Darren Jackson: The way to think about it is two frames. One, when you think about the DIY business, what Elwyn, underneath some of the transformation he talked about quick hits. Those are basic things. It is attachment selling and we know today and we are working on tools today, we just launched earlier this week attachment selling scorecards that allow our team members to better see are we helping our customers get all of the things they need, the total solution for whether it is getting that bake job done or whether it is getting that tune up job. Every day in every store we can now see tools that allow us to see top to bottom in the company who is doing the best job of selling the complete solution or the total job to our customer. Our weekend scheduling is not where it needs to be and those are things in a DIY environment, if we can strike the right balance of getting the right team members in front of customers on the day that they are out there, there is a lot of business in just the basics in order to get that done. We have picked 30 stores where we are beginning to understand customer satisfaction feedback and employee team member feedback as to what we can do different. We have got a DIY summit coming in early June where we are going to bring 20 or 30 of our team members to Roanoke, just like we did with the Parts summit last year and I can not emphasize enough, last year this team did terrific work engaging our team members in the Parts area and our 10.6% comp today has a lot to do with the people that were on the front line giving us the feedback as to what we did differently. We do not have DIY figured out so we are going to get some of those team members in our building, giving us their best advice as to what we need to do differently. Similarly in the commercial space, we have a lot of those opportunities that are right now in terms of going out to the business, MOOG and Wagner are terrific additions, and we are thrilled to have them as partners and growing that business. Getting out there and getting our commercial parts pros, the tools that they need, putting delivery trucks in spaces that we do not have them today, having confidence that we should be going after demand as opposed to what we are getting today is part of where we need to go as well. We are not sitting around waiting for some IT system to show up or getting terrific work out of the supply chain and the other teams, but there are things right in front of us that are part of what we are going after.
Seth Basham (Credit Suisse): Was there a LIFO credit or charge in the quarter?
Judd Nystrom: We highlighted the material drivers from a gross profit standpoint and you will see that in our press releases where 80% of it was supply chain and logistics and 20% of it was pricing. The actual net impact of LIFO and a bunch of other things was immaterial in the quarter.
Seth Basham (Credit Suisse): In your last quarterly conference call you talked about expectation for modest gross margin improvement over the course of 2008. There was a good improvement off a relatively difficult comparison there. As you think about the balance of the year, would you expect this type of improvement to continue or would you expect it to come down?
Elwyn Murray: At the beginning of the year we came out of the fourth quarter fairly soft and we forecast out through the year at a zero comp and hence we gave you the number. At that time we said we anticipated on a zero comp, we anticipated our margins to be up modestly and our SG&A to be down due to a lower comp. Now we come out of the first quarter and our comps are higher than we expected, our margins are higher than we expected and our SG&A came in around where we thought it would be. As look at the balance of the year, those comments still hold and one of the reasons we give that 1% comp increase, 10 cents and 3 cents is equivalent to 10 basis points improvement in margin. Right now, we see those similar trends continuing as we originally laid out.
Seth Basham (Credit Suisse): At what price is your fuel purchase hedged and is that throughout the year?
Kevin Freeland: Essentially what we do is there are two major fuels costs for the company that the transportation from the DCs to the stores and then the fleet of trucks that we have bringing the product to our commercial customers. What we hedge is the diesel for the outbound trucks and it is not something that we have disclosed or intend to disclose in the future, but it locked in the prevailing prices at the end of last year.
Seth Basham (Credit Suisse): On the inventory investments, some of your competitors have taken a long period of time than you have to decide what inventory to invest in to serve the commercial customer and make parts more available. You are making big investment throughout 2008. What gives you the confidence that you are making the right decisions on what categories to invest in?
Elwyn Murray: From May of 2007 through December of last year we got aggressive and Darren has mentioned some of the feedback from our Parts summit, we acted on a lot of the input from our team. One of the beauties of that was it got a jump start, it was not a perfect science, but what we did do is sit on top of that entire experience with our test and learn, test and control lab store type of science. We are able to determine from those 500 stores that we touched where the biggest winners were and why. So we have been able to refine that and so as we look at the remaining if you will 2,500 stores, we know precisely where we want to go for the biggest bang and are deploying aggressively against that this year. There was some learning came out of the action we took last year, not to mention the action we took last year we felt was accretive, we are just going to the most profitable opportunities now quickly.
Mike Norona: A big part of that inventory increase that we did not anticipate would be the addition of MOOG and Wagner, it is a brand new vendor that is going to play an important part in our future. Whenever you bring a new vendor on side there is an upfront investment to build up your inventory. That is a big portion of the increase we see.
Seth Basham (Credit Suisse): You talked about four key financial metrics you are aiming to be a leader in. As you look at your real estate portfolio as it currently stands, would that be limiting to you achieving that goal of being a leader in those metrics?
Jim Wade: I would just say we have to take into account how much real estate we own versus our direct competitors in some of the metrics. But other than that I do not think there is anything that prohibits us from getting where we want to be.
Darren Jackson: One of the things that we learned just paying attention to the customer feedback, when you think about our commercial garages, the thing that is number one on their list is speed of delivery. Through our real estate strategy and granted it was DIY motivated, but it turns out that some of those main and main locations position us well with some important garages as we look across a lot of the markets we participate in. Our advantage in terms of speed of delivery emanates from that real estate strategy and as we go forward we are going to have to continue to balance as we add the new stores, how do we take advantage of that and then how do we build on that as we have talked about with getting the right parts availability for those same customers.
|
More:
