Advance Auto Parts, Inc. (NYSE:AAP) Q2 2023 Earnings Call Transcript

Page 6 of 6

Gene Lee: Yeah. I think a great question. I mean, we had a comprehensive search. Right? We talked to a lot of people and by far, Shane was the best person for this role when you think about his experience set. He’s a very disciplined, thoughtful leader who has been in the professional channel most of his career, but it had exposure to big box retail, a lot of good process and procedures he’s been a part of. I think that he is a car enthusiast. He is sold into the channel before. He loves the business. And I think his leadership style is perfect for where we are in our journey and what we need. I would say that, as we talk to people that had industry experience, people that were most interesting at non-competes, and they’re very difficult to get out of their current position because of the non-competes.

But even so, when it was all said and done, Shane O’Kelly was by far our best candidate for this role in the current situation. He’s well educated, strong discipline background, and he’s just a thoughtful human being with a real focus on customers. And so we’re excited to have the opportunity to bring in a leader like Shane. We’re very pleased that we’re able to do it as quickly as we’re able to do it to identify someone with his skill and talents. And the succession committee did a fantastic job getting us to this point, and we can’t wait for him to be involved.

Operator: Thanks, Michael. Our next question comes from Daniel Imbro from Stephens. Daniel, your line is now open. Please go ahead.

Joe Enderlin: Hey, guys. This is Joe Enderlin on for Daniel. Thanks for taking our question. You mentioned earlier that you think your internal actions are driving improvements in sales. Are you seeing the sales accelerate in the categories you’re specifically investing in price or is it more of a broader acceleration that may suggest a better weather backdrop?

Tom Greco: Good morning. First of all, the drivers really start with availability. I mean, the availability improvements are much more closely correlated to the improvement in sales. And in particular in those categories where we have big opportunities to improve versus last year, and that’s engine management, and heating, cooling, and under par. So, what we are seeing a very close connection. Gene said it well. There’s an action that we’re taking and then we see the corresponding lift. And it’s building through the year. The price indices that we are targeting we have a terrific team in the pricing area. They look at our pricing every week and every category, and we do look very closely at those elasticities. I mean, this category is honestly less elastic than many categories in retail because pricing is either third or fourth and the decision criteria for the installer, but you can’t ignore it. So, that’s really what we’re doing there.

Joe Enderlin: Got it. That’s very helpful. Thank you. As a follow-up, looking at retention. Could you provide some color maybe on how turnover has trended recently? Are you finding it more difficult to retain talent on the Pro side or distribution side?

Tom Greco: Yes. Good question. I mean, we obviously measure it in our supply chain and in our stores. So, I’ll start with the stores that there’s, some roles in our stores that are just vitally important. Every role is critical, but when you think about the general managers, our terrific general managers in the stores, the DMs, the commercial parts pros, that turnover was extremely high when I started here many years ago. It came down significantly. And in the last year and a half, it started to go back up. So, we started to address it directly, towards the tail end of last year. We are seeing that come down. In supply chain, same story, Steve, who’s our new head of supply chain, has done a very good job addressing turnover and supply chain, and that one has come down significantly in the last six months.

So, again as Gene said, when your turnover’s coming down, you’re able to execute better. And we are executing better in our supply chain, and we’re executing better in our stores, and we’re going to stay committed to retaining that slightly important frontline talent that serves our customer every day.

Operator: Thanks, [Daniel] (sic) Joe. We have no further questions at this time. So with that, I will hand back to Elisabeth Eisleben for final remarks.

Elisabeth Eisleben: Yes. Thank you all for joining us today. We look forward to welcoming Shane here in a couple of weeks and speaking with you all again in November. Have a great day.

Operator: This concludes today’s call. You may now disconnect your lines. Thank you for joining.

Follow Advance Auto Parts Inc (NYSE:AAP)

Page 6 of 6