Welcome to the Advance Auto Parts First Quarter 2023 Conference Call. Before we begin, Elisabeth Eisleben, Senior Vice President of Communications and Investor Relations, will make a brief statement concerning forward-looking statements that will be discussed on this call. Good morning, and thank you for joining us to discuss our Q1 2023 results. I'm joined by Tom Greco, President and Chief Executive Officer, and Jeff Shepherd, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will turn our attention to answering your questions. Before we begin, please be advised that remarks today will contain forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including, but not limited to, statements regarding our initiatives, plans, projections, future performance, and leadership transition. Actual results could differ materially from those projected or implied by the forward-looking statements. Additional information about factors that could cause actual results to differ can be found under the captions "Forward-Looking Statements" and "Risk Factors" in our most recent Form 10-K and subsequent filings made with the commission. Now, let me turn the call over to Tom Greco. Thanks, Elisabeth. Good morning, everyone. I'd like to start by thanking our entire team for their relentless focus on serving our customers. The dedication of our frontline team members has been a hallmark of the company for many years. We're grateful for their ongoing commitment. I'll review a couple of themes today in providing an update on our performance in the first quarter and outlook for the balance of the year. First, we're putting the customer and our team members first in every decision we make. While our financial results in the first quarter were well below our expectations, and there is still work to be done, our customer-focused investments in parts availability and price competitiveness resulted in improvements across key relevant performance indicators. We're executing our plan to drive continued improvement in our transactions with pro customers, highlighted by increased parts availability, sustaining competitive price targets, and improved execution across the board. Secondly, as we look to the outlook for the balance of the year, we expect the competitive environment in the pro channel to remain very challenging. As you saw in our release, we're reducing our annual guidance based on the shortfall we experienced in Q1 and our updated balance of year outlook. Additionally, we believe it's prudent to enhance financial flexibility, and we've made the difficult decision to reduce our quarterly cash dividend. We remain committed to executing against our key initiatives to drive top-line growth and improve operational performance. In terms of our top line, Q1 net sales increased 1.3%, while comparable store sales decreased to 0.4%. New stores contributed to net sales growth in the quarter, inclusive of the 21 stores and branches we opened in Q1. We saw a net sales growth in both DIY, omni-channel, and DIFM, with DIY omni-channel slightly outperforming DIFM, driven by a double-digit sales increase in our e-commerce business. In terms of cadence, we believe that lower tax refunds pressured our business in March. From a category perspective, motor oil and brakes led the way as a milder winter impacted cold weather category sales in some of our geographies, particularly in some of our northern geographies. On a regional basis, our sales growth was led by the West. Overall, both net and comp sales growth were below our expectations for the quarter, driven primarily by our professional business. As I mentioned, we saw improvements in the KPIs we tracked to measure parts availability. In collaboration with our vendor partners, our supply chain fill rates improved in the quarter. In terms of availability, our on-hand rates improved by approximately 50 basis points in the quarter. In terms of competitive pricing, we've talked in the past that based on our research, the most important criteria for an installer to make choices about their parts supplier starts with availability, followed by consistency of delivery and relationship. Pricing has historically been the third or fourth criteria for an installer. However, if the gap between our price and competitors becomes too wide, price becomes a bigger factor. Last year, we saw our relative price position within Pro climb to unacceptable levels as a result of changing competitive dynamics surrounding price-related investments. We've done considerable work testing different price points across categories and geographies to determine the best approach to drive increased transactions and growth in our Pro business. This work helped us refine price targets for each category relative to competition, be it a traditional competitor or wholesale distributor. As a result of improved availability, along with the investments we made within Pro to achieve competitive price targets by category, we saw improved performance in both transactions and units relative to the fourth quarter. This was more than offset by less year-over-year growth in average selling price relative to the fourth quarter. In order to sustain our targeted competitive price position in Q1, we had less price realization than planned, which put substantially higher pressure on our product margin rate. Our gross margin rate declined 162 basis points, with the single biggest shortfall versus expectations being less than planned price realization within product margin. Separately, we also experienced a mix headwind within product margin, which Jeff will explain in more detail shortly. These two primary headwinds within gross margin more than offset the benefits we saw from both channel and own brand mix. In terms of SG&A, we incurred a headwind associated with the prior year adjustment, which Jeff will discuss further. The combination of gross margin and SG&A deleverage resulted in an operating margin decline of 339 basis points in the quarter. As we look to the back half of 2023, we're urgently focused on operational improvement. On the top line, we're continuing to drive our DIY omni-channel business behind the strength of DieHard, our Speed Perks loyalty platform, and strong growth in our e-commerce business. In terms of Pro, we're focused on improving top-line sales and driving gross profit dollars. This is highlighted by a back-to-basics approach and a heightened focus on execution across the board. The first big driver here involves further optimization of our inventory and parts availability to improve on-hand rates. In some cases, we plan to sell through owned inventory at discounted rates to transition to new, higher-margin alternatives. The second driver involves our plans to sustain competitive price targets to ensure we close the sale. On the margin front, we've talked about strategic sourcing within category management in the past. We're now taking a much more holistic approach, starting with the latest customer and category insights and updating the role of each category within our business. We apply a very disciplined approach to determine sourcing, distribution, shelf space, pricing, and promotion. Our category management process involves the engagement of our strategic suppliers with an overarching goal of accelerating our mutual sales growth and margin expansion. We're addressing opportunities here on a category-by-category basis, with continued work plan balance of year and into 2024. We also executed a corporate restructuring in the first quarter, which will provide savings balance of year within SG&A. In terms of our balance of year outlook, we continue to be mindful of macroeconomic uncertainty and potential pressure on consumers. For our industry, the primary drivers of demand remain positive, including an increasing car park, an aging fleet, and a modest increase in miles driven compared with one year ago. Our overarching goal for the balance of the year remains to improve operational execution to regain top-line sales momentum, particularly in the professional sales channel. Regaining our share of wallet with existing customers has been challenging. We're elevating our focus on parts availability, sustaining competitive price targets, and improving field execution. Jeff will cover more details surrounding our revised guidance later in the call. Given what we've experienced year-to-date, we expect that sustaining our competitive price targets by category will require higher-than-planned price investments in Pro, and we've factored this into our full-year guide. Before turning the call over to Jeff, I wanna talk briefly about the newly expanded role of our independent Board Chair, Gene Lee, and provide a quick update on the CEO search process. As you saw in our release this morning, Gene is now serving as Interim Executive Chair and will be providing additional operational oversight and support to our management team during this time. I look forward to working with Gene and continuing to leverage his experience as we work to deliver operational improvement in the business, while helping to ensure a seamless CEO transition. With respect to the CEO search, following a very thorough vetting and selection process, we've retained a leading independent search firm to assist with this work. Our succession committee is comprised of board members with significant experience in retail, automotive, industrial, and multi-unit operations. The committee is evaluating internal and external candidates and remains committed to identifying a candidate who's exceptionally fit for the role. With that, I'll now turn the call over to Jeff to review our first quarter financials in more detail and provide our outlook for the full year. Jeff? Thanks, Tom. Good morning. I want to reiterate our gratitude for our team members and the ongoing commitment to putting our customers first while navigating a difficult quarter. In Q1, net sales of $3.4 billion increased 1.3% compared with Q1 2022, driven by new store openings. Comparable store sales decreased 0.4%. Gross profit margin was 43%, compared with 44.6% in Q1 2022. In terms of gross margin, we experienced headwinds associated with targeted price investments, which were above expectations due to the current competitive landscape. It's important to point out that as we remain committed to maintaining the competitive price targets we've established and have now attained in key categories, we were unable to price to cover product costs in the quarter. Product costs were up mid-single digits compared with the prior year, which exceeded our year-over-year price realization. In addition, unfavorable product mix and increased supply chain costs also contributed to gross margin deleverage. In terms of product mix, we routinely see variations which can be influenced by several factors, including macroeconomic conditions and weather. As you know, we had a milder winter in the quarter, which impacted battery and wiper sales in Q1. This, coupled with an increase in motor oil, which carries a lower margin rate, had an unfavorable impact on product margin. While we had channel and own brand mix tailwinds, product mix headwinds more than offset these benefits. The combination of inflationary costs and our new DCs in California and Toronto, as well as lower than expected sales, resulted in supply chain deleverage. This more than offset productivity gains from our supply chain initiatives. SG&A in the quarter was $1.4 billion, compared with $1.3 billion the previous year. As a percent of net sales, Q1 2023 was higher than planned due to the softer top line, and was 40.4%, compared with 38.6% in the prior year. We incurred approximately $17 million in SG&A costs in the first quarter. As a result of management's review, it was determined these amounts were paid in 2021 and 2022, but not correctly expensed in those years. We've concluded these costs were not material to prior years, and therefore, we recognize the adjustment in Q1. Our SG&A deleverage was also due to inflationary headwinds associated with labor and benefit-related expenses. We incurred costs associated with new store openings, which were partially offset by a reduction in start-up costs we incurred in 2022 related to our California expansion. Our Q1 operating income was $90 million, compared with $203.3 million the previous year. On a rate basis, Q1 was 2.6%, compared with 6% the previous year. Diluted earnings per share was $0.72, compared with $2.26 in the previous year. Q1 capital expenditures were $85 million, compared with $114 million the previous year. The year-over-year reduction was primarily attributable to the completion of certain IT-related investments from the prior year, and lower new store and branch openings in Q1 2023. Free cash flow with an outflow of $468 million in the quarter, with the largest contributor being the timing of payables. As you saw in our release this morning, and as Tom mentioned, the board made the difficult decision to reduce our cash dividend to $0.25 this quarter. Given our recent performance and balance of year outlook, we believe it's prudent to retain financial flexibility. Given the factors discussed, we are updating our full year guide to include net sales of $11.2 billion-$11.3 billion. Comparable store sales of -1% to flat, GAAP operating income margin of 5%-5.3%, income tax rate of 24%-25%, diluted earnings per share of $6.00-$6.50, capital expenditures of $250 million-$300 million, a range of $200 million-$300 million in free cash flow, and 40-60 new store and branch openings. With that, let's open it up for questions. Operator? Thank you. If you'd like to ask a question today, please press Star followed by 1 on your telephone keypad to enter the queue. You may withdraw by pressing Star 2. Participants are asked to limit themselves to 1 question and 1 follow-up per person, so we may ensure everyone in the queue gets an opportunity. That's Star 1 to ask a question today. Our first question is from Elizabeth Suzuki from Bank of America. Elizabeth, please go ahead. Your line is open. Great, thank you. Just on the competitive environment, you noted that you expect competition in pro to remain challenging. I mean, do you think that competition is mostly coming from the large chains, or are the smaller independents getting more competitive, too, as the supply chain loosens up and they're able to get more product as well? Hey, good morning, Liz. I think it's a combination of the two. I mean, we measure the relative price indices against the industry, and obviously, we also measure it against our direct, close-in competitors, but we predicate our pricing strategy off of the industry more broadly. Really, those two are both looked at, but the primary driver for us is the industry, because as you know, the pro business is highly fragmented and there's a lot of business out there. It's a $100 billion category, so we look at the whole thing. Great. You know, Tom, you had also mentioned in your prepared remarks, you know, that you talked about plans to sell through some of your own brand inventory to replace with better products. I mean, is the implication there that the own brands didn't meet the demands of your customers in terms of quality or, you know, features, and are you pausing expansion in own brands? Yeah, let me correct that. You know, we have owned inventory, which is essentially inventory that we've already paid for. It's not necessarily own brand. we're essentially transitioning from one brand to another in a couple of big categories, and that's what we're talking about here. For the most part, we're actually transitioning into higher margin own brands. I know that's a little confusing, but this is largely about expediting the process to move out of inventory that is essentially moving out of our system and into higher margin own brands. Got it. Thank you for clarifying that. The next question comes from Chris Horvers, from J.P. Morgan. Chris, your line is open. Please go ahead. Thanks. Good morning. Just at a high level, narrating this, you cut your operating margin by 280 basis points. Is that essentially 250 on the gross margin line and the balance on SG&A, given the lower outlook? Within that gross margin, is that all price investment that's driving that difference? Yeah, Chris, let me give you some context on what happened in the quarter and how we're thinking about balance of the year, and then I'll let Jeff sort of tie it off. In terms of the sales, I mean, DIY was generally in line with our expectations. We were down low single digits in transactions, up mid single digits in average ticket. We posted a positive comp, you know, generally in line. As you know, in Pro, the goal was to invest in inventory and make sure that our competitive price index was in line with where we had targeted. We wanna drive our units, we wanna drive transactions. We're trying to increase our share of wallet with our existing customers, get back to where we were. We're actually making good progress on improving units and transactions in the quarter. We were down low single digits in transactions in the quarter, that was a nice improvement from where we were at the end of last year. We're getting more jobs with our installers. The challenge is twofold. We're not getting enough lift yet, so it is taking longer to recover share of wallet with our existing customers. That's been the biggest issue that we face so far this year. We're gonna stay at it. It's taking longer than we'd like, though. In terms of our average ticket in Pro, it was up low single digits, which is significantly below how we planned that business. As we look forward, you know, that's gonna be a big P&L headwind for the year. I'll let Jeff tie it out from there. Yeah. In terms of the split between margin and SG&A, Chris, the best way to think about it, if you look at the balance of the year, kind of midpoint of the guidance for last year, we're expecting deleverage in both gross margin as well as SG&A, you know, relatively split. I mean, there could be some variability there, but that's when we're sort of thinking about the balance of the year. Just to put a bow on that, we do think that, you know, the second quarter, will be, you know, the most deleverage, and then we'll see improvement in the back half. That's a good segue to the follow-up. As you think about price and availability, have the price investments been made, and now we're sort of annualizing through that, is there any LIFO dynamic there? On availability side, you did add a lot of inventory. Is availability where you want it, or are we also trying to figure out, all right, we have the inventory, but is there a question of it's just not in the right location? Sure. Well, first of all, on the... I'll start with availability because Jeff can connect price a little bit after I talk. We're always gonna wanna have improved availability. We are making good progress there. Our on-hand rates are up, our supplier fill rates are up. Our fill rates from the DCs to the stores are up, so good progress on availability, in terms of our on-hand rates. Still, room to improve there, but clearly we're improving there. In terms of price, you know, as I said with the earlier question, you know, we have a targeted price index versus the industry by category. To answer your question directly, we are where we need to be there. It is resulting in less price realization than we planned, but we are at the targeted index now. Right, we're planning on that being a competitive dynamic through the balance of the year. That is factored into the revised guidance. In terms of impact from LIFO, you know, we're not anticipating anything significant there. You know, we talked about inflation being up mid-single digits. We're expecting some moderation over the back balance of the year. However, you know, the LIFO, we think will be, you know, a slight benefit. Slight benefit for the year, but it was a headwind in 1Q? That was a benefit in 1Q, very small, $7 million. Got it. Okay. Thanks very much. Thank you. The next question comes from Simeon Gutman, from Morgan Stanley. Simeon, you're line is open. Please go ahead. Good morning, everyone. In the prepared remarks, it somewhat painted a picture of, like, a very competitive, price-driven backdrop. Curious if you can discuss, has, especially commercial, resorted to, I don't wanna say any price war, but it sounds a little different than the way the other competitors described it. Are you seeing price matching? Is it coming from the big chains? Is it coming from the independents? Can you discuss that competitiveness a little more, please? Good morning, Simeon. I think it's consistent with what I said earlier. I mean, we're establishing our price targets based on what we see every week in the industry in each category, and we react to that. I mean, we've got a very strong team in strategic pricing. They look at our unit lift in each of the categories in terms of how we would perform at different levels, and we've got a very clear idea of where we need to be in order to deliver unit improvement and secure more jobs. They establish those targets for each category. When we see that move, and again, that's at an industry level, we don't measure it. We look at individual competitors that are close in, but it's really more at the industry level that we drive our pricing strategy off of. you know, I think it's a combination of the two. Can you give any sense for how much of the gross margin impact is due to the acceleration of moving some lines out of your network versus the price investments? it's primarily the price investment. I mean, that has been the single biggest factor. We are able to cover inflation with price, that was by far the biggest driver. Got it. Okay, thank you. The next question comes from Bret Jordan, from Jefferies. Brett, your line is open. Please go ahead. Hey, good morning, guys. Morning. Morning, Brett. Could you talk about the repercussions of the debt to EBITDA now being at 3x? Is this gonna require sort of a more funded working capital level? You know, I guess, what does it do to your, I guess, inventory balances and cost of goods? Yeah, I mean, we're looking to, you know, make the necessary investments within working capital to ensure we have the right availability. We've made substantial improvement in that. In the first quarter, you'll see our free cash flow. When you look at the details, our inventory is up $100 million. We think we have some further investments to go, but we think that'll be largely completed by the end of this quarter. So we're confident that we can get those investments in and, you know, start producing the cash from making those investments. You know, we watch our ratios very closely. It's elevated, and, you know, we believe that's temporary as the availability improves our transactions and we improve the cash flow. Your accounts payable, I think we're in the 70s as a percentage of inventory. Is that number probably heading lower here as we go into a, sort of, you know, into this three-plus debt-to-EBITDA ratio? No, we think we'll see some slight improvement over the course of the year. We had some sizable planned payments in the first quarter associated with our payables, so that'll start to flatten out over the balance of the year. We'll see some slight improvement. Okay. Then a question on commercial. I mean, obviously, could you maybe give us some color as to what percentage of your commercial business is national accounts? Then obviously one of your big national accounts did an RFP in the first quarter that, you know, I think maybe took some business away from you. How do we reconcile that with this phase of price investment? You'd think that, you know, given the fact that you're calling out lower pricing, that, you know, RFPs like that would be going towards you as opposed to away. Sure. Well, obviously, we look at the different channels within Pro, Brett, as you know. We don't break out exactly how big our majors are, but our strategic accounts are very important to us. You know, we believe we'll see to the direct question you mentioned on the RFP, as we get into the back half of 2023, we'll see improvement there, you know, just across our national account base in general for a variety of reasons. Most of the progress we've made so far has come up and down the street, which I'm pleased about. You know, we're gonna continue to drive our up-and-down the street business, secure more jobs, increase our share of wallet. Our field team is highly focused on driving execution in the field, we've got a pretty simple playbook. You know, we're gonna make progress on availability, and we're gonna sustain our CPI. With that, we expect to improve transactions, units, and drive share of wallet. As we get into the back half on Pro, we expect improvement on the strategic side and also a continued progress up and down the street. Okay. Hey, part of that first question, I, the one on the payables and free cash. I guess your free cash guide, you know, given the fact that we're probably gonna have to fund a bit more working capital, is your confidence in that guidance tied to lower CapEx or store opening expense? You know, I guess as you look at the puts and takes of cash flow. Yeah, we took a comprehensive look at all of that, and you'll see we did reduce the number of planned new store openings this year. We've reduced our estimate for capital expenditures. All of that has been contemplated, and we're gonna continue to assess that throughout the year. Okay, great. Thank you. The next question comes from Greg Melich, from Evercore ISI. Greg, your line is open. Please go ahead. Thanks. I wanted to just quantify a little bit more on inflation, what it was in the first quarter, in both DIY and Pro. It sounds like it was low single digit, maybe mid-single, and then what's your expectation for the rest of the year, the cadence of that? You talking cost, Greg, or are you talking about? I'm talking top line- Just to be clear. I'm thinking price. Yep. Top line, that's what I thought. Yeah. Yeah, we saw mid-single digits on DIY in terms of average ticket, and we saw low single digits on Pro, which the Pro number was well below how we planned it. You know, that's kind of where it came in. The guidance, the cadence for the rest of the year, should we expect that to go all to low single digits or near flat? The guidance will be near flat. Yeah, I mean, we're anticipating, you know, that the competitive environment in Pro is. Right ... for the balance of the year, and that's why we're making the single biggest driver of our guidance revision is that. Got it. Okay, good. Then the follow-up is, I know you're bringing inventory back and get fill rates back is still a key primary way to get back share. Is inventory now, I guess, was a 5% year-on-year, is that back where it wants to be, or do you still need to have some inventory investment? We're largely there. We have a little bit more investment we think we need to make that we believe will be completed in the second quarter, and at that point, we think the working capital or inventory investments will be largely completed. Got it. Then my last follow-up was just a little more color on the SG&A, in terms of I know they were up, you had the $17 million, but the other drivers, you said wage inflation. Could you just give us a little more color on those and how they're trending? Wage inflation was the biggest factor, again, mid-single digits. you know, couple that with the top line, and it's pretty difficult to get leverage there. We also did see deleverage in our newly opened stores. You know, we're moving through these phases of last year's pre-opening costs. Now we're moving into open stores, and we get natural deleverage there as we build the revenue. We're still seeing deleverage. That was offset by pre-opening costs that we had last year, so it's sort of shifting that. Those were the big drivers. Got it. Thanks and good luck. Thanks, Greg. The next question comes from Scot Ciccarelli from Truist. Scot, your line is open. Please go ahead. Good morning, guys. A follow-up question on the balance sheet. I know you mentioned there were some timing issues, but vendors in this industry are well known for being very sensitive to the performance of their customers. I guess the question is, are some of your vendors starting to change terms, or maybe are your payment terms on private goods different than or shorter than branded goods? Because if we just had timing differences, I guess I would think the AP ratio would improve a little bit more than what you suggested. Well, there haven't been any significant changes in terms. You know, really the timings associated with the investments we started to make in the back half of the year, and, you know, those invoices are coming due in the first quarter, and we largely anticipated that, so it wasn't a significant surprise to us. As I said, it'll even out over the balance of the year, and we'll see improvement in the AP ratio as the year goes on. If inventory is gonna continue to go up, you would expect AP to increase more than whatever increase is still happening on the inventory side? Yeah. Well, ideally, we start to sell through that inventory, and that'll also help our AP ratio. Yeah, that's the way to think about it. Understood. Thank you. Thanks. The next question comes from Steven Forbes from Guggenheim Partners. Steven, your line is open. Please go ahead. Good morning. Maybe just to start with a quick follow-up on a prior comment. As I think you mentioned, you expect the most deleverage on EBIT margin in the second quarter. Can you just expand on what's driving that? Is it comp compares, or is there something in the margin profile that we should be aware of, that you're cycling as well? Yeah, I mean, part of it is inflation in terms of, you know, we expect that to moderate more in the back half than in the first half. You know, we're dealing with that, and then it's really just finishing out the availability. Once we get that availability where we want it, you know, more improvement in sales in the back half than as compared to the second quarter. Just a quick follow-up. If we think back to the Analyst Day, the transformation, margin expansion timeline, exhibit, and so forth, can you just talk about, you know, whether we're sort of progressing against that timeline or if any of these, you know, changes in the capital expenditure profile, the business or investment agenda has impacted that timeline for the supply chain transformation in any such way? Sure. Well, first of all, a lot's changed since the day we made that presentation. You know, the biggest thing is the competitive environment in pro. Our objective is to regain momentum in our professional business. That's our largest business. It's vitally important for the company. We're getting back on our front foot, on the top line in pro. We're gonna improve our availability. We've got to be where we need to be on the pricing and raising the bar and execution. Relative to what we discussed there, we are continuing to execute all of the margin expansion initiatives that we laid out. This is a new dynamic that we're dealing with, and we're going to address it directly. Thank you. Best of luck. Thank you. The next question comes from Henry Tom from UBS. Henry, your line is open. Please go ahead. This is Michael Lasser from UBS. Good morning. Thanks so much for taking my question. Tom, you're well into the transformation that you started many years ago, and yet it does seem like everything is taking a step back between margins, free cash flow generation. You've needed to cut the guidance, cut CapEx. Why is this all happening now? Is it something that's internally catalyzed or more externally catalyzed? Yeah, I think it's similar to the last question, Mike. I think it is external. I mean, you know, obviously, the dynamic has changed on the pro side. You know, you would say that that's probably been ongoing here for the last year and a half anyway, and that's a fair comment. We are addressing that competitive dynamic. I think I've got a very strong, resilient team here at Advance. We've built a great team, both in the corporate office and in the field. You know, we've faced adversity before, and we've overcome it. I have no doubt that we'll overcome the challenges we face today, but we've got to address what's in front of us right now, and that's about driving operational improvement and regaining share of wallet with our pro customers. We are gonna continue to execute against the things that we believe will continue to improve our business, that were part of the transformation timelines that we've discussed. Tom, are you seeing the challenges in your pro business across both the legacy Advance and Carquest businesses, as well as Worldpac? Maybe a way to address that question is, can you give us a sense for how Worldpac performed in the quarter? Yeah. Worldpac's doing fine. I mean, you know, the multiyear stacks on Worldpac look terrific. you know, we continue to perform very well at Worldpac. Our challenges on Pro are isolated largely to the Advance Pro business. Thank you very much, and good luck. Thank you. The next question comes from Bobby Griffin from Raymond James. Bobby, your line is open. Please go ahead. Hey, everyone. This is Mitch Ingles on for Bobby. My first question is, if the competitive landscape in the pro segment continues to be challenging, and passing through price increases is not an option, what strategies or actions do you have or need to implement in order to rebuild and improve the growth margin in your pro business? Good morning. We talked a little bit about in the script about our category management process. I think that's the single biggest opportunity that we have. It involves a pretty comprehensive approach to each category, where we're essentially looking at sourcing, you know, shelf space, all of the things that are part of category management, and we'll work collaboratively with our supplier partners to mutually drive sales and profit. I mean, I think it's really important that both of us benefit from it, but that would be the single biggest driver. Supply chain remains an opportunity. Our new chief supply chain officer is getting really good momentum with his team. There'll still be further opportunities there as well. Got it. Thanks, Tom. On that subject, can you elaborate on what the supply chain headwinds were in the quarter that led to the deleverage, and what steps are taken to mitigate these going forward? You previously mentioned on the last call about some of the consolidation opportunities in the supply chain. Any updates there? Thank you. Yeah, I mean, the primary deleverage point was the wage inflation that we saw for our labor in the distribution centers. We also had some deleverage of our newer DCs as we get them up to capacity. We'll naturally get improvement there as we get the distribution centers serving a full slate of stores. It's a bit of an iterative process, where you bring a number of stores online. You know, it starts at a lower number until it works up to its full capacity, and once it does that, we'll get much better leverage there. You know, those are the two big ones, and I'll turn it over to Tom on the consolidation part of the question. What we talked about is that our long-term vision for Pro is really to leverage the entirety of our enterprise assets and provide a superior customer experience. As you know, the pro margins are lower than the DIY margins, which results in a natural channel mix headwind. We're testing variations of how we might better leverage the entirety of our enterprise assets. We talked about Toronto in our last call. We're seeing good progress up there, and we see that as an opportunity. There's still work to be done to optimize it, but we believe there's potential to go further there. The end state goal is pretty simple. You know, superior customer experience, accelerate the pro growth while expanding margins and potentially reduce inventory. More to come there. The next question comes from Seth Sigman from Barclays. Seth, your line is open. Please go ahead. Hey, good morning, everybody. My question is mainly on investments. It does seem like there is more of a message today of investing to drive higher sales productivity, which I think is still the biggest gap versus your peers. I think that's both a retail issue and a professional issue. The question is really beyond just price, are there other areas that you may still need to lean into incrementally from an investment perspective, thinking about store investments, labor, et cetera, and could those investments potentially extend into next year? Yeah, good question, Seth, you're absolutely right. I mean, the single biggest difference between our peers and ourselves is that. You know, they have significantly higher throughput in their boxes. You know, we believe. You know, we're obviously talking about availability. That's an inventory investment and making sure we get more parts closer to the customer. Beyond that, we've already made substantial investments in our people through our Fuel the Frontline stock ownership program, that's a big one that we've already made. You know, we're gonna continue to look for ways to drive our e-commerce business, which has been very successful. In terms of DIY, we're actually pleased with our performance there and our relative performance. We've really got to get this pro business, and share of wallet within our pro business back to where it needs to be. From there, obviously, we'll drive our sales per store and obviously, profit per store. Okay, thank you. Just to follow up on the price investment specifically, can you help us frame how off your pricing has been relative to peers and perhaps the scope of the changes that you're making, looking at the percentage of the assortment, maybe the depth of the changes? Stepping back, if you think about how some of your competitors have sharpened prices over the last two years, that's also been combined with other improvements, right? In stock, availability, service, some of which you've already talked about. I guess ultimately, what gives you the confidence today? I understand the gap in performance, but what gives you the confidence today to make those big changes? Thank you. Yeah, we've seen really good progress in many of our stores and many of our categories with the actions we're taking. We've got to just continue to do what we've been talking about on the call, which is a kind of a back to basics approach of improving our availability, making sure our competitive price indices are there, and raising the bar and execution. Where we have that in place, Seth, we're seeing really strong performance, and we just need to replicate that further across the chain. Can you just help us with the scope of the changes, maybe looking at how much of the assortment you're actually changing? Well, we're not changing the assortment. We're, we're improving availability, right? I mean, we're increasing what we call our assortment rates and our on-hand rates. What is designed to go into a store, you know, 22,000 SKUs in an auto parts store. What do we want in the back room? You know, we're improving the quality and composition of the assortment in the back room. When we do that, you know, we see significant improvement in our sales. I mean, the most important thing in our business, as you hear from all of us, is availability. That's the number one driver. Of course, you mentioned the investments from others. You know, that's happened over the last two years, so we've had to, you know, essentially replicate that investment this year in terms of our making sure that we're in line with where we need to be on competitive price by category. The next question comes from Zach Fadem from Wells Fargo. Zach, your line is open. Please go ahead. Hey, good morning. Tom, following up on the last question, comparing you to your peers, curious if you could talk to the structural or infrastructure differences that you believe may be having an impact that drive the lower throughput and thus the need for higher investment. Specifically looking at your commercial business, curious to what extent the execution improvement can narrow the gap versus just having a structural difference? I mean, I think infrastructure-wise, you know, we have the assets we need to compete. I mean, we've got, you know, obviously, a large pro business. It is different than our peers, given that we have the Worldpac business, which is fully integrated, we've got the Advance business. You put all of the large buildings that we can have auto parts in, you know, we have over 500 of those. We're doing a much better job leveraging the entirety of the enterprise assets, and there's still room for improvement up in that area. In terms of execution, you know, we're gonna continue to make sure that we're building the relationships that we have with our pro customers. We're making the number of sales calls we need to make with our account managers that are out there. Bob Cushing has terrific relationships with the large strategic accounts that, you know, are gonna continue to grow at outsized rates over the next several years. We have a lot of things that we can leverage on the pro side of the house to drive growth going forward. Got it. Jeff, a two-part question for you. First one, following up on the Q2 commentary, is there any guidepost that you can give us on magnitude with respect to Q2 comps, where you're tracking today and maybe gross margin versus SG&A? Second, you mentioned doing a corporate restructuring in Q1. Can you help us understand the cost impact in Q1, and then expected savings and productivity for the rest of the year? Yeah, I'll start with the second one first. The cost in the quarter was relatively low. It was low single digit millions, so it was not a significant investment. We haven't broken out the savings in the balance of the year, but it is sizable, and we factor that into the revised guidance. It's something we can quite easily track, and so far, we're measuring up against our expectations. You know, from that standpoint, we feel pretty good. In terms of second quarter, you know, again, we expect deleverage both in gross margin and SG&A, probably be more in gross margin than it will SG&A, but we do expect it to be, you know, a fairly significant deleverage in the second quarter. Gotcha. Appreciate the color, guys. The next question comes from David Bellinger, from ROTH Capital Partners. David, your line is open. Please go ahead. Hey, good morning. Thanks for the question. Going back to the DIFM price gaps. With the changes you've now made, are those gaps largely closed versus your direct competitors? Are you going even further and taking price below other market participants in order to recapture some of the share that's been lost over the past year or so? First of all, David, we are where we need to be. Obviously, it is market by market. You know, we look at it, you know, high-share market, low-share market. Those types of things, you know, will influence, you know, where we target by market. In general, we are where we need to be, and that's what's factored into the full year guide, because where we need to be is significantly lower than we had planned from a price realization standpoint. That's where we are. Okay. A follow-up in regard to just professional sales in general. There's been some concern around certain end customers shifting suppliers. Can you help us understand the breakdown of, I believe it was a flattish pro sales comp this quarter? Maybe you can talk about just average spend per customer in light of the inflation benefit versus any customer losses that occurred within the Q1 period. We are seeing growth in average spend per customer, which is good. You know, it's not where we'd like it to be. We want it to be higher, because the biggest challenge we faced last year was share of wallet with existing customers. I mean, we're now, you know, growing customers. You know, the share of wallet is the opportunity that we're driving at, and we are growing average sales per customer, but it's not where we'd like it to be. Got it. Thank you, Tom. Thank you. The next question is from Seth Basham from Wedbush. Seth, your line is open. Please go ahead. Thanks a lot. Good morning. My question is also around the pricing environment. As you forecast improved performance on sales for the balance of the year, are you anticipating any competitive reaction pricing wise? Yeah, we've obviously considered different scenarios, Seth. You know, we do expect it to be very competitive. You know, Jeff mentioned, you know, essentially flat, you know, on a price realization, which is well below our plan. If that changes to the positive or the negative, we will respond. Got it. Understood. My follow-up question is around private label brands performance. Can you give us some more color on overall performance for private label brands? You mentioned that you're still moving in the direction of private label brands. Are you having pockets where you're having to roll back some of that new products because of underperformance? No, on the contrary, I've been in a lot of stores over the last several weeks. I've met with a lot of customers. People like the quality of our Carquest branded product that we've moved to. We're very pleased with the products, and we're continuing to, you know, improve the assortment rates in the stores and availability of those products. Clearly, you know, we've got a winner in terms of the product quality itself. The return rates are much lower. The manufacturers we have chosen are OE suppliers, so very pleased with that. Just to add to that, we're seeing a benefit in the P&L from own brand in terms of both dollars and rates. It's executing well. We wanna continue to, you know, push that product through because it's a benefit, you know, to the P&L as well. Thank you. The next question is from Michael Baker, from D.A. Davidson. Michael, please go ahead. Your line is open. Okay, thanks. It sounds like you got to where you needed to be in terms of price within the first quarter. Did you see any improvement in your sales trends as you did that, or even, you know, I think we're, what, four or five weeks at least into the second quarter? Are customers reacting at all to your, you know, getting closer to the other guys in price? If not, you know, how long does that typically take, particularly in an industry where, you know, as everyone says, it's not really driven by price? Yeah. Yeah, good morning, Mike. We are. Our customers are definitely responding. you know, we moved I mentioned earlier, we were down mid-single digits on transactions in the fourth quarter. We were down low single digits on transactions in the first quarter, and we expect that to continue to improve. What's being offset there, if you talk about sales and comp, is the average ticket is coming down with that. As we, you know, continue to drive our, you know, units and transactions, we're seeing average ticket come down. Even with that, you know, still coming down, It sounds like you're not gonna invest any more in price, or at least unless others respond. How do you intend to then win back share if, you know, the pricing is now where you think it needs to be? We feel we will win back share because we are seeing improvement, you know, as time goes on units and transactions. You know, as our assortment rate and availability improves, we're seeing improvements there. We do believe that will continue as the year goes on. Okay. Okay, fair enough. Thank you. The next question comes from Brian Nagel from Oppenheimer. Brian, your line is open. Please go ahead. Hi, this is William Dawson on for Brian Nagel. Thank you for taking our question. You mentioned that the structural underpinnings of the sector remain positive in your view. You highlighted the aging fleet and improving miles driven. Just wanted to ask, have there been any changes to your view of near term demand trends in the industry at all? Not really. I mean, I know there's been things written over the last several weeks or so about that. I mean, we still see the industry growth at 3%-5% this year. Based on those, as you said, underlying primary drivers of demand all continuing to improve. You're still seeing pressure on new car sales. You're seeing, you know, people keeping their vehicles longer. That's typically been very good for our industry. We see 3%-5% growth this year. Thank you. That's helpful. Goodbye. Thank you. We have no further questions, so I'll hand the call back to Tom Greco for any concluding remarks. Well, thanks again for joining us this morning. As I shared at the outset of the call, Q1 was challenging. Our financial results were well below expectations. We know there's work to do. We remain focused on increasing parts availability, sustaining our competitive price targets, and improving our field execution. We're committed to executing our long-term strategy to overcome our recent challenges and ensure that Advance is positioned for future success. We look forward to sharing more in August. This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.