This summary is based on the first quarter fiscal 2007 earnings call conducted by Advance Auto Parts Inc. (AAP: chart) on May 17, 2007.

Interim Chairman, President and Chief Executive Officer: John C. Brouillard

Executive Vice President, Business Development: Jim L. Wade

Executive Vice President, Chief Financial Officer: Michael O. Moore

Senior Vice President, General Counsel and Secretary: Eric M. Margolin

Key Investors Issues

- Earnings per share rose to 71 cents from 68 cents in the previous year.
- Same store sales increased 1.1% compared to 3.9% in the prior year quarter.
- For the quarter, gross margin was 48.3%, a 57 basis point improvement over last year.
- For fiscal 2007, earnings are expected to be $2.38 to $2.48 per diluted share.

First Quarter Fiscal 2007 Financial Highlights

During the first quarter, revenue grew 5.4% to $1.47 billion from $1.39 billion in the prior year.

The same-store sales for the first quarter came in at the low end of the firm’s guidance at 1.1% compared to 3.9% last year. During the quarter, the sales results were mixed both geographically and by month. The firm saw strongest sales in February and March and weakest sales in January and April. As with much of retail, sales in the month of April were weak. The firm believes that the cold, wet weather adversely impacted the results during these weeks along with a significant increase in gas prices.

On a geographic basis, sales were strongest in the Northeast and Midwest and weaker in the Florida and Gulf Coast markets that benefited last year from a post-hurricane sales surge. The firm believes that most of this surge has now cycled.

During the first quarter, DIY same store sales were negative 0.2% compared to positive 0.5% last year. DIY comps and specifically customer count remains the firm’s biggest sales challenge.

The commercial same store sales were 5.2% over a strong 16.3% last year. This was a lower commercial same store sales run rate than the firm has had experienced over the last several quarters, and although it was over a strong comp last year, the company needs to renew its focus on getting its commercial comps back to the double digit run rate that it previously achieved. The company is the third largest industry player in commercial sales, but even as it approaches its goal of having 85% or more of its stores with commercial programs, it continues to see significant opportunity to grow its commercial business. Specifically, the firm should expect greater growth from its programs that have been added over the last five years. Historically, these programs have shown the most growth.

Commercial sales, including Autopart International, represented 26.1% of total sales for the quarter, and for the quarter, the total commercial sales were approximately $383 million, a 9.9% increase over last year. Commercial was the fastest-growing segment of the auto after-market and the firm expects it to continue to become a larger portion of its business as well.

During the first quarter, the company added 54 new commercial programs, most of which were in the new stores, bringing the total number of Advance stores with commercial programs to 2,493. Today, about 82% of the firm’s Advance stores have commercial programs, which is slightly up from this time last year.

For the quarter, gross margin was 48.3%, a 57 basis point improvement over last year.

This was primarily due to improved procurement costs and somewhat due to lower logistics costs. The improved procurement costs were due to continued efforts to lower costs with domestic suppliers and an increase in direct sourcing. As a result of this, LIFO was a $10.3 million credit in this year’s quarter compared to a $2.9 million credit in last year ‘s first quarter. These lower procurement costs will benefit the gross margin for the balance of the year; however, to a lesser degree.

SG&A expense rate for the quarter rose 46 basis points compared to last year’s first quarter.

This increase was primarily a result of deleverage on fixed expenses, as a result of low same store sales. This represented a 70 basis point increase. In addition, incentive compensation increased 35 basis points as compared to last year. First-quarter SG&A as compared to last year benefited by two non-comparable items. Last year, the firm held its biannual store managers’ conference, which represented 30 basis points of expense last year. In addition, last year included 20 basis points of expense related to the resolution of certain legal matters and property damage costs.

While the expense rate increased in the quarter, the firm deleveraged SG&A to a lesser degree than in the fourth quarter, as expected. Looking forward, there are a number of programs that will help leverage SG&A and improve return on invested capital. The firm’s commercial growth will consist primarily of leveraging existing commercial delivery programs. Also, the company will be remodeling fewer stores at a much lower cost per remodel, and it is planning to open and relocate fewer stores in 2007 than it did in 2006. The firm expects to leverage SG&A on 3% to 4% same store sales going forward, and the company is looking to accelerate the SG&A reduction initiatives. For second quarter, assuming a low single digit same store sales increase, the firm would expect SG&A to deleverage to a modest degree.