AAP
#Thanks, <UNK> and good morning
I'd like to begin by acknowledging all of our team members and independent owners across the AAP family for their efforts to better serve our customers in the quarter
Through their dedication, we’re executing well against the five-year plan review that our investor conference last November
In Q1, our comp store sales performance was down 2.7%
This result reflects the impact of a series of factors we anticipated in Q1, as well as short-term headwinds that were not planned
These headwinds impacted the entire industry in Q1. Let’s start with what we expected
As we noted last quarter, our Q4 performance benefited from two significant factors; first, the shift of New Year’s Day into Q1, which help Q4 but reduced comp store sales in Q1; secondly, a substantial increase in winter related demand was pulled forward into December and out of January
In particular, our Northern markets benefited from the cold December
Given our geographic footprint, we disproportionately benefited from this in Q4 and it disproportionately hurt us in Q1. None of this was a surprise and the fact that our comps in Q1 were lower relative to Q4 was consistent with our 2017 operating plan and consistent with what we said last quarter when we reported comp sales of 3.1%, our strongest performance in the 12 quarters post the GPI acquisition
We’ve been looking at our across business across Q4 and Q1 combined for several months now
This provides a normalized picture of sequential sales improvement
For the 28-week period, we delivered positive sequential improvement in our comp sales performance
The combined comp for Q4 and Q1 of down 0.3% was approximately 70 basis point improvement versus the comp in Q3 2016. The sequential improvement we’ve delivered in recent quarters demonstrates we’re making real progress
At the same time, we’re not immune to the macro headwinds within the industry, which resulted in unexpected substantially softer consumer demand in the middle of Q1 as reflected in the publicly available data
This timeframe was worse than expected and resulted in a slow start to the spring selling season
That said, these short-term variables tend to smooth themselves overtime and while we need to manage them as part of our day-to-day operations, they don’t change how we’re transforming the business and how we think about long-term growth
The beginning of the quarter was in line with our expectations, as was the end of the quarter
We along with the rest of the industry experienced softness in February and March
The good news is we closed Q1 with stronger performance and this is carried into Q2. As a result, we expect sequential improvement in our top-line growth once again in Q2 as compared with our Q4, Q1 combined number of down 0.3%
So to reinforce the key points surrounding our top-line performance, we’re viewing Q4 and Q1 as one combined timeframe in our transformation
Q3 last year had comps to down 1% and Q4 and Q1 combined had comps of down 0.3%
While this was less than we planned, it represented sequential improvement and we expect to deliver sequential improvement again in Q2. Our steadily improving sales performance reflects the impact of decisive and consistent actions we’ve taken across three areas of focus, giving us confidence going forward; first, our priority to put the customer first is permeating the organization
It has been and will continue to be the key driver for consistent top-line growth
Second, our sustain investments and availability, customer service and our front-line is strengthening execution and engagement
And third, better execution throughout our supply chain is driving increased fill rates, higher in-stocks and reduced order to delivery time
Together, this is resulting in a better experience for customers in both Professional and DIY
Turning to operating income, we’ve been clear
Our turnaround won’t be linear
It’s important to note that while we’re not managing our business quarter-to-quarter, our Q1 operating income results were generally in line with internal expectations at the beginning and end of the quarter with the notable exception of larger than anticipated sales softness in February and March
As in the past several quarters, our operating profit performance reflects deliberate choices to invest in our business and specifically in the customer to position AAP for the long-term
When sales slowed down in the middle of Q1, we could have made a short-term decision to pull back on customer service
But in fact, we made a deliberate decision to sustain investment
At times, we know the difficult choices need to remain to fully capitalize on the significant opportunity we have to drive growth and margins over the long-term
Given the early stage of our turnaround and focus on reinvigorating the customer experience, the choice to sustain investment and customer service in the middle of short-term whether related softness was one of the easier decisions made in the quarter
These investments are beginning to pay-off as evidenced by sequential improvement of comp store sales along with progress on core input metrics, including improved in stock rates, significant reductions in turnover and faster delivery times to customers
The other drivers of our operating margin decline resulted from fixed costs deleverage due to the comparable store sales decline and our continuing efforts to optimize our inventory
Tom <UNK> will provide more color on the financial shortly
At the same time, our productivity agenda is on track and ramping up nicely
We’re now executing against the framework we’ve been constructing over the past several months
As the program boost and design to execution, we’ll realize considerable productivity savings in the back half of the year for our annual operating plan
As a result of these factors outlined, we delivered an adjusted operating margin rate of 7.1% and adjusted EPS of $1.60. Taking all this into account, we remain confident with the progress we’re making as we execute our plan and expect sales and customer momentum to continue with more operating leverage as we enter the back half of 2017. We’re performing well relative to our primary input metrics as the beginning and end of the quarter was in line with expectations
Unfortunately, the middle of the quarter was below plan as was broadly experienced across the industry
We also believe the sales softness was short-term in nature given recent trends
Importantly, Importantly, our productivity agenda ahead of plan
We’ve now conclude that we can drive more gross savings in a shorter period of time
We will do this while continuing to position the business to grow faster
We’ll begin to see improvements from our productivity initiatives in the second half of this year, which will help us meet bottom line targets
With Q1 behind us, I am pleased to report that we are now officially transitioning from Phase 1 of our transformation plan to Phase 2. Phase 1 had three overarching objectives
First, refocus the organization from top to bottom on the customer
We have lost faith of this top priority and needed to regain a customer first culture to ensure a long term growth
Everyone at AAP needed to raise their gain by putting the customer first in everything we do
Across our businesses, we are now seeing adoption of a mindset that everyone's number one priority is sharing for the customer
Second, develop and align the organization behind a clear strategy and five year plan to accelerate performance
In addition, we have defined and are now executing against the new set of foundational cultural shifts we need to make
And third, build a world class leadership team that can execute our plan in the short term while transforming our business in the future
We are re-advancing Advance Auto Parts and I am excited by the fact that we have built a new and highly skilled leadership team by attracting top talent from multiple companies and industries
This when combined with deep parts experience throughout the organization give us a team which can both perform in the short term while transforming our business over the long term
In Phase 1, we made deliberate and sustained investments and availability, customer service and our front line
This has improved input metrics and sales trends were getting market share performance moving in the right direction
With Phase 1 complete, we’re turning our attention to Phase 2. Our objective for Phase 2 include; first, elevate focus on the customer and continue to narrow the performance gap; second, flawlessly execute the multi-year productivity plan we have been developing
We have a significant opportunity to thoughtfully and permanently remove unnecessary costs; and third, challenge our new leadership team to elevate our focus on attracting and developing talent throughout the organization
With stronger talent, we will build new capacities required to win in the future and evolve the culture to deliver value
We have been hard at work with our growth agenda and over the past three quarters developing our Phase 2 initiatives, we’re very excited about the capabilities we’re building as we test and learn new ideas throughout the country
We’re now beginning to scale the top performing initiatives
First, we’re improving the customer experience and driving consistent execution across our network for both Professional and DIY customers
In Professional, it all starts with improving availability
Here we are building on the successful pilots we ran last year
Our availability transformation positions the right parts closer to the right customers by store reduces order to delivery time and drives growth
We have now added more stores to the availability transformation and we are seeing similar robust performance improvements that we saw in our lead markets in 2016. As a result, we’re expanding in select market throughout the balance of the year
We’re also augmenting this improved availability with an enhanced technology platform
We piloted this last fall with exceptional results and made the decision to invest in the back-end analytics engine combined with front end consumer facing technology for customer account managers to improved sales productivity
With better insight into our customers, our customer account managers are able to more effectively manage their time with customers to better meet their needs
This will be fully deployed in Q3. In DIY, we’re equally focused on improving our customer and team member experience
We’ve been running DIY experience pilots in a number of stores and markets
These pilots are standardizing the in-store customer experience store-by-store and region-by-region
So every store has the same consistent processes, the same consistent training and the same consistent approach to servicing the customer
In addition to making critical investments in the customer to drive growth, the second pillar of Phase 2 is the focus on our robust productivity pipeline
Since we announced the productivity agenda and corresponding targets last November at our Analyst Day, we’ve been aggressively putting the structure and leadership team in place to execute a sustainable multi-year productivity program
As we said previously, the productivity muscle simply is not exists at AAP
Our agenda includes thoughtful planning to change the work, investment and infrastructure and people to drive it and an intense focus on increasing visibility and performance management of costs
Our new leadership team has been instrumental in applying both longstanding experience and fresh perspectives to build our productivity agenda
As a result, we’re updating the target we shared with you last November of 500 million in productivity over five years and we now expect to achieve 750 million in gross productivity over four years, reflecting both the significant increase and acceleration
Over the past several months, we’ve been aggressively challenging our sales to think differently about the work and how to thoughtfully and permanently remove waste from our system
The additional 250 million has resulted from our new leadership team challenging the status quo and will allow additional investments in our customers while expanding margins
To be clear, the productivity target is not sales dependent, it’s a gross number and some of this cost benefit will be used to fund growth initiatives, while the vast majority of it will drive margin improvement
Our productivity agenda continues to focus on the three pillars we shared last November; first, zero based budgeting or ZBB; second, the optimization of our supply China; and third reducing material input costs
We’re very excited about this work
Allow me to share some examples
First, on ZBB, we’re standardizing our first to cost control while eliminating redundancies and unproductive spending
There are substantial opportunities here throughout the <UNK>
Our ZBB agenda includes fundamental process redesign, policy changes and a complete rethink of how work it’s done
This has been completed in many areas throughout the <UNK>, and we expect to realize cost savings from this in the back half of 2017. Second, the simplification and optimization of our supply chain will drive both effectiveness and efficiencies
We are looking at our supply chain very differently than we have in the past
We’re starting with the customer and working back to better meet their needs while leveraging the formidable footprint we enjoy today
In doing so, we’re building new capabilities and leveraging the entirety of our asset base
The great news here is that this approach provides the dual benefit of new capabilities and productivity without requiring additional investment in new buildings
As an example of supply chain optimization, we’ve already consolidated fleet management companies, transitioning from three partners to one
Previously, Advance, Worldpac and Auto Part International negotiated three contracts separately, which resulted in three different suppliers and three different contracts
We’re moving to one
In addition to significant savings, AAP will benefit from enhanced analytics and coordination across our entire fleet associated with having a single dedicated partner
This is a material simplification opportunity that leverages scale, dramatically improves asset utilization and lowers cost
Third, let's talk material input costs, again we’re taking a very different approach been in the past
We’re conducting deep dives on product categories to better understand the material cost of the skews in our assortment and what type of collaborative value engineering we can do with our suppliers or brand partners as we now refer them, who are helping us find the wins both of us need to drive accelerated growth
This work has already been conducted on several product categories, resulting in increased cost transparency and an improved material cost structure
We are working with our suppliers and partnership to apply this rigor n process across many categories throughout the balance of the year
To-date, we’ve been building the foundational elements of our productivity agenda and have a high degree of confidence in our plan
We are now ready to drive execution of this plan, which will generate meaningful savings this year and beyond
In summary, as we enter into Phase 2 of our transformational journey, we’re investing in customer service and execution to narrow the top line growth gap versus the industry
We’re dramatically increasing the focus on our productivity agenda to drive margin expansion and perhaps most importantly, we’re we are increasing our proficiency in growing talent and evolving our culture
This is not an overnight process but we’re pacing as expected and we will continue improving each quarter
As I said from the beginning, the opportunity to drive shareholder value at AAP is substantial to fully capture the opportunity ahead
We’re taking focused disciplined approach to accelerate long term growth, while staying lesser focus on improving execution and performance for the balance of the year
With that, I’ll pass it to Tom <UNK> to share financials
When we looked at the investment that we are essentially needed to make in the first quarter of this year, last year the changes that were made in our customer facing hours in the stores was quite negative for the overall customer experience
So we made the conscious decision to invest back in the customer in the quarter
Well, <UNK> let me step back, I mean we’ve gone in the construction of our strategic plan, we’ve obviously look overall longer timeframe than individual quarters
And what we concluded last year and we communicated to, I think the analyst community in November, was the company it really lack focus on the customer period for quite some time
As you know, we’ve been losing market share for seven years and over that timeframe, habits get built-up, our people take a different approach to the customer that we would have liked, different than we would have liked
And as we built-out the strategy itself, we wanted to make sure that we were change that approach with the customer up and down in the organization; so from a leadership team perspective; from a planning of our customer facing hours; from the standpoint of how our stores either active with customers
So as we build out the five-year plan, we look at what we needed to do in 2017 and 2018 and beyond; as you know, we started to make some of those investments last year in the back half of the year
So we’ll start to lap those as we get into the back half
But without a doubt, as we plan the business in 2017, we knew that the first part of the year was going to require investment in the customer
Well, first of all, we’re building a world-class team here in AAP
And as I look around the room, most of the people in the room in here today work with Advanced nine months ago
So that part is dramatically different than when I arrived here
The team we’re building is committed to really building our performance culture up and down in the organization, and that excludes existing leaders at AAP, who’ve been in the industry a long time and are really stepping up
Bob <UNK> in the room here with us today, he is got 30 years of parts business experience
We also brought, some of the new people we brought in, have come from the part of the business
People like Mike Broderick who similarly has 30 years of experience and is now our chief merchant
Bob and Mike are really committed to dramatic improvement, performance improvement here at AAP, so that part is really exciting
I think we’re also injecting smart talented new leaders that have exceptional industry experience up and down the organization
So we brought in Tom <UNK> from Amazon, as you know; Leslie Keating Frito-Lay; Natalie Rothman from Pepsi; we brought in Maria Reyes to run one of our divisions from Private Equity, Mike came to us from Tyco
And these are global leaders who are bringing a completely different mindset and approach to transform AAP
So that might fundamental leadership team is pretty much in place now and now of course we are going the next level down and Tom and self with sitting here, there is two people in the room today that Tom has hired from other companies that have joined us, that are going to add tremendous value
How are they acclimating, I think that’s a great question and integrating to the <UNK>
We still have work to do, I think to build the team work and the energy around the opportunity going forward, these are very talented individuals
They are bringing different perspectives in
But you can snap your fingers and have the top 200 people in the company immediately gel
So I think we have got a little bit of work to do there, but I feel terrific about the talent that’s joining new organization
And I have been really excited by the fact that we have been able to recruit such talented people in, and we have been very successful of that
Yes, let me take that one
No we’re going to stay with our guidance of approximately 250 million
The additional gross productivity number is not dependant on that
With respect to breaking down the 250million, you hit on the key points; it's IT; it's new stores; it's maintenance
We’re not going to go into further detail other than the bucket of that way
We’re not going to comment on the specific margin outlook in the second quarter
We do feel really, really good about our ability to thoughtfully remove cost and improve our flow through as we get to the back half for the year
First of all, I’ll let Bob talk a little bit about with changing on the Professional side of the business
I think it's changing pretty dramatically
Bob, can you talk about how you are pulling together the Professional side
And <UNK>, let me get to your second question, which was around the pacing of the investment
If you think back to what we showed last November, <UNK> lacked focus on the customer, no cohesive strategy inability to execute notable capability gaps on the leadership team
But as we laid things out and constructed the new leadership team from Bob to Tom <UNK> to Leslie Keating is come into our supply chain to Mike Roderick, I mean we really saw an opportunity to drive the productivity agenda faster
And the opportunity there is significant
We really see that a line of sight to the entirety of the 750 million over the four years, it's in the three buckets that we described in the prepared remarks
We plan it strategically, working from the customer back
I mean we’re routing our productivity agenda in the customer
It's not just taking cost out, so we’re routing in the customer
And then we’ve done a very rigorous bottoms up planning exercise that essentially phase of the productivity by year, by period, by geography
So we feel really good about our ability to take the cost out without disrupting the customer
So let me step back from this one <UNK> and provide some context
And our approach is to provide guidance once a year
And consistent with our focus on offering for the long term, we're not going to provide regular updates as a matter of course
The long term outlook for the industry remains very, very compelling for us and we remain focused on executing the key elements of our transformation plan
With respect to 2017, well Q1 had a weak patch in the middle of quarter that impacted the entire industry
We've actually seen improved trends over the last several weeks and based on this, we expect a more normalized environment for the rest of the year
And our investments in the customer are clearly having an impact and with our productivity initiatives kicking in the back half of the year, we feel all of this will drive significantly improved results
<UNK> And then as you think about those long-term productivity targets that you updated today, does the timing change at all, so you shorten the timeframe
Does that impact 2017 or more of the incremental savings in ’18 and beyond?
Well, first of all, <UNK>, we really excited about this productivity agenda
I can't tell you how excited we are, it's been nine months in the making
Obviously, we’ve been working on with our entire team
As Tom came in November, he really brought a dimension to how we were thinking about that we started to accelerate things that hadn’t been accelerated
We brought Leslie Keating in who is a terrific executive, track record of success with productivity Mike Roderick with significant experience interacting with the supplier community being both on the supplier side and working on the part side of the business
So the construction of the productivity agenda is something that we’re very, very excited about
As we look forward we’re going to continue to look at ways to be ahead of where the customers going
Obviously, we want to go over the path is moving and to that end we are going to continue to look places to invest to sustain long term growth
What we showed in November was our goal is to perform above the industry average in terms of sales growth and to expand margin significantly from where they are today, that stands as we sit here today
We’re not going to update exactly how that’s going to play out in the next 12 months, but we should be able to update you towards the end of the year and how that will in fall
But the 750 million obviously is a four year number now, so we are in '17, so '17, '18, '19, '20 is the timeframe for the 750 million
Well Mike, I certainly understand the question
I am go back to as we planned the business for 2017, knowing what we knew in November, which was the challenging situation we were dealing within the front half of the year, reducing customer facing hours, really an inability to execute
We’re still billing out that productivity muscle, some gaps on the leadership team at the time
We obviously plan the business accordingly
From our standpoint, if we hadn’t reflected on the factors I just mentioned and used that in our plan, it would have been somewhat responsible
So we did plan the business to be back half loader in terms of margin flows through
Obviously, we’re’ mindful, we are attracting four in the year but we can’t really speculate on hypotheticals right now
We’re focused on executing our plan and really positioning the business to deliver long term value and that include investments in the customer and building out the productivity
So our transformation is well underway and we are confident we’re going to show the impact of our actions on both top and bottom line in the second half of '17 and beyond
Well, just on your question on will it be better about the year, absolutely, no question about that <UNK>
We haven’t talked a lot about the sales number
But there was, as we said in our prepared remarks
We have the date flip, right? The date flip is pretty basically
We knew exactly what that was going to be worth in the fourth quarter last year
We also had this significant pull forward pull forward or winter related demand into December
In particular, in our Northern market, which we had an idea that was happening, and obviously we finalized our plan in November and early December
So we didn’t know how big that December was going to be
And when you look at some of the categories that performed well in the fourth quarter, they were winter related categories and a lot of that got growing out so not all of that was plan as we planned to first quarter
That said, in the last several months as we continue to really work this productivity agenda hard, Tom <UNK>, Leslie Keating, Mike Broderick, Bob <UNK>, we were really, really pressing hard to take real cost out of the business sustainability and that’s why we feel very good about the long-term prospects to get at the margin expansion opportunity that exists
I mean, our goal is to perform above the industry average, which as you know is 3% to 4%
Everything we look at, says this is a very healthy industry; car park, 2016 new vehicle sales; vehicles in operation; miles driven; average age; all of them say 3% to 4%, which means that we have to be above that in order to achieve our comp sales goals
Sure, yes Matt, I think the way to look at it for investment in the customer is really four buckets; the first one is customer service hours referred to its labor, the second how much is describing is our fuel the front line or filed incentive, the third is parts availability and supply chain, making sure we are getting the right part at the right time at the right place, and then the last is promotion
And just a little bit more color, I mean as Tom said, when we came in and are looking at the <UNK> and its transformation we really need to build the foundation
So are we over indexing and our investment in the customer, absolutely
Is that going to give more surgical overtime and optimize; certainly
We are always going to invest in the customer, but overtime we are going to be able to do it more efficiently
As our productivity agenda catches up is well, this is all going to hit together and we are going to have an inflection point
So that’s the way I think about the investment in the customer
I mean, we’re accelerating our efforts on this now
As you know, we took a bit of step back from what we had been doing, which was more of the old PCR work which was consolidating stores, converting stores, relocating stores
As Leslie has come on in conjunction with Bob, we have really starting to work from the customer back on our asset base
We have got plenty of assets; Leslie would say that, Tom would say that, I would say that
We just haven't leveraged them the way that they could be leveraged and to their potential
So making sure we put the customer first in everything we are doing and construction our supply chain from that is where we’re headed
And we are making some pretty big strives on that
I'm not going to get into all of the details for competitive reasons
But we’re pretty excited about how our enterprise, customer facing tools, technology and supply chain will evolve overtime and really start to improve our key metrics on order to delivery time, having the right part in the right place, our availability in the market, all of those are part of the plan
And the idea is to leverage the entirety of our asset base, not to approach it from the previous approach which trying to integrate advance and Carquest, and we’re looking at it more broadly
So as you well know, many of the strategic accounts have put out or the industry there looking for both the year agreements with their suppliers
And so a number of those come up over the last six months and so
And I’ll tell you that we basically have one certainly in every single one of them, so we’re winning
And we’re winning because of what we basically bringing the capabilities of the organization and certainly what we’re working on, which we shared with them
And we see them as our strategic partners, they basically have looked at us certainly from what we’ve already been able to provide today
And certainly, now, certainly leveraging all the banners across the enterprise, they know what’s coming as well
And as I mentioned that new model that we’re putting out there, they’re extremely interested in that, we’re going to leverage that as well
But I will say, for the most part, customer-by-customer, we’re winning and we’ll continue to win in that particular side of the business there
And as I said, it’s growing, and it will continue to grow
Obviously, we look really close that those things said before we handle these RFP
I mean I think it’s a natural outcome that the large customers in the Professional side of the business or growing get lager
So we’ve got to manage that in our overall portfolio
We reported not going to comment specifically on the size of it, we’re pretty excited about the fact that Bob has coming with his background, with his leadership team
They’ve done a great job packing up what we consider to be the most, the best portfolio in part in the industry, including the training institutes that we’re standing
Bob standing up, integrating the Carquest Training Institute with the Worldpac Training Institute which provides tremendous value to our large customers out there in the marketplace
So we’re going to continue to leverage the scale of all of our businesses to build a more attractive portfolio for our customer based
And overtime, we believe that will help us winning the market
Well, we’re pretty excited about Speed Perks, Dan
We’ve got an opportunity to do a better job connecting directly with our Speed Perks members
I will tell you that will evolve overtime
We want to make Speed Perks more sticky it should be more than just a promotional coupon off events
And so I’ll leave it that but we’re working pretty hard on at a better connect, our physical and digital assets, and that includes the Speed Perks program
Dan <UNK> Well, I know your competitors claim that there is minimal price elasticity for demand in this industry, and we’ve had this amazing gross margin expansion cycle the last 10 years
But do you think we’re at the point now where it becomes necessary use pricing to drive market share?
Yes
It certainly not a huge part of our agenda going forward, we’re looking very carefully and strategic pricing
But in terms of a weight on gross margin, we don’t see that
Dan <UNK> And then just one follow-up question, can you talk about why the higher productivity savings today
It doesn’t sound like, we’re going to see much change in the second quarter, doesn’t really begin to kick into the third quarter
And even then, it really doesn’t really begin to gather momentum until 2018? So curious as to why today was it necessary to talk about the savings, particularly when you’re not comfortable talking about the net savings, on the gross savings?
Well, for sure, comps are the primary focus for us at the moment
We’re driving at customer investments we’re driving at things that matter to our customers, both on the professional side of business and on the DIY side of the business
And our goal is to continue the sequential improvement which we talked about
And obviously relative performance is important within our market share
We don’t get a lot of market share data band
But what we do we pay very close attention to it and we are making progress there
We are not gaining share, okay, to be clear
But we are narrowing the gap in terms of our performance and we are going to continue to stay focused on that
And overtime, the goal is to narrow that completely and then obviously at some point perform above the industry average
So that is the primary focus
Well, first of all, the 750 million is literally down to the dollar, right? The 750 million is planned out over the next four years
We know exactly where that is in the vast majority of cases, that 750 million is not sales, and there is a very little of that moves up and down with sale
When you go to one fleet company from three companies, that doesn’t have anything to do with what we sell
If I am able to reduce the touches which are way too high in our current supply chain, if I can take the touches down, that’s worth something
If I can reduce the number of miles driven on the same number of deliveries in the same amount of sale that takes cost out without driving sales; so we’ve constructed the productivity agenda such that is not sales dependant
So we’re not looking for leverage on these cost out measures, because they tend to be waste or redundancies or things that that can be reduced
And given where our relevant margin is versus the industry average, I think, you can probably see that we have pretty good opportunity to do that, because we have peers in our industry that have already done it
So we’re focusing on essentially looking at our asset base and our model and how we invest with the customer and how do we close the margin gap as we’re driving at the customer agenda
We’re not going to comment specifically <UNK> on the quarter, I mean but we’ve seen a dramatic improvement in our comp obviously coming up a difficult Q1. Your second question was on the ---+ repeat your second question? <UNK> Analyst So you talked about some of the availability type initiatives that you're rolling out
Just kind of curious what kind of comp lift that you're seeing in the test markets?
Very strong, very, very strong lift
We’re now up to I think we’re up to five markets and we’re continue to see the same performance improvement
We’re not going to give a specific number, but it’s very, very strong and very compelling
<UNK> Analyst And just on the Q1 gross margin, just curious if you could give sort of breakout a little bit maybe like how much of that decline was merchandize margin and how much of those deleveraging on occupancy costs and other fix cost?
First of all, great question, <UNK>
I mean, we’re ---+ with Leslie coming on we’re taking a very different step back on the supply chain; again, starting with the customer
She is actually conducted or our team is conducted a series of interviews with customers to better understand the need
We spend a lot of time on DIY consumer insights last year, professional customer insights last year
We’re augmenting that this year to really make sure we understand we’re delivering against what the customers want
She is also looking at it end-to-end
So we’re not looking at discrete parts of our supply chain
We’re looking at the entirety of the supply chain, because a lot of times, in supply chain, you can reduce costs in one area and increase it in another area
So it’s really end-to-end look at it
As part of that, we have, she would say, we would say, Bob would say, all of us would say, we have significant inefficiencies in our current supply chain
We have many nodes, many assets
Obviously, our stores operate at fulfillment centers, as you know
So taking a step back and looking at the entirety of our supply chain and the seamless movement of parts across it, is something that is very much on the agenda and we’re building up the plan to better integrate the various notes we have within our supply chain, which ultimately will improve our order to delivery time for our customers
As you said, take miles out take cost out and reduce our inventory overall
So that’s the goal and more to come
Yes, we are not going to comment specifically on that, but everything is on the table, to be clear
We are going to operate as efficiently as we can
Let me make a comment on that
First of all, I think what customers want wasn’t anything, if they want consistency and execution of delivery
So when they know there’s deflation in order they know when you are having
So I think critically important at Worldpac we have always remain to be focused on making sure that we have that same execution day in and day out
So customers count on that, number one
Secondly, they all have to do certainly with the product assortment as well
Worldpac has unique product assortment, certainly has dispatches repair shops throughout the entire North America
And so that also is not the part of where lion share of a lot of their business is basically schedule
And so therefore that it's valid to schedule delivery
However, there is again more and more pressure on reducing the order cycle time and Worldpac is taking the number of steps to reduce the order cycle time as well
So that’s part of the trends in the industry we’re all doing it
So I think as I mentioned earlier where we are transforming the professional experience with these new start up type of pilots that we have, one that we are starting next week is having all of that capability under one roof
And that’s going to transform and differentiate Advanced from the rest of the industry
Thanks operator
We would like to conclude our call by thanking all of our team members and independent our owners across the AAP family for their efforts to better serve our customers in the quarter
In addition, as we approach Memorial Day, we would like to thank all the members of our military for their service
We are making major changes at AAP and we remain focus on the substantial long opportunity we have to drive shareholder value
We look forward to updating you on our progress once again in August
Thanks for joining us
