Shane O’Kelly: Yes. So I’ll make the math easy. The $150 million is out. We took out $150 million. And then we said, hey, we’re going to take $50 million of that, and it goes in the frontline, for wages, bonuses and training. There’s an incremental amount, roughly double that, that comes from — some of it are our ordinary course. So we’ve got our merit plan for the year. But some of it comes from sunsetting. We had some HR programs out there that we spend money on, that weren’t directed towards the frontline. So we canceled those programs and we’re putting those dollars and do just bonuses and train. So it’s no net — it’s no incremental drag to the company. It’s a better use of funds that we were putting in the right place.
Operator: The next question comes from Brian Nagel from Oppenheimer. Brian, your line is open. Please go ahead.
Brian Nagel: Hi. Good morning. Thanks for taking my questions. So a couple of questions. I guess basically both maybe philosophical in nature. But first off, maybe not really fair, but Shane, so for those of us who followed Advance for a while, I think we’ve heard — we’ve discussed in the past, with prior management teams, supply chain fixes. So I guess, we’re talking a lot about that here as a key component of your view of the business. What’s different? I mean, if you look at the — what you plan to do here for the business, from a supply chain perspective, and evaluating what has been done in the past, what are really the key differences here? And then my second question. You have a lot going on here in the near term. How do you balance or how do you think about market share?
Because you have a very fragmented sector. But within that sector, you’ve got a really — a couple of really strong competitors. So how do you think about maintaining market share amid all these near-term type efforts within the business?
Shane O’Kelly: We’ll start with the second question on market share. There’s lots of good companies. There’s lots of people that we compete with every day. And you played — have some have some notable examples. But there are plenty of smaller companies out there who sell auto parts so we know that we’ve got to earn our keep every day. We’ve put out our guide. We think that’s modest. And we know that our engine, as we restarted with this turnaround, we’ll take a minute to get a full head of steam. But the industry fundamentals are very good. This is a disciplined industry. By the way, it’s an industry that even with the big players, there’s still room and runway to grow. By the way, there is just growth that occurs naturally.
And so we won’t be a share taker, but we’re — first step is to be a shareholder, and I mean that in terms of market share. So that’s what we’re looking to do. And we don’t spend the day thinking. Any time you put two companies to get together, the first thing you got to think about is what are you going to do with the logistics infrastructure and so we let two different models exist for a long time and then had sort of a patch solution. And what we’re telling the market today is the right answer for auto parts distribution is to have one single national network. And that’s what we’re doing. And so you won’t be able to identify facilities in terms of that’s a blue versus red EG Carquest versus Advance. We’re Advance Auto Parts, and we will have a national distribution network.
The second thing is the idea of using this market hub. And I think you see that probably. It’s — I think it’s a good way to get product closer to the more SKUs closer to the customer to be more responsive. And I think that’s a function — that’s a bit of an evolution. I think the customers’ expectations have increased in terms of what can you get me in a short time frame. We want to be participated in that, and that market makes that happen.
Brian Nagel: Got it. I appreciate all the color. Good luck. Thank you.
Shane O’Kelly: Thanks, Brian.
Operator: The next question is from Scott Ciccarelli from Truist. Scott your line is open. Please go ahead.
Scott Ciccarelli: Thanks for fitting me in guys. So you talked about 400 teammates that are now gone, but can you provide more color on where you’re able to take out $150 million of expenses from your cost structure. It’s a pretty big number in a short period of time. And related to that, have you factored in some sort of negative impact on sales? Like, in theory, the people there related to that, have you factored in some sort of negative impact on sales? Like in theory, the people there were doing at least something semi-productive?
Shane O’Kelly: So the cost takeout was broad-based. So no functional area was exempt. And if I go back to an earlier comment, I think we had a bit of a headquarters-centric approach to running the business. And with that, you end up with low in your corporate infrastructure. I believe in the inverted pyramid, the idea that we need to be field first, and corporate needs to be lean. Corporate needs to be everybody who sits in a corporate seat needs to be supporting the field. And so we went across the functional areas. I think notably, marketing was an area where there were more significant cuts than in the other areas because we invested in marketing programs that didn’t have a yield. And so we view that cost takedown not only as necessary, but one that didn’t dampen our sales, if anything, I think we’ve got the opposite going out as we cleared out some bureaucracy.
We booked at processes that were inefficient, and we’re empowering the front line. And as we take dollars and put it in the front line and reduce turnover and create energy, those team members feel like they’re heard and supported in a way that wasn’t occurring.
Scott Ciccarelli: Okay. So you don’t think you’ll lose any sales on the reduction in marketing — can you add one other question. Are there more restatements to historical results? And anything on ’23 we should be thoughtful of before some of the new team on the finance side came in?
Shane O’Kelly: Are you saying more than what actually is being reported today?
Scott Ciccarelli: Correct.
Shane O’Kelly: Yes. No, I think what we’re talking about today is what we’ve shared today are the restatements that we plan to see in the Form 10-K. We’ll have the Form 10-K out in short order. It should be within that extension period of time.
Scott Ciccarelli: Got it. Okay. So no more restatements or results. Okay. Thanks guys. Good luck.
Shane O’Kelly: Thanks, Scott.
Operator: Our next question comes from Max Rakhlenko from Cowen. Max your line is open. Please go ahead.
Max Rakhlenko: Great. Thanks a lot thanks. So first, how far away are your in-stocks from where they need to be and where you want them to be? I think you mentioned they’ve improved by 200 basis points. So how much room ahead? And then just how we should think about that timing.
Shane O’Kelly: Max, we didn’t get the question. Can you say one more time, please?
Max Rakhlenko: Sorry, just how far away your in-stocks from where they need to be? I think you mentioned 200 basis point improvement. So how much further room do you have to go? And then just how should we think about the timing?
Shane O’Kelly: Yes. So we’re doing that real time. And as we complete this — our inventory system that comes online, it will get better from where it sits today. So I want to put a definitive number on it, but that journey continues. We do get customer feedback that says, hey, I feel better about your product availability. We get feedback from our world as well. But I don’t want to put a pinpoint but more to come, but material progress that has been noted by customer and field team members.
Ryan Grimsland: Yes, I’ll just add. I think broad-based improvement, absolutely, broad-based improvement, but there’s still work to do geographically. I think 38 different distribution centers, some are smaller, just the ability to allocate the work. That’s the work that we’re doing with the new system and being able to get there. So there’s still work to do, but broad-based significant improvement.
Max Rakhlenko: Okay. And then how are you thinking about pricing on the DIFM side and whether you are where you need to be in order to be competitive? And then just latest thinking around private label versus national brands following some of the conversations that you’ve been having with the pros?
Shane O’Kelly: So I’ll start with private label. We think private label is an important dimension of the business. And we’ve got some great brands that we control. Die Hard, I think, is a premier name. The Carquest name. And think about Carquest as it relates to our platinum brakes product. So we’ve seen growth in private brands and we want private brands to be an important part of the portfolio. I think something we’ve done is, in the past, sometimes our exuberance as it relates to who we work with, we may have had suppliers not in a position to fully represent what our needs are. We’ve come through those issues and our merchant and sourcing teams are making sure that we’re not only getting high-quality products but we’re getting it in the quantities that we need.
On the pricing front, a couple of things here. One, this is a disciplined industry. And I think that’s important, the conduct between the players in terms of how the active customers. I would describe as rational. But customer feedback is an important dimension. I would say we need to be in the ZIP code of the customers’ needs on price. But availability is important, as is speed to service. And that’s something that we’re focused on. We know that if you’ve got a — if you’re a pro and you’ve got a car on a lift, you’ve got a Chevy Tahoe that needs brake rotors, we’ve got to get them to you expeditiously. So we’re focused on that speed of service, which is something we measure. But as it relates to price, we’ll be where the market sort of demands.
Max Rakhlenko: Got it. Thanks a lot.
Elisabeth Eisleben: All right. Thank you all. That is our last question for today. Thank you for joining us. We look forward to sharing more progress on our decisive actions that we covered today when we speak with you again in May. Have a great day.
Operator: This concludes today’s call. Thank you very much for your attendance. You may now disconnect your lines.
