Good morning, welcome to the Advance Auto Parts Second Quarter 2023 Conference Call. Before we begin, Elisabeth Eisleben, Senior Vice President, Communications and Investor Relations, will make a brief statement concerning forward-looking statements that will be discussed on this call. Good morning, thank you for joining us to discuss our Q2 2023 results. I'm joined by Gene Lee, Interim Executive Chair, Tom Greco, President and Chief Executive Officer, and Tony Iskander, Interim 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 leadership transition, initiatives, plans, projections, and future performance. 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 Gene Lee. Good morning, everyone, thank you for joining us. I'm pleased to be able to join the call today and speak with all of you. I'll turn the call over to Tom and Tony shortly to review the second quarter results and outlook for the remainder of the year. Before I do that, I'd like to take a moment to address the announcements we made this morning regarding new leadership and a comprehensive strategic and operational review, as well as provide some of my own perspectives on the business, the work that we have ahead of us, and the actions we are taking. Following a thorough search, the board has named Shane O'Kelly as President, Chief Executive Officer, and Director of Advance Auto Parts, effective September 11th. We are pleased to have identified an individual of Shane's caliber to join Advance and have him come on board as we are undertaking the operational and strategic review of the business. Together with our financial advisor, Centerview Partners, we are committed to evaluating the full spectrum of alternatives and opportunities to increase shareholder value and ensure the long-term success of Advance. I'm confident Shane will add valuable insight to this review. Shane is a highly accomplished, customer-centric executive with more than 30 years of operational, strategic development, integration, and complex supply chain experience. He has a proven record of success developing high-performing teams and cultures to drive results. He joins Advance from HD Supply, where he has served as CEO since 2020, following the company's acquisition by The Home Depot. Prior to HD Supply, Shane was CEO of Interline Brands, which also operated as The Home Depot Pro. We are confident that Shane brings the right skill set, discipline, and expertise to lead Advance into the future. I plan to remain in the interim executive chair role through the end of the year to work alongside Shane and the management team. I look forward to welcoming him to Raleigh in September. Until Shane's official start date, Tom will continue to serve as President and CEO. Thereafter, he will serve as an advisor to help ensure a seamless transition of leadership responsibilities. On behalf of the entire board, I thank Tom for his many contributions to Advance, which notably includes the culture he has built with highly skilled and committed team members and a talented bench of leaders. We also announced today Tony Iskander as interim Chief Financial Officer. Tony brings more than 25 years of finance and accounting expertise to the role and has served as the company's Senior Vice President, Finance and Treasurer since 2020. We are beginning a search to identify the company's next permanent CFO and are pleased to have someone with Tony's experience to step into the role on an interim basis. We are also pleased to have Tony on the call today to review Q2 results, along with Tom. Since expanding my role to serve as Interim Executive Chair and partnering more closely with the leadership team, I have taken a deeper dive into the business and our strategy. As a board, we recognize that there is significant work to be done. We are conducting the operational and strategic review to develop a long-term strategy to deliver best-in-class shareholder value. We are executing a number of operational improvements, including inventory optimization initiatives, improving asset productivity across the enterprise, investment in our frontline organization to reduce turnover and discipline cost controls, which we expect to benefit the cost structure and working capital while strengthening Advance for the long term. We know there's more work to be done, and the team is focused on building on these actions and looking for ways to drive even stronger performance and enhanced value. The company is providing updated full year 2023 guidance today, which considers recent performance and balance of the year expectations. I would note that after Shane joins next month, I expect to work closely with him on the business plan to ensure we capitalize on both Advance's near-term and long-term potential. With that, I'll now turn the call over to Tom. Thanks, Gene, and good morning, everyone. Before I start, I want to express my sincere appreciation to the board for all their support over the last seven years. I look forward to working with Gene, Shane, and Tony to enable a seamless transition. As I turn to our Q2 results... I also want to thank all of our team members for their relentless focus on serving our customers. Coming into the quarter, we knew Q2 was going to be challenging, and that the investments we're making in both inventory to help improve availability and strategic pricing to maintain competitive price targets would build through the year. On our Q1 earnings call, we talked about moving with urgency, with a back-to-basics approach and a heightened focus on execution, and this is how we approached the quarter. We delivered net sales growth in the quarter. However, the balance of our Q2 financial metrics remained challenged. As Gene noted, while we're executing some operational improvements, there are further actions that need to be taken to accelerate profitable growth. I'll speak to our sales and transactions in the quarter, and Tony will speak to the key drivers behind our results in more detail. Before that, I'd like to touch briefly on steps we've taken recently to better support our people. During the quarter, we made investments to more strongly position Advance in attracting and retaining high-caliber talent in our frontline roles. More specifically, we implemented compensation increases for key roles in our stores and supply chain. In our customer support center, we're also making investments this year to help retain high-caliber talent. We know that having the right compensation in place for our organization is critical to maintaining our strong culture and delivering operational excellence, and we've already seen reduced turnover. Turning to net sales, we saw growth in both DIY Omnichannel and DIFM during Q2, with DIY Omnichannel outperforming DIFM through continued e-commerce momentum, which delivered another quarter of double-digit growth. From a category perspective, motor oil, batteries, brakes, and engine management led the growth in Q2. DieHard continues to perform very well and gained unit share within batteries once again in the quarter. Meanwhile, improved availability on our Carquest brand resulted in further own-brand penetration in the quarter. Regionally, our sales growth was once again led by the West. In terms of comparable store sales, the decline of 0.6% was primarily driven by negative comparable store sales in Pro. However, we saw sequential improvement in each period in both Pro and DIY, with the last four weeks of Q2 registering slightly positive comparable store sales growth overall. Our top-line sales continued to improve into the third quarter as we delivered low single-digit comparable sales growth during the first four weeks. Our performance benefited from the initiatives we've talked about earlier this year to drive improved transactions in both DIY Omnichannel and Pro. First, our improved availability was driven by the inventory investments we made, along with year-to-date improvements in supply chain fill rates and store on-hand rates. As in-stocks improved in the quarter, we saw sequential sales growth in key hard parts categories. Second, our category management actions continued in Q2 to ensure we sustained competitive price targets. In addition, we've discussed in the past the opportunity to increase owned brand penetration to improve margins. As discussed on the May call, we launched a sales campaign in Q2. This was primarily targeted at accelerating the transition to Carquest-branded products, as well as reducing slower-moving inventory in our network. Finally, our field team is now in full stride, executing a Pro customer activation plan, highlighted by increasing customer sales calls and ensuring a high level of accountability to grow weekly customer counts and drive share-of-wallet gains with existing customers. Our actions resulted in sequential improvement in transactions in Q2 compared to Q1 in both Pro and DIY. While DIY Omnichannel transactions were down slightly in Q2 versus the prior year, average ticket was up mid-single digits. We continue to make progress increasing loyalty with DIY consumers, as evidenced by ongoing traction with our Speed Perks program, which grew by approximately 15% and ended the quarter with nearly 15 million active members. Our Speed Perks percentage of transactions continues to climb and hit over 48% in the quarter, a 420 basis point increase from this time last year. I'd like to commend our field team for their strong execution of Speed Perks and their dedication to strengthening our value proposition for DIY consumers. Specific to Pro, we remain committed to delivering a best-in-class customer experience. Transactions moved back into positive territory in Q2, an improvement versus Q1. As expected, average ticket was down slightly as we sustained our focus on maintaining competitive price targets and the execution of the targeted sales campaign I just mentioned. Within both strategic accounts and TechNet, we saw improved performance in the quarter, and TechNet grew to almost 17,000 members. In summary, the actions we've taken to improve availability, sustain competitive pricing, and enhance our service helped us drive share of wallet gains and improve our call status with Pro installers, including the very important up-and-down-the-street business. With that, I'll turn the call over to Tony to review some of the drivers behind our second quarter results and provide an update on our outlook for the full year. Tony? Thanks, Tom, and good morning. I would first like to thank the board and Tom for their confidence in me. I would also like to thank all our team members for their continued dedication and focus on the customer. In Q2, our net sales increased to 0.8% compared with Q2 of 2022, and comparable store sales decreased 0.6%. Gross profit margin deleveraged 174 basis points compared to the prior year, primarily driven by higher product costs and supply chain deleverage. Sustaining competitive price targets contributed to transaction growth in the quarter. However, this resulted in the majority of gross margin headwinds. Additionally, we experienced higher supply chain costs that were driven by investments in our distribution center team members, as well as positioning more parts closer to the customer. We expect these investments will help further improve retention and drive productivity. SG&A, as a% of net sales, deleveraged year-over-year due to labor-related inflation, which includes investments in store payroll. As a result of gross margin and SG&A headwinds, our Q2 operating income margin deleveraged 256 basis points compared with the previous year. Our lower operating income, combined with higher interest expense, resulted in diluted earnings per share of $1.43, compared to $2.38 in Q2 2022. Free cash flow through the end of Q2 was an outflow of $309 million. In Q2, we had an inflow of $150 million. We finished the quarter with a cash balance of $277 million and $95 million outstanding on the revolver. While we're in compliance with all debt covenants, we amended the interest coverage ratio in our credit agreement. In terms of full year guidance, we are slightly increasing our outlook for both net and comparable store sales based on recent trends and continued progress in the professional sales channel. We are reducing our outlook for operating income margin rate, diluted earnings per share, and free cash flow. We now expect deleverage in gross margin rate in the back half. This is primarily due to our commitment to maintain competitive price targets and our expectation that channel mix will remain a headwind as professional continues to strengthen. In addition, as we highlighted earlier, we are accelerating the sell-down of products and categories to expedite the transition to higher-margin owned brands. In terms of SG&A, we expect the compensation investments we are making in our team, as well as certain non-recurring costs, primarily related to the leadership changes announced this morning, will result in slight SG&A deleverage in the back half. These headwinds will be partially offset by cost savings we expect to realize from our corporate restructuring earlier in the year. We now expect our SG&A rate at the midpoint will be slightly below the back half of last year. All of these factors have been considered in our full year updated guidance, which includes net sales of $11.50 billion-$11.350 billion, comparable store sales of -0.5% to +0.5%, GAAP operating income margin of 4.0%-4.3%, income tax rate of 25%, diluted earnings per share of $4.50-$5.10, capital expenditures of $200 million-$250 million, a range of $150 million-$250 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 would like to ask a question, you may do so by pressing star followed by one on your telephone keypad. To revoke your question, please press star followed by two. When preparing for your question, please ensure your phone is unmuted locally. For today's Q&A, we kindly ask that you limit yourself to 1 question and 1 follow-up question only. Our first question comes from Simeon Gutman from Morgan Stanley. Your line is now open. Please go ahead. Good morning, everyone. I'll have a question and a follow-up, and I guess this is to Tom, Gene, and Tony. First, on Worldpac, I wanted to ask how deeply it's integrated into Advance, and then if you can talk about the synergy with the business today. Hey, good morning, Simeon. Obviously, we still run Worldpac as a, you know, the design that they've had initially. They did integrate Autopart International into Worldpac. We are able to source parts from Worldpac. Our enterprise catalog is visible to all of our customers, so in that respect, it's integrated. Overall, they still run the business relatively independently, and it's continues to perform very well.. Okay, and then the follow-up is, if you look at, and I'm gonna isolate it to a couple of areas: merchandising, supply chain, and operations. If we're to diagnose the biggest priorities of enhancement, especially as you know, new leadership looks at this business, where do you think the biggest opportunity exists between those? Then as a solution, do you think it's, it's a combination of P&L investments and capital, or does it weigh to one side or the other? Good morning, Simeon. It's Gene. I, I think, you know, that's what the strategic review is all about, looking at the different parts of our organization and trying to determine where is the biggest leverage point. I, I think it's not right for me to answer that question. I think that's a question for Shane to figure out as soon as he gets on board. I think the way you've framed it is a good way to frame it. Then I think what we need to do is determine how do we prioritize what initiatives will give us the biggest payback as quick as possible. I, I would say that's in, that will be in Shane's 90-day agenda, along with me. I, I, I don't really wanna commit to which one of the three is, is where the investment needs to be made. Thanks, Simeon. Our next question comes from Greg Melich, from Evercore ISI. Your line is now open. Please go ahead. Hi. Thanks. Good morning. Given the investments in both people and not passing through pricing, I guess I have two parts to the one question, which is, what are your inflation assumptions in top line for the back half? Second, could you fill us in on how much payroll is growing year-on-year, both in the first half and then in the plan for the back half? Good morning, Greg. Yeah, so we expect low single digits, on, on the pricing front, and wage inflation is more like mid-single. That low single-digit on pricing inflation. What's the cadence through the year? Was that like high single-digits in the first quarter and then gets to 0 or low single-digits in the fourth quarter? Yeah, we, we were, we were more like mid-single early in the year. It's gradually coming down. We do have, you know, a lot of work we're doing on sourcing and through the category management work, which will, you know, help us a little bit with that in the back half. You know, it's, it's a very gradual reduction through the year. We also have a freight benefit in the back half, as you know, and I'm sure that you're seeing that in other parts of the retail overall. Thanks, Greg. Our next question comes from Michael Lasser from UBS. Your line is now open. Please go ahead. Good morning. Thanks a lot for taking my questions. Number one, can you give us a rough approximation of the sales and profitability of the Worldpac as it stands today? Yeah. No, we haven't broken that out, Michael. My, my follow-up question, Tom, is, as you think about the pricing environment, is it that Advance has just had to play a significant amount of catch-up and its price gap with the peers in the space has, has been widened, and so it's constantly having to make these price investments because of these wide gaps? Or are you seeing further, are you seeing further, decreases in prices across the space that you're having to invest in? And to what degree is this happening more so among national accounts versus up- and- down- the- street accounts? There's a lot there, Michael. I'll do my best here. First of all, you know, I think you characterized it fairly well. In the back half of last year, you know, we did see our price indices move above the market to places that we didn't like and were unacceptable to us. We did start correcting that early this year, and it's sustained through the year. The other factor that's important to note is we called out the accelerated sell down of products that were transitioning to the Carquest brand in the back half. You know, that is something that it is gonna weigh on gross margin in the back half. It's neutral on dollars, but it's, you know, 30-35 basis points of rate in the back half. You know, that's, that's also a factor. The, the good part of that is, we're transitioning out of inventory that we've already paid for, and we're moving into higher margin products with terms. You know, it's gonna have a, a benefit for us down the road. Those, those are the two big wild cards on the or big factors rather on the pricing front. National accounts versus up and down the street, there's, there's really not a lot of difference there in terms of what we've seen. This has been a rational industry for a long time, and I suspect it will be going forward. Thanks, Michael. Our next question comes from Elizabeth Suzuki from Bank of America. Your line is now open. Please go ahead. Great. Thank you. I just wanted to clarify on the margin guidance. You mentioned you expect to deleverage gross margin in the back half, and then some slight SG&A deleverage in the back half. Then there was a comment about, some, some of those headwinds being partially offset by cost savings and the SG&A rate being slightly below the back half of last year. I just wanted to understand whether SG&A was gonna be a headwind or a tailwind to margin in the second half of this year. Good morning, Liz. It's a slight headwind, so it's a little bit above last year, and it's based on the investments we're making in our people. We've really prioritized the customer and our people, and as, as Gene mentioned, that opens the door for the operational review to really look for ways to more efficiently and effectively flow through to the bottom line. Okay, more of the margin headwind's gonna be on the growth side, and then, theoretically, going forward, as owned brands become a larger percentage of your total, that should result in some gross margin expansion in the years ahead? I mean, this is all pending, you know, whatever the strategic review comes out with, but just thinking about that one piece of the, the gross margin story. Yeah, that's correct. In the back half, we expect more deleverage from gross margin. As I just mentioned to Michael, you know, 30-35 basis points of that is this accelerated transition of products into CQ. Great. Thank you. Our next question comes from Chris Horvers from JP Morgan. Chris, your line is now open. Please go ahead. Thanks. Good morning. Following up on an earlier question, the improvement that you've seen in the business in the, the last eight weeks, I guess, to what degree did the DIY business improve? Then on the Pro side, you know, you mentioned both national accounts and up and down the street business improved, but was it weighted to one side versus the other side of the Pro? Yeah. Good morning, Chris. Yeah, we're pleased with DIY. It's our third consecutive quarter of growing comp sales in DIY, it did improve in the quarter. You know, the availability investments that we're making, benefit DIY, too. Our e-commerce business is performing well. Pro did, has improved more. As you know, in the last half of 2022, we slipped in Pro, it disproportionately in the last, you know, several weeks, Pro has improved better. You know, the national accounts versus up and down the street, we're seeing improvement in both. You know, there is good progress there. You know, TechNet is performing better, really, all of our professional business is benefiting from the actions we're taking. I will call out that the field is doing a very good job executing as well. They're getting out there, meeting with the garages, you know, moving up the call list, all the things that we need to do to win the business with our, our installers up and down the street and national accounts. Got it. You know, there's a lot of questions around Worldpac, sizing the business, the margins of the business. Is it as a potential way to create shareholder value? I guess, can you, can you talk out loud for us as you think about the strategic relevance of having Worldpac in the argument from the start of the acquisition, and through your tenure has always been the, you know, the expansiveness of the catalog, the one-stop shop, you know, that Worldpac brings on top of what it Advance brings. You know, what, what do you lose? Secondly, is there any cash flow dynamics that we're concerned about here? You know, obviously, your free cash flow guidance has come down, you know, are you concerned that, you know, this could start to unwind some of the vendor financing programs that you have in place, and there's some compelling reason to create cash flow, and better, better sort of financial leverage on the balance sheet? Hey, this is Gene. There was a real lot in that question. I'm not sure we're gonna get to, get to all of it, but let me just start off with, you know, I think the first part of the question asking about Worldpac's role in the organization. I think Tom can give his opinion on that, but this is going to be Shane's decision on how. After we do the strategic and operational review, he's gonna need to be the one who decides what role Worldpac plays in the organization, whether you integrate it or you don't integrate it, you, you know, run it as a separate business, and how does it play with all the other assets in the organization? I think that's really. It's important. I think Tom can give his opinion on how he thinks about the business, but this is gonna be a Shane decision as we move forward. Sure. I mean, the, the big thing, Chris, is, is the enterprise assortment. It gives us a, a broader assortment than anybody in the industry. Obviously, we've got national brands. We've got our own brand lineup, which we're very proud of, and then, obviously, the OE products that Worldpac brings to the table, gives us up to 350,000 in-market stock parts. That, that gives us an advantage there, and we're able to leverage that through all of the banners that we sell to the customers. That's the big thing. Again, as Gene said, you know, we've got to go through the review and find new ways to, to flow through profitability to the bottom line. You know, that'll, that'll come out of the review. And then anything on the balance sheet side? Hey, Chris, this is Tony. We're not seeing any changes in our supplier finance programs or any attractiveness in that. You know, as you know, we disclose that, and you'll read more about that in the Q later today. Got it. Thanks. Thanks very much. Thanks, Chris. Our next question comes from Bret Jordan from Jefferies. Brett, your line is now open. Please go ahead. Hey, good morning, guys. On the Carquest private label strategy, I guess you've been losing some commercial market share in the last quarters and obviously are talking about price investment now around the brand. I guess, is that something that's either is the commercial perception of that an issue in the share loss, or is it an availability issue in the share loss? I think, if you look back at last year and into the first part of this year, it was primarily availability, Bret, as you, as you highlighted, a minute ago. I, I do think our availability improvements that we've made there have been the biggest driver of the change. Our on-hand rates are up very nicely in the key categories we transitioned, which, you know, engine management, undercar, et cetera. That's been the, the bigger driver, and we expect that to continue to be a benefit for us in the back half. Our professional installers love the Carquest brand. Our brakes are the best. We have the best brake program in the business, and, you know, transitioning these, these products has been very difficult. It's taken us more time than we would like, but once we get them in and the customer gets a chance to install them, you know, this, this is a product that we get repeat, repeat business off of. Okay, a follow-up question on that, on that supplier base. I guess, you know, obviously, the fact the payables programs, given the leverage ratio, might be under some pressure, but in the transition to more private label, is that going to support the payables? Are those vendors willing to take a longer term than maybe a national brand would? I mean, we, we obviously factor in, all those changes, Bret. When we make a change from a national brand to, to Carquest, we, we know what the change in the terms are, so we, so we factor all that in, and it's part of the calculus, right? When we make the decision, we look at the margin rate, we look at the quality, you know, we look at the, at the, the vendor itself, most of which are OE providers, so they make a very high-quality product, and then we evaluate the terms. It's a holistic decision that we're making in terms of selecting our suppliers. Okay. I guess from that, from the forecast on cash flow for the year, where do you see the payables ratio getting down to? I guess, as we add another couple EBIT quarters, that might have your leverage ratio above 3. Yeah, as you saw from Q1 to Q2, it's starting to go up, and we expect it to continue to increase over time as we, as we get some of those investments, you know, behind us, and then we continue to build and replenish. We, we actually believe that the AP ratio will continue to, to expand. Okay, great. Thank you. Thanks, Bret. Thanks, Bret. Our next question comes from Seth Sigman from Barclays. Seth, your line is now open. Please go ahead. Hey, good morning, everyone. I wanted to follow up on the gross margin. You know, it sounds like part of the issue is pricing to cover the cost, but I'm curious, why is that so different for AAP? I'm curious, are you still seeing incremental cost pressures in COGS, or is this really a function of, you know, you had elevated product and supply chain costs last year, some of that was capitalized into, into inventory or on the balance sheet, it's just flowing through now as the inventory turns. If that's right, you know, do you have visibility into when that starts to normalize through this year? I think that the earlier question sort of answered that one, Seth, which is, you know, we did see our pricing elevate above the market in the back half of last year, and we are addressing that as we go into this year, and you'll see that through the back half. You know, we're committed to a holistic solution here. We wanna make sure our availability gets better, our visibility of our parts is better, and service and delivery continues to improve. You know, we are going to sustain the price index. We'll continue to stay focused on that, but as we get into obviously further out, you know, you'll see that normalize. Okay. If we look at the EBIT margin outlook for the second half of the year, you did lower it, but it looks like the year-over-year change will be down less than, I guess, in the 1st half of the year. Can you just help us contextualize what may be driving that improvement and trend in the second half of the year? Yeah, sure. I mean, for, for sure, on the gross margin side, you know, we, we mentioned freight earlier. Freight becomes a, a tailwind for us in the back half. Some of our category management initiatives begin to benefit us in the back half. Just year-over-year, you know, price versus cost is not as, as punitive as it was in the front half of the year. We've got more sales, so there's less supply chain to leverage on, on the gross margin side. As we said, SG&A is, is, is smaller. You know, we're gonna have, you know, be slightly above last year's rate on SG&A, which involves the investments we're making in our team, to make sure that we, you know, reduce turnover in the stores and really, you know, keep all the great people we have here in, in the corporate office. Those, those are the two drivers, and both of them are gonna get better than they were in the front half. Got it. All right, thank you. Thanks, Seth. Our next question comes from Steven Zaccone from Citigroup. Steven, your line is now open. Please go ahead. Great, good morning. Thanks very much for taking my question, and congrats on the, you know, new CEO announcement. I guess, Gene, my question is for you. As you take a more active role in the business, I'm curious for your assessment of how long it will take for this business to return to profitable growth. I know Shane will come in, and it seems like he has a lot to figure out, but from your seat, do you think of this as a one-year invest to grow margin strategy, or is this something that's more multi-year in nature? Well, I, I think it's, it's less than one year. I mean, I think that we should start seeing incremental improvement, pretty quickly here. There's some really good actions that are being taken right now, especially around the operational front. I think we're doing a much better job today, up and down the street with our professional customers. I think we're operating at the store level much better. I think we're making significant improvements in, in supply chain. More importantly, I think, when you think about, our strategy with our, our top 4,000 products that we're calling Never Out, we've made great progress there too. I think that we are, you know, I think that the price to inflation gap will continue to grow, and as we move forward, we should actually be able to price to cover inflation after we wrap. Therefore, you're, you're not gonna see the same kind of deleverage in the gross margin line. I, I think that we're gonna start seeing improvement pretty quickly. We've been working hard the last 90, 120 days on, on some, I think, some focused initiatives that are starting to, starting to come through for us. We're seeing that in the sales line. We're excited every morning that we're seeing, seeing some sales growth. I think as we get past the back half of the year, we will actually see price at, at inflation or slightly above inflation, and then we can get to start to leveraging both gross margin and gross profit and, and our SG&A. That's great. Thank you for that detail. Just to follow up, because there's been several questions clearly on Worldpac, but I was curious with the operational and strategic review, is it fair to conclude that includes, that includes the potential for asset divestitures? I think there's a range of options that we have to consider. You know, we sit here today, we think Worldpac is a great asset. As, as I think about all our assets, you know, I think the number one issue in our organization today is asset productivity. We need to evaluate the productivity of all of our assets, including Worldpac. We need to understand what's the potential of all those assets? How do they fit organizationally, and how to best operationalize those assets? To me, that's what the comprehensive, you know, strategic review is all about. I think there's gonna be more focus on the operational review because we have, we have a lot of opportunity there to improve our, our processes and procedures from end to end. I think that's really over time, where the cost savings will come, is through improving those processes and procedures. I think Tom, Tom mentioned earlier that we were working hard on our category management. We have an outside consultant in working with us, and we're making some really great progress that I think will, will show some positive results into 24. I'm excited about that. There's other opportunities, and what I've been referring to as the value chain, to evaluate all our processes and procedures. I would say we have a wide range of options. Everything is on the table, I think we need to truly understand, Shane needs to truly understand what's the potential of all these assets and how do they fit in and how we best operationalize them. Great. Thank you for all the detail. Best of luck. Thanks, Steven. Our next question comes from Steven Forbes, from Guggenheim Partners. Steven, your line is now open. Please go ahead. Good morning. I have a two-part question on capital spending. First, given the reduction in spending plans year to date, you know, from the start of the year, can you help us better understand what the team has pulled back on? The second part is, as we think about sort of more normalized capital spending ratios looking out, any initial thoughts on what the go-forward spend rate should be? Yeah. Thank, thanks, Steven, good morning, Steven. This is Tony. As you'll recall, in the, in the first quarter, you know, we, we had a higher number of new store openings, we brought that down in our guide after the first quarter, that's primarily driving the reduction in capital spend. You know, on a go-forward basis, that's what the strategic review is going to help us identify. Thank you. Thanks, Steven. Our next question comes from Kate McShane from Goldman Sachs. Kate, your line is now open. Please go ahead. Hi, thanks. Morning, Kate. Thank you for taking our question. We just had a simple question about your view on current inventory levels and in stocks, and if there are any categories where you still think your inventory is not where you want it to be, and when you can expect to maybe be more in line there? Yeah, we feel pretty good, Kate, about the inventory levels. We've, we've done a, Gene mentioned the, you know, the, the real intense focus on our highest velocity SKU and making sure that we're in stock on those items. We've added some depth, to, to the, the highest velocity SKU in the stores and the distribution centers. That's paying dividends, and we've also added coverage or breadth, which is also helping. We measure that by virtue of our on-hand rates and our close rates, which are both growing significantly. You know, it- we, we feel very good. The categories themselves that are benefiting the most are the ones that we were weak on last year. You know, the transition that was made, we had a lot of different suppliers that we're involved with. Those suppliers have really stepped up, and we're grateful for that. Our suppliers are really important to us. We're starting to really make some gains in the in those categories, and there's still a lot of room for us to grow from there. There's nothing uniformly good or uniformly negative at this point. We've grown, you know, in aggregate, and each of those categories are moving up nicely. Thank you. Thanks, Kate. Our next question comes from Brian Nagel from Oppenheimer. Brian, your line is now open. Please go ahead. Hi, good morning. My first question, a bit of a follow-up to a prior question, but if you look at the improving business you've seen lately, improving sales you've seen lately, how... if you step back, how much of that is internal efforts on the part of Advance, you know, versus maybe a solidifying backdrop within, within, within the sector? Yeah, I mean, it's that's difficult to say, Brian. Obviously, we don't, we don't really get to see that until our peers will report a more, more comparable timeframe. We see DIY, which we feel really good about, you know, comparatively. The Pro channel is the one I'm, I'm referencing, so we really need to see how everybody else performs. It's, it's been extremely hot this summer, so, you know, we are seeing strength in those categories. You'd expect heating and cooling, obviously. But overall, as we talk to our suppliers, you know, particularly the ones in, in hard parts categories, we are doing much better. We feel, we feel good about the actions we're taking, and we're gonna continue to execute against them. Hey, Brian, it's Gene. I always wanted to say that what I've seen is that the team is taking a specific action, and we're seeing a specific result because of that action. I think, you know, I think Tom is correct. We need to see the backdrop, but what I, I can see from where I sit is, they tell me we're gonna do something, we do it, and then we, we get a reaction from that. That's positive in my mind. That's helpful. I appreciate it. Then my follow-up question, in your prepared comments, you talked about, I guess, a shift you made in a, in a, in a debt covenant, if I said that correctly. I guess the question is, maybe you can articulate what you did there. You know, to, to what extent that affords you more flexibility, and, and could there be other, you know, similar type adjustments being made here to, to the debt structure of the company? Hey, Brian, this is Tony. I'll take that. As I mentioned in the prepared remarks, we, we adjusted our interest coverage ratio. That provides a little bit of relief, primarily due to the higher interest, the expense that we carried earlier in the year. We did not adjust the leverage ratio. Those are our two primary covenants. We're confident in that, but it gives us a further financial flexibility should we need it. Got it. Thanks, Tony. I appreciate it. Thanks, Brian. Thanks, Brian. Thanks, Brian. Our next question comes from Scot Ciccarelli from Truist. Scot, your line is now open. Please go ahead. Good morning, guys. I, I know you talked about, improving sales trends the last, call it, six, eight weeks. You've posted negative comps in the first half. Can you help us understand why you would slightly raise the full-year comp estimate? Is, is it just a matter of, you know, kind of the, the latest momentum, or is there something else you're expecting to play out in the, the back half? It really is the, the momentum we've seen in, in recent weeks, Scot. Obviously, the fourth quarter is always volatile, so, you know, we have to keep that in mind. We did finish the year strong on DIY in the fourth quarter last year. Based on everything we've seen, you know, we, we track, as, as you guys do, the, the multiyear comps, the multiyear sales, everything that we're doing, we feel very good about our, our guidance on sales. Okay. Secondly, I, I know Tony talked about expectations for payables inventory to improve during the course of the year. I think someone asked about it. Is there any kind of target ratio for the end of year? I, I don't think I caught that. Yeah, we haven't identified a targeted ratio, but we expect to see improvement in that accounts payable to inventory ratio throughout the year and into next year. No magnitude you can provide us? Not today. Okay. Thank you. Thanks, Scot. Our next question comes from Seth Basham from Wedbush. Seth, your line is now open. Please go ahead. Thanks a lot, good morning. Within your professional business, are you currently seeing more gross margin rate pressure in national accounts or up and down the street customers? Yeah, I mean, it's really when we look at the competitive price index, Seth, we look at it in multiple ways, obviously. We are matching with or targeted in each of those channels. There's no major difference between the two. Got it. Then, in terms of your balance sheet, with the declining flat free cash flow, do you see risk that your credit rating could be downgraded from investment grade? We can't speak on behalf of the agencies, but we are in active dialogue with them all the time. We do believe that the free cash flow that you see in the year is reflective of the inventory investments we've made. If you look at in prior years, we do believe that that's a good indication of what this, this company can return to. Thanks, Seth. Our next question comes from Zachary Fadem from Wells Fargo. Zach, your line is now open. Please go ahead. Hey, good morning. Is there any extra color you can provide on how the up-and-down-the-street business has been performing relative to your national accounts? Just from an infrastructure perspective, can you talk about what you think your competitive advantages and disadvantages are today for serving these particular customers relative to your peers? First of all, the, the up-and-down-the-street business, as we mentioned earlier, I mean, there's a lot of customers, Zach. We, we look at how many customers we're selling to every week. We look at the dollars per customer every week, and we are seeing progress there. I think our, our longer term, you know, our belief is that the, the larger strategic accounts are going to grow faster than the up-and-down-the-street business. But, you know, at, at the moment, you know, we are seeing strength on, on both sides of that business. Can you repeat the second part of your question again? I just wanna make sure I understood it right. What do you think your advantages or disadvantages are for serving these particular customers versus your peers? I think it's, it's similar to what we've said. I think it's similar on both sides of the business. I mean, it's, it's about having an enterprise assortment. We've got a great footprint. We've got terrific brands and high-quality parts, you know, and we're gonna continue to leverage, you know, our availability, the visibility of our products, our service, and delivery. You know, we grew up in the professional business. Carquest is a professional brand, we'll continue to leverage all of the things that we have to win the professional business. As Gene said, the idea from here is to improve the asset productivity of our business and ensure that as we drive growth, we're able to flow it through better to the bottom line. Got it. I know that the strategic review is, is ongoing, so the answer to this question may change. As you comb through all the short-term noise this year around your P&L, pricing, investments, et cetera, can you talk through what you think the right structural EBIT margin is for this business over the long term? I think that, I mean, that, as we sit here today, that's impossible to pinpoint. You know, what I, what I believe today, as I get more involved in this, is that there's a lot of room for incremental improvement year-over-year. We do have some structural differences than to the, to our other big competitors. I think they're well documented. We know that we can improve where, from where we are today significantly. I, I think putting a number out there is unfair to Shane O'Kelly and the rest of the management team. We need to go through more so the operational review to understand what the true opportunities are to service our customers and take care of our team members, and to provide the best service we can to every one of our customers. That's gotta be the goal long term. Thanks, Zach. Our next question comes from Michael Baker, from D.A. Davidson. Michael, your line is now open. Please go ahead. Okay, thanks. you know, Gene, if I could just follow up on that, on that last point. Can, can you remind... Or what do you see as the structural differences between your margin structure and the other guys? We, we know there's, you know, different rent versus own situation, which maybe drags down your margins a little bit versus competitors, but even if you look at it on, like, an EBITDA basis, there's a huge gap, and that gap has widened over time. So what, what are the structural differences besides, you know, you guys rent more stores than they do? Well, I think it's the mix of the business. Remember, we've got a very large business inside our business, which is the independents, which the margin structure is very, very different, but it's a very lucrative business. I would say the biggest thing that impacts our margins overall is the asset productivity, right? We're doing approximately 1.7 a box, and the other guys are doing approximately 2.3, 2.4. I mean, if you just look at that productivity and just increase it, you know, just to $2 million, what it does to our margins. You know, the flow through on that additional sales is fantastic. Also, when you look at, you know, the way our distribution centers are set up, that's a huge structural disadvantage that will, will need to be addressed at some point. How that gets prioritized? I don't know today, but that needs to be dealt with. So I keep reverting back to, and I, I, I describe it as asset productivity. Our assets are not productive enough to create the right margin structure. You get into own versus rent, channel mix-... our independent business, but the first priority is to improve the, the, the, you know, the productivity of all the assets. That'll impact the biggest impact on margins. Yeah, yeah, I completely agree, and I would say that some of that isn't necessarily structural. That's the opportunity. If I could ask one other question. Sure. I guess that was my follow-up to the first question. This is my main question. Talk to us about the qualities that you thought makes Shane O'Kelly the right, the right pick. Is it his distribution capabilities or operational capabilities? You know, it's been a while since I, I, I assume you looked at auto, you know, people who are in the auto parts business. How much does that factor in? Or, you know, how much did you consider that, and, and what made Shane better than anyone within the business? Yeah, I think great question. I mean, I think comprehensive... We had a comprehensive search, right? We talked to a lot of people, by far, Shane was the best person for this role. When you think about his experience, experience set, he's a very disciplined, thoughtful leader, who has been in the professional channel most of his career, but has had exposure to big box retail. A lot of good process and procedures, he, he's, he's been a part of. I think that he is a, he's a car enthusiast. He has sold into the channel before. He loves the business, I think his leadership style is perfect for, you know, where we are in our journey and what we need. I would say that, you know, as we talked to people that had industry experience, people that were most interesting had non-competes, and they're very difficult to, you know, to get out of their current position because of the non-competes. 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, disciplined background, and he's just a thoughtful human being with a real focus on customers. 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. The succession committee did a fantastic job getting us to this point, and we can't wait for him to be involved. Thanks, Michael. Our next question comes from Daniel Imbro from Stephens. Daniel, your line is now open. Please go ahead. 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? Is it more of a broader acceleration that may suggest a better weather backdrop? Good morning. 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 undercar. We are seeing a very close connection. Gene said it well. There's an action that we're taking, then we see the corresponding lift, and it's building through the year. The price indices that we are targeting have. We have a terrific team in the pricing area. They look at our pricing every week in 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 in the decision criteria for the installer, you can't ignore it. That's really what we're doing there. 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? Yeah, good question. I mean, we, we, we, we obviously measure it in our supply chain and in our stores. I'll start with the stores. You know, that there's, there's, you know, some roles in our stores that are just vitally important. Every role is critical, but 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. We started to address it directly towards the tail end of last year, and we are seeing that come down. In supply chain, you know, 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. Again, as Gene said, when your turnover is 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 gonna stay committed to retaining that vitally important frontline talent that, that serves our customer every day. Thanks, Daniel. We have no further questions at this time. With that, I will hand back to Elisabeth Eisleben for final remarks. Yeah, 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. This concludes today's call. You may now disconnect your lines. Thank you for joining.