Advance Auto Parts Reports First Quarter 2024 Results
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.
- 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.
- 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
The gross profit margin decrease of
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
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.
“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
The company's gross profit decreased
SG&A expenses were
The company's operating income was
The company's effective tax rate was
Net cash provided by operating activities was
Capital Allocation
On May 21, 2024, the company declared a regular cash dividend of
| __________________________________ | |
| (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 |
||||||
(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
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 |
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?
How did Advance Auto Parts' comparable store sales perform in Q1 2024?
What was the gross profit for Advance Auto Parts in Q1 2024?
How much did Advance Auto Parts' SG&A expenses improve in Q1 2024?
What were Advance Auto Parts' operating income and margin for Q1 2024?
What was the diluted EPS for Advance Auto Parts in Q1 2024?
What is Advance Auto Parts' outlook for full year 2024 net sales?
When will Advance Auto Parts pay the declared dividend?
