STOCK TITAN

Advance Auto Parts Reports First Quarter 2024 Results

Rhea-AI Impact
(Neutral)
Rhea-AI Sentiment
(Neutral)
Tags
Rhea-AI Summary

Advance Auto Parts (NYSE: AAP) reported its Q1 2024 financial results, showing a net sales decrease of 0.3% to $3.4 billion compared to the same period last year.

Comparable store sales declined by 0.2% and gross profit fell by 2.2% to $1.4 billion. The gross profit margin decreased by 82 basis points to 42%. SG&A expenses improved to 39.4% of net sales from 39.9% due to cost control efforts.

Operating income was $86 million (2.5% of net sales) and the effective tax rate increased to 33.2%. Diluted EPS dropped to $0.67 from $0.81. Free cash flow was an outflow of $46.3 million, better than the $472.5 million outflow in the previous year.

The company declared a dividend of $0.25 per share, payable on July 26, 2024. For the full year, AAP forecasts net sales between $11.3 billion and $11.5 billion, with diluted EPS ranging from $3.75 to $4.25.

Positive
  • SG&A expenses reduced to 39.4% of net sales from 39.9% due to cost control.
  • Free cash flow outflow improved to $46.3 million from $472.5 million in the previous year.
  • Dividend of $0.25 per share declared, payable on July 26, 2024.
  • Q1 2024 operating income of $86 million, representing 2.5% of net sales.
  • Net cash provided by operating activities was $2.7 million compared to a $382.5 million outflow in the previous year.
Negative
  • Net sales decreased by 0.3% to $3.4 billion year-over-year.
  • Comparable store sales dropped by 0.2%.
  • Gross profit declined by 2.2% to $1.4 billion.
  • Gross profit margin decreased by 82 basis points to 42%.
  • Operating income margin declined to 2.5% from 2.9% year-over-year.
  • Diluted EPS fell from $0.81 to $0.67.
  • Effective tax rate increased to 33.2% from 28.5%.

Insights

Advance Auto Parts has reported a 0.3% decrease in net sales, which might be construed as a slight concern for investors given the broader context of expected growth. However, a closer look reveals a nuanced picture. While sales dipped marginally, the company’s efforts to tighten its cost controls are noteworthy. The SG&A expenses decline by 50 basis points to 39.4% of net sales, indicating effective cost management. This reduction was achieved through a combination of headcount reduction and marketing expense cuts, partially offset by reinvestment in field wages and training. The operating income, while slightly lower year-over-year, reflects these operational improvements.

The gross profit margin decrease of 82 basis points to 42.0% can be a red flag. This was mainly due to increased costs that weren't fully offset by pricing. Investors should keep an eye on whether these cost pressures persist or whether the company's supply chain improvements will help mitigate them in future quarters. The effective tax rate increase and EPS drop further underline the need for caution in the short term, though these may be less impactful over the longer term as operational efficiencies take hold.

Advance Auto Parts’ free cash flow improvement from a significant outflow to a much smaller outflow of $46.3 million is encouraging. It underlines liquidity improvements, which are essential for ongoing investments and potential acquisitions.

Overall, while the results are mixed, the cost control measures and cash flow improvements position the company for better performance in the future, suggesting a cautiously optimistic outlook for long-term investors.

The slight decrease in net sales and comparable store sales indicates a challenging market environment for Advance Auto Parts, possibly due to macroeconomic factors such as inflation and fluctuating demand in the automotive aftermarket industry. However, the company's strategic focus on supply chain consolidation and the potential sale of Worldpac could streamline operations and enhance profitability.

Advance Auto Parts' decision to convert three distribution centers to market hubs is a strategic move that may reduce logistics complexity and improve delivery times, ultimately enhancing the customer experience. Reinvesting savings into frontline compensation and training also suggests a focus on improving service quality, which could foster customer loyalty in a competitive market.

Despite these positive moves, the decrease in gross profit and drop in operating income margin reflect underlying cost pressures. Investors should monitor how effectively the company can leverage its cost-cutting measures and reinvestments to drive future growth.

The company's full-year guidance indicates modest growth aspirations, with projected net sales of $11.3 to $11.5 billion and comparable store sales growth of up to 1%. This conservative outlook could reflect cautious optimism amid ongoing economic uncertainties.

Overall, while the company's proactive measures are commendable, the effectiveness of these strategies in driving sustained growth remains to be seen, warranting a watchful approach from investors.

RALEIGH, N.C.--(BUSINESS WIRE)-- Advance Auto Parts, Inc. (NYSE: AAP), a leading automotive aftermarket parts provider in North America that serves both professional installer and do-it-yourself customers, announced its financial results for the first quarter ended April 20, 2024.

“Our team continues to execute against our decisive actions, including commencing our supply chain consolidation and making meaningful progress toward the potential sale of Worldpac,” said Shane O’Kelly, president and chief executive officer. “While the industry experienced a slower start to 2024 compared with our expectations, the actions we began in the back half of last year will help us streamline our operations for the long term. Our leadership team and I continue to focus on improving the core fundamentals of our business while reducing costs, which is reflected in our year-over-year SG&A reduction. As previously announced, we are reinvesting a portion of the savings back into the foundation of our business, including frontline compensation and training. We also made progress on our other decisive actions, including beginning three of our DC to market hub conversions.

“We continue to work on improving our overall performance by removing complexities and distractions to increase our value proposition and deliver shareholder value. We recognize we still have significant work ahead of us, however the actions we're taking will put us on the path to delivering improved results. I want to thank all our team members for their continued commitment to serving our customers as we navigate through this pivotal year for Advance.”

First Quarter 2024 Results (1,2)

First quarter 2024 net sales totaled $3.4 billion, a 0.3% decrease compared with the first quarter of the prior year. Comparable store sales decreased 0.2%.

The company's gross profit decreased 2.2% to $1.4 billion. Gross profit margin of 42.0% decreased 82 basis points compared with the first quarter of the prior year. This was primarily driven by increased costs that were not fully covered by pricing actions. These were partially offset by supply chain productivity.

SG&A expenses were $1.3 billion, which improved to 39.4% of net sales compared with 39.9% in the first quarter of 2023. This was primarily driven by the cost control efforts initiated at the end of 2023, including reduced corporate expenditures from the decrease in headcount and significant reduction of marketing expenses as well as a net gain on asset sales. These were partially offset by the reinvestment in field wages and training as well as typical expense inflationary pressure.

The company's operating income was $86.0 million, or 2.5% of net sales, compared with 2.9% in the first quarter of 2023.

The company's effective tax rate was 33.2%, compared with 28.5% in the first quarter of 2023. The higher effective income tax rate was due to a discrete charge for share-based compensation. The company's diluted EPS was $0.67 compared with $0.81 in the first quarter of 2023.

Net cash provided by operating activities was $2.7 million through the first quarter of 2024 versus $382.5 million of cash used in operating activities in the same period of the prior year. Free cash flow through the first quarter of 2024 was an outflow of $46.3 million compared with an outflow of $472.5 million in the same period of the prior year.

Capital Allocation

On May 21, 2024, the company declared a regular cash dividend of $0.25 per share to be paid on July 26, 2024 to all common stockholders of record as of July 12, 2024.

__________________________________
(1)

All comparisons are based on the same time period in the prior year. Comparable store sales include locations open for 13 complete accounting periods and exclude sales fulfilled by distribution centers to independently owned Carquest locations.

(2)

As reported in the company’s fourth quarter and full year 2023 earnings release, the company corrected non-material errors in certain previously reported financials. All comparisons are based on the corrected historical results as presented in the company’s prior earnings release dated February 29, 2024.

Full Year 2024 Guidance

 

 

As of May 29, 2024

($ in millions, except per share data)

 

Low

 

High

Net sales

 

$

11,300

 

 

$

11,500

 

Comparable store sales(1)

 

 

0.0

%

 

 

1.0

%

Operating income margin

 

 

3.2

%

 

 

3.5

%

Diluted EPS

 

$

3.75

 

 

$

4.25

 

Capital expenditures

 

$

200

 

 

$

250

 

Free cash flow (2)

 

Minimum $250

(1)

Comparable store sales include locations open for 13 complete accounting periods and exclude sales fulfilled by distribution centers to independently owned Carquest locations.

(2)

Free cash flow is a non-GAAP measure. For a better understanding of the company's non-GAAP adjustments, refer to the reconciliation of non-GAAP financial measures in the accompanying financial tables included herein.

Investor Conference Call

The company will detail its results for the first quarter ended April 20, 2024 via a webcast scheduled to begin at 8 a.m. Eastern Time on Wednesday, May 29, 2024. The webcast will be accessible via the Investor Relations page of the company's website (ir.AdvanceAutoParts.com).

To join by phone, please pre-register online for dial-in and passcode information. Upon registering, participants will receive a confirmation with call details and a registrant ID. While registration is open through the live call, the company suggests registering a day in advance or at minimum 10 minutes before the start of the call. A replay of the conference call will be available on the company's Investor Relations website for one year.

About Advance Auto Parts

Advance Auto Parts, Inc. is a leading automotive aftermarket parts provider that serves both professional installer and do-it-yourself customers. As of April 20, 2024 Advance operated 4,777 stores and 320 Worldpac branches primarily within the United States, with additional locations in Canada, Puerto Rico and the U.S. Virgin Islands. The company also served 1,152 independently owned Carquest branded stores across these locations in addition to Mexico and various Caribbean islands. Additional information about Advance, including employment opportunities, customer services, and online shopping for parts, accessories and other offerings can be found at www.AdvanceAutoParts.com.

Forward-Looking Statements

Certain statements herein are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are usually identifiable by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast, “guidance,” “intend,” “likely,” “may,” “plan,” “position,” “possible,” “potential,” “probable,” “project,” “should,” “strategy,” “will,” or similar language. All statements other than statements of historical fact are forward-looking statements, including, but not limited to, statements about the company’s strategic initiatives, including cost reduction initiatives, the company's ability to complete the potential divestitures of Worldpac and Carquest Canada, operational plans and objectives, expectations for economic conditions, future business and financial performance, as well as statements regarding underlying assumptions related thereto. Forward-looking statements reflect the company’s views based on historical results, current information and assumptions related to future developments. Except as may be required by law, the company undertakes no obligation to update any forward-looking statements made herein. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements. They include, among others, the company’s ability to complete the potential divestitures of Worldpac and Carquest Canada, the company’s ability to hire, train and retain qualified employees, the timing and implementation of strategic initiatives, deterioration of general macroeconomic conditions,  geopolitical conflicts, the highly competitive nature of the industry, demand for the company’s products and services, access to financing on favorable terms, complexities in the company’s inventory and supply chain and challenges with transforming and growing its business.  Please refer to “Item 1A. Risk Factors” of the company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), as updated by the company’s subsequent filings with the SEC, for a description of these and other risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements.

Advance Auto Parts, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands)

 

 

April 20, 2024 (1)

 

December 30, 2023 (1)

 

(Unaudited)

 

(Audited)

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

451,003

 

$

503,471

Receivables, net

 

825,384

 

 

800,141

Inventories

 

4,828,314

 

 

4,857,702

Other current assets

 

236,507

 

 

215,707

Total current assets

 

6,341,208

 

 

6,377,021

Property and equipment, net

 

1,611,251

 

 

1,648,546

Operating lease right-of-use assets

 

2,589,504

 

 

2,578,776

Goodwill

 

989,921

 

 

991,743

Other intangible assets, net

 

583,547

 

 

593,341

Other assets

 

85,679

 

 

86,899

Total assets

$

12,201,110

 

$

12,276,326

Liabilities and Stockholders' Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

4,031,299

 

$

4,177,974

Accrued expenses

 

668,205

 

 

671,237

Other current liabilities

 

510,345

 

 

458,194

Total current liabilities

 

5,209,849

 

 

5,307,405

Long-term debt

 

1,787,221

 

 

1,786,361

Noncurrent operating lease liabilities

 

2,191,201

 

 

2,215,766

Deferred income taxes

 

364,564

 

 

362,542

Other long-term liabilities

 

83,625

 

 

84,524

Total stockholders' equity

 

2,564,650

 

 

2,519,728

Total liabilities and stockholders’ equity

$

12,201,110

 

$

12,276,326

(1)

These condensed consolidated balance sheets have been prepared on a basis consistent with the company's previously prepared consolidated balance sheets filed with the Securities and Exchange Commission (“SEC”), or derived from the audited consolidated financial statements at that date, but does not include the footnotes required by accounting principles generally accepted in the United States of America (“GAAP”).

Advance Auto Parts, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share data) (unaudited)

 

 

Sixteen Weeks Ended

 

April 20, 2024

 

April 22, 2023 (1)

Net sales

$

3,406,254

 

 

$

3,417,594

 

Cost of sales, including purchasing and warehousing costs

 

1,977,180

 

 

 

1,955,666

 

Gross profit

 

1,429,074

 

 

 

1,461,928

 

Selling, general and administrative expenses

 

1,343,053

 

 

 

1,363,990

 

Operating income

 

86,021

 

 

 

97,938

 

Other, net:

 

 

 

Interest expense

 

(24,875

)

 

 

(29,718

)

Other expense, net

 

(1,290

)

 

 

(674

)

Total other, net

 

(26,165

)

 

 

(30,392

)

Income before provision for income taxes

 

59,856

 

 

 

67,546

 

Provision for income taxes

 

19,844

 

 

 

19,223

 

Net income

$

40,012

 

 

$

48,323

 

 

 

 

 

Basic earnings per common share

$

0.67

 

 

$

0.81

 

Weighted-average common shares outstanding

 

59,558

 

 

 

59,334

 

 

 

 

 

Diluted earnings per common share

$

0.67

 

 

$

0.81

 

Weighted-average common shares outstanding

 

59,841

 

 

 

59,544

 

(1)

The condensed consolidated statement of operations for the sixteen weeks ended April 22, 2023 reflects the correction of non-material errors the company discovered in previously reported results.

Advance Auto Parts, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands) (unaudited)

 

 

 

 

 

Sixteen Weeks Ended

 

April 20, 2024

 

April 22, 2023

FAQ

What were Advance Auto Parts' Q1 2024 net sales?

Advance Auto Parts reported Q1 2024 net sales of $3.4 billion, a 0.3% decrease year-over-year.

How did Advance Auto Parts' comparable store sales perform in Q1 2024?

Comparable store sales for Q1 2024 decreased by 0.2%.

What was the gross profit for Advance Auto Parts in Q1 2024?

The gross profit for Q1 2024 was $1.4 billion, a decline of 2.2% year-over-year.

How much did Advance Auto Parts' SG&A expenses improve in Q1 2024?

SG&A expenses improved to 39.4% of net sales from 39.9% in Q1 2023.

What were Advance Auto Parts' operating income and margin for Q1 2024?

The operating income was $86 million with an operating income margin of 2.5%.

What was the diluted EPS for Advance Auto Parts in Q1 2024?

The diluted EPS for Q1 2024 was $0.67, down from $0.81 in Q1 2023.

What is Advance Auto Parts' outlook for full year 2024 net sales?

Advance Auto Parts expects full year 2024 net sales to range between $11.3 billion and $11.5 billion.

When will Advance Auto Parts pay the declared dividend?

Advance Auto Parts will pay the dividend of $0.25 per share on July 26, 2024.

ADVANCE AUTO PARTS INC

NYSE:AAP

AAP Rankings

AAP Latest News

AAP Stock Data

2.27B
59.67M
1.11%
110.35%
12.13%
Specialty Retail
Retail-auto & Home Supply Stores
Link
United States of America
RALEIGH