headwinds that we had, and we've communicated to everyone. But as we look into the the third quarter, as I mentioned in my prepared remarks, um, we're looking for earnings to be up, somewhere between 5 and 10 percent and that means the combination of everything within the business. The Top Line, the cost actions, the continued Improvement in gross margin. All of those things in total, I think give us a a better uh outlook for the second half of the year in terms of how we're performing from our earnings perspective.
Speaker Change: And and what was the incremental 30 million um over structure and expense? What was that spent on and that 200 million of savings is that is that already started to flow in or does that come next year?
Well, no, I mean we've already got uh the combination of actions we took last year, along with the actions, we've implemented in 2025, are already benefiting the current year as we shared. Uh, for the quarter, we had an 18 Cent benefit in the full year. The 200 million is what we're looking at as an annualized benefit getting into 2026. Uh, obviously, we'll give you a sharper view on that as we give you a 2026 guide.
Burton Napier: As we look ahead, in terms of the additional actions we've taken to end the quarter, I would just say, and keep it kind of simple. We're just continuing to lean into simplifying our operations and streamlining our back office. We've got great opportunities to do that across looking at global efficiencies and really being sure that we can be smart. Obviously, some of our weakness has been in Europe. And so we're looking to be smarter in terms of how we streamline things there as well and gain efficiency. So we think the investment we made at the end of the quarter here to do a few more actions is the right one.
Burton Napier: It's what you do when you continue to face a sluggish outlook and a weaker outlook and not turning as fast as you expected. And it's what you would expect us to do. So we'll get a little bit more benefit for that in twenty, twenty five. We've included that in our outlook and that's the reason we also had a little bit of a tweak in our cash flow outlook.
Speaker Change: But we think the way we're tracking at this point allows us to, to be confident that that'll be an over hundred million dollar annualized benefit. As we look ahead in terms of the additional actions, we've taken to end the quarter, I would just say and keep it kind of simple. We're just continuing to lean in to simplifying our operations and streamlining our back office. We've got great opportunities to do that across it looking at Global efficiencies. Um, and really being sure that we can be smart, obviously some of our weakness uh, has been in Europe. And so we're looking to be smarter in terms of how we streamline things there as well. Uh, and gain efficiencies. So we think the investment we made at the end of the quarter here to uh do a few more actions as the right 1. It's what you do when you continue to face a sluggish Outlook, uh, and a weaker Outlook and not turning as fast as you expected. And it's what you would expect us to do. So, we'll get a little bit more benefit for that, in 2025. We've included that in our Outlook.
Greg Malik: Well, thanks, and good luck. Thanks, Greg.
Uh, and that's the reason. Uh we also had a little bit of a, a tweet in our cash flow out Outlook as well.
Speaker Change: Well, thanks and good luck.
Speaker Change: Thanks. Thanks, Greg.
Michael Lasser: Your next question comes from Michael Lasser with UBS Security. Your line is now open. Good morning. Thank you so much for taking my question. Genuine Parts is a large and complex organization. In the past, the company has taken actions to streamline the portfolio.
Speaker Change: Your next question comes from Michael Lasser with you BS security. Your line is now open.
Good morning, thank you so much for taking my question.
Genuine part.
William Stengel: At this juncture, would you be able to accelerate the deployment of your strategies and successful execution of those initiatives if you were to have more of a streamlined organization, and how does that fit into your thinking today?
William Stengel: Michael, I'll take that one. Listen, we love both of these businesses. They're great businesses. They're large markets, attractive markets. They're similar in many ways in the sense that the initiatives that we're doing at the business are additive to both. And we've leveraged that over the last two or three years to accelerate our execution to make both businesses better. So I would say, you know, the benefit that we get from having these two businesses together as we push forward in the near term to execute specific initiatives, whether it's sales effectiveness, tech initiatives, supply chain, they're all relevant.
William Stengel: And we feel good about making both sides of our business better. Better at pace and being separate certainly at this moment probably doesn't give us a pace benefit because of the way in which we're all working together.
William Stengel: So we feel good about how we're positioned today and constantly thinking about how to make the business better in each of our verticals but also in the aggregate.
Speaker Change: Michael, I'll take that 1. Listen, we we love both of these businesses, they're great businesses. Um, they're uh, large markets attractive markets, they're similar uh, in many ways in the sense that the initiatives that we're doing at the business are additive to both, uh, and we've leveraged that over the last 2 or 3 years to accelerate our execution to make both businesses better. So I would say, um, you know, the the benefit that we get from having these 2 businesses together as we push forward in the near-term to execute a specific initiatives. Whether it's sales, Effectiveness, Tech initiatives supply chain, they're all relevant and we feel good about making both sides of our business. Um, better at PACE uh, and being separate. Uh, certainly at at this moment, probably doesn't give us a pace benefit, um, because of the way in which we're all working together. So, we feel good about how we're positioned today. Uh, and
Speaker Change: constantly thinking about how to make the business better, um, you know, in each of our verticals, but also in the aggregate
Michael Lasser: Okay, my follow up question is on the auto business. It's performed consistent with what you expected in the first half of the year. You have now taken into account all of the tariffs. You're going to get a couple hundred, maybe a few hundred basis points of like-for-like pricing in the back half of the year. So A, is that what you expect the industry to see from a like-for-like pricing benefit?
Okay.
Speaker Change: Follow a question, is on the auto business.
Burton Napier: And B, why are you lowering your top line outlook for this segment in light of those first two factors?
Burton Napier: Maybe I'll take the second part of your question first, Michael, and just give you some color on the way we thought about kind of the elements of the top line. And we gave those comments at the segment level, so I'll try to break it down a little bit. And there's a lot of moving pieces here. We certainly saw the inflation benefit that we gave you move up. That's predominantly on the back of what we see as more tariff and the pricing benefit from tariff being in the low single digit range that I shared in my prepared remarks.
Speaker Change: It's performed consistent with what you expected in the first half of the year. You have now taken into account, all of the tariffs you're going to get a couple hundred. Maybe a few hundred basis points of like for like pricing in the back half of the year. So a is that what you expect the industry to see from a like for like pricing benefits and B. Why are you lowering your Topline outlook for this segment in light of those first 2 factors?
Burton Napier: You know, the question is a good one. Why not keep the revenue outlook flat? Why do you change it? And I think that really gets into unpacking the different elements. They don't impact us in a linear fashion.
Burton Napier: So maybe we'll start with Europe as an example. Europe marked conditions, while they haven't gotten any worse, they certainly didn't get any better in the second quarter. And we don't expect them to get much better for the rest of the year. And so when you think about a Europe business in which we moderated expectations, we've done that on the top line base revenue assumption, but there was no tariff benefit to offset any of that. And so you have a pure negative there.
Speaker Change: Maybe I'll take the first, the second part of your question. First, Michael, um, and just give you some color on the way we thought about kind of the elements of of the Top Line. Um, and we gave those comments at the segment level. So I'll try to break it down a little bit and there's a lot of moving pieces here. We certainly saw uh, you know, the inflation benefit that we gave you move up. That's uh predominantly on the back of what we see is, as more tariff uh, in the pricing benefit from tariff being in the low single digit range that I shared in my prepared remarks. You know, the question is a good 1, why not keep the revenue Outlook flat? Why do you change it? And I think that really gets into unpacking, uh, the different elements. They don't impact us in a linear fashion, so maybe we'll start with Europe as an example. Uh, Europe market conditions. Uh, while they haven't gotten any worse, they certainly didn't get any better in the second quarter, uh, and we don't expect them to get much better for you.
Burton Napier: When you move back to the U.S. and you look at the automotive business, we did moderate some of the base assumptions there, but we do have an offset there. And so that impact is a little bit more balanced. I would say still leaning towards a net headwind when we think about that.
Burton Napier: And then you move into the rest of the automotive segment. You think about Canada, again, moderated top line, but with a little bit of tariff consideration. APAC's another one like Europe taking down the revenue with no tariff offset. So I think when you take the totality of that, and let's remember we're giving you guys ranges, they're meant to be guideposts, and we can land the plane in varying degrees of those guideposts. And so I don't want to be overly precise about something that's pretty imprecise given the backdrop. But I would just say that hopefully that gives you some color about how we thought about the individual pieces.
The rest of the year. And so, when you think about Europe business in which we've moderated expectations, uh, we've done that on the top line, base Revenue assumption, but there was no tariff benefit to offset any of that. And so, you have a pure negative there when you move back to the US and you look at the automotive business, uh, we did moderate some of the base assumptions there but we do have an offset there and so that that impact is a a little bit more uh, balanced. I would say, still leaning towards a net headwind when we think about that and then you move into the rest of the the automotive segment. You think about Canada again, moderated Topline but with a little bit of tariff consideration Apex and other 1 like Europe, taking down the revenue with no tariff offset. So I think when you take the total the totality of that and let's remember, we're giving you guys ranges they're meant to be guideposts, uh, and we can land the plane in varying degrees of those guideposts. And so I don't want to be overly precise about something.
Burton Napier: It is complex. We do have some tariff offsets in certain regards, but in other places we didn't.
Burton Napier: And the net totality of that was to bring the revenue outlook down for the Hey, Michael, I might just also add, you know, as it relates to is our Same Skew Inflation Outlook Relevant for Everybody Else? I don't know. All of our businesses are different. All of our country of origin nuances are different. Our exposure to steel is different. We had some industrial competitors out that you know had a different view of their inflation outlook. So I know that's not what the investment community wants to hear because we want to extrapolate you know our information to others but I think I would offer up some caution on doing this.
Speaker Change: That's pretty imprecise given the backdrop. But um I would just say that hopefully that gives you some color about how we thought about the individual pieces. It is complex. We do have some tariff offsets in certain regards, but I know the places we didn't and the net totality of that was to bring the revenue Outlook down for the year.
Hey Michael. I might just also add you know as it relates to is our
Burton Napier: We've done the work that we think is most appropriate and thoughtful for our business and how that relates to others.
Burton Napier: I'll leave it to the experts to figure out.
Speaker Change: Same SKU, inflation, Outlook relevant, for everybody else. I don't know. Um all of our businesses are different. All of our country of origin nuances are different. Our exposure to steal is different. We had some industrial competitors out that, you know, had a different view of their inflation Outlook. So I I know that's not what, um, the investment Community wants to hear because we want to extrapolate, you know, our information to others, but I think I would uh offer up some caution on doing this. We've done the work that we think is uh most appropriate and thoughtful for our business and how that relates to others. Um I'll leave it to the experts to figure out.
Kate Mcshane: Thank you so much, and good luck.
Speaker Change: Thank you so much, and good luck.
Kate Mcshane: Your next question comes from Kate McShane with Goldman Sachs. Your line is now open. Hi, good morning. Thanks for taking our question.
Speaker Change: Your next question comes from, Kate McShane with Goldman Sachs, your line is now open.
William Stengel: We just wanted to drill down a little bit more on the performance in the European segment by country, and just wondered how much of your initiatives like the NAPA brand expansion are helping offset some of maybe the broader macro headwinds. Yeah, thanks, Kate. You know, we had, we had kind of mixed performance throughout Europe. The key takeaway is that while it was mixed, it's sequentially improved in most geographies, most countries as we went into the second quarter. So as we close second quarter, we saw improvement in the majority of our geographies. The NAPA branded product is a real differentiator for us in the market.
Hi, good morning, thanks for taking our question. Uh we just wanted to drill down a little bit more on the performance in the European um segment uh by country and just uh wondered how much of your initiatives. Like the Napa brand expansion are helping offset. Some of maybe the broader macro uh headwinds
William Stengel: And what we're seeing, and we've made some public comments about this, I mean, in these markets, your customers are looking for value. And that's at the core of the NAPA offering in Europe, and it's first of its kind in many ways. And so we've got good penetration in all of our geographies from a NAPA branded product standpoint, and it's absolutely helping us offset a sluggish market over there. So I'd say mixed, not one market kind of an outlier, but all kind of mostly sequentially improving as we went through the second quarter.
Speaker Change: Yeah, thanks Kate. Um, you know, we we had um, we had kind of mixed performance throughout Europe. The key takeaway is that while it was mixed, it's sequentially improved. Um, in most geographies most countries as we went into the second quarter. So as we close second quarter, we saw Improvement in the majority of our geographies. Um, the Napa branded product is a real differentiator for us in the market, uh, and what we're seeing, and we've made some public comments about this. I mean, in these markets, your customers are looking for value. And that's at the core of the Napa offering in Europe, and it's um, first of its kind in many ways. And so uh we've got good penetration in uh all of our geographies from a Napa Brandon, products standpoint and it's uh absolutely helping us offset a a sluggish Market over there. So I'd say mixed uh, not
Speaker Change: 1 market kind of an outlier, um, but all kind of mostly sequentially improving, as we went through the second quarter,
Unknown Executive: Thank you.
Thank you.
William Stengel: We have now reached the end of our allotted time.
William Stengel: I will now turn the call to Will. Thanks again, everybody, for your interest in Genuine Parts Company. We look forward to giving everybody an update on our call in October. Have a great day, and thanks so much.
Will Stingle: We have now reached the end of our allotted time. I will now turn the call to will for closing remarks.
Thanks again, everybody for your interest in genuine parts company. We look forward to giving everybody an update on our call in October, have a great day, and thanks so much.
Unknown Executive: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect.
Will Stingle: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating in assay, please disconnect your lines,