Release Date: May 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total sales increased by 3.5%, demonstrating resilience in a challenging macro environment.
- Operating profit grew by 4.9%, indicating effective cost management.
- Earnings per share rose by 7.5%, reflecting strong bottom-line performance.
- International same-store sales grew by 9.3% on a constant currency basis, highlighting successful global expansion.
- Commercial business initiatives are showing progress, with plans for accelerated growth and improved customer service.
Negative Points
- Domestic same-store sales were flat, indicating challenges in the core market.
- Weather conditions negatively impacted sales, particularly in the Northeast and Midwest regions.
- DIY sales were down 1%, with discretionary categories underperforming.
- Commercial sales growth slowed to 3.3%, compared to 6.3% in the previous year.
- Inflation and delayed tax refunds affected consumer spending patterns, impacting sales performance.
Q & A Highlights
Q: Could you talk a little bit about the cadence? You commented at the end of the quarter in the commercial business ended a bit softer and obviously very early in Q4, but could you give us any color sort of as we've trended sequentially into the fourth?
A: Yes. The commercial business, like we said, has been choppy. The last 4 weeks were the more difficult compares for the quarter and as we said several times, I hate being the weatherman, but this particular spring has been challenging for us from a wet and cooler season, and typically, in the latter half of the quarter, we start seeing some improved performance around the hot weather categories like AC chemicals and AC hard parts and battery sales, et cetera. And we just didn't get that through the last several weeks of the quarter. - Philip B. Daniele, CEO, President & Director
Q: Could you speak to the degree of vendor rebates you've yet to receive? And how long you should benefit from this catch-up period for all the growth that you've had since prior to the pandemic?
A: Well, certainly, our gross margins, as it relates to our relationship with vendors, has an opportunity improved. As Phil mentioned previously, we are coming off a period of significant hyperinflation, particularly in the areas like flat freight. Quite frankly, we saw snarls across the majority of the supply chain. It impacted them from the standpoint of having higher labor costs, higher input costs in total. So we're starting to see that abate, and that's given us an opportunity to go and negotiate for some deflation as we move forward. We're still in early innings there. And I wouldn't say that all of the inflationary pressures have abated, but we're certainly in a much better position today than we were a year ago. - Jamere Jackson, CFO of Customer Satisfaction
Q: Now that you're starting to lap some of the earlier signs of maintenance deferral at some of the tire centers, are you starting to see trends improve with that cohort of customers? And just broadly, can you speak to the performance at like the national accounts, the tire centers, the buy here, pay here dealers and then the up and down the street mechanics?
A: I would say if you kind of broke apart those segments that you just talked about, probably the most challenged group of customers or customers that are -- drive their repair revenue from tires. Tires have definitely been a pressure point. I think that downward trend on tires has probably flattened out a little bit. But I still think the tire segment in particular, is under some pressure and has been for quite a while. On your other segment of customers, the buy here, pay here lot and used car centers, those have been more challenged as well. You think about there was tons of used cars that were sold over the last 2 years or so. And I think that's just been slower. Also, as the consumers under a little bit more economic pressure due to inflation, not just in our category but across all of retail and across life at the moment, I think there's more pressure on some of those bigger ticket items like tires. New tires is a pretty big purchase for our customer. - Philip B. Daniele, CEO, President & Director
Q: Can you share some math on Mega-Hubs? What -- you mentioned 200 over time, can you tell us year-over-year how many should we see per year? And then -- and can you frame the 1-year lift from them, please?
A: Yes. So certainly, from a Mega-Hub standpoint, we're pretty excited about our future there. As we've announced, we've -- we'll likely have over 200 Mega-Hubs at full build-out. Last year, we opened 20. We're likely going to open less than that this year. And we've got work to do. But our pipeline is very strong, and our pipeline is robust as we look into FY '25. So we're going to go as fast as we possibly can. These are big boxes and difficult-to-find places. But we've done a really good job and worked really hard to fill up that pipeline, and you'll start to see that accelerate as we move into FY '25 and beyond. - Jamere Jackson, CFO of Customer Satisfaction
Q: Given the slowdown in sales that obviously we're talking about, is there anything else you guys think you can do to accelerate the sales trends? Or is it just a matter of executing the way you can and you need the broader environment to improve? And then kind of part 2 of this is, is there a point at some stage where if sales stayed sluggish, does it potentially tempt you to go through another round of price investments?
A: Yes. Let me start with kind of your first -- the first part of your question. Are there things that we can do to improve? The answer is yes. We're in the process now of doubling down on customer service and execution. And on the commercial side, we're continuing on both sides. We're continuing to invest in hard parts coverage and hubs and mega hubs. Those drive sales. On the commercial side, we continue to invest in ways to service the customer better and faster, and we like those initiatives that we have. So I think those help to improve our sales execution, if you will. - Philip B. Daniele, CEO, President & Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
