William Rhodes: No, it is always challenging, that’s specific vehicle, specific application information from our competitors. But, what we’ve seen in the marketplace is that we are very well-positioned and comfortable that we’ve made in a shift towards later model coverage and will continue to refine that as we go. The other piece that we have is hub stores where we’re going deeper and deeper all the time to learn how early we need to be. At this point in time we are quite comfortable now. It is always evolving, as new vehicles come on roads as failure rates change, it is a constant revolution, but we are quite pleased where we are today.
Dan Weaver: Your electronic loyalty card was implemented at the end of calendar 2006. Can you remind us how many active accounts are on the other system and what you’re learning from that and how it’s changing the way you either merchandise stores or price of product?
William Rhodes: It is still fairly early in the process overall. We are building accounts to your point and we continue to increase our overall penetration in the accounts that we have. We are still at the very early stages, obviously revenue haven’t cycled a full year yet.
Mike baker (Deutsche Bank): You talked about adjusted $1 million fee from Midas. Where if that was in your SG&A and is that unique this quarter or is that something that you expect to be ongoing?
William Rhodes: Yes, the $1 million is in SG&A.
Mike Baker: Could you quantify how much Duralast and imports are as a percentage of sales?
William Rhodes: It is currently a small percentage of sales, but it’s an opportunity for us to growing.
David Cumberland (Robert Baird): You mentioned higher profitability in commercial in Q3. For about how long have you achieved the trend of higher profitability in this business?
William Rhodes: Throughout the year, our organization has done a good job, account to the commercial model, and being able to identify opportunities, improved profitability. It’s not a 100% about the sales. We want to our balance our ability to drive sales as well as to drive profitability, and we want to be able to create a model that can sustain that on a long-term basis.
Tony Cristello (BB&T): With the new parts assortment, are you seeing a greater mix of the Duralast Gold brand from the commercial side, or is there still tractions at some of those lower levels of Duralast product?
William Giles: They are done in both. Overtime, we’ve increased the coverage in specific categories for Duralast Gold. When we’ve done that, we have seen in the very lower season in marketplace. In other places where we didn’t see it and that well received in the past, repaired those back and the Duralast brand is a great brand as well.
Tony Cristello: On the Midas issue, was the level of run rate in total for what you were supplying in parts in 2003? How much did that deteriorate, if any, from where you are now? Have you already lost some of that business under that contract because the aggressive environment, more people are trying to attack the DIFM space and therefore the incremental loss is less as you anniversary this?
William Rhodes: Yes. We have lost substantial amounts over the last couple of years, but it is not necessarily due to the level of competition. I would attribute it two other things. Number one, the exhaust business, I think you all have seen over time has continued to decline. We have changed our relationship even though the last year and a half was how we manage exhaust, and that impacted. But the bigger piece is most of the shops are finding that as parts proliferation continues, it is uneconomical to carry a lot of parts on the shelf and you are stuck in your shops. It is much more productive to buy them from a hard shop provider from people like us that have inventory already deployed around the country.
John Lawrence (Morgan Keegan): As you transition out of that at the end of June, I assume that there is some distribution expense that goes away and you can allocate that more toward the sales process. Is that the way to look at that?
William Giles: Yes. The vast majority of the expense is related to supporting that supply chain business are all variable.
John Lawrence: In direct imports, are you still in a methodical standpoint of trying to figure out suppliers or how those shipments are arranged? Can you talk about strategy versus execution at this point of getting that direct import problem?
William Rhodes: Yes. I wouldn’t characterize it as cautious of that. We’re more aggressive, but we are cautious on the individual manufacturers if they get to know we have spent a considerable amount of time over there in the last two months. There are many people from here who have been over there looking for new opportunities and working with existing suppliers. We are comfortable we worked up the logistics on it. As we find new opportunities, we are going into full stream ahead. |