Q1 2025 Summary
Published Feb 7, 2025, 7:58 PM UTC| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +2% | Stable domestic and international demand drove revenue upward, supported by modest same-store sales gains and newly opened locations. However, higher cost of sales and a challenging macro environment tempered more robust growth. Forward-looking, management continues to focus on store expansions and parts availability to sustain momentum. |
Auto Parts Stores | +2% | Growth was primarily driven by new store openings and steady commercial demand, although the pace of expansion moderated compared to prior quarters. Rising operational costs and competitive pressures also impacted performance, but future capital investments in hubs and mega-hubs aim to drive further growth. |
Other | +7% | The ALLDATA and E-commerce businesses benefited from increased repair software adoption and online sales. Broader digital channel investments and shop management solutions supported ongoing expansion. This segment is expected to remain a growth driver as more consumers shift to online platforms. |
Net Income | -5% | Despite revenue gains, higher interest expense and slightly increased tax expense reduced profitability. Cost pressures in payroll and supply chain also weighed on margins. Looking ahead, continued focus on expense management and operational efficiencies may help offset these headwinds. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Foreign Exchange Impact (Revenue) | Q2 2025 | no prior guidance | Approx. $95 million drag | no prior guidance |
Foreign Exchange Impact (EBIT) | Q2 2025 | no prior guidance | Approx. $30 million drag | no prior guidance |
Foreign Exchange Impact (EPS) | Q2 2025 | no prior guidance | Approx. $1.30 per share drag | no prior guidance |
Sales Trends | Q2 2025 | no prior guidance | Expected to “modestly improve” | no prior guidance |
Gross Margin | Q2 2025 | no prior guidance | Expected to remain positive, with potential LIFO headwinds | no prior guidance |
Same-Store Sales | Q2 2025 | no prior guidance | Potential positive impact in spring months | no prior guidance |
International Store Openings | FY 2025 | no prior guidance | Around 100 stores | no prior guidance |
Capital Expenditures (CapEx) | FY 2025 | no prior guidance | More than $1B | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue (FX Drag) | Q1 2025 | $(55) million drag on revenue | $4,279.641 million | Beat |
EBIT (FX Drag) | Q1 2025 | $(16) million drag on EBIT | $841.149 million | Beat |
EPS (FX Drag) | Q1 2025 | $(0.63) per share drag on EPS | $32.52 | Beat |
Interest Expense | Q1 2025 | $108 million | $107.629 million | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Commercial segment growth | • Q4 2024: Commercial up 10.9% (17-week basis), strong initiatives, Mega-Hub focus. <br>• Q3 2024: Up 3.3%, weather and comps affected results. <br>• Q2 2024: Up 2.7%, holiday/weather impacts. | • Q1 2025: Commercial sales up 3.2% to $1.1B, slight deflation (-0.7%), hurricanes caused disruption, Mega-Hubs growing faster. | Sentiment: Moderating growth vs. previous quarters, but still positive; confidence in Mega-Hubs and growth initiatives. |
Competitor store closures | • No mention in Q4 2024, Q3 2024, or Q2 2024. | • Competitor shutting stores on the West Coast, short-term pricing headwind but long-term share gain opportunity. | New topic in Q1 2025; could boost market share going forward. |
Consumer sentiment | • Q4 2024: Stable but pressured at lower income levels, no major catalyst expected near-term. <br>• Q3 2024: Under pressure, especially for big-ticket items. <br>• Q2 2024: Not explicitly mentioned. | • Q1 2025: Cautious sentiment, discretionary categories (~17% of mix) underperform, economic pressures dampening sales. | Sentiment: Remains cautious across periods, especially in discretionary categories. |
DIY performance | • Q4 2024: DIY comp down ~1%, traffic -2%, discretionary softness. <br>• Q3 2024: Traffic -2%, ticket +1%, weather issues. <br>• Q2 2024: DIY comp -0.3%, traffic -2.2%. | • Q1 2025: DIY comp down 0.4%, ticket +1.3%, transactions -1.8%, discretionary weakness. | Sentiment: Consistently soft traffic but some ticket growth, discretionary remains weak. |
Foreign exchange headwinds | • Q4 2024: 500 bps drag on int’l sales, -$32M sales, -$8M EBIT, -$0.32 EPS. <br>• Q3 2024: Not mentioned.<br>• Q2 2024: Not mentioned. | • Q1 2025**: -$58M to sales, -$17M EBIT, -$0.68 EPS from MXN/USD shift; further drag expected in FY2025. | Trend: Began explicitly in Q4 2024, continuing impact in Q1 2025; significant ongoing headwind. |
Gross margin expansion | • Q4 2024: Down 21 bps reported due to LIFO, but +32 bps ex-LIFO from merchandising. <br>• Q3 2024: +102 bps, strong core margins, LIFO credits. <br>• Q2 2024: +160 bps, deflation benefits. | • Q1 2025: Up 16 bps to 53%, driven by merchandising margin improvements; slight LIFO headwind. | Trend: Ongoing margin improvement via pricing discipline and cost management; LIFO fluctuations are a swing factor. |
Inflation trends | • Q4 2024: Near flat inflation, expects ~3% average ticket growth longer term. <br>• Q3 2024: Inflation moderating, impacting ticket growth. <br>• Q2 2024: More normalized, some deflation from freight. | • Q1 2025: DIY ticket inflation ~1.6%, slight deflation on commercial side; expects return to ~3% ticket growth. | Sentiment: Inflation has cooled from prior peaks; company expects eventual return to historical inflation rates. |
Interest expense | • Q4 2024: $153.2M (+41% YoY). <br>• Q3 2024: $104M (+41% YoY). <br>• Q2 2024: $102.6M (+56% YoY). | • Q1 2025: $107.6M (+18% YoY), driven by higher rates and debt levels. | Trend: Rising consistently due to higher debt and rates each quarter. |
International expansion | • Q4 2024: 31 new stores in MX, 18 in BR, strong growth but FX drag. <br>• Q3 2024: 12 new in MX, 1 in BR, ~9.3% CC growth. <br>• Q2 2024: ~10.6% CC growth, 859 int’l stores. | • Q1 2025: Opened 11 stores (6 MX, 5 BR), int’l same-store +13.7% CC but +1% reported, aiming ~100 new int’l stores in FY25. | Sentiment: Continues robust expansion in Mexico/Brazil; FX headwinds a challenge; overall bullish on international. |
Market share gains | • Q4 2024: Gains in both DIY and commercial; strong commercial outperformance. <br>• Q3 2024: Believes they gained share in DIY and DIFM. <br>• Q2 2024: Targeting more share in commercial via hubs. | • Q1 2025: Potential share gains from competitor exits on West Coast; invests in commercial and international for share. | Trend: Ongoing share gains in DIY and commercial; new competitor closures could boost future share. |
Mega-Hub expansions | • Q4 2024: 109 Mega-Hubs, aiming for 20+ openings in FY25, pipeline ~70. <br>• Q3 2024: 103 Mega-Hubs, targeting well north of 200. <br>• Q2 2024: ~101 Mega-Hubs, plan 200+ total. | • Q1 2025: 111 Mega-Hubs; raised long-term target to ~300; 80 in pipeline; fueling faster sales growth. | Sentiment: Aggressive push to expand Mega-Hubs, proven sales driver, crucial for commercial growth. |
Rust Belt weather impact | • Q4 2024: Not mentioned.<br>• Q3 2024: Cooler/wetter impacted sales, ~200 bps drag in commercial. <br>• Q2 2024: Midwest swings in weather impacted comps. | • Q1 2025: Underperformance (~400 bps gap) vs. other regions, milder weather hurting sales. | Trend: Continues to be a factor, especially in mild winters; no direct mention in Q4. |
Staffing challenges | • Q4 2024: Not mentioned.<br>• Q3 2024: Not mentioned.<br>• Q2 2024: Staffing improved vs. pandemic but not at pre-pandemic levels. | • Q1 2025: Emphasized importance of ensuring stores are staffed properly despite macro headwinds. | Trend: Re-emerges in Q1 2025; was last discussed in Q2; still a work in progress. |
Strong free cash flow | • Q4 2024: $723M in Q4, $1.9B in FY24. <br>• Q3 2024: Continues to be a “strong cash flow generator,” $735M buyback. <br>• Q2 2024: Expects strong FCF, supporting capital returns. | • Q1 2025: $565M in FCF, slightly down vs. prior year; committed to returning cash to shareholders. | Sentiment: Remains robust but slightly lower YoY; focus on shareholder returns persists. |
Share repurchases | • Q4 2024: $711M repurchased, 6% share reduction in FY24. <br>• Q3 2024: $735M repurchased, $1.4B remaining. <br>• Q2 2024: $224M repurchased, $2.1B authorization left. | • Q1 2025: $505M bought back, $1.7B auth. left; over 100% of ‘98 shares repurchased over life of program. | Trend: Ongoing, significant buybacks; central to capital returns strategy. |
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Operating Income Outlook
Q: Can you maintain EBIT growth if comps stay sluggish?
A: We expect comps to improve throughout the year and are positioning ourselves with inventory and infrastructure to seize opportunities. We anticipate strong gross margins due to effective merchandising , and we're managing SG&A expenses in a disciplined way. We plan to invest in growth without negatively impacting operating income. -
Mega-Hub Expansion
Q: Why raise Mega-Hub target to 300, and any change in opening cadence?
A: We've increased our Mega-Hub target because these stores continue to deliver outsized performance and boost both commercial and DIY sales. We've learned we can place Mega-Hubs closer together with minimal cannibalization. We have about 80 stores in the pipeline, but opening them takes around two years. -
Inflation and Tariffs Impact
Q: How will rising CPI and tariffs affect pricing?
A: Tariffs are uncertain, but we've diversified suppliers and remain nimble in our supply chain. Freight costs are spiking, which may increase cost of goods and pricing over time. We expect normal industry inflation to return, potentially serving as a tailwind, but it will develop slowly. -
Competitor Store Closures
Q: Impact of peers exiting West Coast markets?
A: As competitors close stores and discount heavily, we may face short-term headwinds from price cuts. However, over time, this presents a significant opportunity to gain market share in those regions. -
Same-Store Sales Impact
Q: How does the calendar shift affect comps?
A: The extra week last year negatively impacted this quarter's comps by about 1 point. We expect to recover this in the spring, potentially seeing an extra bump in comps. -
Capital Allocation and Debt Levels
Q: How are you approaching capital allocation and debt?
A: No change in our capital allocation policy; we aim to maintain a leverage target around 2.5x. This provides financial flexibility to invest and return cash to shareholders. We'll manage our debt accordingly, impacting decisions on upcoming debt maturities. -
Quarterly Sales Cadence
Q: How did the first quarter trend into the second?
A: The DIY business underperformed in Rust Belt markets but was consistent overall. The commercial business was weaker in the first four weeks due to hurricanes disrupting Southeast markets but returned to normal volumes later in the quarter. -
SG&A Management
Q: How are you handling SG&A growth?
A: We are investing in growth initiatives focused on speed and productivity while managing SG&A expenses in a disciplined way. Wage pressures have cooled, helping control costs. -
Weather Impact Expectations
Q: Is winter improving sales in cold regions?
A: It's early in the quarter, but we are encouraged by initial winter conditions. The key will be whether Rust Belt markets receive cold and snow throughout the season, which hasn't occurred in recent years.