Advance Auto Parts, Inc. (AAP)
Q2 2010 Earnings Call Transcript
August 12, 2010 10:00 a.m. ET

Executives

Joshua Moore – Director, Finance and IR
Darren Jackson – CEO
Jim Wade – President
Kevin Freeland – COO
Mike Norona – EVP, CFO

Analysts

Dan Wewer – Raymond James
Scot Ciccarelli – RBC Capital Markets
Allen Hatzimanolis – BB&T Capital Markets
Chris Horvers – JPMorgan
Michael Lasser – Barclays Capital
Alan Rifkin – Bank of America
Gregory Melich – ISI
Ryan Brinkman – Goldman Sachs
Mark Mandel – ThinkEquity


Operator

Welcome to the Advance Auto Parts second quarter 2010 conference call. Before we begin, Joshua Moore, Director of Finance and Investor Relations will make a brief statement concerning forward-looking statements that will be made on this call.

Joshua Moore

Good morning and thank you for joining us on today’s call. I would like to remind you that our comments today contain forward-looking statements we intend to be covered by and we claim the protection under the Safe Harbor provision for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Forward-looking statements address future events, developments or results and typically use words such as belief, anticipate, expect, intend, will, plan, forecast, outlook or estimate, and are subject to risks, uncertainties and assumptions that may cause our results to differ materially, including competitive pressures, demand for the company’s products, the economy in general, consumer debt levels, dependence on foreign suppliers, the weather and other factors disclosed in the company’s 10-K for fiscal year ended January 2, 2010 on file with the Securities and Exchange Commission.

The company intends these forward-looking statements to speak only at the time of this conference call and does not undertake to update or revise them as more information becomes available. The reconciliation of any non-GAAP financial measures mentioned on the call with the corresponding GAAP measures are described in our earnings release and our SEC filings, which can be found on our website at advanceautoparts.com.

For planning purposes, our third quarter earnings release is scheduled for Wednesday, November 10, 2010, after market close, and our quarterly conference call is scheduled for the morning of Thursday, November 11, 2010. To be notified of dates of future earnings reports, you can sign up through our Investor Relations section of our website. Finally, a replay of this call will be available on our website for one year.

Now, let me turn the call over to Darren Jackson, our CEO. Darren?

Darren Jackson

Thanks, Joshua. Good morning, everyone. Welcome to our second quarter conference call. First, I would like to thank our 51,000 team members for delivering a record performance in our second quarter 2010. The team continues to position us for another great year with strong top line and bottom line results through their focus on execution and an unwavering commitment to serving our customers.

We remain confident in our team members and our strategies as they fueled the 6.9% increase in our year-to-date comp store sales. Our team continues to drive the resurgence of our DIY business, while extending the string of double digit comp store sales gain in our commercial business. The favorable market conditions and successful execution of our key initiatives drove a 7.2% increase in total sales and a record store sales productivity that reached $1.64 million per store on a trailing four quarter basis.

Our availability excellence teams continue to shine by expanding our gross profit rate by over 100 basis points resulting in double digit operating income growth during the quarter. The 12% operating margins are a glimpse in the potential of our overall business. I am encouraged by our continued improvements in our overall customer satisfaction scores achieved while delivering a record 16.5% return on invested capital.

Collectively the strategic and financial progress is evident in our customer experience and our bottom line results. Similar to the first quarter, we outperformed both our financial and strategic objectives during the second quarter 2010. We are pleased with the continued progress of the initiatives that we had previously shared with you. Jim, Kevin, and Mike will provide updates on some of these initiatives later in the call.

Our team is the most important factor to Advance’s success. Our highly engaged team members have a passion for serving our customers, and are committed to serving our customers better than anyone else. We continue to assess the engagement of our team through our team’s calibration survey, and I am encouraged that those scores continue to increase across the company.