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Genuine Parts Co (GPC) Q2 2019 Earnings Call Transcript

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Genuine Parts Co (NYSE: GPC)
Q2 2019 Earnings Call
Jul 18, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the Genuine Parts Company Second Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Sid Jones, Senior Vice President of Investor Relations. Thank you. You may begin.

Sidney G. Jones -- Senior Vice President, Investor Relations

Good morning, and thank you for joining us today for the Genuine Parts Company Second Quarter 2019 Conference Call to discuss our earnings results and outlook for 2019. I'm here with Paul Donahue, our Chairman and Chief Executive Officer; and Carol Yancey, our Executive Vice President and Chief Financial Officer.

Before we begin this morning, please be advised that 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.

Paul D. Donahue -- Chief Executive Officer & Chairman

Thank you, Sid, and I'll add my welcome to our second quarter 2019 conference call. We appreciate you taking the time to be with us this morning. Earlier today, we released our second quarter 2019 results. I'll make a few remarks on our overall performance, and then cover the highlights across our businesses. Carol Yancey will provide an update on our financial results and our current outlook for 2019. After that, we will open the call up for your questions.

To recap, our second quarter performance across our global platform, total sales were a record $4.9 billion, up 2.3% from Q2 of 2018, driven by a 1.6% comp sales increase and a 2.7% benefit from strategic acquisitions, net of a 1.5% headwind from foreign currency translation, and a 1.5% impact from the Auto Todo divestiture.

Net income in the second quarter was $224 million and earnings per share were $1.53, excluding the impact of transaction and other costs related to acquisitions, adjusted net income was $230 million or $1.57 per share.

Our second quarter results were highlighted by positive total sales growth in each of our automotive regions including the US, Canada, Europe and Australasia and in our Industrial segment, while the Business Products Group had a slight decline in sales. Our core automotive performance in Europe was pressured by the ongoing transitory factors of a mild winter season and broad economic and political consideration.

Turning to a more detailed review of our business segment. Total sales in our global automotive group, which represented 56% of our total revenues, were up 1.4%. This includes a 1.3% comp sales increase and a 3.5% benefit from acquisitions. This was partially offset by an unfavorable foreign currency translation of 2.5% and the impact from the sale of Auto Todo in Q1. By region, our US automotive sales were up 2.3% in the second quarter with comp sales at plus 3%. This marks a continuation of solid US sales comps and our fourth consecutive quarter of 3% comp sales growth, despite the challenge of wet conditions across much of the country throughout the quarter. We remain confident in the strength of the US automotive aftermarket over the balance of the year, and we look forward to executing on our growth initiatives to seize the opportunities provided by both a positive business climate and sound industry fundamental.

In the second quarter, we had positive sales growth with both our commercial and retail customers. We were especially pleased with the strength of our sales to the commercial segment, which represents close to 80% of our total US automotive sales. While we experienced sales gains across our commercial customer segment, sales to our NAPA AutoCare centers drove the outperformance. Sales for our AutoCare customers were up 5%, in line with the first quarter and improved from the 3.5% growth in 2018. This is a direct result of the increased focus by our new management team to drive a greater share of wallet with these strategic customers. NAPA AutoCare represents the fastest-growing customer segment for our US automotive business and is targeted to represent well over 18,000 members this year, so we expect continued growth from these customers in the quarters ahead.

Sales to our major account partners were up 2% in the quarter also consistent with Q1. This follows essentially flat sales in 2018, so it's encouraging to see the sales gains of this key group thus far in 2019.

We also believe there is opportunity for additional growth as we move ahead. Major accounts, which include fleet and government customers, national tire centers, regional accounts and OE dealers among others, represent a large and important customer segment. Driving improved sales with this group is meaningful to our overall results and an important element of our growth strategy.

Turning to our Retail segment. Sales to this group were positive as noted before, but pressured somewhat from the wet weather that persisted throughout the quarter. We believe our retail business will bounce back as the weather normalizes. A retail impact stores, which represent those stores that have been renovated and reset continue to outperform our overall retail performance and we have significant opportunity to further expand this initiative across our network. While we have

successfully completed this initiative in our company stores, we've really just began implement these changes at our independent stores. In addition, the NAPA Rewards Program, which now has reached 10.7 million members strong, continues to drive additional retail sales and positively impact our overall results.

At NAPA Canada, our business remains strong, having produced another quarter of solid sales growth driven by mid-single-digit comp sales growth and the added benefit of accretive tuck-in acquisitions. Our Canadian team maintained a strong margin, and we expect to continue to build on this positive momentum.

In Europe, our automotive business continued to operate in a challenging sales environment. The mild winter across most of the regions in which we operate, disruption of business associated with Brexit and the overall softening economic environment each weighed heavily on our core sales and significantly pressured our operating results. Our management team in Europe began taking steps to address these issues early in the first quarter by implementing comprehensive cost savings initiatives to mitigate the effects of this downturn. We are ramping up these ongoing efforts and expect to partially offset our profit declines in Europe over the balance of the year.

During the quarter, we announced the closing of the PartsPoint acquisition, effective in June. This new business is an excellent strategic fit for AAG, and we're excited for the growth opportunities we see in the Netherlands and Belgium. The Benelux region of Europe has not been impacted by the economic and political factors affecting much of Europe, providing a more stable operating environment. We expect PartsPoint to generate estimated annual revenue of USD330 million and look forward to growing this business and further strengthening our European operations.

And finally, yesterday, we announced that AAG has entered into an agreement to acquire the Todd Group, a leading distributor in France for heavy-duty and truck parts and accessories for the independent heavy-duty aftermarket. The European heavy-duty market has avoided the economic and other pressures in Europe and continues to grow at solid rates. With the addition of Todd, AAG becomes the undisputed leader in the independent heavy-duty aftermarket in France with well over 300 total locations. We expect this transaction to close in the fourth quarter of 2019 and for this business to generate USD85 million in estimated annual revenues.

Undoubtedly, we are all disappointed with our recent results in Europe. We remain committed to our growth plans, while also taking proactive steps to immediately reduce our cost structure and work through these challenges, which we believe to be transitory in nature, but impactful in the near term as we have seen in this quarter's results.

In Australia and New Zealand, we are pleased to report another solid quarter with low to mid-single-digit sales increases for both total and comp sales. This steady growth reflects the positive impact of a well-executed growth strategy, combined with the effect of cost controls and sound aftermarket fundamentals.

As part of our growth plans for this business, we increased our investment in Sparesbox to 87% effective July 1. While not significant to our financial results, Sparesbox is Australia's leading online automotive parts and accessories business. As a cutting-edge digital specialist, this partnership serves to enhance our understanding of the digital marketplace and grow our digital sales capabilities in Australasia and potentially across our global operations. We are excited to expand our partnership with the Sparesbox team and look forward to growing our business together.

In summary, while our European business remains challenged, our automotive businesses in the US, Canada and Australasia are performing well thus far in 2019. We are confident that we can continue this positive trend, while also working to improve our European results in the quarters ahead.

Turning now to our Industrial Parts Group. This business continues to perform well with sales of $1.7 billion, up 4.9%, including 3.1% comp sales growth and a 2.1% benefit from acquisitions, which was partially offset by a slight currency headwind. Importantly, this quarter's sales growth drove improved profitability and a 30 basis point improvement in operating margin. So we are pleased with the continued progress we are making in our industrial business.

Overall, we continue to effectively execute on our growth initiatives and operate in a stable industrial economy. In addition, our acquisitions continue to perform well and positively contribute to our overall results.

Looking to our product and industry sector sales performance, our results were consistent with the first quarter. 12 of 14 major products groups posted sales gains with especially strong results in the industrial supplies, material handling and hose and pumps category leading the way. Additionally, nine of the top 12 industries where we compete generated sales increases, highlighted by strong growth across several sectors, including iron and steel, fabricated metal products, chemicals and allied products, aggregate and cement, food products and automotive sectors. Offsetting these positive results were softer sales in the electrical specialties group, primarily driven by the impact of lower copper pricing.

We remain confident in the growth outlook for our North American industrial business for the balance of the year. In addition, as previously announced, we expanded our industrial footprint into Australasia with the purchase of the remaining 65% stake in Inenco effective July 1. We originally purchased a 35% stake in Inenco in 2017 and held the opportunity to acquire the balance of the company at a later date. Throughout our two-year partnership, this team consistently exceeded our expectations, and we look forward to growing our business together for many years to come. Inenco is already one of Australasia's leading industrial distributors with operations in Australia, New Zealand, Indonesia and Singapore, and total annual sales of approximately USD400 million. Inenco is an excellent strategic fit with Motion in North America from a products and services perspective and presents tremendous opportunities with our global suppliers and extensive and diverse customer base.

Likewise, we expect to realize additional cost-related synergies associated with our automotive business in Australasia. So we are excited to move forward with full ownership of this outstanding organization and we officially welcome Roger Jowett and the Inenco team to GPC.

Now we want to update you on our performance at S.P. Richards, our Business Products Group. For the second quarter, total and comp sales for this business were down slightly. While Business Products has performed well for several quarters, we experience a bit of softening in our core office supply business in Q2, although, our facilities and safety supplies business delivered solid results. FBS represents 35% of our total Business Products revenue and is the fastest-growing segment in the industry, providing us with additional future growth opportunities.

In addition, during the second quarter, we operated well and we held our operating margin constant with last year. This bodes well for margin improvement as sales strengthen, and we build on our position as the only independent national business products wholesaler in the US.

So that's a recap of our consolidated and business segment results for the second quarter of 2019.

With that, I'll hand it over to Carol for her remarks.

Carol B. Yancey -- Executive Vice President and Chief Financial Officer

Thank you, Paul. We will begin with a review of our key financial information and then we will provide our updated outlook for 2019.

With our second quarter total sales of $4.9 billion, representing a 2.3% increase and including 1.6% comparable sales growth, our gross margin in the quarter was 32.4% compared to 31.6% in 2018 with the improvement in margin relating to several factors. Similar to the first quarter, the increase primarily reflects higher margins in our automotive and industrial businesses due to the ongoing initiatives, including taking advantage of a global supplier presence, more flexible and sophisticated pricing strategies and favorable product mix.

In addition, the increase in supplier incentives across our business segments also had a positive impact on gross margins. Our team has done an excellent job of improving our gross margin and for the balance of the year, we continue to expect our 2019 gross margin rate to remain relatively in line with our current run rate. This assumes continued inflation in the 1% to 2% range and consistent levels of volume incentives.

The pricing environment has been relatively inflationary thus far in 2019. In automotive, price increases primarily reflect the impact of tariffs, while industrial and Business Products have seen increases associated with general inflation in areas such as raw material pricing, commodities and supplier freight. Thus far, we have been successful in passing on the price increases to our customers to protect our gross margin overall, so we continue to believe that the current levels of inflation have been a net positive to our results. We expect this to continue through the balance of 2019.

Specific to tariffs, their impact in the second quarter as well as the six months relates to the 10% tariff previously implemented. By segment, the impact of tariffs on our sales in the second quarter were 1.2% for US automotive, 0.3% for industrial and 0.3% for Business Products. As mentioned before, we have maintained our gross margin related to the 10% tariff, and we expect to do the same as we incur the 25% tariff impact going forward. As a reminder, 10% of our US cost of goods sold is subject to this tariff, including 20% of our US automotive cost of goods sold and 9% of our Business Products cost of goods sold.

Turning to our SG&A, these expenses were $1.2 billion in the second quarter, which represents 24.7% of sales. These operating costs were up 6% from last year as a result of several factors, including the effect of rising cost in areas such as payroll, freight, IT and cybersecurity as well as the loss of leverage on our expenses in Europe and Business Products due to the declines in their comparable sales for those businesses.

As we have discussed in several of our past earnings calls, we have ongoing initiatives to offset the rising cost environment and to better leverage our expenses as we move forward. These includes steps to more effectively integrate our acquisitions, facility consolidations, productivity solutions and other initiatives to drive efficiencies across our operations. As Paul will cover later, we recognized the need to produce greater cost savings and we're developing additional plans to get that done.

So now let's discuss the results by segments. Our automotive revenue for the second quarter was $2.8 billion, up 1.4% from the prior year and our operating profit of $228 million was down 6% with an operating margin at 8.2% compared to 8.9% margin in the second quarter of 2018. So while we continue to see improvement on our gross margin line, we were also impacted by rising costs as well as the deleveraging of expenses in Europe, which accounts for more than half of the decline in our margin.

As mentioned earlier, we are enhancing the initiatives to address our cost in the quarters ahead.

Our industrial sales were $1.7 billion in the quarter, a solid 5% increase from Q2 of 2018. Our operating profit of $136 million is up another solid 9% and operating margin improved to 8.1% from 7.8% last year with the 30 basis point increase due to gross margin expansion and the leveraging of expenses. The industrial businesses continue to operate well with 10 consecutive quarters of strong sales and operating results.

Our Business Products revenues were $478 million, down 1% from the prior year. Operating profit was $21 million and 4.4% of sales, which is consistent with 2018. So solid operating results as this business continues to stabilize. Our total company operating profit in the second quarter was $386 million, down 1.2% on a 2.3% sales increase and our operating profit margin was 7.8% compared to 8.1% last year.

We had net interest expense of $23 million in the second quarter, which was consistent with the first quarter, but down from the $26 million in the second quarter last year. Looking ahead, we're currently expecting net interest to be in the $97 million to $98 million range for the full year, which is up from our previous estimate of $91 million to $93 million. This accounts for the new debt assumed for the PartsPoint and Inenco acquisitions.

Our total amortization expense was $24 million for the second quarter and for 2019, we are updating our full year amortization to approximately $100 million from the previous $92 million, also due to our recent acquisitions. Our depreciation expense was $42 million in the second quarter and we continue to expect depreciation of $170 million to $180 million for the year. On a combined basis, we expect depreciation and amortization to be in the range of $270 million to $280 million for 2019.

Continuing with the segment information presented in our press release, the other line, which primarily represents our corporate expense, was $37 million in the second quarter, which includes $4 million in transaction and other costs primarily related to the PartsPoint acquisition. Excluding these costs, our corporate expense was $33 million, which has improved slightly from 2018, when adjusted for the $9 million in transaction and other cost recorded last year.

For 2019, we continue to expect our corporate expense to be in the $125 million to $135 million range. Our tax rate for the second quarter was 25.7%, which is an increase from the 24.4% rate in the prior year. This is primarily due to the nondeductible transaction and other cost as well as statute-related adjustments that are reported in these periods. For the full year, we continue to expect our 2019 tax rate to be approximately 25%.

Now let's turn to the balance sheet, which remains strong and in excellent condition. Our accounts receivable of $2.8 billion is up 6% from the prior year. This compares to our 2.3% total sales increase and it also includes a 3.7% impact from our acquisitions, including PartsPoint, which was acquired in June. We remain very pleased with the quality of our receivables. Our inventory at June 30th was $3.8 billion, up 8% from June of last year. This increase primarily relates to the additional inventory that was acquired through the acquisitions over the last 12 months, which added 6.5%. In addition, the increase in inventory includes the impact of inflation as well as tariffs. We remain focused on maintaining this key investment at the appropriate levels as we will move forward.

Our accounts payable of $4.1 billion is up 6%, due mainly to the increase in purchasing volume and to a lesser degree, the benefit of improved payment terms with our key global partners. At June 30th, our AP to inventory ratio stands at 108%. Our total debt of $3.9 billion at June 30th is up from $3.4 billion at March 31st, and this is due primarily to the additional private placement debt that we assumed for the recent acquisitions of PartsPoint and Inenco.

We entered into these agreements with favorable rates and maturity periods ranging from five to 15 years. At June 30th, our average interest rate on our total outstanding debt stands at 2.5%, which has improved from 3% at June 30th last year. We remain comfortable with our current debt structure and have a strong balance sheet and the financial capacity to support our future growth initiatives and our ongoing priorities for effective capital allocation.

Turning now onto our cash flows. We have generated approximately $300 million in cash from operations thus far in 2019. For the full year, we currently expect approximately $1 billion in cash from operations and free cash flow, which excludes capital expenditures and the dividend to be in the range of $300 million to $350 million. So we expect our cash flows to continue to support our ongoing priorities for the use of our cash, which we believe serves to maximize shareholder value.

Our key priorities for cash remain the reinvestment in our businesses, strategic acquisitions, the dividend as well as share repurchases. We have invested $107 million in capital expenditures thus far in 2019, which is up from $65 million in 2018. This reflects our growing global platform and the planned increase in our investment in areas such as technology and productivity in our facilities. For the year, we continue to plan for capital expenditures in the range of $300 million.

Our 2019 annual dividend of $3.05 was increased 6% from 2018 and is approximately 54% of our 2018 adjusted earnings, which is within our targeted payout ratio. 2019 marked our 63rd consecutive annual increase in the dividend paid to our shareholders and it's a record we are proud of.

Regarding our share repurchase program, we continue to have 16.4 million shares authorized and available for repurchase. We have not made any purchases under the program in 2019, as we have been active with other investment opportunities such as the recent M&A activity and capital expenditures that were discussed in this call.

So now let's discuss our current outlook for 2019. In consideration of our results, thus far in the year, our current growth plans and initiatives and the market conditions we see for this foreseeable future across our operations, which includes the slowing global economy and continued softness we expect in Europe over the balance of the year, we are updating our full year 2019 sales and earnings guidance. In addition, we took into account the recently added PartsPoint and Inenco acquisition as well as the impact of a strong US dollar, which we continue to estimate as a 1% currency headwind for the full year.

Finally, our outlook accounts for one additional selling day in the third quarter relative to 2018 to make up for the one less selling day in the first quarter of 2019. With these factors in mind, we expect our full year sales to increase 4.5% to 5.5%. This updated sales outlook represents a change from our previous guidance for a plus 3% to plus 4% sales increase and it includes an approximate 2% sales contribution from the PartsPoint and Inenco acquisitions.

As is customary, this guidance excludes the benefit of any future acquisitions. By business segment, we are guiding to plus 4% to plus 5% for the automotive segment, which is improved from our previous guidance of plus 2.5% to plus 3.5% due to an approximate 2% contribution from PartsPoint; plus 7% to plus 8% for the industrial segment, which is up from plus 5% to plus 6% previously and this is inclusive of an approximate 3% sales contribution from Inenco and essentially flat to down slightly for total sales for the Business Products segment.

On the earnings side. We expect diluted earnings per share to be in the range of $5.42 to $5.52, which accounts for the transaction and other costs incurred through the first six months of 2019. We are updating our outlook for adjusted earnings per share to $5.65 to $5.75 from $5.75 to $5.90 previously. This represents a $0.15 to $0.20 change in earnings before an approximate $0.05 contribution from PartsPoint and the additional 65% investment in Inenco. As a reminder, adjusted diluted earnings per share excludes any first half as well as future transaction and other costs.

So that completes our financial update and outlook for 2019. We enter the second half of the year committed to our initiatives to grow the business and improve our operating results. We also remain focused on further strengthening our balance sheet and generating strong cash flows to support an effective and meaningful capital allocation.

Paul, I'll turn it back over to you.

Paul D. Donahue -- Chief Executive Officer & Chairman

Thank you, Carol. With this quarter's challenges and the need to modify our full year outlook, it'd be easy to overlook our teams' accomplishments, which include the following; we achieved record quarterly sales of $4.9 billion, including positive comp sales growth in our US, Canadian and Australian automotive businesses; we improved our gross margin significantly with a 91 basis point gain; our industrial business continues to perform well with operating margins improved 30 basis points; we further stabilized our Business Products operating margin, which was unchanged from last year; and we expanded our global footprint with two large strategic acquisitions, PartsPoint Group in the Netherlands and Inenco in Australia.

That said, we also thought it would be important to remind you of our multi-year efforts to optimize our portfolio and position the company for sustained long-term growth. We spoke to this journey at our June 4th Investor Day and want to highlight a few key points for you now. First, we expanded our automotive footprint beyond North America and into Australasia six years ago, and this group has performed very well for us and added significant value. More recently, since 2017, we've added 45 acquisitions to our portfolio, which have provided $3 billion in incremental revenues and positively contributed to both our automotive and industrial footprint. While the majority of these new businesses have represented strategic bolt-on types of acquisitions, we've also stepped out and taken advantage of more significant opportunities, including our entree into Europe in late 2017 via Alliance Automotive, which we have further expanded with key strategic acquisitions in 2018 and 2019. And effective this month, our industrial expansion into Australasia with the purchase of Inenco.

And while our European operations performance has impacted our first half results, we believe the challenges for this business are transitory and we remain 100% confident in the industry fundamentals and longer-term growth prospects for this group as well as the value it will create as part of our portfolio.

In addition to these expansionary initiatives, we have also taken steps to streamline our operations. In 2018, we consolidated our electrical business into Motion Industry to build a larger, stronger and more cost-effective industrial business. Effective this year, we consolidated several automotive operations representing our in-house supply network to NAPA to a more efficient North American automotive supply chain. And finally, earlier this year, we divested of our legacy automotive business in Mexico, Auto Todo to more effectively focused on the growth potential of our NAPA Mexico model established just a few years ago.

Today, we go to market with a strong and cohesive automotive network and enhance global industrial operation and a reenergized Business Products Group. We remain confident in our overall strategy and the additional growth opportunities we continue to pursue across our global platform. Make no mistake, we are not satisfied with our overall results in the quarter. That said, we are confident the plans we are implementing will have a long-term positive impact on our cost structure. Our immediate focus is on the execution of our initiatives to control cost and improve our profitability. While this has been a consistent theme for us throughout our transformation process, and we have had some success through our investments in technology and automotive supply and industrial realignments, we have yet to fully realize the savings we need to outpace the pressures of rising cost and the increase in the spend for necessary investments.

So to this end, we are accelerating our ongoing cost savings plan and developing aggressive expense reduction initiatives to effectively address our cost structure, drive meaningful savings and ultimately deliver incremental value. The senior leaders across our business and corporate office have been tasked with this mission and we will be held accountable to work together to execute on plans to eliminate cost as well as standardize and automate processes, while ultimately enhancing our productivity to further support our ongoing growth.

As examples, through our early efforts, we have identified opportunities to restructure and consolidate several functional areas in facility, reducing both personnel and occupancy cost such that we can operate more efficiently and at a lower cost.

Clearly, the successful execution of these and other cost initiatives will require some heavy lifting and the focus of our entire organization. In addition to these initiatives, we'll also be working to aggressively drive incremental revenue growth, capturing a greater share of wallet with our existing customers, securing new business opportunities, driving our digital strategy, and finally, securing additional bolt-on acquisitions will all play a part in delivering an improved top line performance.

We have a highly capable management team and anticipate delivering improved results and creating value for our shareholders. We will update the investment community on our action plans and progress in our third quarter earnings call.

Thank you for listening. And with that, we'll turn it back to the operator, and Carol and I will take your questions.

Questions and Answers:

Operator

Great, thank you. At this time, we'll be conducting a question-and-answer session. (Operator Instructions) Our first question is here from Daniel Imbro from Stephens. Please go ahead.

Daniel Imbro -- Stephens Inc. -- Analyst

Yeah. Hey, good morning, guys. Thanks for taking my questions.

Carol B. Yancey -- Executive Vice President and Chief Financial Officer

Good morning.

Daniel Imbro -- Stephens Inc. -- Analyst

I wanted to actually with the clarifier, Paul. I may have missed this in the prepared remarks, but can you just share what were European overall comp sales during the second quarter? Did you guys share that in the prepared remarks?

Paul D. Donahue -- Chief Executive Officer & Chairman

Daniel, the comps out of Europe, if you recall Q1, we were down slightly in Europe. And in Q2, that deceleration really it was amplified and our comps in Europe were down closer to 7% to 8% in the quarter.

Daniel Imbro -- Stephens Inc. -- Analyst

Got it. Thank you. That's helpful. And then just digging into that a little bit deeper, are their certain geographies that are meaningfully weaker than other? Obviously, you noted the Benelux is more resilient. And then just within that, we didn't get much of a winter, but we did get some recent extreme heat, did that drive any uptick? Or how was the cadence through 2Q across Europe?

Paul D. Donahue -- Chief Executive Officer & Chairman

Yes. That's a great question, Daniel. And as you know, our three primary markets are France, the UK and Germany. We've just entered Benelux. We're also in Poland. We've seen Benelux and Poland have largely escaped some of the downturn we've seen in France, UK and Germany. The biggest challenge for us in Q2 was France, followed by the UK. Germany actually bounced back in Q2. They had a soft first quarter, but actually showed a slight increase in Q2. And I would also -- you commented on the recent warmer temps, record high temps in Europe. And what we've seen out of the blocks and July, and it's early Daniel, but we have seen better sales performance in the month of July and we would attribute some of that, certainly to the extreme heat that we've seen in our markets.

Daniel Imbro -- Stephens Inc. -- Analyst

Great. Thanks, that's really helpful.

Paul D. Donahue -- Chief Executive Officer & Chairman

You're welcome.

Daniel Imbro -- Stephens Inc. -- Analyst

And then last one for me. Just on the US auto side, weather you noted was disruptive given the rain. Could you maybe quantify what kind of headwinds that was to your business here in the US?

Paul D. Donahue -- Chief Executive Officer & Chairman

Yeah. It's hard to say -- to pinpoint exactly, Daniel. But look, I think Q2 was just one more reminder for all of us that the impact that mother nature can have in our business. We were -- if you look at the cadence of the quarter, we were -- in the US automotive, we were up slightly in April. May was our most difficult month. And certainly, when you look at the weather patterns, May was the most challenging weather related month. It was awfully wet, still cold. And then we bounced back in June with a much stronger June. So hard to pinpoint exactly, but we absolutely know it had an impact.

Daniel Imbro -- Stephens Inc. -- Analyst

Great. Thanks so much guys, and best of luck.

Paul D. Donahue -- Chief Executive Officer & Chairman

Thank you.

Carol B. Yancey -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Our next question is from Kate McShane from Goldman Sachs. Please go ahead.

Kate McShane -- Goldman Sachs -- Analyst

Hi, good morning. Thanks for taking my question. If I can just follow-up on the auto parts retail comment and question earlier. I was wondering if you can maybe characterize the competitive environment currently just now that we're a few months in now with the tariffs. Are you seeing your competitors pass price through as well?

Paul D. Donahue -- Chief Executive Officer & Chairman

Yeah. It's a great question, Kate. We are -- and I'm assuming you're referencing our US automotive business?

Kate McShane -- Goldman Sachs -- Analyst

Yes, US.

Paul D. Donahue -- Chief Executive Officer & Chairman

Yeah. And look, the environment is still very same. We have seen our competitors passing along tariff related increases much like we have. So we have not seen any serious disruption in the automotive aftermarket here in the US. So we're continuing to monitor very closely, but at this point, I think everybody has passed along the increases.

Kate McShane -- Goldman Sachs -- Analyst

Okay, thank you. And then my second question unrelated. I think on the last quarterly call you hosted, you were talking about working capital improvement that was starting this year for Europe because you were putting supply chain programs in place. And I just wondered if you could update us on where you are with that and what it contributed in the quarter?

Carol B. Yancey -- Executive Vice President and Chief Financial Officer

Yes. So we did have -- we continue to actually perform quite well the synergy targets we've put in place when we bought Europe year and a half ago years ago. Those include both procurement synergies and working capital synergies. So we're right on track for that with working capital being delivered. Having said that, a lot of the way these terms come in and we've got these terms, while they are negotiated globally, we could see a benefit in the US as it relates to the European suppliers as well. So we know we have further benefit coming in the second half and that's contemplated in our guidance. So Q2, you didn't necessarily see much of an impact, but we have implied for improvement both in global automotive, including Europe and North America as well honestly as our industrial business for the second half and that's contemplated in our guidance.

Kate McShane -- Goldman Sachs -- Analyst

That's helpful. Thank you.

Operator

Your next question here is from Scot Ciccarelli from RBC Capital Markets. Please go ahead.

Scot Ciccarelli -- RBC Capital Markets -- Analyst

Good morning, guys. How are you?

Paul D. Donahue -- Chief Executive Officer & Chairman

Good morning.

Scot Ciccarelli -- RBC Capital Markets -- Analyst

So Paul, I guess, I just want to understand kind of the cadence a little bit better. So -- and this is specifically on the US auto side. If April was up just slightly, I'd probably interpret that, I don't know 1% to 2%, I would also assume May was down a couple of points just given how wet it was, I mean what we know it does to the business. So get to a 3% comp for the quarter, should we assume June was up at least in the mid-single-digit range?

Paul D. Donahue -- Chief Executive Officer & Chairman

Absolutely. Scot, you're spot on with your assumptions.

Scot Ciccarelli -- RBC Capital Markets -- Analyst

Okay. Got it. And do you attribute that to anything but kind of the weather cadence? Or is there something else that may have happened? Just so we can kind of understand if there's another influence on that factor.

Paul D. Donahue -- Chief Executive Officer & Chairman

Well, if you go back to my prepared comments, Scot, what we saw in the quarter, as we saw in Q1 as well, is our DIFM, our commercial business is solid. We are -- we continued the good momentum we had in Q1 in our NAPA AutoCare business. We believe we're grabbing greater share of wallet with our key AutoCare customers. So that business, as mentioned in my prepared remarks, we're very pleased with. Our Major Accounts business is positive, which is certainly an improvement over where we were last year. We're -- if you think about the impact of the weather, Scot, certainly in the month of May, that's probably more -- we were more impacted on our retail side than our commercial business.

Scot Ciccarelli -- RBC Capital Markets -- Analyst

And was the gap between DIY and commercial wider this quarter than it has been in recent quarters?

Paul D. Donahue -- Chief Executive Officer & Chairman

Yes, it was got it.

Scot Ciccarelli -- RBC Capital Markets -- Analyst

Got it. Okay. Thanks, guys.

Paul D. Donahue -- Chief Executive Officer & Chairman

You're welcome.

Operator

Our next question is from Chris Horvers from JP Morgan. Please go ahead.

Christopher Horvers -- JP Morgan -- Analyst

Thanks. Good morning, everybody.

Paul D. Donahue -- Chief Executive Officer & Chairman

Good morning, Chris.

Christopher Horvers -- JP Morgan -- Analyst

Carol, can you talk about -- can you break down the EPS guide change a little bit further. I get the $0.05 for the acquisitions. But just thinking about the core Motion business, the core NAPA business and particularly in the US like versus Europe, how did it -- how did you change the underlying guide in the core businesses ex the acquisitions? Is it effectively lowering for European losses? But at same time, it looks like Motion's sales outlook is a little lighter for the year considering the acquisitions. So maybe you could talk us through that, that would be really helpful.

Carol B. Yancey -- Executive Vice President and Chief Financial Officer

Sure. I'm happy to. So starting with automotive first. Implied in our Q1 comps, we did moderate probably 0.5 point or so in Q2. That is in part based on -- again, the US comps while strong at 3%, they were 3.5% for Q1. Europe, as Paul mentioned, they are running down mid-single digits through the first half. So we lowered a bit for Europe, we lowered a small amount for US and quite honestly, we've seen some weakness in Australasia. So as we look at that business more so on their top line, we had a little bit there. So implied in that automotive, there is a slightly lower comp that went into our guidance. And then you're spot on for industrial as well. What industrial has seen is it's maybe happened a little sooner. The signals are definitely mixed, but where we had implied comps of maybe three to four in Q1, we're looking at more two to three right now. That is taking into account the slowing business in our electrical specialties group that we called out in Paul's comments. A lot of that is due to copper pricing and some of their customer mix. But again, we felt it was appropriate to lower just a bit for industrial. And then we do see a bit of moderation in some of our operating margin headwinds in the second half. So that was factored in as well. So that's kind of the walk through on the guidance.

Christopher Horvers -- JP Morgan -- Analyst

And just a couple of questions, follow-ups there. So for the US, the tick down for the sort of implied US comp for the year, was that solely because of 2Q? Or did you change your back half outlook?

Carol B. Yancey -- Executive Vice President and Chief Financial Officer

Probably more -- a little bit of Q2, but honestly, it was very transitory. As Paul mentioned, I mean, this was weather in Q2 and transitory. We still feel good about our commercial business and a lot of the factors. So really more of a Q2. We're not seeing anything else right now that would give us concern in the second half.

Paul D. Donahue -- Chief Executive Officer & Chairman

Chris, just to tag team on that a little bit. You look at our core for GPC, it's certainly North American automotive and industrial and we feel good about both of those key businesses and both had a good first half of the year. We expected -- everybody has been calling for a significant slowdown on the industrial -- in our industrial business in the second half of the year. And if you follow all the metrics, whether it's PMI, which has declined significantly from January to June, but then there was a manufacturing number that came out earlier this week, which was very positive. So you're getting mixed signals on the industrial side. So we're being a bit cautious. But our Motion business is hanging in there. And when you look across industrial, I mean, you're looking at 34 straight months of growth in that world. So we're feeling pretty good about our two key and core businesses.

Carol B. Yancey -- Executive Vice President and Chief Financial Officer

Yeah. And one final thing, I would just say the operating margin decline for Europe is probably more of a standout than some of the slight modifications in the US comp or the industrial comp.

Christopher Horvers -- JP Morgan -- Analyst

And so just to clarify that, is Europe -- European auto, did you say it's operating at a -- operating margin -- operating income loss currently?

Carol B. Yancey -- Executive Vice President and Chief Financial Officer

No, no. And look, just to be clear, and we talked about this in Q1, the margin decline in automotive margins, we said in Q1 was primarily as a result of Europe with them comping down 1%. To their credit, they in March, took action plans and set out full plans for all their countries and they are starting to make a lot of progress on those plans. But what happened in Q2 was such -- so much more pronounced that it's really hard for them to -- I mean, when you're comping down at a higher, as Paul mentioned, 7% or 8%, whatever plans you had in place, it's difficult to see the improvement. We do see some of that coming in the second half or some moderation. So when you look at automotive margins in Q2, we've said more than a half -- it was probably 50 basis points of the 70 basis point decline. And again, we would expect to see that moderate with the plans they have in place. The teams have done some good job at looking at some consolidation of facilities, looking at some of their headcount and some of the restructuring that they're doing and they've got close attention on all these areas. So they are definitely positive over prior year. It's just the leverage issue with the poor sales decline.

Christopher Horvers -- JP Morgan -- Analyst

Understood. And one last one. Just on -- a follow-up on the tariff question earlier. So going to 25% now, presumably those price increases are passing through now. So is the behavior the same? They seemed to be passed on very quickly by you and your peers back in September, call it of last year. Is the 25% -- is there any difference to like has it been passed on more hesitantly? And then how do you think about what -- maybe the inflation outlook will be for the industry given it's moved from 10% to 25% for the US NAPA business?

Carol B. Yancey -- Executive Vice President and Chief Financial Officer

Yeah. So great question. And as we kind of look ahead, I think as we -- as you spoke to the 25% tariff, we do believe and we know and we've already done -- passed those along. In many of our businesses and product lines, those went into effect right away. Not seeing any issues of passing them along. But having said that, our business has been pursuing alternative sourcing as we look to move purchases outside of China, be it Malaysia, India, Vietnam, Mexico are picking up capacity. In addition, our Chinese sources are also moving some of their capacity from China and that's going on as well. So when we look at the full year, we will have a more pronounced effect for tariffs in the second half that'll be passed through. We expect second half to be approximately 2% for automotive and I think we were 1.2% in the first half. So that'll get us to probably 1.5% full year tariff/inflation for automotive. For Business Products and Office Products, it's going to be something less -- it'll probably be 0.5% for the full year on tariffs. But their inflation, which includes raw materials, commodities, supplier freight, their inflation will be more like 2% on a full year basis.

Christopher Horvers -- JP Morgan -- Analyst

That's super helpful. Best of luck. Thank you.

Paul D. Donahue -- Chief Executive Officer & Chairman

All right. Thanks, Chris.

Carol B. Yancey -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Our next question is from Seth Basham from Wedbush Securities. Please go ahead.

Seth Basham -- Wedbush Securities -- Analsyt

Thanks a lot, and good morning.

Paul D. Donahue -- Chief Executive Officer & Chairman

Morning, Seth.

Seth Basham -- Wedbush Securities -- Analsyt

My first question is just to close the loop on the US auto comp trends. It saw nice strengthening in July. You spoke to material improvement in Europe in -- I mean, you spoke to material improvement in Europe in July. Do you also see further acceleration or consistent mid-single-digit type comp growth in the US in July to-date?

Paul D. Donahue -- Chief Executive Officer & Chairman

It's early yet, Seth. But certainly, I would tell you that the hot, hot temps that we're seeing across the US right now is going to be a real boost for our business. If you think about the NAPA business, we do a significant chunk of business up in the Midwest central, which will get -- I'm sure somewhere -- someone will ask about regionality in our trends. The -- despite all the wet weather, the Midwest central was our strongest performing business in the quarter. We do a lot of business with farmers and agriculture. And many of these farmers are just now getting out in the field. So this hot weather will help and we expect to see a boost in our top line in US automotive in Q3.

Seth Basham -- Wedbush Securities -- Analsyt

Got it. That's helpful. Any other call-outs from a regional performance standpoint for the quarter?

Paul D. Donahue -- Chief Executive Officer & Chairman

Yeah. So I mentioned central part of the US, Midwest, Upper Midwest. But I've been also very pleased to see some strengthening performance in the south, both in the southwest part of the country as well as the southeastern part of the country both. We track eight geographical regions, Seth. Those four would be at the top of the list.

Seth Basham -- Wedbush Securities -- Analsyt

Fair enough. And then turning to margins for the auto business in the US. You saw a decline there, I guess implied by your comments. What's driving that decline? What are you doing to control cost in the US to alleviate that pressure?

Carol B. Yancey -- Executive Vice President and Chief Financial Officer

Yeah. And I would mention, the other basis point decline in automotive margins is, in part, Canada and Australasia's automotive margins. And I would tell you it's a little bit of the slowing that we talked about in Australasia. Some of it is timing and we definitely expect to see some improvement in the second half for both of those businesses. US was slightly down. It was very minor. So we are really almost running flat US automotive margins. And remember, we're comping at 3.2% for the six months and we're getting pretty good leverage, flattish operating margins out of that. But having said that, we're not going to sit and say that we're satisfied and we certainly want to improve our SG&A performance. So there's a number of things that, that group is looking at. Specifically looking at it from a North American automotive standpoint, Paul mentioned facilities and as we look toward facilities, it's consolidation and rationalization in a number of facilities with automation. In the last six months, we've got several facilities both in Canada and the US with goods departs and, bear mechanism, vertical less modules, things like that, mechanized sorters that we're using. Additionally, Paul mentioned functional areas. So think about IT, technology. We're really looking at a digital transformation of our IT infrastructure, so we can best optimize things like the number of data centers we have, leveraging the cloud, new technologies in networking, back office functions, robotics, sales organization, leadership. So a number of things that we're working on as a group.

Paul D. Donahue -- Chief Executive Officer & Chairman

Hey, and Seth, I just would tag team on Carol's comment. You had asked this question of us at our Investor Day as well. And I would tell you that our teams have been really hard at work to reduce our overall cost structure at GPC. As Carol mentioned, we're reviewing every aspect of our business. What I would tell you is during our Q3 call and presentation, we'll be in a much better position to begin to unveil some of those more detailed plans for you.

Seth Basham -- Wedbush Securities -- Analsyt

Wonderful. Thanks a lot. I look forward to it.

Paul D. Donahue -- Chief Executive Officer & Chairman

You're welcome.

Operator

Your next question is from Bret Jordan from Jefferies. Please go ahead.

Bret Jordan -- Jefferies LLC -- Analyst

Hi, good morning.

Carol B. Yancey -- Executive Vice President and Chief Financial Officer

Good morning.

Bret Jordan -- Jefferies LLC -- Analyst

Most of them have been asked, but a couple of cleanups, I guess. The other four regions, could you tell us how the East, Northeast, West and Northwest did?

Paul D. Donahue -- Chief Executive Officer & Chairman

Yeah, happy to, Bret. The -- most of those guys are in line. Where we looked at our comps, most of our regions were right in between on the low side of one to two and on the high side up to four and a half or so. But where we see a bit more challenge is out west and I already mentioned the strength we're seeing in the Midwest, Central, Southern parts of the country as well. The Northeast, despite really, really bad weather, performed just fine and as did the mid-Atlantic. So not a huge -- sometimes, we see really huge disparity among the regions. But what I would tell you that -- kind of that range narrowed this quarter. The other thing I would mention, Bret, that we did see across all of our divisions is strengthening in our DIFM business. And that was consistent among all of our regions, which we are -- I mean look, that's our bread and butter and we're really encouraged to see some of the DIFM initiatives that our teams have been working so hard on really begin to take hold.

Bret Jordan -- Jefferies LLC -- Analyst

Okay, great. And then I guess, as we look at Europe and you've called out weather and the economy. I guess, could you sort of weigh the impact of weather versus the economy and the softness there? And obviously, as we get further from winter, have we -- sort of have we regionally skewed the performance where weather is less impactful, but some economies are more impactful?

Paul D. Donahue -- Chief Executive Officer & Chairman

So Bret, we talked about that a little bit on the last call and we had the question earlier about the US weather impact. Bret, it's really hard to pinpoint exactly. We do know it's a significant factor. If you go back a year ago, certainly, in the UK, they had one of their coldest winters on record, followed this year by one of the warmest winters on record. So it had a significant impact. It's very difficult to pinpoint an exact number. But I would tell you that with the record heat that we've seen over the last number of weeks, we are seeing an uptick in the business and that's got us feeling better about our back half prospects in the key markets in which we compete.

Bret Jordan -- Jefferies LLC -- Analyst

Okay, great. Thank you.

Paul D. Donahue -- Chief Executive Officer & Chairman

You're welcome, Bret.

Operator

Our next question is from Elizabeth Suzuki from Bank of America. Please go ahead.

Elizabeth Lane Suzuki -- Bank of America Merrill Lynch -- Analyst

Great, thank you. Just a longer-term question on Europe because we've just seen another acquisition there. There's -- even though you've seen some, perhaps, temporary weakness. Just curious how much of that weakness you think is going to continue to impact your overall results for more than a couple of quarters? And what the vehicle fleet dynamics are that make it an attractive market for you to be in long term?

Paul D. Donahue -- Chief Executive Officer & Chairman

Yeah, great question, Liz. We're still very bullish on the European aftermarket and hence the additional acquisitions that you've seen and read about over the last number of weeks. If we look at those individually, the one that we just announced yesterday, Todd. Todd is a very strong heavy duty truck parts supplier in France. They have 30 plus location. The combination of Todd along with our existing heavy duty footprint that we have in France will position us as the number one player. And we've seen our heavy duty business pulled up well across all of Europe despite the slowdown that we're seeing in the light vehicle market. So we feel good about the acquisition of Todd. We feel good about our acquisition of PartsPoint, which is based in the Netherlands and Belgium as their stronghold. And again, they've not been as impacted as the -- some of the other markets with the slowdown. And as we look at the European market and the vehicle part, the vehicle part that is similar in size to the US, the age demographics are similar, it is an incredibly fragmented aftermarket across Europe. And we have not lost our excitement about that marketplace for the long term and we think we'll be just fine. The issues we're faced with right now, Liz, we believe are largely transitory and we'll get past them as we go through the second half of the year.

Carol B. Yancey -- Executive Vice President and Chief Financial Officer

And Liz, one other thing about the margins. The team has done a tremendous job, and we -- Europe very impactful from a global procurement synergies. So when you look at our gross margin results and the overall improvement in margins and where we are tracking through our synergies with Europe, again, that volume is impactful for us. It's really the opportunities they have with some SG&A as they work through these core sales declines. So longer term, we see that working its way out.

Elizabeth Lane Suzuki -- Bank of America Merrill Lynch -- Analyst

Okay, that's very helpful. And just one more quick one is that what age do vehicles typically enter your addressable market in Europe? Is it similar to the US? Or is the sweet spot a little bit different?

Paul D. Donahue -- Chief Executive Officer & Chairman

No, it's similar, Liz. It's when the vehicles are going out of warranty and those warranties are very similar in Europe as they are in the US. And the other thing I would mention about the European market is there is very little to almost no retail business. So DIFM really rules the aftermarket in Europe. So very similar to the US. I would mention, Liz, now that we're on the European market, one of the initiatives that we'll be launching in the second half of the year is to launch our NAPA private brand in Europe and we've got plans in place to launch it in the UK in three key product categories. And we think that's going to be a -- give our team a real boost in the second half of the year.

Elizabeth Lane Suzuki -- Bank of America Merrill Lynch -- Analyst

Great. Thanks very much.

Paul D. Donahue -- Chief Executive Officer & Chairman

You're welcome.

Operator

Your next question is from Michael Montani from Evercore ISI. Please go ahead .

Michael David Montani -- Evercore ISI Institutional Equities -- Analyst

Hey guys, thanks for taking the question. Just wanted to add some extra clarity, if I could around the US comp trajectory. Sorry, if I had missed this, but did you provide what the overall commercial and then DIY comps were in the quarter?

Paul D. Donahue -- Chief Executive Officer & Chairman

We did not provide that, Mike, for the quarter. I would tell you that both DIFM and DIY were positive. And I would also tell you that DIFM significantly outperformed our DIY business in the quarter.

Michael David Montani -- Evercore ISI Institutional Equities -- Analyst

Okay. And then if I heard correctly, I think you said there is a 3% US comp in auto, but then more like a 2.3% total growth there. Was there store closures or other rationalization there that could have caused that?

Paul D. Donahue -- Chief Executive Officer & Chairman

Yeah, and that was a good catch, Mike. Much like we talked about in the first quarter, I guess it's a little unusual to see comps outpacing total, but that was the case in Q2. And you're right, our total US comps were up 3% and what we're pleased with Mike, that's our fourth consecutive quarter of 3% plus comp. We did have store closures that we're up against. We had, I believe about 40 plus in -- that were not in our mix in 2019. But that's an ongoing part of our business. And where we have underperforming stores, whether they're company owned or independent owned, we're going to move and that's a necessary part of the business. I would tell you that we see that -- even though that was a factor in Q1 and Q2, we see that trend really slowing in the second half of the year.

Michael David Montani -- Evercore ISI Institutional Equities -- Analyst

Okay, thanks. And then if I could on traffic and ticket. I heard 1.2% from tariffs. Was the ticket basically the same so that traffic was up over 1.5% to drive this through the year?

Paul D. Donahue -- Chief Executive Officer & Chairman

Well, what I would tell you Mike, is that again, we saw our average basket, average ticket was up significantly year-over-year close to 4% up year-over-year. Unfortunately, what we saw this quarter, which showed a bit of a reversal over the last two or three quarters, is we saw our foot traffic down just a bit. And honestly, we attribute that to some of the inclement weather that we saw. When you have as much rain as we saw in late April, May, even into early June, that's going to -- unfortunately, it's going to impact the foot traffic we see in our stores. And so that was an impact in Q2.

Michael David Montani -- Evercore ISI Institutional Equities -- Analyst

The last thing I had was on the US EBIT margin, if I heard correctly for automotive was maybe down slightly, even with the 3.2% comp. And so I was just trying to reconcile that because with the total company, gross is up 85 bps plus and I think automotive was one of the stronger ones. Can you just help us understand and parse that out?

Carol B. Yancey -- Executive Vice President and Chief Financial Officer

Yeah. So again, we've talked about, and you're right, the US automotive team has done a terrific job on the gross margin. And we are really pleased in this inflationary and tariff environment to be able to protect and maintain our gross margin percentage, pass those through and also have just core improvement in gross margin. The things we talked about in SG&A and some of it I call out is our increased level of investment. These things that we're doing with facilities and automation and technology, digital investment, pricing investment, you see our elevated CapEx. We've talked about IT spend, cybersecurity. Those things are all weighing on their SG&A. We actually -- when we look at payroll and freight, where we were a year ago with payroll and freight is -- I mean, I think, I remember this call a year ago, payroll was up 6% in -- year-to-date. And a year ago freight was up, low double digit. They are sitting more like 2% to 3% in payroll and 6% to 7% for freight. So those things have moderated and that's helped, but we still have the cost of some of these investments that's in our SG&A. So they should be second half again, as comps continue around 3%. We should see that be similar and hopefully maybe a bit better in the second half.

Michael David Montani -- Evercore ISI Institutional Equities -- Analyst

Great, thanks so much.

Paul D. Donahue -- Chief Executive Officer & Chairman

Thanks, Mike.

Operator

Our next question here is from Chris Bottiglieri from Wolfe Research. Please go ahead.

Chris Bottiglieri -- Wolfe Research, LLC -- Analyst

Thanks for taking the questions. I just want to -- the last part you left off. Are you assuming 3% in the back half? Wasn't sure that was like a tongue slip or something.

Carol B. Yancey -- Executive Vice President and Chief Financial Officer

For our U.S. comps?

Chris Bottiglieri -- Wolfe Research, LLC -- Analyst

Yes, in the back half.

Carol B. Yancey -- Executive Vice President and Chief Financial Officer

That's fair, yes.

Chris Bottiglieri -- Wolfe Research, LLC -- Analyst

Okay, that's helpful. And then I want to dig in on margins for a little bit. So it's -- in Europe, it's roughly 20% of your business that's shown a 50 basis point decline. The math would imply European margins were down 250 bps. If I recall the accounting and business structure in France is a little bit different than the rest of Europe though. So it sounds like a lot better than 200 basis point decline last quarter given the weakening macro environment you saw in Q2. But just trying to understand if France was a disproportionate impact for that margin decline? If anyway you can contextualize, that would be helpful?

Carol B. Yancey -- Executive Vice President and Chief Financial Officer

Yeah. I mean, we're not going to get into exact specifics on that, but you heard Paul say, France was one of the toughest markets in Q2. And from a number of factors in the quarter, that was a difficult market and it was a difficult comp for them. Again, that team has a number of things in place that they're looking at and we should hope to see some of those things take effect. We do think and we've modeled for this that what we saw in the first half for Europe, the impact on margins does moderate in the second half. And that's because of some of the things they're putting in place. But France was a disproportionate number.

Chris Bottiglieri -- Wolfe Research, LLC -- Analyst

That's helpful. And then free cash flow. You kind of touched this in the prepared comments, but looks like you cut the free cash flow guide at $100 million. The EPS cut was I know just backing into with the price for EBITDA, seems a lot less. So trying to get a sense is our CapEx going up relative to the plan. Is it all working capital? Are there more like cash non-GAAP items driving that? Any way you can contextualize the cut of free cash flow would be helpful?

Carol B. Yancey -- Executive Vice President and Chief Financial Officer

Yeah. So I think -- I mean, you're right. We modified it slightly maybe around $100 million. I would say it's more around working capital. The timing of when these terms come. So let's say we have terms with our supplier that are 180 days and then we negotiate it to be 240 days or we negotiate to 360, we don't see that for another six months. So the timing of some of the working capital is what went into that. So that was really -- and there is some slight changes in some of the other categories, but mostly working capital. CapEx, we looked at $300 million, which is what it's been the whole time.

Chris Bottiglieri -- Wolfe Research, LLC -- Analyst

Got you. Okay. And then final one is like positive question. This industry is historically very dissensitive, a cyclical. I understand like initially, there's economic weakness in Europe and a lot of other factors that are transitory that you're dealing with. But is there any way to look at your data internally and tell you how did the European business perform on a same branch basis compared to how your US business performed in the last downturn? Just trying to get a sense for like does this get better or soon? Or this because it's defensive and like this cyclicality that we're seeing today maybe goes away even if European growth kind of stays where it is. Any way to contextualize, that would be helpful?

Paul D. Donahue -- Chief Executive Officer & Chairman

Yeah. Chris, I'll take a shot at it. Look, we do believe it's going to get better. The European marketplace, as I mentioned to an earlier question is very similar in nature. The aftermarket is very similar in nature to the US aftermarket. And I think what we saw, which was a bit unprecedented in Q2, as we talk to our senior management team, who you've met, Chris, they've been running that business for 30 years in Europe and what they saw in Q2, they have not seen in all the time they've been running that business. It was a confluence of events. Certainly, the slowdown in the economy. Some of the geopolitical issues with Yellow Vests and disruptions around that coupled with an incredibly mild winter and all of those factors unfortunately hit us at once and led to a really soft quarter for the team. We don't see that as a long-term situation, and certainly, we'll -- we're certainly expecting that to improve in the second half of the year and well into 2020.

Carol B. Yancey -- Executive Vice President and Chief Financial Officer

And I think one final thing. We think we will see improvements from their cost initiatives and as well as the integration of their acquisitions, too, as we look ahead, which will help offset those.

Chris Bottiglieri -- Wolfe Research, LLC -- Analyst

Got you. Makes sense. All right, thank you for the time.

Paul D. Donahue -- Chief Executive Officer & Chairman

Thanks, Chris.

Operator

This concludes today's question-and-answer session. I'd like to turn the floor back over to management for any closing comment.

Carol B. Yancey -- Executive Vice President and Chief Financial Officer

We'd like to thank you for your participation in today's call. We appreciate your support and interest in Genuine Parts Company, and we look forward to talking to you at our Q3 call. Thank you, and have a great day.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.

Duration: 77 minutes

Call participants:

Sidney G. Jones -- Senior Vice President, Investor Relations

Paul D. Donahue -- Chief Executive Officer & Chairman

Carol B. Yancey -- Executive Vice President and Chief Financial Officer

Daniel Imbro -- Stephens Inc. -- Analyst

Kate McShane -- Goldman Sachs -- Analyst

Scot Ciccarelli -- RBC Capital Markets -- Analyst

Christopher Horvers -- JP Morgan -- Analyst

Seth Basham -- Wedbush Securities -- Analsyt

Bret Jordan -- Jefferies LLC -- Analyst

Elizabeth Lane Suzuki -- Bank of America Merrill Lynch -- Analyst

Michael David Montani -- Evercore ISI Institutional Equities -- Analyst

Chris Bottiglieri -- Wolfe Research, LLC -- Analyst

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