Welcome to the Advance Auto Parts First Quarter 2024 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, and thank you for joining us to discuss our Q1 2024 results. I'm joined today by Shane O'Kelly, President and Chief Executive Officer, and Ryan Grimsland, Executive Vice President and Chief Financial Officer. Following Shane and Ryan's 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 strategic and operational review, initiatives, plans, projections, and future performance. Actual results could differ materially from those projected or implied by the forward-looking statements. Additional information about forward-looking statements and factors that could cause actual results to differ can be found under the captions "Forward-looking Statements in Our Earnings Release" 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 Shane O'Kelly. Thanks, Elizabeth. Good morning, and thank you for joining us for our First Quarter Earnings Call. Before we review the quarter, I would first like to thank the entire Advance team for their continued dedication to serving our customers. Their passion and commitment make a difference each and every day. The year started off slower than anticipated across the industry. At Advance, we saw negative impact from weather coupled with a challenged consumer who was experiencing diminished purchasing power, higher credit card debt, and uncertainty about the balance of the year in terms of macro conditions. As a result, our Q1 performance was lower than expected, with comps down 20 basis points year-over-year. On a positive note, our professional business saw low single-digit improvements in both comp and transactions. We believe that winning in Pro is important to our overall strategy and are pursuing that business across multiple segments, including up-and-down-the-street customers, strategic accounts, Carquest independents, and Worldpac. Regarding up-and-down-the-street customers, we are putting additional focus this year on winning with those accounts and recapturing lost customers. In terms of our turnaround, we continue to execute against our previously outlined decisive actions designed to simplify our business. Those decisive actions are: Number 1, continuing the sale process for Worldpac. Number 2, reducing our costs to become more competitive while investing a portion of those savings back into the front line. Number 3, making organizational changes to position us for success. Number 4, improving the productivity of all assets. And number 5, consolidating our supply chain. We believe these actions will have a long-term positive impact on our business, and let me share a few important updates on each. Starting with the potential sale of Worldpac, we are well underway with that process. We are very pleased to have healthy interest, and we are looking to conclude the process before we report our second quarter results. As a reminder, we previously discussed the potential sale of our Canadian business and will evaluate that once the Worldpac sale is complete. Second, reducing and controlling costs is a major focus, and we are beginning to see benefits from the actions we took in the fourth quarter. We delivered on the $150 million in annualized savings outlined on our previous calls, and this is evidenced by a reduction in our year-over-year SG&A of $21 million in this quarter, despite a softer top line. We're also beginning to see benefits from the $50 million reinvested into our front line, including a more than 50% reduction in our district manager turnover, and we expect to see improvement in other key roles throughout the year. In addition, our indirect purchasing team is executing against our recently launched initiative to reduce a minimum of $50 million on an annualized basis. We have finished the diagnostic stage and are targeting reduced indirect expenditures in areas such as technology, transportation costs, and corporate contracts. We expect to see the bulk of the savings beginning in 2025. Next, regarding our third decisive action on organizational changes, we are excited to announce that Bruce Starnes is joining the Advance team as Executive Vice President and Chief Merchant. This is part of an orderly succession plan, and in this role, Bruce will lead all aspects of our merchandising function. Bruce is an auto enthusiast and brings deep merchandising experience, having recently served at Target for nearly 20 years, most recently as Senior Vice President of Merchandising Capabilities and Operations. The expertise of one of our newest board members, Tom Seboldt, who has over 30 years as a merchandising leader in the automotive aftermarket industry, will also help speed Bruce's onboarding. Bruce will be partnering with our outgoing Chief Merchant, Ken Bush, who will remain in an advisory role to help ensure continuity in the merchandising function. We want to congratulate Ken on his upcoming retirement after nearly 20 years with the company, and we want to welcome Bruce to the Advance Auto Parts family. Turning to our fourth decisive action regarding our asset productivity across the company. Improving this remains a top priority and includes both company stores and independently owned Carquest locations. In the first quarter, we closed 17 underperforming stores and opened 7 new stores. Last quarter, we shared that we had notified over 100 Carquest independent locations that we were removing them from our program, and we completed this action in Q1. In addition, our IT team's focus on POS system reliability is enabling significant in-store productivity improvements for team members, and that's impacting their ability to better serve our customers. We will continue our efforts to elevate existing store operations across Advance and drive profitable growth. The last area I wanted to discuss in regard to our asset productivity is inventory. We have had recent success with the implementation of our new merchandising system. We put new leaders in charge of the project along with additional accountability on the work plan, resulting in the achievement of several key milestones in Q1. This new system will overhaul key merchandising processes, including planogram sets and store replenishment. In the first quarter, we added 130,000 SKUs in the new system across nearly 500 suppliers. By the end of the second quarter, we expect all of our actively replenished SKUs to be converted to the new system, which is well ahead of our previous expectations to be complete by the end of the year. This is one of several steps to enhance inventory availability and productivity. Finally, our fifth decisive action to consolidate our supply chain is underway with the long-term goal of operating as a single unified network. We've now mapped what this network will look like, and I'd like to take a few minutes to describe its components and our incremental progress. We expect our unified network to have 14 large DCs. We currently have 13 of the required replenishment DCs needed and are scouting the location for the 14. These 14 facilities, averaging approximately 550,000 sq ft each, will serve as our nationwide replenishment nodes. The next component of the unified network will be market hubs. As discussed last quarter, this is a new node of our network, and we recently completed a successful pilot. Our market hubs will have an average SKU count of more than 80,000 and will enhance our existing hub network. There are three ways that we will be adding market hubs: number one, converting existing stores with sufficient footprint; number two, converting smaller existing DCs; and number three, greenfielding new locations. We have completed 4 store-to-market hub conversions utilizing the learnings from our successful pilot. By the end of 2024, we expect to have at least 20 market hubs in operation, including approximately half from the conversion of existing DCs. 3 of these DC conversions are already underway. Those are Baton Rouge, Raleigh, and Memphis, and we expect to complete all of them by the end of the third quarter. Importantly, by using existing stores that have sufficient footprint and converting smaller legacy DCs, we believe we can accelerate this initiative with more rigor than if we were to greenfield all locations. The third component of our unified network includes over 300 existing hubs that we currently operate. These hub locations currently serve and will continue to serve as sources for expanded availability for surrounding stores. On average, they have approximately 35,000 SKUs on hand compared with approximately 23,000 in our traditional blended-box stores. The performance of our hubs and Market Hubs reinforces the benefit of having parts closer to customers. We expect the development of this unified network to take time and are planning to have the 14 large DCs and at least 60 Market Hubs added to our existing network of hubs by the end of 2026. Let me also provide a brief update on our implementation of our warehouse management system, or WMS, across our DC network. This is a key enabler of our unification, and last quarter we indicated that there were 3 facilities still to convert. We have recently completed the implementation at our Delaware, Ohio, DC and expect to complete the remaining 2 by the end of the year. While we are making early progress with all of our decisive actions, we recognize that we have substantial work to improve our business's performance. Our entire team is committed to fostering a disciplined approach in all functions, leading to increased accountability and internal clarity of our goals. Turning to the broader macro environment, we are fortunate to operate in an attractive, needs-based industry with stable fundamentals. However, we recognize that our business will still likely feel negative impacts as customers show signs of financial distress and if macro conditions deteriorate. Even with that backdrop, we are improving execution by remaining focused on our decisive action. We know this turnaround will take time, but I am encouraged every time I visit a store or DC and meet the team members who take care of our customers. We have established clear priorities, and our leadership team is energized to deliver on our goals. Now, I would like to turn the call over to Ryan to review our financial performance in the quarter. Ryan? Thanks, Shane, and good morning, everyone. Before I move to our financials, I would also like to thank our almost 70,000 team members for their continued dedication and hard work throughout the quarter. Q1 was challenging from a year-over-year perspective. However, we have instilled renewed P&L discipline and rigor and remain confident in our ability to capitalize on the significant opportunity ahead. In the first quarter, net sales of $3.4 billion decreased 0.3% compared with Q1 2023. The decrease was primarily driven by the reduction of independence and store closures of about $11 million as we continue our focus on improving asset productivity. Comparable store sales decreased 0.2%. While we still have room for improvement in our assortment and availability levels, we are encouraged by the actions we have taken and, relative to our pro-business, helped contribute to positive transactions and comp growth in the quarter. As anticipated, we saw continued pressure on DIY in Q1, resulting in low single-digit negative comparable store sales. From a category perspective, we saw strength in batteries as well as filters and engine management, driven by improved availability. In the quarter, we experienced particular softness in several categories as we are seeing consumers adjust their buying behavior and looking to stretch every dollar they spend. This was evidenced by our year-over-year decline in discretionary categories as well as deferred maintenance in the quarter, such as brakes, which are often purchased in combination with tire maintenance and installations, which have been down across the industry. The West and Midwest were our top-performing regions, while the Mid-Atlantic, Southeast, including Texas and Florida, were our most challenged. As Shane mentioned, the weather impacted our sales as the country experienced a slower start to the spring season. In Q1, gross profit was $1.4 billion, or 42% of net sales, which declined 82 basis points from the prior year quarter. The deleverage was primarily driven by cost, not fully offset by price. In terms of price, we've also been reassessing our relative position in the market as well as our approach to strategic pricing. We recognize circumstances where we have been notably uncompetitive and have been making appropriate adjustments focused on categories with higher visibility and elasticity. In Q1, we actioned on 8,500 SKUs, an investment of approximately $40 million on an annualized basis. We are committed to driving accountability to achieve and remain competitively priced. I'm confident the restructuring to align our pricing and merchandising teams will help provide the appropriate discipline to ensure success. In Q2, we continue our merchandising excellence initiative, including securing lower pricing from our vendors, assessing our assortment and its availability, as well as reviewing how we are priced in the market. Despite all of these efforts, we believe that we will see pressure in Q2 as the consumer will likely face continued uncertainty impacting our top line. In addition, we will be lapping last year's actions, which will cause margin rates to be significantly more challenged than Q1. We expect to begin seeing improvement in the back half of the year as we'll have cycled the prior year's pricing initiatives and begin to see an acceleration on units. In addition, we expect that our supply chain consolidation and ongoing merchandising productivity efforts, including key front-room category resets and back-room hard part line reviews that were completed in Q1, will positively contribute to our supplier-partner negotiations. In addition to pricing, warehouse capitalization costs and the planned investment in our DC consolidation negatively impacted gross margin in the quarter. Our overall supply chain productivity partially offset the deleverage, driven by improved lines per hour, replenishment frequency, reduction of independent locations, and the previously announced closure of our Asheville DC. SG&A was $1.3 billion in Q1 2024, down $21 million compared with Q1 2023, and improved 48 basis points of percent of our net sales. This was driven by cost-saving efforts we discussed earlier and included a significant reduction in corporate expenditures and headcount executed in Q4 last year. Additionally, we have had one-time gain from an asset sale in Florida. As discussed previously, we are reinvesting a portion of these savings back into our front-line team members, which partially offset the savings we realized this quarter. We experienced higher year-over-year professional fees primarily related to continued remediation of our material weakness, which was a headwind to SG&A in Q1. Finally, similar to many retailers, we experienced ongoing inflationary pressure related to overall wages, occupancy costs, and transaction expenses. Our Q1 operating income margin decreased 34 basis points compared with the prior year quarter. In terms of the second quarter, we believe that this will be our toughest margin quarter of the year as a result of pricing actions taken last year that we are lapping. However, as the year progresses, we expect to see stronger margin improvement in the back half. Diluted earnings per share were $0.67 in Q1 compared with $0.81 in the prior year quarter. EPS was primarily impacted by the decrease in operating margin as well as a $0.05 impact related to discrete tax item related to stock-based compensation. We have significantly increased the discipline around our capital spending process, focused on investing in high-return initiatives aligned with our decisive actions. As a result, our Q1 2024 capital expenditures were $49 million compared with $90 million in Q1 of 2023. Free cash flow for the quarter was an outflow of $46 million compared with an outflow of $470 million in the prior year quarter. This was primarily driven by lapping the timing of payables in Q1 of the previous year. Our full-year guidance remains unchanged. We are committed to executing against our decisive actions and believe they will enable steady performance improvement across Advance. Before I turn the call back to Shane and Q&A, I want to provide an update on our internal control remediation efforts. We continue to ensure we have the appropriate experienced personnel as we backfilled open roles and hired approximately 30 experienced personnel with the requisite accounting and internal controls knowledge and experience. We made some important hires in the first quarter who were quickly onboarded and are making progress in their roles. In addition, we've added redundant and compensating internal controls to enhance our internal control structure. We have been thoroughly testing our remedial efforts and are committed to completing the remediation. As you will see in our Form 10-Q, a prior significant deficiency identified in Q4 2023 has been elevated to a material weakness in a discrete area of controls. Similar to our material weakness regarding staffing, we are robustly testing to ensure our controls are working as designed over an appropriate amount of time. Our internal control environment remains a top priority for us, and we look forward to updating you on the completion of our remediation. Now I'll turn it over to Shane. Thank you, Ryan. We have significant work to do in terms of turning around the business, but I am confident we are on the right path. I want to once again thank our team members for their unwavering dedication to supporting our customers while adapting to the challenges we faced during the quarter. In the wake of Memorial Day, it's always appropriate to reflect on the contributions of the brave men and women who gave their lives in the service of our country. With that, I would like to open it up to address your questions. Operator? If you'd like to ask a question on today's call, please press *1 on your telephone keypad now to enter the queue. When preparing to ask your question, please ensure your headset's fully plugged in and unmuted locally. That's *1 on your telephone keypad. Our first question today comes from Bret Jordan at Jefferies. Bret, your line is open. Please go ahead. Hey, good morning, guys. Morning, Bret. Could you talk about the cadence of the first five months that gives you comfort in maintaining the comp guide for the year? Yeah, I think the cadence I think we started out a little bit slower due to weather, but started to pick up throughout the quarter. I think Q2, we're seeing similar trends from Q1, but really expect the back half of the year will have more favorable compares. And some of the initiatives we're putting in place, Brett, we are expecting to see that continue to bear fruit, especially as we've seen in the pro-business coming out of Q1. Yeah, as I think about it, positive pro comp and transactions, I think we'll look to continue doing that. As Ryan mentioned, we've got initiatives specifically targeting pros, notably up and down-the-street customer. But I also think on the DIY side, the U.S. consumer the U.S. consumer is facing a bit of an inflection point as they look at their personal debt loads, as they look at where their purchasing power is. And so I think there's some reticence there in terms of how they're spending. And so we think that continues as well. Great. And then on the pro side, national account versus up and down the street, the positive comp you saw in the first quarter, was there much difference between those two segments? Yeah, we don't like the break I appreciate it, but we don't like the breakout, the specifics of those two, but we did see positive growth. Positive comps. In both sides? Yep. Okay, thank you. The next question comes from Michael Lasser from UBS. Michael, your line is open. Please go ahead. Good morning. Thank you so much for taking my question. The challenging outcome with DIY, how are you thinking about that segment over the course of the year, and what are going to be the key drivers that improve the performance of DIY sales from here? So I think there's a macro story here, and good morning, Michael, that affects where the consumer goes. I think the U.S. consumer. The good news is there's a needs-based function for our business. And so those staples where you can't put off doing things, e.g., my car won't start and it needs a new battery, so we'll continue to see those kinds of plays. But there's also a tendency now for consumers to defer maintenance if they can as they wrestle with their checkbooks at the end of the month. I don't see anything changing that in the near term, and so I think the trend that we see continues. We're obviously doing a number of things in terms of how we get to them. We've done some creative marketing programs. We're using our website. We do training with our in-store associates in terms of how they greet customers and understand needs and do appropriate attachment sales. So there's certainly not a lack of activity on our part to make sure we're maximizing opportunities where we interact with consumers. But I just think fundamentally, at a macro level, there's a bit of a, as I said before, an in flection point. Okay. My follow-up question is on the Worldpac sale. Is there any risk that it won't close or won't be announced in the second quarter? And can you give us some sense of what your guidance might look like for this year if you were to close the deal before the end of the year? Obviously, the intent of the question is to get some sense of how the underlying AAP business is doing outside of Worldpac so we can have a basis to understand what the transformation is looking like there. Thank you. Yeah, so great question, Michael, and certainly understandable that you'd want to get behind that. We don't do segment reporting, and I've used an expression in the 40 acquisitions that I've done: "A deal's not a deal till a deal's a deal." So when we have something to announce, we'll absolutely announce it. But I'll just go to the big picture, which I think is important for everybody. Just got to respect the process. So we're very happy where we are. We're in the middle of it. We believe we'll have it wrapped up before our next earnings announcement, and that's what we've got. And as soon as something's different, e.g., we complete the transaction, we'll let you know, and then we'll look to Ryan to pick what remainder company looks like. Yeah, Michael, and we definitely want to give you that perspective, but we got to wait till there's actually a decision. And when we have that, we will if and when we do have a transaction there, we will update our guide and update the projections going forward for the remainder. Thank you very much. The next question comes from Simeon Gutman from Morgan Stanley. Simeon, your line is open. Please go ahead. Hey, good morning, everyone. Shane, maybe one more try at Worldpac, and I'll respect the process. Can I ask, is the decision to sell it still the decision is the right one for the business, or is it price-dependent? And then connected to that, the positive low-single digits that I heard for commercial DIY, I assume, does that include Worldpac, or you're separating them out from how you're conveying the message to the street? Yeah, so Simeon, appreciate that. We're not going to speak about WorldPAC versus the rest of the business at this time. We are in the midst of working through the process here, so we'll keep that off the table until we have something where we can speak to them. But we are happy with our pro-business, and we are happy with the process and where it's at to date. We'll be able to give you more updates as we actually firm something up. The decision on this one is still from a strategic standpoint. We still have the same strategy. We're focused on the blended box, and WorldPAC is not necessarily tied to that decision. That's why we're exploring this opportunity, and we'll continue to explore. We're happy with the we're happy with where it's at right now. Yeah, thanks for asking the question. My follow-up. Yeah, the follow-up, you hired a new merchant. I wanted to ask about the opportunity with merchandising, if the SKU mix is aligned properly to the vehicle population, and then how should we think about you're doing supply chain consolidation. If you decide to make changes with merchandising, does that have any, is there a timing or sequencing effect with supply chain, or are there two different activities? Yeah, I would say there are two different activities. So first, thanks for asking the question. We're thrilled to have Bruce Starnes joining, and I think there's a couple of things that are worth unpacking here. First, in terms of his leadership and his fit, his energy level, he's personally an auto enthusiast. We view that as very important. His merchandising fundamentals in terms of skills he's learned at Target, we have really, really enjoyed getting to know him in this process. I think worth mentioning in terms of how we're doing the transition, we have Tom Seboldt on the board who joined us 30 years as a merchant in the industry. He will help with Bruce's onboarding. Ken Bush is sticking around through a transition period through his retirement. So this is very much an orderly transition, and so we're very excited to have him come on board. There's always work we can do as it relates to the SKU mix and the vehicle population. I think there's an ocean of auto parts out there, and so as Bruce puts his mark on the merchandising team, we'll always review what our availability is and having the right part in the right time frame for our customers. So you can imagine a body of work going on there. It doesn't come at the expense of, nor is it a sequencing set of activities with supply chain. So supply chain is moving now rapidly. Steve Szilagyi, our supply chain leader, spent about a year putting our plan together. He is now running in terms of getting our large DC infrastructure established, getting everybody on WMS, introducing market hubs as a node inside of our system. And so as that process goes on, changes to our assortment can occur within it and occur within our business every day today. Thanks. Good luck. T hank you. The next question comes from Greg Melich from Evercore ISI. Greg, your line is open. Please go ahead. Hi, thanks. I wanted to follow up on inflation, deflation, and specifically the price investment you referenced. So could you just help frame the 8,500 SKUs, what percentage of the total SKUs that is, and the $40 million investment, assuming that's about 30 or 40 basis points a year of deflation, does the whole box still have a little bit of inflation, or how would you frame that? So the impetus for the $40 million came from both our own data assessments and then getting feedback from customers, their pro-customers and consumer customers, where we were just fundamentally out of the market in terms of being competitive. And I think this is important. I think the conduct in this industry is a rational one. We're a rational player in terms of what we do. But in instances where our pricing just simply doesn't make sense relative to the market, we made some surgical moves to make sure our pricing reflected what the market is so that we're viewed as a legitimate source from where customers will buy. So 8,500 as a percentage of our SKUs is a relatively small percentage, Ryan, if you want to add some comp. Yeah, Greg, I mean, it's about 3% of the enterprise SKU count right now. I think if we looked at Advance only, it's about 8%. So it's not a significant portion of the overall, but it is just making sure that we get competitive in some key areas. Got it. And that $40 million, would you say that across the box, if the industry is still rational, that we're still seeing slight inflation in the comp in first quarter? Yeah, there's still a little bit of inflation, I think, in the industry, just slight inflation in the quarter. It is very rational. And like we said, we want to be competitive from a pricing standpoint, and I think the overall industry is fairly rational. Yeah, I would use the term disinflation. So I don't think we've hit deflation, but certainly that tempo of inflation has metered. Got it. Thanks and good luck. Thank you. The next question comes from Scott Ciccarelli from Truist. Scott, your line is open. Please go ahead. Good morning, guys. Can you provide any more color on the amount of margin pressure you're expecting for Q2, just given the moving pieces out there, and then help us understand the bridge to getting to better margins in the back half? Yeah, absolutely. So we are going to see a little bit more pressure in Q2. Some of these pricing actions we've taken are going to cycle a full quarter, and there's probably some more that we need to take to get competitive across the board. So we'll take additional pricing actions where it makes sense to be competitive in the marketplace. So we expect to see margin rate decelerate in Q2. Also, we're cycling last year where price was a lever that was pulled last year in Q2, and so we're cycling that. So it's not as much about, "Hey, we're just bringing prices down," but it's also about the comparison year-over-year. In Q1 of last year, there wasn't as much of a price action. In fact, they were actually trying a little bit to get more competitive last year in Q1. So the cycle and comparison wasn't as significant, but in Q2, we're comparing against some pricing actions last year, so that kind of compounds on it. Not going to give specifics guide around the quarter, but I would see you would expect that rate from Q1 to decelerate. Now, what we're doing, a couple of things. One is all the PLRs that we've done in the first part of the year, we're going to start to see the benefit of those take place in the back half of the year. We're going to see the unit start to take off. We have seen where we've made changes in price, we've started to see some of the unit start to take hold, but that takes a little bit of time as consumers start to see that. So we'll see some of that. And then we're continuing to work with our supplier partners on cost out that's going to help impact the second half of the year. And then as our supply chain consolidation takes hold, we'll see some of that benefit start to hit in the back half of the year. So these things take a little bit of time to come up in the back half. We also have better comparisons in the back half than we do in the first half. We mentioned that going into the year, that our first half would be more pressure than the back half, really due to some of these pricing actions we're cycling and comparing against. Hopefully, that was helpful, Scott. Yep, super helpful. Just to clarify, though, you do expect Q2 operating margin to be lower than your Q1 operating margin? Yeah, year-over-year. From a year-over-year basis. Yeah, I mean, from a year-over-year basis, right, the deleverage, yep. Got it. Thank you. Yep. Thanks, Scott. The next question comes from Chris Horvers at JPMorgan. Chris, your line is open. Please go ahead. Hi, good morning. It's Christian Carlino, one for Chris. Are you thinking about what structural gross margins might look like any differently now that you're investing in price, or presumably this has been part of the plan and you still have visibility to eclipsing that 42% over the near to medium term once you recapture some of the one-time costs from last year? Thanks. Yeah, this is definitely part of the plan as we continue to investigate competitively price, and we still are committing to our guide for the year, and we still have line of sight to that. So we're still comfortable with where we believe we'll land the year given the macro backdrop, but this is part of the plan, and we're going to invest where we can to be competitive. Yeah, I think the pricing actions are modest. And there's the other side of that equation, which is what our merchant team can do working with our vendors to make sure they're securing the appropriate source costs for our product. So I think we've got some opportunity there, and we'll look for Bruce as he comes on board to start putting programs in place for that. Got it. That's helpful. Understanding there's not much to update us on the transaction at this point, could you speak to how you're thinking about the potential use of proceeds from the sale? Is there a level of leverage where you'd be more comfortable stepping up the investments in the DC conversions or some of the other turnaround efforts you're undertaking? Yeah, so we think about three potential uses. I think the first, Ryan, working with our treasurer, Tony Iskander, will look to delever the company to some degree. So they'll look at our various debt tranches and decide which ones we'd potentially take out. So I think that's an important that's the first use. And then the second use, which we've started to ask our different functional areas, is where we would accelerate investment for already underway initiatives that we can bring about a faster conclusion. And you could think about a couple of candidates here. So from a supply chain perspective, we've got this ongoing new market hub development, our large DC network buildout. So Steve would likely be a candidate for proceeds. Technology, we talked about POS stability. We still have some stores that are on a legacy POS system. We could do POS unification would be an example. And then as you think about stores in terms of our new store opening capability, condition of our stores, junior ward, there'd likely be some opportunities there. So those three constituents, I think, are at the top of the list of where we would put money to move faster with things that we've got going on. And so that's kind of the two priorities. Third would be thinking about our shareholders in some way, but those are the three. Got it. Thank you very much. Best of luck. The next question comes from Zach Fadem from Wells Fargo. Zach, your line is open. Please go ahead. Hey, good morning. Can you talk a bit more about the game plan for Market Hub conversions? You mentioned some successful pilots. Curious what you saw that gave you confidence. And any early color you can share in terms of what you would expect in terms of lifts on the Pro or DIY customer? Yeah, and I think you see this elsewhere in the industry, but the premise is that if you have parts closer to customers and you're more responsive, you get more orders. And so what we did is we looked at how we sit in that regard in terms of what can we get you in 30 minutes? What can we get you in 2 hours, 4 hours, same day, next day? And we found there's a significant shortfall in the number of parts that we can get you at those requisite time frames. So we said, "Well, how do we accelerate that? How do we be more competitive?" And so what a market hub does is it pushes parts closer to the customer to where we can get it to other hubs or stores where it would otherwise have to come from the DC. And our DC works in two ways. We have replenishment orders which go to stores with some frequency. We also had developed a parts delivered quickly program for one-offs, which was expensive and time-consuming. And so by using the hub, we get it to we can get it to a store more quickly than if it was coming from the DC. And so that's what we've seen. And what we see both physically within that store, that actual hub where we have those parts, we get sales. And then the surrounding stores, and you could think about that as about 100 stores, they're now getting better service because they were previously relying on only the DC. So that's the premise. I think just another comment here, sometimes in a business, being a fast follow can be an effective strategy. And so beyond our own pilot results, I think the effectiveness with this market hub concept elsewhere in the business also points to the idea that it's a good one. Got it. Thanks for the color. And then a couple of clarification questions. First, on the gain on the SG&A line, any quantification of the impact there? And then second, any color on the slight notch up in the high end of your 2024 sales outlook? Yeah, Zach, appreciate you bringing that up. When the press release was issued, we noticed immediately the error. We're going to send an amendment out. We are confirming our guide. The top end of that sales guide should be 11.4, not 11.5. The rest of the numbers are accurate. So you should see that come through shortly. As far as the gain, the gain was $18 million in the quarter. It was also implied in our guide. That was a P1 gain. Got it. Appreciate the time, guys. Yeah, likewise. Thank you. The next question comes from Aaron Reed at Northcoast Research. Aaron, your line is open. Please go ahead. Yeah, thanks for taking my call. I just wanted to follow up on the sale of the Worldpac, and it sounds like you had the initiative. Once the proceeds come in, it's the amount of reducing debt, really improving some of the stores. And it sounds like an additional component is possibly returning funds to shareholders. My question is, is that going to be largely dependent on the price that you get for it, or is it something to where it's an order tier where debt first and then store improvement is going to be I mean, how should we look at that allocation when that's all said and done? Yeah, I'll start, and then Ryan and Tony joined us this morning. He can jump in. Debt first. I think that is the best early use of proceeds. And so we'd go there. And again, Tony and Ryan will figure out exactly where we'd draw the line in terms of how much we would pay off. Our sense, though, is that there's monies for all three of those potential use buckets based on our assessment of Worldpac's value. But gentlemen? Yeah, so hey, Aaron, good to talk to you again. We would first put money towards deleveraging, getting back, and getting closer to our leverage targets that we've talked about publicly, closer to 2.5x over time. We would also put money towards our initiative, some of what Shane and Ryan talked about earlier in our prepared remarks. And of course, anything excess would go back to shareholders, and we would look to do that over time as well. Yeah, and I think the biggest thing is we're going to be prudent on this one as well and the timing and sequencing of that. We know this is a multi-year turnaround for the company. And so the first, that priority of pay down the debt and then invest in the business for the turnaround are the top priorities for us. Okay, great. Thanks. And then I guess just the follow-up questions to going a little closer. You said trying to get back closer to that target debt ratio. Does that mean that you don't believe that with the sale and allocation, we'll be able to fully achieve your target debt ratio? Yeah, Aaron, we're not ready to talk about the actual dollar amounts that we would get from the transaction. So we'll wait to be able to share that when and if we do have a transaction, if that's all right. Yeah. Great. Thank you much. Appreciate it. Thanks, Aaron. The next question comes from Steven Forbes at Guggenheim Partners. Steven, your line is open. Please go ahead. Good morning. This is Renee Marinon for Steve Forbes. I want to focus on the DC to market hub conversions. Can you help us think through the KPIs you are focused on as you think through the ROI of such progress and whether these conversions can drive the improvement you need? Thank you. I missed the very last part of your sentence. If you could, just say that one more time, please. Yep. And whether these conversions are driving the improvement you need. Oh, yeah. Fantastic. So as we think about metrics, sales per sq ft, service interval for SKUs available, sales are all important in terms of what we do it, along with the cost to convert and then the ongoing operating costs. So those are some of the key metrics. Let me also talk qualitatively about what goes on. One of the challenges in our network is we'd previously made the decisions that we would treat all DCs equally. We have 38 DCs serving the boxes, and the disparity in their size ended up with huge inequities in terms of what stores saw in terms of their replenishment. You could be a store manager and have a 1,000,000-sq-ft DC that's a few hours away that's servicing your store, or you could be a store manager and have a 100,000-sq-ft DC servicing you and your facility. The breadth and depth of what was available to you as a store was fundamentally different depending on which DC was serving you. But we declared them all to be replenishment nodes, which creates an issue. By the way, we declared them all to be intake nodes, which we would go to our vendors and say, "Hey, we need you to ship product into 38 DCs," which meant some DCs could take a truckload and other DCs would take an LTL skid. So we knew structurally that's just not a good way to operate a supply chain. So with that backdrop, as we've gone in and modeled it, it also makes sense from some of the metrics that we just alluded to. So what we're doing with a Market Hub is we're taking 40,000-50,000 sq ft. And again, it comes from any one of the three sources. We have some larger stores that can fit this profile. We have these DC conversions. And then we also will be doing some greenfields. Then we think that 80,000-plus SKUs, give or take, some will cheat a little bit higher, is the right number of SKUs. Now, for these DCs that we're converting, we're in long-term leases with them at favorable rates. So economically, that's been something that's been good for us. We will partition what we need and sublease the rest. In some cases, we'll exit the facility altogether. But that's the method of how we then develop the baseline economics of the facilities. We also won't be using mechanization and think about both the ongoing maintenance and operating costs of that. And instead, this will look with a traditional racking and pick model in terms of what we'll do. And so as we've looked at what the cost to operate it and then the service that's provided, that works. But I will go back to that original big picture, which is going to our vendors and saying, "Hey, you only need to ship into 14 large DCs." And then for our stores on replenishment, the full breadth and depth now available or will be available to every store, that is valuable to us as well. Thank you. The next question comes from Max Rakhlenko from TD Securities. Max, your line is open. Please go ahead. Great. Thanks a lot. So first, the 8,500 price action SKUs, is that the biggest chunk of the SKUs, or is that just the start? And the SKU count could ultimately look quite a bit bigger over time. So one of the things that we did in the company is we moved pricing into merchandising. So previously, those had been disjointed functions. The way I think about pricing is we want to be we want to be competitive. We don't want to lead the market down. We don't want to be inappropriately highly priced to where customers don't want to buy from us. I mentioned before, we think it's a logical industry with good conduct. So what you can expect from us is good merchants will be talking to their vendors to make sure that we're sourcing at the right cost. I think we have opportunities there. Good merchants are looking at their portfolio. In some instances, they'll say, "Hey, I think we're higher relative to the market," and we move down. In other instances, they're going to say, "Actually, we have opportunity to move price up." I think the key message you could take away from us is that we'll have capable pricing teams working very closely with merchants to be at the market, and we'll look to make sure we're sourcing to hit the margins that we need to hit. Yeah, Max, I'll add. Of those 8,500 SKUs, some of them, we actually brought price up, right? So this is about getting right priced across the portfolio. Obviously, the bulk of them were bringing prices down and being in a competitive place, but we did bring some up too, to Shane's point as well. And we said it's about 3% of the overall enterprise SKUs and 8% of Advance. Will that increase, as Shane said, as the new merchant comes in, as merchandising works through it? I'm sure that there will be more that will add to it. Got it. It's very helpful. And then can you speak to a competitive environment and progress you're making with your up-and-down-street accounts? And then what are some of the key initiatives besides price, and how should we think about the cadence of acceleration as the year goes on? Yeah. So if you look at our 92-year history, I think throughout Advance's history, we've viewed the pro-customer as a market that we have a right to participate in. And so it's a perfectly natural set of activities for us that we have a lot of deep capability. And so there's a whole series of activities going on. So first, we used outside sales team members, CAMs. We've rejuvenated their compensation program. And if you think about we've talked about investing in the front line, CAMs and CPPs, CPPs being commercial parts pros, and they're the in-store pro conduit. We're investing in both of those roles in terms of compensation. We're investing in those roles in terms of training. We're investing in those roles in terms of career trajectories. We're doing a lot in terms of understanding our market. So in the proximity to where a store exists, who are all the pro customers, and what's our relative penetration with those customers? What is the visit frequency? What products are we propositioning to that customer? Those are all things that go on. We have TechNet, which is a warranty service and capability builder for our pro customers that we bring to the market. And so there's a whole litany of activities: our pro website, our equipment program, our recognition trips. So across the spectrum of what a pro customer would find attractive, we have an answer for their needs. And it's just about being organized and highlighting those needs. And we're really pleased with the direction that's taking place. Great. Thanks a lot. Best regards. Thank you. The next question comes from Chris Bottiglieri from BNP Paribas. Chris, your line is open. Please go ahead. Hey, thanks for taking the question. Just a couple of clarifying ones. The $18 million, was that a sales leaseback or something else? And then on Worldpac, do the accounting control remediations, does that influence the Worldpac sale? Does that need to be resolved first before so the finance can be relied on? I'm just curious if that's having any impact on the asset sale. Yeah, Chris. No, the Worldpac piece is not going to impact the transaction there from that perspective. That's kind of kept separate. From a sale gain on asset, it was a sale-leaseback. Yep. What's sale-leaseback? Okay. And then just the last one, the capitalized supply chain cost, you called it out this quarter. Can you quantify that and tell us what you're thinking in terms of Q2 in the back half? Is that something that should persist or not? From an overall inflation standpoint, we expect that to be very moderate for the rest of the year from a product inflation rate. Obviously, in our guide, originally, we said we wouldn't be able to capitalize on full inflation on the year because we were going to be taking pricing actions, and we'll continue to do that through the year. In fact, I think in our guide, we talked about inflation being about 1% in the industry, and we expect it to be somewhere still around 1%. Okay. Okay. Thank you. The next question comes from Carrick Erwin from Barclays. Carrick, please go ahead. Your line is open. Oh, hey, guys. It's Seth Sigman. Hopefully, you can hear me. I want to follow up on a couple of questions. I guess number one, hey, hey, guys. Sorry for the confusion here. So two quick follow-ups, and I'll just ask them both up front here. So just on the guidance for Q2, just trying to think about more pressure year-over-year on operating margin. Can you just give us a little bit more flavor? Is that more on gross margin or SG&A, or is it really a combination of both? So let's just clarify that. And then my real follow-up question is around the store footprint. It looks like the pace of closings is starting to pick up a little bit here. How do you think about that? Do you have a view on the ultimate number of store closings and maybe any more color on what you're learning, some of the characteristics of the units that you're closing? That would be great. Thanks. Yeah, great question, Seth. A couple of things. The pressure in Q2 will be mainly driven on gross margin. That's where we're going to see the pressure. It's mainly driven by the pricing actions, cycling those pricing actions from last year, and some of the timing of us working to get some of the cost out in product costs, supply chain benefits, etc., and the unit lift that will take time as the consumers recognize our new competitive pricing. So it's mainly going to be realized in gross profit on that perspective. I'll talk on the store closing. Thanks for asking the question. So first, we don't have an idea to go out and just say, "Hey, we want to shut X number of stores." It's all part of our asset productivity assessment. And so we're looking across the network. We're looking at every asset that we own and say, "Hey, what does this do for the company? And is it where it should be? And is it doing what it could be?" So when we identify it as it relates to a store, the first thing we say is, "Hey, can we turn the store around?" I mean, that's the preferred lens. And so we look at what the management is and how the management's performing. We talked about our pro efforts, and we say, "Hey, have our pro efforts grounded there? What's going on with the outside sales team member in that geography, the CPPs?" So first blush with the store's performance is always to say, "Can we make this a healthy store?" There are some instances where if you look at our regional market share, structurally, we're in a situation where we just can't make the math work, and that's where closing becomes an option. And so we don't publish a number in terms of, "Hey, we think this is how many we think we are going to close or could close." It's just an ongoing management of the business that's now one of the items in the toolbox. By the way, so too is opening a new store. In that regard, we haven't published an NSO number, but I think I want people to know that our real estate team, in terms of its capabilities, we've really made a number of improvements there. We've unified real estate under one leader. We've looked at our real estate management process in terms of buy versus lease, in terms of site selection, in terms of timeline to get a facility up, in terms of hit-out and fit-out, in terms of new store opening processes. So we're really seeing, for the new stores we opened, a much better process that is something that we'll look to leverage in the future All right. Thank you all so much for joining us this morning. That is all the questions we've received. We appreciate your time and continue to support. I look forward to updating you again after we report Q2. Have a nice day.