Good morning, and thank you for participating in today's call. I'm joined by Shane O'Kelly, President and Chief Executive Officer; and Ryan Grimsland, Executive Vice President and Chief Financial Officer. During today's call, we will be referencing slides which are available to view via webcast. The slides have also been posted to our Investor Relations website. Before we begin, please be advised that management's remarks today will contain forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including, but not limited to, statements regarding initiatives, plans, projections, guidance and expectations for the future. Actual results could differ materially from those projected or implied by the forward-looking statements. Additional information can be found under Forward-Looking Statements in our earnings release and Risk Factors in our most recent Form 10-K and subsequent filings made with the SEC. Shane will begin today's call with an update on the business and our strategic priorities. Later, Ryan will discuss 2024 results and 2025 guidance. Following management's prepared remarks, we will open the line for questions. Now, let me turn over the call to our CEO, Shane O'Kelly.

Thank you, Lavesh; and good morning, everyone. I would like to begin today's call by thanking our entire team for their continued dedication and hard work during a difficult year. 2024 was pivotal for Advance. We reinforced our commitment to the blended box by taking transformative actions to divest non-core operations and optimize our asset base for growth. We have rebuilt the organization under a leadership team that blends deep automotive knowledge with fundamental retail expertise. Most recently, we are excited to have Shweta Bhatia join as Chief Technology Officer and Jeff Vining join as General Counsel. We are operating the company with a customer-first mindset and our field and corporate teams have been empowered to prioritize actions to serve our customers' needs. In November, we introduced a three-year strategic plan with a focus on executing the basics, which will enable us to deliver adjusted operating margins of approximately 7% in 2027. We ended the year with liquidity to fuel our initiatives and I remain optimistic about the future of Advance and our opportunities for value creation. Moving to our results. Our fourth quarter and full year financial performance was broadly in line with the range of revised expectations we shared in November. We reported an improvement in comparable sales during Q4, although profitability was impacted by transitory costs related to our strategic actions. We are in the early stages of stabilizing our operations and expect results to gradually improve as we move through 2025. Ryan will provide details later. Along with announcing our results this morning, we reiterated our three-year goals and provided additional detail on our first quarter expectations. As we execute our strategic plan, we expect to get back on the path of delivering positive comparable sales growth and delivering more than 500 basis points of improved operating margin over the next three years. To support this plan, leaders across the organization have set clearly identifiable milestones and we are closely tracking against our KPIs. There is a lot of positive change happening across the company and our teams are energized for the path forward. We fueled that energy with Accelerate 2025, our national leadership meeting, which returned after a 10-year hiatus. Using the theme of Connect, Act and Advance, we showcased how we are connecting as one team to execute key priorities to advance our turnaround. Nearly 1,500 team members and more than 400 vendor representatives participated. The event provided our field leaders an opportunity to learn about new products and engage in training to better serve our customers. We recognized top performers and discussed how our three-year strategic plan is geared to providing access to the right part at the right place with the right service for our customers. I would like to thank our vendor partners that participated at the event. We continue to see overwhelming support from the vendor community in our efforts to turn around the company. This was evident in some of the feedback from vendors who told us that: one, they appreciate our commitment to improving operations by focusing on the basics; two, they are experiencing a new level of energy and engagement from the Advance team; and three, they appreciate our partnership approach and sense of urgency to drive results. This feedback is important as merchandising excellence is critical to our success in the turnaround and I am pleased to see the progress made by our team. Next slide. At the foundation of our strategic plan are three pillars that put us on a path to deliver consistent, profitable growth. Functional teams across merchandising, supply chain and stores have begun to implement specific plans to drive progress over the next three years. Importantly, to drive greater accountability across our teams, we have assigned a critical performance indicator for each pillar to track progress. In our view, the successful execution of these activities will improve the experience for our customers, team members and vendors and enable the company to deliver stronger sales and profitability over the long term. Now, I will provide an update on the progress within each strategic pillar. Let's begin with merchandising. Our team has made considerable progress over the last year conducting line reviews for front and back room assortment to secure quality products at the right cost. We are partnering with vendors on both product selection and growth opportunities. We expect the savings from lower product costs to build throughout the year with a larger benefit expected to be realized in the second half of 2025. Our merchant team has built strong analytical rigor to identify SKU needs based on car part characteristics, competitive insights and deep knowledge from our field team. In the process, we are gaining a better understanding of the universe of parts required in our system, which is helping us better plan inventory across our store and DC network. To move parts closer to the customer and to enable our store teams to access parts faster, we are focusing on improved store-based availability. Having the right parts at the store level for each designated market area, or DMA, will enable us to improve service levels for customers. During Q4, we piloted the New Assortment Framework in a DMA in the Southeast. We created a top-down assortment plan for each store, hub and market hub in this DMA, which led to the replacement of hundreds of SKUs. Since launching the pilot, we have seen an improvement in performance for stores in the pilot DMA compared to a control group of stores. Encouraged by these results, we made the decision to roll out the New Assortment Framework across the top 50 DMAs over the next 12 months to 18 months. This rollout will cover more than 70% of our sales and we believe the phased approach will enable us to effectively manage the resources and implementation. The completion of this rollout will lay a strong foundation for increased access to parts for our stores and support our goal of improving store in-stock depth to the high-90s range from the low-90s range where it is today. Improvement in the SKU depth will enable our field team to serve customers faster, driving more repeatable business for the company. Next slide. In terms of supply chain, during 2024, we made significant progress on the transformation and build out of our multi-echelon distribution network. We began our consolidation project in late 2023, when we operated 38 DCs in the US. Since then, we have closed 10 and expect to close another 12 in 2025, including four DCs on the West Coast to end the year with 16 DCs. Our ultimate goal is to operate 12 large DCs by the end of 2026 with an average footprint of approximately 500,000 square feet per facility. As we complete the consolidation of these DCs and flow higher volume, we expect to drive incremental labor productivity measured in product lines per hour. At the end of Q4, we saw modest improvement in this metric and continue to target consistent improvement over time. Performance on this metric is expected to be driven by effective allocation of labor in DCs, optimization of pick pack processes and stronger collaboration with our merchant team to consolidate inbound volume. Also in 2024, we continued our expansion of market hub stores. We currently operate 19 with 17 of them opened in 2024. During 2025, we plan to open 10 more, while simultaneously building our pipeline for openings in 2026 and 2027. The opening of fewer market hubs in 2025 compared to 2024 is due to a temporary reprioritization of supply chain activities to complete store and DC closures and the related rebalancing of inventory across our network. We expect to accelerate the pace of market hub openings in 2026 and continue to target 60 locations by mid-2027. The market hubs are designed to increase our speed of service by placing approximately 85,000 SKUs closer to the customer, which increases same-day parts availability. A market hub typically supports 60 to 90 stores in its radius. Through the end of 2024, the market hubs and their network of service stores were delivering above-target comparable sales growth. While still relatively early, these results give us confidence in our strategic direction and our ability to drive stronger sales in the years to come. While we consolidate DCs and scale the growth of our market hubs, we have also begun initial work to optimize both the routing of replenishment orders from DCs and the movement of product between hubs and stores. We are in the early stages of implementing a new routing framework, following changes to our store and DC footprint. This is expected to be rolled out in stages through the year. This optimization is designed to increase the number of stops that our delivery trucks make on each route while also maximizing the amount of product delivered per stop. Based on our 2025 operating plan, we expect the combination of DC labor productivity and routing optimization to drive supply chain costs lower and improve gross margin in the second half of 2025. Next slide. In our stores, the team is focused on improving speed of service. Faster service times enhance the utilization of our asset base, which yields higher labor productivity. During Q4, we modestly improved our time to serve. However, we are still behind our goal of delivering parts to our pro customers within 30 minutes to 40 minutes. Our merchandising and supply chain teams are making strides in expanding access to parts for our stores. To capitalize on this and to increase the speed and quality of service, our store leadership is putting in place a standardized store operating structure which guides our teams on store labor scheduling and better allocates resources, such as delivery trucks and driver hours. We started testing this new model at the end of 2024 and saw a clear divergence with improved performance in the test stores. The results of this test are encouraging when you consider that we are still in the early stages of accurately placing assortment at the store level. During Q1, we will be expanding this test to additional markets to further refine our resource allocation parameters and expect to launch the new model across all stores by the end of the year. Based on feedback from field members at our national sales meeting last month, I sensed a new level of excitement around this operating model. As an example, today our GMs spend more time than necessary on hiring, staffing and scheduling. The standardized operating model makes these activities more efficient, which frees up GM time to focus on training and customer service. During 2025, our plan assumes a sequential improvement in time to serve as we expand the operating model throughout the country. The improved service levels will enable us to drive higher transaction volumes and position us to leverage expenses with an improvement in sales. To conclude my section, let me provide an update on our store closure activity. Immediately on the heels of the Worldpac sale, our team diligently assessed and identified store closure opportunities to better position the company for long-term success. We made the difficult decision to close approximately 500 corporate stores and 200 independent locations. The process consisted of four major work streams. One, communicating to individual stores and preparing the stores for closure. Two, conducting liquidation sales at stores and transferring pro customers to alternate locations. Three, negotiating lease terminations. And four, the physical closure and handover of stores. I am pleased to report that our progress on each of these activities is meeting expectations against very aggressive timelines. We began liquidating inventory at closing stores and DC locations in late November and expect to be largely complete over the next few weeks. We have successfully negotiated leases for more than 250 stores with termination costs tracking favorably against expectations and we will exit the majority of our lease obligations by the end of the year. In January, we began the physical closure of stores and expect the closures to be fully complete by the end of March, ahead of our original mid-2025 timeline. Regarding the independent stores, we stopped servicing 191 locations at the end of Q4. The bulk of those locations are in the West and serviced by DCs that are also being closed. Ending service to these independent locations will simplify supply chain logistics and help save costs. On the customer side, our pro sales team has proactively reached out to customers impacted by the closures in their service area and, wherever possible, we have transitioned that pro-business to a nearby store. Our pro team will continue to maintain regular dialogue with these customers and provide solutions to serve them effectively. Executing closures of this magnitude has been a major undertaking and I want to acknowledge the tremendous effort of our team. We have moved with urgency to close these locations ahead of our original timeline so that we can allow our teams to quickly pivot to long-term foundational improvements for our business. Let me now hand the call over to Ryan to discuss our financials.

Thank you, Shane; and good morning, everyone. I would like to thank the Advance team for their hard work over the past year and especially over the last few months as we began executing our three-year plan. I also want to thank our frontline team for their dedication to serving our customers every single day. As indicated last quarter, we made certain changes in the presentation of our financial statements. First, our results show a breakdown of continuing operations for the Advance business, excluding discontinued operations related to the sale of Worldpac. Second, to provide a better understanding of our performance, we report select financial measures on an adjusted non-GAAP basis to exclude the impact of certain items. Our guidance and financial plan for the next three years is based on these adjusted financial measures. Lastly, we are providing detail on atypical items that impacted performance. These items include transitory costs and expenses associated with our strategic actions. In our view, looking at our reported results through this lens will provide a helpful understanding of our underlying performance. Now let's turn to our results. As Shane mentioned, we moved with urgency to execute store closures. As a result, our fourth quarter and full year financials include costs associated with these closures, although comparable sales exclude closing store locations. Fourth quarter net sales from continuing operations were $2 billion, a 1% decrease compared with Q4 last year. Comparable stores declined 1% and exclude closing store locations that generated $74 million in liquidation sales. Our comp performance was stronger in the second half of Q4 and especially in December as extreme winter weather conditions drove demand for failure-related items, such as batteries. In terms of channel performance, our pro comp was slightly negative and outperformed DIY, which declined in low single digits. On a two-year basis, our pro comp continued to track positive. During Q4, transactions declined in the low single digit range in both channels, although pro performed relatively better. Average ticket grew in the low single digit range and was positive in both channels. From a category perspective, we also saw strength in filters and fluids and chemicals, while discretionary categories remained pressured. Adjusted gross profit from continuing operations was $779 million or 39% of net sales, resulting in gross margin contraction of 170 basis points compared to last year. The lower gross margin was driven by two transitory factors, both of which are not included in our non-GAAP adjustments. First, approximately 180 basis points of headwind related to end-of-year inventory adjustments associated with an annual review of vendor balances and inventory associated with DCs closed during the year. And second, approximately 100 basis points headwind associated with liquidation sales. Without the impact of these factors, our gross margin would have been in line with the revised expectations shared in November, reflecting seasonally lower gross margin in Q4 and expense deleverage due to the lower sales volume year-over-year. Adjusted SG&A from continuing operations was $878 million or 44% of net sales, resulting in deleverage of 175 basis points compared to last year and primarily driven by higher labor-related expenses. As a result, adjusted operating loss from continuing operations came in at $99 million or negative 5% of net sales. Adjusted diluted loss per share from continuing operations was $1.18 compared with a loss of $0.45 per share in the prior year. We ended the year with negative free cash flow of $40 million compared with negative $84 million in the prior year. Free cash flow includes approximately $90 million of cash expenses associated with store closures. Adjusting for these expenses, free cash flow would have been positive. There were atypical gross margin factors that negatively impacted Q4 results, which were not included in our reported adjusted non-GAAP results. We estimate that these items amounted to approximately 280 basis points of operating margin headwind and approximately $0.68 of EPS headwind during the fourth quarter. Next, let's recap our full year 2024 financial performance. For the full year, net sales from continuing operations were $9.1 billion, a 1% decrease compared to last year. Full year comparable store sales declined 70 basis points, driven by the deceleration in the second half of the year and attributed to the overall softness in the consumer spending environment, including deferral and spending for maintenance items as seen across the industry in 2024. In terms of channel performance, our full-year pro comp was positive, while DIY declined in the low single-digit range. Transactions declined in the low single-digit range, mainly driven by DIY, while pro transactions were relatively flat year-over-year. Average ticket grew in the low single-digit range in both channels. From a category perspective, we saw strength in batteries, filters and engine management, while sales in discretionary categories were weaker. Adjusted gross profit from continuing operations was $3.8 billion or 42.2% on net sales and an expansion of approximately 30 basis points compared to last year. Our full-year gross margin performance benefited from lapping approximately 160 basis points of inventory-related headwinds from last year. However, this benefit was partially offset by the $100 million in price investments to realign our pricing to market levels and the expense deleverage associated with lower sales volume. Also, as indicated previously, transitory cost factors related to additional inventory adjustments, closing store liquidation sales, loss of revenue due to hurricanes, and system outages during the year impacted gross margin. We estimate these transitory factors collectively drove approximately 90 basis points of headwind for the full year and are not included in our adjusted non-GAAP results. Adjusted SG&A from continuing operations was $3.8 billion or 41.8% of net sales, driving a deleverage of approximately 50 basis points compared in 2023, primarily driven by higher labor-related expenses. Our full-year SG&A expenses were consistent with expectations provided at the start of the year for aggregate spending to be flat to slightly up. Adjusted operating income from continuing operations was $35 million and 40 basis points as a percent of net sales compared to 60 basis points last year. Adjusted diluted loss per share from continuing operations was $0.29 compared with a loss of $0.28 last year. To conclude my discussion of full year results, I am also pleased to report that we have successfully remediated all outstanding material weaknesses as of the end of 2024. I would like to thank our finance and accounting teams for achieving this in line with our original timeline and for their efforts in enhancing our control environment. I am excited to welcome Michael Beland as Chief Accounting Officer. Certain atypical items influence results during the year and we believe the disclosure of these items provides a clearer picture of the underlying performance of our business. We estimate atypical items amounted to approximately 60 basis points of operating margin headwind and approximately $0.64 of EPS headwind during the year. As it relates to our cash and liquidity position, we remain committed to maintaining sufficient liquidity over our three-year planning horizon. At the end of the fourth quarter, we had approximately $1.9 billion of cash on our balance sheet. The increase in cash compared to last quarter is mainly related to proceeds from the Worldpac sale in November. Net proceeds from the transaction are now estimated at approximately $1.45 billion. Following payment of transaction fees and preliminary tax assessment of the transaction, the tax liability is now estimated to be approximately $200 million lower than our prior expectation. Separately, as indicated last quarter, we are incurring certain cash expenses associated with closures of stores and DCs. In aggregate, we now expect to spend approximately $300 million, which is in line with the low end of our prior expectation. This revised outlook is being driven by favorability in lease negotiations that Shane referenced earlier and lower than expected closure costs. During 2024, we incurred approximately $90 million of these expenses and expect the majority of the balance to be incurred in the first quarter of 2025. The combination of lower than expected tax liability for the Worldpac transaction and store closure expenses has further enhanced our cash position and strengthened our balance sheet. Our current cash position does not include availability under our revolving credit facility, which is fully undrawn. Moving to an update on full-year guidance. As a reminder, 2025 is a 53-week fiscal period and our guidance includes the contribution from an extra week in the fourth quarter. Starting with net sales. We expect net sales in the range of $8.4 billion to $8.6 billion, which is a reduction of 5% to 8% year-over-year due to store closures. We expect comparable sales growth of 50 basis points to 150 basis points on a 52-week basis. We expect sequential improvement in comparable sales during 2025 with stronger growth in the back half of the year, supported by our strategic focus on improving parts availability and customer service levels. During the first half, we will be cycling through the $100 million of price investments from 2024, which will pressure comparable sales growth. Net sales also includes contribution from 30 new stores planned to be opened this year and 42 new stores opened last year that will enter our comp base. In addition, we expect the 53rd week to contribute approximately $100 million to $120 million in sales. Moving to margins. Adjusted operating income margin is expected in the range of 2% to 3%. There are four main factors influencing operating margin for the year. First, following the sale of Worldpac, we will be cycling through approximately 30 basis points of intercompany margin from 2024. Second, we continue to expect to save approximately $60 million to $80 million in operating costs related to closing store and DC locations. The full run rate of the savings will begin during Q2 and as a result we expect approximately half of these savings to contribute to margin favorability this year. Third, gross margin expansion is expected to be the primary driver of improvement year-over-year, supported by product cost savings along with improvements in supply chain, labor productivity, and transportation cost savings. And fourth, we expect SG&A expense to be down year-over-year with margin in the range of flat to slightly down. SG&A includes the impact of annual wage inflation and other field investments, offset by favorability from labor productivity and indirect cost savings. The range of operating margin guidance assumes various scenarios for realizing benefits from our strategic activities across merchandising, supply chain, and store operations. The timing of realizing these benefits combined with progress on sales growth could drive variability in performance during the year. While we don't typically provide quarterly guidance, we are providing additional color on our expectations for Q1. We expect net sales of approximately $2.5 billion with comparable sales decline of approximately 2%. We are seeing more week-to-week volatility in our sales performance thus far in Q1 and as a result our performance is tracking below expectations. We expect our trends to improve over the next few weeks as seasonal comparisons ease. Regarding profitability, we expect Q1 operating margin of approximately negative 2%, primarily driven by closure costs. Gross margin is expected to improve compared to Q4, although still declined year-over-year due to the margin headwind associated with liquidation sales at closing locations and lapping last year's price investments. For SG&A, we expect expenses to be slightly down year-over-year, including the impact of closure costs. However, the lower sales will result in higher expense deleverage compared to Q4. Adjusting for these transitory closure costs, Q1 operating margin is estimated at slightly negative, which is an improvement compared to Q4 and gives us confidence on the path for margin improvement. Moving to full-year EPS and free cash flow. We expect adjusted diluted EPS in the range of $1.50 to $2.50. This includes approximately $0.40 or $35 million in interest income from short-term cash investments and approximately $0.05 contribution from the 53rd week. We expect free cash flow in the range of negative $25 million to $85 million at the end of the year, primarily driven by the estimated $200 million of remaining cash expenses associated with store and DC closures. Excluding these costs, we expect to generate positive free cash flow for the year. We expect to spend approximately $300 million of capital expenditures this year on our strategic initiatives and IT store and supply chain infrastructure. Based on our 2025 planning assumptions, we are tightening our leverage ratio expectation to a range of 3.5 times to 4 times. The improvement in our leverage ratio is expected to be primarily driven by improved operating performance during 2025. To conclude, I want to acknowledge that while we have reaffirmed our initial 2025 guidance set in November, we are also closely monitoring multiple developments in the external landscape and our guidance does not assume any impact from potential changes in the consumer spending environment, tariffs or other macro factors. As I indicated previously, we remain focused on executing and tracking the progress of our strategic initiatives. However, variability in the timing of realizing the benefits of internal initiatives could create volatility during the year. From a top-line perspective, sales have started off weaker than expected entering the year, which is factored into our Q1 expectations. I do want to note that if the lower sales environment were to persist for longer than we anticipate, the low end of our guidance range would be a reasonable expectation for the year. We believe we have the right strategy centered on core retail fundamentals to deliver our financial objectives. Shane and I are confident in the plan and the team's ability to execute with a greater emphasis on accountability and progress on KPIs. The implementation of activities under our strategic plan will continue through 2025 and 2026 as we expect to see the margin benefits build throughout the next three years to support our 2027 financial objectives. As we execute our turnaround and improve the performance of the business, a reduction in leverage ratio remains a top priority. Our objective is to reduce debt leverage from more than 4 times currently to approximately 2.5 times by the end of 2027. We expect to reach this target by repaying debt obligations at or before maturity, reducing lease obligations and improving profitability. Before moving to Q&A, I want to provide a brief update on our supply chain finance program. Our total capacity under the program currently stands at $3.5 billion, which accounts for a reduction in capacity following the recent credit rating downgrade. At the end of Q4, approximately $2.8 billion of payables related to our continuing operations were utilizing in this program. We will continue to engage with our banking partners to ensure we have maximum operational flexibility in the short and long term. I want to reiterate, we are confident in our path forward. Our strong balance sheet and improved liquidity position provides a solid foundation to execute our strategic actions to improve business performance and deliver stronger shareholder returns over time. Thank you. And I will now hand the call back to Shane.

Thank you, Ryan. In closing, I want to thank everyone for joining our call today. And in particular, I want to thank our team members once again for their continued dedication to serving our customers. We have charted a path forward for our turnaround and the entire team is energized and focused on our execution against our priorities. With that, let's open the call for questions.

Thank you. The first question comes from Bret Jordan with Jefferies. Bret, your line is open. Please go ahead.

Good morning, guys.

Good morning, Bret.

Could you discuss the new merchandise and the new assortment that is affecting 70% of your volume? Can you provide more details? Is this more focused on private label or branded products? Are you consolidating existing suppliers? I would appreciate any additional information you can share.

Yes. I believe there are two main areas that shape our approach. The first is assessing what we should stock in our stores based on the vehicles in operation nearby. Previously, we relied too much on what we sold directly rather than considering the vehicle population around our stores. The second area has been how we manage store inventory. We often allowed stores to find solutions among themselves for inventory needs. For example, if a store only had four spark plugs available and eight were needed, we would let them coordinate between stores to meet the demand. However, we need to prioritize fulfilling orders at each individual store. This focus on store-level availability is important. Smriti Maheshwari, who oversees our inventory programs, is dedicated to analyzing these two aspects: the vehicle population and individual store inventory management. We've discovered that many common items need to be removed from stores while others need to be added, allowing us to fulfill orders more effectively at the store level without sourcing from other locations.

The next question comes from Chris Horvers from JPMorgan. Chris, please go ahead. Your line is open.

Thanks. Good morning, guys. So my question is, I guess, can you talk about the reporting dynamics of one-time versus not one-time? It looks like inventory liquidation is being backed out, but you have this what you're describing as transitory costs. So like what makes one able to back out versus not being able to back out? And since it's an accounting question, I would just add can you talk a little bit about the cadence of the year after your expectation in the first quarter on the comp side? Thank you.

Yes. Thanks, Chris. I'll answer that question there. So the kind of, A, what we call atypical items are items that happen within the quarter, not really tied to our strategic objectives and initiatives, but they're items that take place within the quarter. And this past quarter as we were closing a significant number of locations, divesting Worldpac, we also were doing work on our balance sheet to ensure our inventory assumptions, estimates, everything else was appropriately reflecting the RemainCo going forward. So the adjustments to our non-GAAP are really tied specifically to those actions we're taking on our strategic initiatives large scale. The atypical ones are items where they come up in the quarter, but we wouldn't expect that to be reflective of the ongoing business going forward. And that's how I kind of phrase that. For the sequence of the quarters going forward, I would expect sequential improvement every quarter as our initiatives start to take hold. Q1 obviously we gave expectations, because it is a messy quarter with the store closures taking place, we're going to close 500 locations and another 200 independents within the quarter. That's going to have a pretty meaningful impact on the quarter. But as these initiatives take hold and as we start to roll these out, the assortment work that we're doing that takes time to roll out over 50 DMAs. The work merchandising is doing on merchandising excellence, the timing that that starts to hit COGS really pushes us forward. Also our assumption around the macro environment, the macro environment, consumers still being a little bit pressured in the first half where we expect the macro to improve a little bit in the back half of the year, that also is implied within our guidance. So I just expect sequential improvement over the quarters going forward.

The next question comes from Simeon Gutman from Morgan Stanley. Simeon, your line is open. Please go ahead.

Good morning, everyone. I wanted to ask about the 7% EBIT margin goal for 2027. You mentioned comparing growth, and I usually think of it as around 3% in the mid-single digits. Can you elaborate on how we can leverage SG&A or whether it largely depends on improving gross margins back to the mid-40s? Additionally, Shane, I'd like to understand the significance of establishing a strategic goal for the company compared to not providing guidance at all and possibly allowing the business to exceed expectations. I recognize I'm referring to past experiences, where there were some negative outcomes associated with previous guidance, but I wonder if there is an inherent opportunity to unlock gross margin that would make this target seem very achievable. Thank you.

Yes. I'll begin, Simeon. Thank you for the question, and I'll allow Shane to add his thoughts. To achieve a 7% target, we are aiming for a margin rate in the mid-40s and keeping the SG&A rate below 40% relative to sales. This is how I would approach the modeling to reach that 7%. Our merchandising excellence initiatives will significantly improve COGS, along with enhancing supply chain productivity by consolidating distribution centers. Additionally, we will improve productivity in our stores. You will notice this in our guidance for the year, where we anticipate productivity gains that will counterbalance inflationary pressures on SG&A. We plan to continue this effort over the next few years. Therefore, the assumptions are a margin rate in the mid-40s and SG&A below 40%.

Yes. And Simeon, on the other part of your question, fair push. Ryan and I have been reticent to put out broader long-term guidance. And we effectively took a year before we did it. And as we thought about the 7%, obviously aware that getting over our skis and putting numbers out there that would be difficult to attain could create issues that the company's seen in the past. But the way we thought about it is, where we're looking to take the company, we view as a very reasonable trajectory. We think that for a company of our size in the industry that it's in with the characteristics that are part of what goes on in aftermarket auto parts, that getting the 7% over a three-year period is appropriate both externally, but also internally in terms of how we grade and hold our team accountable. The idea that we're doing it over a period of years, the idea that we were willing to do the very tough foundational items to get there and think about that in terms of selling Worldpac and doing store closures, the residual business that we have and the pillars that we've outlined, we think put us on a path that make us comfortable articulating that 7%.

The next question comes from Kate McShane from Goldman Sachs. Kate, your line is open. Please go ahead.

Hi. Good morning. Thanks for taking our question. It sounds like the vendor feedback has been solid certainly since the meeting that you just highlighted in your prepared comments. How much progress are you making in improving your costs with the vendors and what will that look like as we go throughout the year?

Yes, I will let Ryan explain how it develops over the year. From a high-level perspective, when we gathered in January at our Accelerate event with 400 vendors, it was our first event of that scale in a decade. Allowing our vendors to interact with our leaders and outside sales team generated a clear enthusiasm for our success. Having another aspect to the industry enhances it from their viewpoint, both as a growth opportunity and in terms of the number of healthy competitors they can work with. This was mutual; our sales team was eager to connect with vendors, learn about new products, and explore collective market approaches. This theme has been consistent since I arrived and is now evident in our discussions about opportunities for growth, strategic positioning regarding costs, and ways to streamline logistics and ordering processes. We are excited about collaborating on new offerings alongside what we currently have, and both parties are moving forward with enthusiasm.

Yes. And Kate, I'll just add from a numbers perspective. We're very pleased with what we're receiving in that partnership and how we're working through that. It's both a cost and improving our cost in terms, but also improving our promotional pricing. That also has an impact on the COGS this year, but we are seeing positive movement there on the cost perspective. You'll see that play out sequentially quarter-over-quarter as those costs start to come through is some of that work we did in 2024 and that'll start to come through in Q2. And in Q3 and Q4, you'll start to see a lot of that work really start to show up in our rate. Remember though, from a leverage/deleverage, just a reminder, in Q1 we're cycling the price investments. So from a leverage/deleverage, you'll see an impact just as we cycle that. That'll start to dissipate as we get closer to the back half of the year and then we'll be cycling over it and you really start to see the change in leverage/deleverage in the back half of the year. But I would expect that the benefit from that work the merchants are doing with our vendor partners to be a sequential improvement throughout the year and more in the back half.

The next question comes from Steven Forbes of Guggenheim. Steven, your line is open. Please go ahead.

Good morning, Shane, Ryan. I was hoping to maybe explore the critical metrics that you're referencing behind the initiatives. And so maybe for my question, if we could focus on the time to serve, curious, Shane, if you could sort of talk about how much variability there is in this metric today across the core DMAs you serve? Meaning are there any DMAs where the target time to serve is consistently being achieved? And if so, can you frame up for us like how the current comp performance of the business compares between those DMAs where you're hitting those delivery time windows versus where you're currently not? As we think about like what the real opportunity is from a productivity standpoint as we look ahead to the years 2026 and 2027?

Yes, that's a great question, Steven. I'll address your point and then delve further into it. Our three pillars are focused on ensuring our success and boosting product sales. In our analysis of barriers to this goal, we realized that we often lacked the right parts. This aligns with Bret's concern about ensuring we have the necessary parts available in stores for customers. The right place pertains to our supply chain operations. Then there's the right service, which includes everything from customer support interactions to response times. This is crucial, especially in the professional sector where timing is everything. When a vehicle is on the lift and repairs are needed, the service shop requires immediate answers about part availability and delivery times. They can't afford to wait long, as it impacts their workflow and technician productivity. Historically, we discovered that without proper measurement, we would miss out on orders because shops would express their preference for us but couldn't wait for parts. When we evaluate our delivery performance, we acknowledge it's not where we want it to be. We see a range of results across different stores. In some cases, we are able to quickly deliver parts to nearby customers, which leads to increased sales when our response times are better than the average. We aim to replicate these successful practices throughout our network because they clearly make a difference. Clients in the professional sector need to trust that when a vehicle is in for service, they can rely on us for timely part availability, which in turn leads to increased orders.

The next question comes from Seth Basham from Wedbush. Seth, your line is open. Please go ahead.

Thanks a lot, and good morning. Good to see the progress resetting the business. My questions are around the first quarter in terms of the volatility you're seeing. What's driving that? Is it weather? What's tax refund season's early read? And as we think about atypical costs in the quarter, can you help us quantify those? Thank you.

Sorry, can you repeat the last part of that question on atypical, Seth? Sorry.

Yes. Quantifying atypical costs that aren't backed out of adjusted results.

Oh, yes. Absolutely. All right. So first, the volatility. A lot of it is weather-related also in the quarter. We see week-over-week volatility, one week doing great, one week down. We see a lot of weather. It's been colder in different areas. So we have seen weather impacted. We have noticed, we have been tracking tax refunds. I think last week, they were down 50% year-over-year in distribution. So it looks like the refunds are slightly delayed in the quarter. But we track that regularly. We're ready. We believe the stores are prepared. We've got the right inventory levels prepared for as the season breaks. When the weather does break, we're ready to capitalize on it. So that's driving some of the volatility. We also think the consumer is still a little pressured as well. And so the consumer is pressured right now, especially the consumer at our cohort. We feel like there's a lot of pressures around that from inflation and other things that are still impacting their ability to purchase discretionary items, make trade-offs. And so we're monitoring that and how the consumer reacts in this environment. Confidence report came out yesterday, not favorable. So we're monitoring that to see how much of that has impacted some of the volatility in the quarter as well going forward. As far as atypical items. So atypical items in Q4 specifically was about 280 basis points on gross margin, about $0.68 on EPS and the adjusted EPS. On a full year basis, that was about, let's say, full year was 90 basis points on gross margin, 60 basis points on operating income margin and about $0.64 on the EPS. And I think in the slides that we provided give you a good depiction of those impacts.

The next question comes from Greg Melich from Evercore ISI. Greg, please go ahead.

Hi. Thanks. You mentioned a little bit of ticket growth, average ticket. How much of that was inflation and how much of that might have been mixed or items in baskets? And just curious where you feel about your price gaps now in the market?

Yes. Great question. We actually feel our pricing is in a good place, very competitive now. Again, where a rare strategy of just having a competitive everyday price. And that $100 million investment, I think, put us in a good position, both on the DIY and on the pro side. Inflation is about 1%.

And Greg, obviously, we'll keep an eye on what the market is doing, and that could be on inflationary trends. We'll keep an eye on what the market is doing as it relates to tariffs. We're a rational actor where there's an opportunity to pass along pricing, we're going to pass along pricing.

The next question comes from Michael Lasser from UBS. Michael, please go ahead.

Good morning. Thank you so much for taking my question. In light of your DIFM business being down slightly in the fourth quarter, it does seem like there were some share losses. So where do you think those share losses occurred in terms of the type of customer? Also are you seeing any evidence that the store closures and the restructuring plan are having an impact on the psychology of your DIFM consumer where they might be pulling back because of some of the uncertainty with the transformation? And then lastly, it's totally understandable that Advance has a lot of opportunity to improve its KPIs versus where it's been. But is improving versus where it's been enough given that your competitors during this time are also going to make advancements that may keep the performance gap where it is? Thank you very much.

Thanks, Michael. There's a lot to discuss. Let's begin with store closures and their psychological effects. When we announced the closure of stores, it definitely caused people to pause and rethink. The good news for us is that the closures on the West Coast meant we exited that market completely, so there's no lingering psychological concern there. On the East Coast, since the closures involved individual stores and not entire markets, we still have a strong presence and don’t perceive any negative psychological impact. For instance, when I spoke to one of our field leaders, he mentioned a couple of closures in his market and expressed relief because he had been trying to close those underperforming stores for some time. So, at the field level, the response has been positive, as it allows us to eliminate poorly performing locations while our outside sales team remains active in those areas. Now, regarding performance indicators, we're focused on improvement. We compete in a robust industry with strong competitors, but there’s a vast market for auto parts, which means our success doesn’t necessarily depend on the failure of others; we can all thrive. Lastly, about where we're seeing store losses in relation to the DIY market, the situation on the West Coast has been part of the overall trend, while on the East Coast, there isn’t a specific cause; it’s been a general challenge across the professional sector.

Final question we have time for today comes from Michael Baker at D.A. Davidson. Michael, please go ahead.

Hi. Thanks. Quick two-parter. One, if you could talk about the comp lift that you're seeing around the hub stores, similar to what others have asked about what you're seeing with the merchandise assortment and the time to serve. Just curious what kind of improvement you're seeing there? And then secondly, your guidance assumes the economy gets better in the second half of the year. We're all sort of amateur economists here. But just curious what you're seeing or what led you to believe that the economy will get better in the second half of 2025? Thank you.

Yes. Great question, Michael. Thanks for asking. I'll take the first part on the hub stores, and Ryan can jump in on the guidance. What we did on the hub stores is we set up test and control groups. So we measure the hub store and then we measured the radius of impacted stores and see what the comp sales is versus control. And we are seeing both broadly and in terms of the number of hub stores and across time that when a hub store is there, there is a positive impact to comp relative to control for hub stores, by the way, and the hub store itself grows, because now that's a large skewed facility that functions as a store, but also a positive comp relative to control for the service stores. And it makes sense. It makes sense because you've seen this market paradigm in other players in the market. It makes sense, because everything else being equal, you've now put an 85,000 SKU facility that can service these stores, sometimes as quickly as within the hour for parts that they otherwise wouldn't have been able to get. And so we're pleased with that, and we are going to continue to roll forward with the market hubs. We've got 19 open. We'll get 10 more this year. And then we'll continue and we put out 60 as our next sort of guidepost for that by mid-2027.

On the guidance, Ryan? Yes. As far as the back half of the year, we're not saying significant improvement. We're saying normal market conditions in the back half, which would be a slight improvement from the front half where the consumer is pressured. I think that's consistent with what external market forecasts are for us and what others in the industry are predicting. And obviously, we'll monitor the consumer, monitor the changes in that environment and update accordingly as that progresses.

Okay. I'm going to close with a quick comment for everybody. First, thanks for joining the call. As we go on this turnaround journey, Ryan and I have been at it with the team for just over a year. If you look at the strategy going with the blended box as our approach. And as you think about our willingness to do the hard things that we need to do to get this company on the right trajectory, selling Worldpac, closing stores, combining the supply chain, cutting costs, restructuring the organization, we're doing all of those things. We have firm footing in terms of we're in a good industry. We have a great cash position. And so those put us in good stead. And then we've got great people. And I want to end by thanking all of the men and women at Advance every day who've continued through these tough moves and, by the way, endorse the moves in terms of putting Advance on a footing to be in the auto markets industry as the player that our legacy harkens back to. We've been around for a long time. We look forward to being around. And thanks, everybody, for joining the call today.

This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.