Advance Auto Parts Management Discusses Q2 2012 Results - Earnings Call Transcript

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 November 8, 2012, before market open. And our quarterly conference call is scheduled for the morning of Thursday, November 8, 2012. To be notified of the dates of future earnings reports, you can sign up through the 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 President and Chief Executive Officer. Darren?

Darren R. Jackson

Thanks, Joshua. Good morning, everyone. Thanks for joining us and welcome to our second quarter conference call. Before I begin, I'd like to thank our 54,000 team members for their hard work and diligence as they navigated us through a challenging quarter.

As you have seen in our earnings release this morning, our second fiscal quarter reflected a near-term slowdown within the industry and in our results. Today, I thought it'd helpful to provide some context and perspective on the drivers of the slowdown.

As we anticipated, the second quarter faced weak consumer demand in both DIY and Commercial with significant slowdown in our cold weather markets principally located within the Northeast and Great Lakes regions of the U.S.

From a consumer perspective, gas prices continue to weigh on demand. The average gas price increased nearly $0.10 a gallon over the first quarter of this year. The good news is the current outlook is for gas to be lower the rest of the year.

Macro environment continues to be stressed with high unemployment and low consumer confidence, which has constrained consumer spending. This was evident across retail and reflective of our business as consumers were only willing to spend the absolute minimum amount on failure-related parts and were willing to defer maintenance purchases. This slowdown in both failure and maintenance spending impacted both DIY and Commercial and led to a deceleration in sales growth versus the first quarter. The principal driver on the deceleration was a sequential quarter-to-quarter decline in the average ticket, while our transaction growth was down modestly. In the non-cold-weather markets, we saw transaction growth from Q1 to Q2 accelerate in the low single digits. The overall company transaction growth in Commercial still remained positive in the low single digits from a comparable store perspective. The average ticket decline reflects a combination of mix of products sold and our pricing position in the second quarter.

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