Good day, ladies and gentlemen. Welcome to the Genuine Parts Company Second Quarter 2022 Earnings Conference Call. Today's call is being recorded. [Operator Instructions] A question-and-answer session will follow the presentation and instructions will be given at that time.

At this time, I would like to turn the conference over to Sid Jones, Senior Vice President, Investor Relations. Please go ahead, sir..

Good morning and thank you for joining us today for the Genuine Parts Company second quarter 2022 earnings conference call. With me today are Paul Donahue, our Chairman and Chief Executive Officer; Will Stengel, our President; and Bert Nappier, our Executive Vice President and Chief Financial Officer.

As a reminder, today’s conference call and webcast includes a slide presentation that can be found on the Genuine Parts Company Investor Relations' website.

Please be advised this call may include certain non-GAAP financial measures, which may be referred to during today’s discussion of our results as reported under Generally Accepted Accounting Principles.

A reconciliation of these measures is provided in the earnings press release issued this morning, which is also posted in the Investors section of our website. Today's call may also involve forward-looking statements regarding the company and its businesses.

The company's actual results could differ materially from any forward-looking statements due to several important factors described in the company's latest SEC filings, including this morning's press release. The company assumes no obligation to update any forward-looking statements made during this call.

Now I'll turn the call over to Paul for his remarks..

Thank you, Sid, and good morning. Welcome to our second quarter 2022 earnings conference call. As Sid mentioned, I'm here with Will as well as Bert, who was on his first earnings call as CFO. Welcome to the call Bert. We are pleased to report continued strong results from Genuine Parts Company in the second quarter of 2022.

The GPC team had another record quarter consisting of double-digit sales and earnings increases and a steady cadence of continued growth throughout April, May and June. Total sales were $5.6 billion, up 17%, and adjusted earnings per share were $2.20, up 26% from last year.

We continue to benefit from the resiliency of our automotive and industrial businesses and the strategic mix of our operations. We would like to thank our 53,000 talented GPC teammates for their exceptional work and commitment to excellence.

A few highlights in the quarter include another quarterly sales record for GPC and our automotive and industrial segment, segment operating margin expansion in both segments and for GPC overall, record quarterly earnings and double-digit EPS growth for the eighth consecutive quarter and strong cash flow generation and the further strengthening of our balance sheet.

We continue to execute our key strategic initiatives to deliver market share gains and drive positive momentum in our top and bottom line results despite ongoing macroeconomic pressures.

Our teams are doing an excellent job of navigating supply chain disruptions, enabling our business with the product we need to serve our customers and capture market share. For example, we are investing in our businesses to enhance forecast accuracy for product demand, improve fill rates and optimize our network footprint.

Our size and global scale continue to be an advantage as we work to have the right part in the right place at the right time. Likewise, our pricing strategies have proven valuable in substantially offsetting product inflation and rising freight cost. Our M&A strategy has also been effective.

As you will hear from Will, the accelerated integration of KDG has been executed with a high degree of precision and has had a meaningful impact on our industrial performance.

In addition, our global automotive teams have been active with ongoing strategic bolt-on acquisitions, such as the addition of [indiscernible], which rounds out our national footprint in Germany, the largest economy in Europe.

We continue to explore a healthy pipeline of acquisition targets and M&A remains an important part of our global growth strategy.

Additionally, we are benefiting from ongoing initiatives, such as accelerating the rollout of the NAPA brand, our international markets, as well as further investing in B2B and B2C omnichannel enhancements to both our catalog data and technology platforms.

We also continue to upgrade our pricing and product category management strategies to further extend our leadership positions in the global automotive and industrial markets. As we look at the operating environment more broadly, our automotive and industrial business are benefiting from several tailwinds.

The continued increase in miles driven and the average age of vehicles, limited new car inventory and elevated used car prices are supporting demand in the automotive aftermarket and driving continued strength in the DIFM segment.

In Industrial, PMI continues to signal manufacture and expansion and industrial production showed gains again in the second quarter, representing the eight consecutive quarter of growth. We are closely monitoring potential consumer headwinds, including the effective, historically high inflation and its impact on gas prices, freight and wages.

However, we will stay focused on our strategic initiatives and remain agile in the execution of our business on a day-to-day basis. The enthusiasm and momentum in our business was on full display last week, when for the first time in seven years, we hosted our 2022 NAPA Expo in Las Vegas.

This gathering brought together more than 15,000 global attendees, including Napa AutoCare customers, independent Napa store owners, Napa store managers, key suppliers and leaders across our operations.

It was an extraordinary event packed with seminars, insights, business, building strategies, and an extensive trade show featuring our global suppliers and key business partners. We took the opportunity to introduce our new Napa brand campaign, Get Up & Go.

And you could feel the positive energy and excitement for the future of Napa and the automotive aftermarket overall. The biggest takeaway is that the Napa team in the U.S. and across the globe is well positioned for the future. During the quarter, we also had the opportunity to spend time in the field with our Motion leadership team.

We visited our operations and customers across the Midwest and saw firsthand the momentum in our industrial business and the progress of the KDG acquisition. As we mentioned in our last call, we have been active in 2022 building on our commitment to responsible ESG business practices.

This has included formalizing our carbon emission reduction strategy, as well as driving continued progress in DE&I. We look forward to providing additional details in our progress in these areas later this year, as we publish our 2022 corporate sustainability report.

So again, we thank each of our GPC teammates for taking great care of our customers and delivering another quarter of record results. Now I'll turn the call over to Will..

Thank you, Paul. Good morning, everyone. I'd also like to thank the global GPC teams as well as our supplier partners for their ongoing commitment to serving our customers. We appreciate the team effort and hard work to deliver great results around the world.

During the second quarter, we built on solid momentum and delivered strong results across both our automotive and industrial businesses. Our results were driven by team execution and discipline focused on strategic initiatives.

We continue to align our initiatives around five foundational priorities, including talent and culture, sales effectiveness, technology, supply chain, and emerging technology. We will highlight select initiative examples as we review the business performance.

Turning to the performance details by segment total sales for our global automotive segment were $3.5 billion in the second quarter, an increase of approximately $271 million or 8.5% versus the same period last year.

Sales growth was relatively consistent in all three months of the quarter and on a comparable basis sales growth for the quarter was plus 8%. Our global teams delivered mid-single digit to low double digit comp growth across each of our operations.

And as Paul mentioned, the automotive segment continues to be driven by solid industry fundamentals and focused team execution. Global Automotive segment profit was $323 million and segment operating margin was 9.3%, representing a 20 basis point increase from the same period last year.

The improvement in segment profit was driven by strong operating discipline across our operations, despite a dynamic environment. During the second quarter, our automotive business experienced slightly higher product cost inflation compared to the mid-single-digit experience in the first quarter.

The pricing environment remains rational and we're pleased with the ongoing positive impact of our category management initiatives. Looking ahead, we believe current levels of inflation will continue through the second half of 2022. Now turning to an overview of our automotive businesses by geography.

In the U.S., automotive sales grew approximately 11% during the quarter, with comparable sales growth of 7%. Sales were solid across each U.S. region and broadly across product categories with breaks, filters and fluids, all posting double-digit increases in the quarter. We continue to be pleased with market share growth with many of our categories.

Sales to both commercial and retail customers were positive with low double-digit commercial growth outpacing retail, which moderated to mid-single-digit growth as expected. Our commercial business representing approximately 80% of U.S. auto sales saw broad based strength across all customer segments.

Digital channels across all customers also performed well with low double-digit sales growth during the second quarter, reflecting continued traction from investments in our omnichannel experience. Others select U.S.

initiative examples to highlight include the rollout of an enhanced PROLink, our B2B digital commerce platform, new sales and marketing programs, including the new NAPA Get Up and Go brand campaign, pricing and sourcing analytics, inventory and forecasting tools and DC productivity initiatives, to name just a few.

In Canada, sales grew approximately 16% in local currency during the second quarter. Comparable sales were up 14% and up 26% on a two-year stack reflective of the continued strength of the reopening of the Canadian market and solid team execution.

To highlight an example of emerging technology initiatives, during the second quarter, we officially launched NexDrive in Canada. Originally launched in Europe in 2020, NexDrive is a program that enables our network of automotive service centers to repair next-generation hybrids and EV vehicles.

As part of this program, we partner with our vast service center network to offer product training tools and technology. We currently have over 100 NexDrive service centers in the European market and we're excited to bring this offering to the Canadian market.

Our emerging technology council comprised of global strategic partners also continues to help inform and advance our strategies. In Europe, our automotive team delivered a terrific quarter as well despite the dynamic geopolitical environment. Sales in Europe increased 19% in local currency in the second quarter.

Comparable sales increased 7% for the quarter and are up more than 40% on a two-year stack basis. Growth continues to be driven by continued focus on strategic initiatives. Initiative highlights in Europe include new account expansion, continued NAPA rollout within and across the region and technology and supply chain investments.

The recent Lausan and Canol [ph] acquisitions in Spain and Germany respectively are also exceeding our expectations and we're encouraged by the opportunities we're working on to capture in these businesses. In the Asia-Pac automotive business sales in the second quarter increased 11% in local currency from last year.

Comparable sales were up 8% from last year and up 26% on a two-year stack, both commercial and retail sales performed well with Repco and NAPA growth driven by strong execution of complimentary customer value propositions and robust demand. Our motorcycle accessories division also performed well, benefiting from ongoing store expansion.

In addition, during the second quarter, our Asia-Pac team completed the acquisition of Steady [ph], a leading Australian branded direct-to-consumer distributor of lighting products focused on the four-wheel drive market.

The acquisition creates a differentiated product offering in a multi-billion dollar profitable high growth segment in Australia and New Zealand. Turning to the Global Industrial segment. During the second quarter, total sales at Motion were $2.1 billion, an increase of approximately $547 million or 34.5%.

The sales cadence was consistently strong throughout the quarter and comparable sales, which exclude the benefit of KDG increased 18% versus last year. This marks our fifth consecutive quarter of double-digit comparable growth driven by the strong performance in our North American business.

The strength in our North American industrial performance was broad based with double-digit sales growth across virtually all product categories and major industry served with particular strengths coming from equipment and machinery, aggregate and cement and automotive customers.

Industrial segment profit was $225 million or 10.6% of sales, a new record for the Industrial segment. This represents a 110 basis point increase from the same period last year. The improvement is a result of Motion’s impressive growth and disciplined operating performance.

For the second quarter, inflation in the Industrial segment held in the low-single digit range, consistent with the levels we saw on the first quarter. The pricing environment remains rational and we do not expect any significant shifts in product inflation in our industrial business through the balance of 2022.

Select initiative highlights contributing to the strong performance in the industrial business include sales programs to capture profitable share of wallet with target accounts, data driven, strategic pricing, and sourcing programs, technology investments to enhance the omni-channel experience and inventory productivity and footprint optimization initiatives.

As Paul mentioned, the KDG acquisition has added to the Motion team momentum. The teams are executing well defined plans with customers, suppliers, and teammates to deliver growth and create value as a combined business.

To provide a bit more commentary on the recent integration progress, the team successfully onboarded KDG associates to Motion HR programs, accelerated the realignment of functional support teams, integrated systems and accelerated the co-location of overlapping branches.

In addition, the team partnered with vendors to improve programs and product availability, utilized cross-functional field teams to sell services across shared customers, harmonize inventory strategies and rebranded stores under the Motion banner. All major work streams are at or ahead of plan.

We’re extremely pleased with the momentum of the integration efforts and excited for the growth opportunities as one Motion team. As we execute on our global initiatives, we compliment them with strategic bolt-on acquisitions to capture share in our fragmented markets and create shareholder value.

The M&A pipeline continues to be active and will remain discipline to pursue transactions that advance our strategy, deliver profitable growth, and create long-term value. In summary, we had another terrific quarter, which resulted in record sales and profit for Genuine Parts Company.

We acknowledged that the macro environment remains dynamic, but we learned as a team from the challenges presented by the pandemic. We continued to prioritize our customers as we analyze our business indicators remain agile and strategically invest with discipline in initiatives that extend our global leadership positions.

Thank you again to the entire GPC team for an exceptional quarter. And with that, I’ll turn the call over to Bert..

6% to 8% total sales growth for the Automotive segment, an increase from 5% to 7% previously. The new outlook reflects 6% to 8% comp sales growth consistent with our previous estimate. For the Industrial segment, we are updating our total sales outlook to 26% to 28% an increase from our previous outlook of 21% to 23%.

The new outlook includes a 9% to 11% comp sales increase, which is up from 5% to 7% previously. We’ve had an exceptional first half of 2022 boosted by our industrial business and the success of our acquisition of KDG along with solid global automotive results.

Our outlook for the full year reflects our ongoing confidence in our businesses to execute on our strategies, despite a dynamic and uncertain external landscape. Our continued strong cash flow generation also provides us with full flexibility to continue to invest in the business and return cash to our shareholders through our dividend.

We look forward to reporting on our progress in our third quarter call in October. Thank you. And we will now turn it back to the operator for your questions..

Thanks. Good morning, everybody. So a few questions from a top line perspective, so focusing first on the U.S. NAPA business. Interesting to note that your DIY business was up, some of your peers talked about a late spring impacting sort of the start of the quarter.

So can you give us a sense if that customer how consistent that comp cadence was during the quarter? And then moreover, as you think about quarter to date, what are you seeing in the U.S. Walmart pre-announced earlier this week, talking about pressures on the low end consumer and some other companies have said that as well.

So just curious if you’re seeing any variation in the DIY side of the business in the U.S.?.

Yes. Chris, good morning. It’s Will here. Let me take a crack and Bert and Paul can jump in if you have anything to add. So as you alluded to generally speaking U.S. automotive combine, do it for me, do it yourself consistent through the quarter on a monthly basis.

I would say, on the do it yourself side, we did see some moderation through the quarter as we expected based on year-over-year comparables. I would say that we’re not reading into a softness in the customer based on what we’re seeing in our data.

And so I’m not sure that we have the same takeaway that perhaps some of your traditional retailers are reading through in terms of the help of the consumer..

And I would – Chris, I would just add onto that, you kind of asked about the current quarter please report that U.S. Automotive continues to be in good shape. The trends we’re seeing in July are very similar to what we saw in Q2. So all is positive on the U.S. Automotive front..

So just to double click on that a little bit, the DIY moderation was really just anniversary in stimulus from April of last year?.

We agree..

And then separately on the Motion business, Motion is doing in incredibly well. One of your peers in the industrial parts distribution business talked about some signs of moderation as they saw other quarter progress and into the current quarter. So curious, if you had any comments on that side as well..

Yes, Chris, similarly we saw very consistent strength through the quarter. And as Paul alluded to kind of early looks and commentary around July, we’re seeing that continued strength coming out of the quarter, as well as we had in our prepared remarks. We saw broad strength across all of our end markets.

We saw broad strength across all of our product categories. And we spend a lot of time in the field talking with customers, and I would say the mood is cautious, but on the margin quite positive. We’re obviously watching it and cautiously optimistic, but we feel good about what we’re seeing in the business..

And one last quick follow on, obviously a lot of questions about, what’s going on in Europe? How’s that business holding up as sort of the years played out with the war and energy prices over in that region?.

Yes, I’ll take that Chris. Our European business continues to be rock solid. We had another really good quarter. I could not be more proud of our European team. And we saw it across all of our markets. We saw really nice sales increase in Germany. Our Netherlands business is strong, really pleased to see our business in France, posting mid-single-digits.

So all is good there. As you know, we’re not in Russia or Ukraine, and so not necessarily feeling that impact. You mentioned the energy issue, Chris, which obviously is getting a lot of press we’re watching it closely. We are not an energy dependent business. So our DCs, our stores will continue to operate as they always have.

So, we’re watching it certainly, we’re concerned, we’re a little concerned over the potential for some economic challenges, but again, please to say really strong quarter by our team, and we’re seeing that strength carryover into Q3 as well..

Thanks very much. Best of luck..

Yes. Thank you, Chris..

And ladies and gentlemen, our next question comes from Michael Montani with Evercore ISI. Please go ahead..

Hey, good morning. Thanks for taking the question. Just wanted to ask, if I could about the sales guidance, which seems to imply to hit the midpoint for the full year, for example, an automotive, 400 bps to 500 bps of moderation. And then a 10 percentage point plus slow down for industrial.

Just wanted to see if that’s kind of more conservatism, if there’s something, in particular that you’re seeing, how we should think about that in light of some of the traction that you’ve discussed for your initiatives?.

I’ll take that one, its Bert. Hey Mike. Good morning. Thanks for the question. Look first, I’d just like to thank our teams for the tremendous work so far in the first half. And I’ll try to give you some color on the guidance from there. Certainly exceeded our expectations in the first half.

The business continues to be very resilient and balanced, but a number of factors were contemplated into how we raised guidance, obviously the sales numbers that I provided in my prepared comments, the outperformance in the first half, and the momentum we see in the underlying business that Paul and Will have talked about.

We needed to balance that against the fact that we just can’t ignore that there’s tightening economic conditions that potentially could impact businesses in the second half. So, we’re trying to balance the strength of the first half and our momentum exiting Q2 while being eyes wide open and prudent about what we see out there.

And again, we've already talked about a few of these things with inflation lingering COVID conditions, the geopolitical landscape, ongoing supply chain constraints. So look, on the back half guide for sales our original plan for the year assume some normalization of growth rates in the second half. And our views are really unchanged on that.

When you look at a year ago, the outperformance we had in the second half was quite significant and we just can't expect a year-for-year repeat of that level of outperformance. So we moderated that a little bit, look at a normalized growth rate in the second half.

As I mentioned in my prepared comments, we do have some FX headwinds that are incremental to our guide in April about $0.08 as we look at that. But look, we're going to stay focused, look for additional growth opportunities in the second half, stay disciplined on costs and look for efficiency gains.

But at the end of the day, we're going to improve operating margin and have operating margin expansion for the full year. And we think that's a pretty good outcome..

Got it. Thank you.

And then if I could follow up just on the cost side, one question bit housekeeping but just how to think about interest expense in light of some of the move up in interest rates? And then secondly on gross margins, given the strong organic growth and then inorganic increases kind of why the supplier incentive pressure there would think you guys might have had some incremental benefits going on there?.

Yeah, I'll take – I guess I'll take both of those. Look, I think, we're really in a positive spot on our capital structure. We're at 1.8 times levered that's below our range of two to 2.5 times. We have a very strong investment grade rating.

And we look at our debt structure, it's nearly 100% fixed with some episodic borrowing against our revolver usually intra-month. But when you look at that, I don't see a lot of volatility there. We've got a weighted average interest rate of 2.3%.

The only place we've seen a little bit of pressure is in our AR securitization program, in operating expenses. But it's still very, very attractive capital source for us and really not anything of consequence to call out there.

In terms of gross margin, back to your question on that, look we landed at 35% for the quarter that was in line with our own expectations.

The underlying execution from our teams, which has been absolutely tremendous in core activities around category management and pricing has driven significant margin improvement as I mentioned in my prepared remarks. Unfortunately, that's a bit hard to see this quarter.

We got three big factors masking that some expected moderation in supplier rebates as you mentioned and I'll talk about that here shortly, foreign currency and inflation.

When you look at the supplier rebates those moderated from a year ago we had some heightened supply chain challenges in the prior year that you're all intimately aware of, and those impacted the amounts we received from our suppliers.

And so that's abated a bit, if you recall, we had a 40 basis point margin expansion from those a year ago and so that's as anticipated moderated. The great part about that, the flip side of that is we have more inventory to get to our customers, and we've got a better level of availability to be able to drive through to the business.

I'll just land that point with, we expect gross margin for the full year to be consistent with 2021. And again, we think that's a great outcome in this very dynamic environment..

Thank you. And good luck..

Thank you, Mike..

And our next question today comes from Liz Suzuki at Bank of America. Please go ahead..

Great, thank you. Just on inflation which is the kind of topic. Sure.

What do you think pricing and margins could look like when inflation ultimately moves in the other direction? As in, if we find ourselves in a deflationary environment, can you hold on to price actions you've taken or do you think the competitive environment has changed such that it might get more challenging to keep pricing sticky?.

Hey, Liz, it’s Bert how you doing? I hope you having a good summer. Thanks for the question. Look, I'll take that one a bit.

Look, the inflationary environment has persisted and it's no doubt, a tough dynamic out there for everyone retires, very intense focus from everyone and our teams are doing a great job of managing it and have been able to generally pass along as you pointed out price increases to mitigate the impact.

Our strategy there has been to protect gross margin rate, so that's our focus. If you look at the downside of that, we wouldn't expect to see the environment pull back on pricing. Obviously that would take some time to work through, but we wouldn't see an immediate pullback in the environment.

We'll stay competitive on that front and watch the marketplace. But again, I think the bottom line is, we wouldn't see a big pull back in terms of pricing or the pricing environment in general and obviously cost changes take quite some time to work through the supply chain..

Great. Thank you.

And just how much of the comp growth in each of your segments? Do you think will be attributable to inflation or your SKU for – SKU inflation for the year, and as you look out into next year, do you expect that to moderate?.

I think I’ll start with the back half of your question and just say for the back half of the year, we really, as Will mentioned in his remarks expect inflation levels to stay where they are from here for the rest of the year. That’s how we contemplated it in our guide. That’s a slight uptick from what we saw on the first quarter.

And then if you look at it all up for GPC consolidated, we see the impact kind of mid-single digits on the top line within the motion industrial business. That’s low-single digits on the top line. And then for the auto business globally, we see that in the high single digits on the top line for the rest of the year..

Great. Thank you..

Of course..

And ladies and gentlemen, our next question today comes from Scot Ciccarelli with Truist Securities. Please go ahead..

Good morning, guys. Scot Ciccarelli. So just a clarification on that same-SKU inflation concept specifically in the U.S.

So are we basically seeing that units are fairly steady or flat with the comp gains coming from rising prices or is there another lever in there we have to be cognizant of?.

Hey Scot. Thanks for the question. It’s Bert. I’m on a roll here. I’ll keep taking these, yes, I think, the best way to characterize it is how you’ve couched it there. We’d see the environment to flattish in terms of how the U.S. auto business is performing..

Got it. And then pivot to the European business once again, we know our experience in the U.S. has been when you have a spike in gas prices, people tend to often drive less, they need a little less maintenance, because there’s less wear and tear on the vehicles.

Because we have an energy centric challenge for a lot of countries that you guys are operating in Europe and what could become a lot worse in the next call it six, nine months? What is your view and what is your history say regarding those markets? Do they act any differently than what we see in the U.S.

or is it pretty consistent kind of geography?.

Hey, Scot. This is Paul. I’ll take that. The – look, the environment we see in Europe in our five years now in that market is very consistent with what we see in the U.S. And look, it’s steady as we’ve seen in the U.S., the automotive aftermarket is incredibly resilient. If there is a recession, which many are predicting, but it remains to be seen.

We expect our business to continue to move in a positive direction. So we’re very pleased with our team, with our performance, with our footprint which excludes Eastern Europe and with our performance to date, which has been very, very strong.

And as you heard in the quarter Scot, we expanded our footprint first quarter into Spain and certainly expanded our footprint in Germany this past quarter. So we’re in a good place with a great team and with a positive outlook for the balance of the year..

Great. Thanks a lot guys..

You bet..

And our next question today comes from Bret Jordan with Jefferies. Please go ahead..

Hey, good morning guys..

Hey, Bret..

Hey, Bret,.

Could you talk about, I think you mentioned fill rates improving.

But could you talk about sort of where you are on supply chain improvement and obviously a year ago, first half of 2021, there are a lot of supply constraints, but maybe where are we versus sort of target or normal levels?.

Yes. It’s Will here. I’ll take that one. So I would characterize global supply chain as stable to slightly improved over the last 100 days. We’ve seen a moderation in our ocean freight rate.

I would say that the ports continue to be more congested than average in particular on the East Coast now relative to what we saw early in the year on the West Coast. But the suppliers aren’t experiencing problems, obtaining vessel space, which is a positive development. Lockdowns are moderating over in Asia, which is a positive development.

And I think for us as we’ve thought through and worked through these developments, we’ve improved actually how we execute. So we've rebalanced some of our poor activity. We've rebalanced some of our supplier geographies and we're gaining some nice traction there.

So the one thing that I would call out is the transport from port to final destination that is still challenged, whether we're talking rail or freight logistics, but net-net were slightly improved relative to where we were 100 days ago..

Okay, great. And I think you talked about the cadence of the quarter from the sales standpoint. Did you say anything interesting regionally? Is there any real dispersion in U.S.

auto?.

We sell nice strengths down the Eastern half of the United States. One could make the case that fuel prices on the west coast impacted that given there's so much more elevated relative to the national average, but the Northeast, the Southeast in our Atlantic region showed nice strength through the quarter..

Okay, great.

And the final, I guess any sign of trade down you talked about stable consumer demand, but is there any kind of a mix-shift particularly around the lower end consumer where they're looking for the lower price point option?.

Hey, Bret, it's Bert. I'll take that one and look we're not just – we're not seeing much evidence of consumers trading down, customers trading down at all. I think the customer's been pretty resilient despite the rising fuel prices and other inflationary pressures.

When you look at the auto business, it's non-discretionary to a large degree; you need your car fixed in this environment, particularly with a shortage of new cars and higher use of car prices as well. So customers are focusing on availability and service, which is our sweet spot and we've got product readily available.

Same on the industrial side we're not seeing a pull back there. The momentum continues as you saw in our Q2 results. And so we just really continue to focus on as Will talked about supply chain, inventory management and having the right product in the right place..

Great. Thank you..

Thank you..

And our next question today comes from Daniel Imbro with Stephens Inc. Please go ahead..

Hey, good morning guys, thanks. I wanted to circle back on the pricing backdrop. Obviously it's been topical with some of your big peers investing in price. It sounds like you guys aren't really feeling the impact of that yet.

I guess first is it still true, you guys really aren't feeling any discernible impact? And then Will, if not using price, you talk through a number of initiatives in you're prepared remarks on the auto side.

Can you talk about which of those you expect to drive the most share gains or kind of what you guys are leaning into as you look out to next year and get back to share gains not just recouping some of the underperformance during COVID?.

Yes. Daniel, let me see if I can't break down your questions. First piece was, are we seeing any impact from competitive pricing strategies in the market? And I would tell you that we're not seeing an impact from anything that's been announced by competitors as it relates to pricing the market continues to be rational.

And as we've talked a lot about here we're doing our own strategic work around pricing to be agile and react to the market and super proud of the team there.

The second part of your question was which part of our initiative stack is driving share gains near term and recently? And all of our work around sales force effectiveness obviously is turning into nice momentum.

The pricing work is turning into nice momentum and all of our technology investments that's improving the customer experience and making us easier to do business with. And while I talk about, I think your question was U.S. auto specific, all of those initiatives are relevant as we look around the globe.

We have flavors and versions of all of those same initiatives which I think is contributing to very nice global broad-based strength..

Yes, that's helpful. And then Paul, maybe follow-up on the industrial piece; you guys talked about momentum continuing through the second quarter across all of your end markets. It is still true about half that business is contracted. So you guys have good visibility into the back half of this year.

And then just within those end markets and quarter-to-date, are you seeing any signs of weakness among different end markets or any particular concerns you see there?.

No. And you are correct, Daniel. It is about half of our business is under contract and pleased to say we are not seeing any signs of slowdown in our business segments. And certainly we could call out a few that were continuing to see accelerate as we go into the second half.

So yes, industrial is performing incredibly well as you've heard throughout this call..

Got it. I'll leave it there. Best of luck..

Thank you..

Thanks Daniel..

[Operator Instructions] And today's final question comes from Seth Basham with Wedbush Securities. Please go ahead..

Thanks a lot and good morning guys. My first question is just around the outlook for, especially the U.S. NAPA business. Just thinking about the trends and miles driven as gas prices are still very elevated. Do you expect pressure on your business units declining perhaps on a comparable store basis in the U.S.

in the back half of the year, as we see some of the moderation and key leading indicators for your business?.

Hey, Seth its Bert. I'll take that, maybe will have a little will can have a little perspective to add to it as well. But look, I think our guidance assumes that we continue to perform, as Paul said as well in the U.S. auto business. It's a dynamic environment out there. You see gas prices dropping and over the last several weeks.

So that's a positive in terms of miles driven. We continue to look at that very closely; miles driven were up a little over 1% in May. Most recent data we've seen. And so I think the underlying fundamentals remain very robust for that market. You got the average age of a car up for the fifth consecutive year. You've got all time, low scrap rates.

You have pent-up demand for travel. I think, across the U.S. in terms of people wanting to get out and take vacations. And so I think the underlying fundamental for the marketplace is there to continue to perform well. And our guide reflects that..

I would just add on to that Seth. Bert mentioned gasoline is coming down and it's coming down quickly. It's been its down. I think, I heard this morning, $0.17 in the past week. And what we're seeing is an incredibly resilient consumer.

We heard from our friends at AAA 88% of travelers over the July 4th weekend, which gasoline was well over $5 a gallon in that timeframe. 88% of travelers were on the road in their vehicles. So as always the automotive aftermarket is incredibly resilient. I think our consumers are pretty resilient.

So we're feeling, good about our NAPA business in the second half..

Got it. Thanks. And then a follow up question on a competitive environment and some of the big competitor’s price investments.

You're not seeing any major impact, but as the supply situation improves for WDs, do you expect that change the competitive environment at all?.

I don't think we do Seth..

It remains to be seen Seth, but look I think the improvements we're seeing in our NAPA business, we saw it firsthand last week. We had 15,000 of our NAPA store owners, auto care centers. The positive momentum we have coming out of that conference.

The positive momentum that I hear from our teams and our independent owners our NAPA auto care centers are major accounts. Our guys are in a good place. And I expect that to continue in the second half of the year..

Seth, I would just, I would also add, I think this is a market where scale really matters. I think we've talked about that before. And so as product comes into the market, I think your scale and your global relationships make a difference. So we feel like that, that's a nice tailwind for us as we move forward..

Good to hear. Thank you very much..

Okay, thank you..

And ladies and gentlemen I’m showing no further questions. I'd like to turn the call back over to the management team for any final remarks..

Yes, thanks Roco [ph]. And to, all of our participating analyst out there. Thanks for your questions. Thanks for participating. And look, I’ve just closed with our teams are doing great work. We couldn't be more proud of the results we turned in Q2.

And as we look ahead to Q3 and the balance of 2022, we continue to believe GPC is really well positioned with the financial strength to continue to support our growth plan. So listen, thanks again for your interest in GPC. Enjoy your summer, and we'll see you in October. Thanks..

Thanks everyone..

And thank you, ladies and gentlemen this concludes today's conference call. You may now disconnect your lines and have a wonderful day..