Genuine Parts Company (NYSE:GPC) Q1 2024 Earnings Call Transcript

So I think as we think about the bigger national accounts, they are feeling some sluggishness from a cautious consumer. And so that’s on top of the work that we’re doing to make sure that we’re covering the market in the major accounts and each of its segments in the right way with a lot of strategic intent. A – Will Stengel Hey, Greg. I would just add, we had the Auto Care Advisory Council in here very recently, the teams, that group is energized. We we’ve got a growing Auto Care base. The quality of our auto cares has never been better and that’s a program now that’s 18,000 members strong and growing. And our goal is just continue to capture more-and-more of their spend, which our team is doing a great job of executing. So that’s a business that’s been a hallmark of NAPA for many, many years.

And certainly we’re energized with the direction that group is going. Q – Greg Melich And if I could throw in one more. I think last year you bought in over 100 drivers, that was a real dial-up. I guess, is that — are you continuing at that pace this year? How does that help all these initiatives to buy those folks in? A – Bert Nappier Well, look, Greg, it’s Bert. We announced in Q1 or the year-end call that we were pivoting some strategy there around the independent owner model. Look, that model has been successful for many, many years and will continue to be. And both models work in our business and they’ll stay in our business. We’ve refined the approach a little bit and we’re going to lean into owning more stores where we can and see that mix shifting some over-time.

And that’s really around the opportunities we see in target priority markets. And so we’re going to continue to accelerate the pace. We did so in the first quarter. We had 45 stores acquired from independent owners in the first quarter. That’s against 33 stores in the fourth quarter and then that number in the prior year would have been 16. So we’re excited about this opportunity and we think it’s great for the business. It’s going to allow NAPA to really control more of the transaction, the customer experience, the strategic priorities in key markets. And we think that’s a real positive thing for the business. A – Paul Donahue Hey, Greg, and I’d also mention the acquisition of independent stores is not a new development for Genuine Parts Company.

We’ve been doing that every year for as long as I’ve been here. As Bert mentioned, we see that accelerating in 2024, we saw it in Q1 and expect that to continue throughout the year. But our — us buying and selling independently-owned stores is not a new phenomenon for GPC. Q – Greg Melich That’s great guys, and good luck. A – Paul Donahue Thank you. A – Bert Nappier Thanks, Greg. Operator Your next question comes from Michael Lasser with UBS. Please go ahead. Q – Henry Carr Good morning. This is Henry Carr on for Michael Lasser. I just wanted to ask, I believe you said you’ve been seeing more positive buying behaviors from your independent owners. What exactly is driving that? Thanks. A – Will Stengel Yes, Henry, thanks for the question. Look, I think — I think one of the things that we’ve been very clear about is all these initiatives that I detailed in my prepared remarks, those are not just relevant for our business, but also our independent owners.

And so we’ve been very thoughtful and close in our partnership, working with them to make sure that they’ve got the right inventory, they’re running their stores and their businesses the right way operationally. And so when we say that we’re doing initiatives around NAPA, it’s not only company-owned stores, but also the independent owners. And I think — I think those programs are having an effect. A – Paul Donahue Hey, Henry, I’d just — I’d add to Will’s comment. I think it’s also evident of the great job our ops team is doing in improving availability and improving our overall supply chain for U.S. Auto. Q – Henry Carr Thank you very much. Operator The next question comes from Bret Jordan with Jefferies. Please go ahead. Q – Bret Jordan Hey, good morning, guys.

A – Paul Donahue Hey, Bret. A – Bert Nappier Hey, Bret. Q – Bret Jordan Could you talk about, I guess regional performance for the U.S. business? And then I guess my second question would be the cadence of the quarter as far as the progression through the months.

Will Stengel: Yes. So I’m assuming this is a U.S. Automotive question. The progression — the progression through the quarter was sequentially improved starting January, February, March. So March was a very strong month for us. As we look at regional, we had a good quarter in the East, Mid Atlantic, West kind of outperformers. And relative to those three parts of the business, Midwest and Southern were a little bit soft. As you know, we’ve got five divisions. They’re all about equally weighted. So nothing of note, but that’s how the quarter played out.

Bret Jordan: Great. Thank you.

Operator: Your next question comes from Seth Basham with Wedbush Company. Please go ahead.

Seth Basham: Thanks a lot. [Technical Issues] business. If you could just go a little bit deeper on the regularization of the field teams that you mentioned, how broad is this? And what customer segment are you focused on with this reorg?

Paul Donahue: Hey, Seth, can you repeat the question? You cut out on us with your — the first part of your comment.

Seth Basham: Sorry, within U.S. auto and the regularization of the field teams that you mentioned, how broad is this across the country and what customer segment are these field teams focused on?