Advance Auto Parts' CEO Discusses Q4 2011 Results - Earnings Call Transcript

Advance Auto Parts (AAP)

Q4 2011 Earnings Call

February 16, 2012 10:00 am ET


Joshua Moore -

Darren R. Jackson - Chief Executive Officer, President and Director

Kevin P. Freeland - Chief Operating Officer

Michael A. Norona - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Assistant Secretary

Charles E. Tyson - Senior Vice President of Merchandising


Gary Balter - Crédit Suisse AG, Research Division

Anthony F. Cristello - BB&T Capital Markets, Research Division

Matthew J. Fassler - Goldman Sachs Group Inc., Research Division

Gregory S. Melich - ISI Group Inc., Research Division

Christopher Horvers - JP Morgan Chase & Co, Research Division

Daniel R. Wewer - Raymond James & Associates, Inc., Research Division

Scot Ciccarelli - RBC Capital Markets, LLC, Research Division



Welcome to the Advance Auto Parts Fourth Quarter 2011 Conference Call. [Operator Instructions] Today's call is being recorded. If you have any objections, please disconnect at this time. 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'd like to remind you that our comments today contain forward-looking statements. We intend to be covered, and we claim the protection under the Safe Harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address future events, developments of results and typically use words such as believe, anticipate, expect, intend, will, plan, forecast, outlook or estimate and are subject to risks, uncertainties and assumptions that may cause the result 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, business interruptions and other factors disclosed in the company's 10-K for the fiscal year ended January 1, 2011, on file with the Securities and Exchange Commission. The company intends these forward-looking statements to speak only as of 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 in our website at For planning purposes, our first quarter earnings release is scheduled for Thursday, May 17, 2012, before market opens. And our quarterly conference call is scheduled for the morning of Thursday, May 17, 2012. To be notified of future dates of 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 1 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. Welcome to our fourth quarter conference call. First, I'd like to thank our 52,000 Team Members for their hard work and congratulate them on an outstanding performance in the fourth quarter and for fiscal 2011. The team's focus and dedication enabled us to achieve new record levels of performance this year. Our continued investment in service and availability translated into industry-leading service experience as measured by NPD, while improving the efficiency of our operations. Together, these investments resulted in record profitability as reflected in our 90 basis point improvement in our operating income rate, which reached an all-time high of 10.8%. We remain on track to achieve our goal of 12%. Our improved operating performance enabled our full year earnings per share to grow 29.4% to $5.11, while our return on invested capital reached a record 19.5%. Mike will provide more specific details on the fourth quarter and our full year results in a few minutes, as well as the outlook for 2012.

Our heritage is grounded in our commitment to service and is reflected in our promise "Service is our best part." Just as important, our values inspire, serve and grow are critical to how we deliver on our promise on a consistent basis. Together, our team's dedication to our promise and values resulted in record levels of customer satisfaction, Team Member engagement and financial returns in 2011.

Operationally, we set new standards of achievement in delivery speed, reliability, inventory on hand and e-commerce sales to name a few. Finally, we finished the year slightly below double-digit comps in our Commercial Business and saw sequential improvements in DIY throughout 2011.

We entered 2011 by simplifying our strategies to service leadership and superior availability. Service leadership in simple terms is to help customers buy through delivering on customer expectations, which requires a relentless focus on service basics and behaviors. We made material investments in our district leadership team, the measurement of commercial delivery speed and reliability, and our service leadership assessments. Ultimately, our goal is to maximize the value of each customer engagement, whether it's when a customer walks into one of our stores, calls us or clicks on our website.

Superior availability is focused on building an industry-leading supply chain through our efforts to buildout our hub network and implement our new warehouse management system. This new warehouse management system is a critical element of our state-of-the-art distribution center set to open in the fall of 2012. Kevin Freeland will provide you with more insights on our progress under our superior availability strategy shortly.

I am pleased with the strategic progress we made, as well as our financial results that accelerated throughout the year. Specifically, we were able to generate a 2.9% comp store sales gain during our fourth quarter and a 2.2% for the fiscal year. Overall, our business continues to be impacted by regionality but was less so in the fourth quarter.

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