Advance Auto Parts CEO on Q3 results, company outlook

Advance Auto Parts CEO Tom Greco joins Yahoo Finance live to discuss his company's most recent quarter results, as well as his outlook for the business at large.

Video Transcript

MYLES UDLAND: Well, Advance Auto Parts out with their latest quarterly results yesterday. The company reporting comp sales growth over 10%. Joining us now to discuss the quarter is Advance Auto Parts CEO Tom Greco. Tom, great to have you on the program. On the call, you called it the company's best quarter in 15 years. So maybe you could start by just outlining some of the dynamics that you guys have seen in your business through the third quarter that puts you in the position to say that kind of thing to investors.

TOM GRECO: Yeah, well, thank you, Myles, for having me. And I couldn't be prouder of our team members and independent partners that put up the numbers. Obviously, they've navigated through this pandemic brilliantly. We've put the health, safety, and well-being of our people first. And we've really seen strength on both sides of our business. We have, obviously, two businesses.

We have a DIY business, where you're seeing a strength with people basically having time on their hands, repairing their own vehicles, washing their own vehicles. You hear that in the home improvement sector. And our professional business bounced back nicely, too. We grew mid-single digits, which we're very proud of. So, obviously, a lot of dynamics going on in the marketplace overall, but a strong quarter for us.

BRIAN SOZZI: Tom, a really strong quarter, but there was a little concern on the street on same-store sales coming out of the quarter. I want to focus on what people are buying for the winter. What does the business look like right now?

TOM GRECO: Yeah, we still feel very strong, Brian. We've had a-- obviously, we reported mid-single digits, quarter-to-date sales, which is still very good. You know, for us, we're very happy with that. I mean, our long-term plan is to perform at or above the market, which we think is about 3% to 4% growth over the long term. So we're still very much gaining share, which is important for us. And we're excited about the winter selling season.

We've obviously acquired DieHard, which is a great brand, and it's one that we're lifting back up. We had some advertising that broke two weeks ago on that. And when the winter comes, which it will, we'll see some real strength in our battery business as a result of that.

JULIE HYMAN: Tom, you guys withdrew guidance or stopped giving guidance earlier in the year because of the coronavirus pandemic. You're still not giving guidance. What would give you enough certainty around the outlook to be able to give those forecasts once again?

TOM GRECO: Yeah, I think, Julie, once we get clarity on a vaccine and what's gonna happen in the work environments, work remote is obviously the-- what's happening now around the country. And when people are working remote, that takes miles driven out of the system for our sector. And when we get a vaccine and people start to return to work and return to school and do all the things that we love to do, go to restaurants, you'll see that miles driven bounce back. And that will give us a lot more certainty in how to look forward. So it's really around that piece of it.

MYLES UDLAND: And then, Tom, thinking about that eventual rebound in miles driven, obviously a lot of folks have purchased cars, often for the first time, during this period. What's the expectation, I suppose, from your side of that exchange on how long it is before that person is, you know, a customer of yours, not just one time, but hopefully, at least as you see it, on a recurring basis?

TOM GRECO: Well, we're very excited about that. I mean, clearly, as you said, you know, some people have made the choice to get a used vehicle during the pandemic. We've seen a real surge in used vehicle sales. And that's right away beneficial for us. Because, typically, those used vehicles are off warranty. And that means they go to an independent garage or they're gonna be repaired by an individual DIYer. And when that happens, we'll see a surge in our business.

Typically, we call the sweet spot 6 to 12 years old. You know, that's when you see the peak of maintenance and repairs on a vehicle. And so as the vehicle fleet ages, you know, that's generally very good for the automotive aftermarket. So obviously we don't like new vehicles slowing going in the short term, sorry, over the long term, but in the short term, it's actually very good for our business to see an aging fleet, and that means more repairs.

BRIAN SOZZI: Tom, I can't figure out your stock price. We talked to you three months ago for second-quarter earnings, blowout quarter. This quarter, 10.2% comp increase highs in 15 years, operating profits up close to 35%. Why hasn't the stock responded to this? What are you hearing from the street? What does the street want from you? Are there places to cut costs?

TOM GRECO: Well, that's a good question, Brian. I mean, we're executing our plan. I mean, as exactly as it's been designed. You know, our goal is to rapidly expand margins, which we did, drive our comp sales at or above the market, which we did in the quarter. And we also generated a tremendous amount of cash as a company. I mean, our AP ratio was at an all-time high. And we will return that excess cash to shareholders. So we're gonna just keep executing our plan. And over time, I'm sure the stock price will respond accordingly. But we're very pleased with our performance, and it's very much in line with what we're sharing with investors.