Advance Auto Parts Reports Third Quarter 2024 Results and Completes Comprehensive Review of Operational Productivity
Advance Auto Parts (NYSE: AAP) reported Q3 2024 results with net sales of $2.1 billion, down from $2.2 billion year-over-year, and comparable store sales decreased 2.3%. Gross profit increased 11.0% to $907.9 million (42.3% of net sales). The company announced an Asset Optimization Program targeting reduction of 500 corporate stores, 200 independently owned locations, and four distribution centers by mid-2025.
The company completed the sale of Worldpac for approximately $1.5 billion and introduced new fiscal 2027 financial objectives targeting approximately 7% adjusted operating income margin. For full-year 2024, AAP expects comparable store sales of approximately -1.0% and adjusted operating income margin between 0.25% and 0.75%.
Advance Auto Parts (NYSE: AAP) ha riportato i risultati del terzo trimestre 2024 con vendite nette di $2,1 miliardi, in calo rispetto ai $2,2 miliardi dello scorso anno, e le vendite nei negozi comparabili sono diminuite del 2,3%. Il profitto lordo è aumentato dell'11,0% a $907,9 milioni (42,3% delle vendite nette). L'azienda ha annunciato un Programma di Ottimizzazione degli Attivi con l'obiettivo di ridurre 500 negozi corporate, 200 negozi di proprietà indipendente e quattro centri di distribuzione entro la metà del 2025.
L'azienda ha completato la vendita di Worldpac per circa $1,5 miliardi e ha introdotto nuovi obiettivi finanziari per il 2027, puntando a un margine di reddito operativo rettificato di circa il 7%. Per l'intero anno 2024, AAP prevede vendite comparabili nei negozi di circa -1,0% e un margine di reddito operativo rettificato compreso tra lo 0,25% e lo 0,75%.
Advance Auto Parts (NYSE: AAP) informó los resultados del tercer trimestre de 2024 con ventas netas de $2.1 mil millones, una disminución respecto a los $2.2 mil millones del año anterior, y las ventas en tiendas comparables cayeron un 2.3%. Las ganancias brutas aumentaron un 11.0% a $907.9 millones (42.3% de las ventas netas). La compañía anunció un Programa de Optimización de Activos que tiene como objetivo reducir 500 tiendas corporativas, 200 ubicaciones de propiedad independiente y cuatro centros de distribución para mediados de 2025.
La empresa completó la venta de Worldpac por aproximadamente $1.5 mil millones e introdujo nuevos objetivos financieros para el 2027, buscando un margen de ingreso operativo ajustado de aproximadamente el 7%. Para el año completo 2024, AAP espera ventas comparables en tiendas de aproximadamente -1.0% y un margen de ingreso operativo ajustado entre 0.25% y 0.75%.
Advance Auto Parts (NYSE: AAP)는 2024년 3분기 실적을 보고하며 순매출이 $21억으로 지난해 $22억에서 감소했으며, 비교 가능한 매장 매출도 2.3% 감소했다고 발표했습니다. 총 이익은 11.0% 증가하여 $9억 790만으로 집계되었습니다(순매출의 42.3%). 이 회사는 2025년 중반까지 500개의 기업 매장, 200개의 독립 운영 매장, 4개의 유통 센터 폐쇄를 목표로 하는 자산 최적화 프로그램을 발표했습니다.
회사는 약 $15억에 Worldpac의 매각을 완료하고 2027 회계 연도 재정 목표를introducing하여 약 7%의 조정 운영 수익 마진을 목표로 하고 있습니다. AAP는 2024 회계 연도 전체 매장 매출이 약 -1.0%가 될 것으로 예상하며, 조정 운영 수익 마진은 0.25%에서 0.75% 사이가 될 것으로 보입니다.
Advance Auto Parts (NYSE: AAP) a rapporté les résultats du troisième trimestre 2024 avec un chiffre d'affaires net de 2,1 milliards de dollars, en baisse par rapport à 2,2 milliards de dollars l'année précédente, et les ventes dans les magasins comparables ont diminué de 2,3%. Le bénéfice brut a augmenté de 11,0% pour atteindre 907,9 millions de dollars (42,3% du chiffre d'affaires net). L'entreprise a annoncé un programme d'optimisation des actifs visant à réduire 500 magasins d'entreprise, 200 emplacements indépendants et quatre centres de distribution d'ici mi-2025.
L'entreprise a conclu la vente de Worldpac pour environ 1,5 milliard de dollars et a introduit de nouveaux objectifs financiers pour l'exercice 2027 visant un objectif de marge de revenu opérationnel ajusté d'environ 7%. Pour l'année 2024 dans son ensemble, AAP s'attend à des ventes comparables d'environ -1,0% et à une marge de revenu opérationnel ajusté comprise entre 0,25% et 0,75%.
Advance Auto Parts (NYSE: AAP) berichtete über die Ergebnisse des dritten Quartals 2024 mit einem Nettoumsatz von $2,1 Milliarden, was im Vergleich zu $2,2 Milliarden im Vorjahr einen Rückgang darstellt, und die vergleichbaren Verkaufszahlen der Geschäfte sanken um 2,3%. Der Bruttogewinn stieg um 11,0% auf $907,9 Millionen (42,3% des Nettoumsatzes). Das Unternehmen kündigte ein Programm zur Optimierung der Vermögenswerte an, das die Reduzierung von 500 Unternehmensgeschäften, 200 unabhängig geführten Standorten und vier Verteilungszentren bis Mitte 2025 zum Ziel hat.
Das Unternehmen hat den Verkauf von Worldpac für ca. $1,5 Milliarden abgeschlossen und neue finanzielle Ziele für das Geschäftsjahr 2027 vorgestellt, die etwa 7% bereinigte operative Ertragsmarge anstreben. Für das Gesamtjahr 2024 rechnet AAP mit einem Rückgang der vergleichbaren Verkaufszahlen von etwa -1,0% und einer bereinigten operativen Ertragsmarge zwischen 0,25% und 0,75%.
- Gross profit increased 11.0% to $907.9 million (42.3% of net sales vs 36.9% prior year)
- Completed Worldpac sale for $1.5 billion cash consideration
- Net cash provided by operating activities improved to $81.0 million vs -$28.3 million prior year
- Net sales declined to $2.1 billion from $2.2 billion year-over-year
- Comparable store sales decreased 2.3%
- Adjusted operating income margin declined to 0.8% vs prior year
- Negative full-year 2024 guidance with comparable store sales expected at -1.0%
- Planning closure of 500 corporate stores and 200 independent locations
Insights
The Q3 results and strategic restructuring announcement reveal significant challenges at Advance Auto Parts. Net sales declined to
The company's aggressive restructuring plan to close 500 corporate stores, 200 independent locations and 4 distribution centers by mid-2025 signals a major operational overhaul. The
The scale of AAP's restructuring reflects deeper industry challenges beyond company-specific issues. The planned closure of 700 total locations represents a significant reduction in retail footprint that will reshape market dynamics in the auto parts sector. While this may benefit competitors like AutoZone and O'Reilly in terms of market share, it also signals potential saturation and evolving consumer behavior in the aftermarket parts industry.
The focus on "core retail fundamental excellence" and
- Announces Asset Optimization Program Targeting Reduction of 500 Corporate Stores, 200 Independently Owned Locations and Four Distribution Centers by Mid-2025
-
Introduces New Fiscal 2027 Financial Objectives Targeting Approximately
7% Adjusted Operating Income Margin (1) and Approximately 2.5x Debt Leverage Ratio; Provides Preliminary 2025 Guidance - Identifies Over 500-basis points of Operating Margin Expansion Opportunity Through Fiscal 2027 With Focus on Core Retail Fundamental Excellence
"We are pleased to have made progress on our strategic actions, including the completion of the sale of Worldpac and a comprehensive operational productivity review of our business,” said Shane O’Kelly, president and chief executive officer. “We are charting a clear path forward and introducing a new three-year financial plan, with a focus on executing core retail fundamentals to improve the productivity of all our assets and to create shareholder value."
On November 1, 2024, the company completed its previously announced sale of Worldpac for aggregate cash consideration of approximately
Third Quarter 2024 Results (1,2,3,4)
Third quarter 2024 net sales from continuing operations totaled
The company's gross profit increased
The company's SG&A expenses were
The company's operating income was
The company's effective tax rate was (58.4)%, compared with
Net cash provided by operating activities was
(1) |
Adjusted Operating Income Margin 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. |
|
(2) |
All comparisons are based on continuing operations for the same time period in the prior year, unless otherwise specified. The company calculates comparable store sales based on the change in store or branch sales starting once a location has been open for approximately one year and by including e-commerce sales and excluding sales fulfilled by distribution centers to independently owned Carquest locations. Acquired stores are included in the company's comparable store sales one year after acquisition. The company includes sales from relocated stores in comparable store sales from the original date of opening. |
|
(3) |
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 28, 2024. |
|
(4) |
On August 22, 2024, the company entered into a definitive purchase agreement to sell its Worldpac Inc. business (“Worldpac”), which reflects a strategic shift in its business. The sale was completed on November 1, 2024. As a result, the company has classified the results of operations and cash flows of Worldpac as discontinued operations in its condensed consolidated statements of operations and condensed consolidated statements of cash flows for all periods presented. The related assets and liabilities associated with the discontinued operations are classified as held for sale in the condensed consolidated balance sheets. |
Capital Allocation
On October 29, 2024, the company declared a regular cash dividend of
Full Year 2024 Guidance
For the balance of 2024, the company is providing guidance that includes expectations for continuing operations as well as adjusted metrics that take into account non-GAAP adjustments.
|
|
As of November 14, 2024 |
||||||
($ in millions, except per share data) |
|
Low |
|
High |
||||
Net sales from continuing operations |
|
Approx. |
||||||
Comparable store sales (1) |
|
Approx. ( |
||||||
Adjusted operating income margin from continuing operations |
|
|
0.25 |
% |
|
|
0.75 |
% |
Adjusted diluted EPS from continuing operations |
|
$ |
(0.60 |
) |
|
$ |
0.00 |
|
Capital expenditures |
|
$ |
175 |
|
|
$ |
225 |
|
Free cash flow (2) |
|
Approx. flat (including strategic costs) |
(1) |
The company calculates comparable store sales based on the change in store or branch sales starting once a location has been open for approximately one year and by including e-commerce sales and excluding sales fulfilled by distribution centers to independently owned Carquest locations. Acquired stores are included in the company's comparable store sales one year after acquisition. The company includes sales from relocated stores in comparable store sales from the original date of opening. |
|
(2) |
Adjusted operating income margin from continuing operations, Adjusted diluted EPS from continuing operations and Free cash flow are non-GAAP measures. 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. The company is not able to provide a reconciliation of these forward-looking non-GAAP measures because it is unable to predict with reasonable accuracy the value of certain adjustments and as a result, the comparable GAAP measures are unavailable without unreasonable efforts. |
Strategic Priorities and Financial Objectives
Strategic Priorities
The company is executing a strategic plan to improve business performance with a focus on core retail improvements. The company has identified opportunities that it believes can improve adjusted operating income margin by more than 500-basis points through fiscal 2027. This strategic plan is anchored on three pillars outlined below to put the company on the path to deliver consistent profitable growth.
-
Store operations
-
Reduction in
U.S. asset footprint - closing 523 Advance corporate stores, exiting 204 independent locations, and closing four distribution centers. - Standardization of store operating model and improving labor productivity.
- Acceleration in pace of new store openings.
-
Reduction in
-
Merchandising excellence
- Strategic sourcing to improve first costs and bring parts to market faster.
- Assortment management to enhance availability of parts.
- Pricing and promotions management to improve gross margin.
-
Supply chain
- Consolidation of distribution centers to operate 13 large facilities by 2026.
- Opening of 60 market hub locations by mid-2027.
- Optimization of transportation routes and freight to lower costs and improve productivity.
Financial Objectives (Advance Auto Parts continuing operations)
The company is introducing new fiscal 2027 financial objectives and providing preliminary fiscal 2025 guidance.
|
|
Preliminary FY 2025 Guidance (53 weeks) |
|
FY 2027 Objectives |
Net sales ($ in millions) |
|
|
|
Approx. |
Comparable sales growth |
|
|
|
Positive low-single-digit % |
New store growth |
|
30 new stores |
|
50 to 70 new stores |
Adjusted operating income margin (1) |
|
|
|
Approx. |
Leverage Ratio (Adj. debt/ Adj. EBITDAR) (1) |
|
3.0x – 4.0x |
|
Approx. 2.5x |
(1) |
Adjusted operating income margin is based on performance of Advance continuing operations and excludes intercompany margins related to Worldpac. Adjusted operating income margin from continuing operations and Adjusted Debt to Adjusted EBITDAR ratio (“leverage ratio”) are non-GAAP measures. 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. The company is not able to provide a reconciliation of these forward-looking non-GAAP measures because it is unable to predict with reasonable accuracy the value of certain adjustments and as a result, the comparable GAAP measures are unavailable without unreasonable efforts. |
Investor Conference Call
The company will detail its results for the third quarter ended October 5, 2024, via a webcast scheduled to begin at 8 a.m. Eastern Time on Thursday, November 14, 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 installers and do-it-yourself customers. As of October 5, 2024, Advance operated 4,781 stores 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,” “target,” “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, restructuring and asset optimization plans, financial objectives, operational plans and objectives, statements about the sale of the company’s Worldpac business, including statements regarding the benefits of the sale and use of proceeds therefrom, statements regarding 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 hire, train and retain qualified employees, the timing and implementation of strategic initiatives, risks associated with the company’s restructuring and asset optimization plans, deterioration of general macroeconomic conditions, geopolitical factors, the highly competitive nature of the industry, demand for the company’s products and services, ongoing risks associated with the disposition of Worldpac, the company’s ability to maintain credit ratings, risks relating to the impairment of assets, including intangible assets such as goodwill, 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) (unaudited) |
||||||
|
||||||
|
October 5, 2024 |
|
December 30, 2023 |
|||
Assets |
|
|
|
|||
Current assets: |
|
|
|
|||
Cash and cash equivalents |
$ |
464,492 |
|
$ |
488,049 |
|
Receivables, net |
|
668,937 |
|
|
609,528 |
|
Inventories, net |
|
4,042,200 |
|
|
3,893,569 |
|
Other current assets |
|
180,448 |
|
|
180,402 |
|
Current assets held for sale |
|
2,137,690 |
|
|
1,205,473 |
|
Total current assets |
|
7,493,767 |
|
|
6,377,021 |
|
Property and equipment, net |
|
1,479,738 |
|
|
1,555,985 |
|
Operating lease right-of-use assets |
|
2,399,630 |
|
|
2,347,073 |
|
Goodwill |
|
600,182 |
|
|
601,159 |
|
Other intangible assets, net |
|
409,501 |
|
|
419,161 |
|
Other noncurrent assets |
|
85,366 |
|
|
85,988 |
|
Noncurrent assets held for sale |
|
— |
|
|
889,939 |
|
Total assets |
$ |
12,468,184 |
|
$ |
12,276,326 |
|
Liabilities and Stockholders' Equity |
|
|
|
|||
Current liabilities: |
|
|
|
|||
Accounts payable |
$ |
3,498,460 |
|
$ |
3,526,079 |
|
Accrued expenses |
|
641,914 |
|
|
616,067 |
|
Other current liabilities |
|
458,343 |
|
|
396,408 |
|
Current liabilities held for sale |
|
994,824 |
|
|
768,851 |
|
Total current liabilities |
|
5,593,541 |
|
|
5,307,405 |
|
Long-term debt |
|
1,788,513 |
|
|
1,786,361 |
|
Noncurrent operating lease liabilities |
|
2,018,383 |
|
|
2,039,908 |
|
Deferred income taxes |
|
380,118 |
|
|
355,635 |
|
Other long-term liabilities |
|
89,949 |
|
|
83,538 |
|
Noncurrent liabilities held for sale |
|
— |
|
|
183,751 |
|
Total stockholders' equity |
|
2,597,680 |
|
|
2,519,728 |
|
Total liabilities and stockholders’ equity |
$ |
12,468,184 |
|
$ |
12,276,326 |
Advance Auto Parts, Inc. and Subsidiaries |
||||||||||||||||
Condensed Consolidated Statements of Operations |
||||||||||||||||
(In thousands, except per share data) (unaudited) |
||||||||||||||||
|
|
|
|
|
||||||||||||
|
Twelve Weeks Ended |
|
Forty Weeks Ended |
|||||||||||||
|
October 5, 2024 |
|
October 7, 2023(1) |
|
October 5, 2024 |
|
October 7, 2023(1) |
|||||||||
Net sales |
$ |
2,147,991 |
|
|
$ |
2,218,205 |
|
|
$ |
7,098,302 |
|
|
$ |
7,194,670 |
|
|
Cost of sales, including purchasing and warehousing costs |
|
1,240,093 |
|
|
|
1,400,638 |
|
|
|
4,036,898 |
|
|
|
4,154,190 |
|
|
Gross profit |
|
907,898 |
|
|
|
817,567 |
|
|
|
3,061,404 |
|
|
|
3,040,480 |
|
|
Selling, general and administrative expenses |
|
907,495 |
|
|
|
896,145 |
|
|
|
2,954,707 |
|
|
|
2,959,238 |
|
|
Operating income (loss) |
|
403 |
|
|
|
(78,578 |
) |
|
|
106,697 |
|
|
|
81,242 |
|
|
Other, net: |
|
|
|
|
|
|
|
|||||||||
Interest expense |
|
(18,805 |
) |
|
|
(19,375 |
) |
|
|
(62,127 |
) |
|
|
(69,948 |
) |
|
Other income (expense), net |
|
2,393 |
|
|
|
(305 |
) |
|
|
12,769 |
|
|
|
232 |
|
|
Total other, net |
|
(16,412 |
) |
|
|
(19,680 |
) |
|
|
(49,358 |
) |
|
|
(69,716 |
) |
|
(Loss) income before provision for income taxes |
|
(16,009 |
) |
|
|
(98,258 |
) |
|
|
57,339 |
|
|
|
11,526 |
|
|
Provision for income taxes |
|
9,354 |
|
|
|
(24,072 |
) |
|
|
34,763 |
|
|
|
6,360 |
|
|
Net (loss) income from continuing operations |
|
(25,363 |
) |
|
|
(74,186 |
) |
|
|
22,576 |
|
|
|
5,166 |
|
|
Net income from discontinued operations |
|
19,349 |
|
|
|
12,149 |
|
|
|
56,413 |
|
|
|
59,696 |
|
|
Net (loss) income |
$ |
(6,014 |
) |
|
$ |
(62,037 |
) |
|
$ |
78,989 |
|
|
$ |
64,862 |
|
|
|
|
|
|
|
|
|
|
|||||||||
Basic (loss) earnings per common share from continuing operations |
$ |
(0.42 |
) |
|
$ |
(1.25 |
) |
|
$ |
0.38 |
|
|
$ |
0.09 |
|
|
Basic earnings per common share from discontinued operations |
|
0.32 |
|
|
|
0.20 |
|
|
|
0.95 |
|
|
|
1.00 |
|
|
Basic (loss) earnings per common share |
$ |
(0.10 |
) |
|
$ |
(1.05 |
) |
|
$ |
1.33 |
|
|
$ |
1.09 |
|
|
Basic weighted-average common shares outstanding |
|
59,684 |
|
|
|
59,474 |
|
|
|
59,618 |
|
|
|
59,411 |
|
|
|
|
|
|
|
|
|
|
|||||||||
Diluted (loss) earnings per common share from continuing operations |
$ |
(0.42 |
) |
|
$ |
(1.24 |
) |
|
$ |
0.38 |
|
|
$ |
0.09 |
|
|
Diluted earnings per common share from discontinued operations |
|
0.32 |
|
|
|
0.20 |
|
|
|
0.94 |
|
|
|
1.00 |
|
|
Diluted (loss) earnings per common share |
$ |
(0.10 |
) |
|
$ |
(1.04 |
) |
|
$ |
1.32 |
|
|
$ |
1.09 |
|
|
Diluted weighted-average common shares outstanding |
|
59,902 |
|
|
|
59,630 |
|
|
|
59,878 |
|
|
|
59,588 |
|
(1) |
The condensed consolidated statement of operations for the twelve and forty weeks ended October 7, 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) |
||||||||
|
|
|
|
|||||
|
Forty Weeks Ended |
|||||||
|
October 5, 2024 |
|
October 7, 2023 |
|||||
Cash flows from operating activities: |
|
|
|
|||||
Net income |
$ |
78,989 |
|
|
$ |
64,862 |
|
|
Net income from discontinued operations |
|
56,413 |
|
|
|
59,696 |
|
|
Net income from continuing operations |
|
22,576 |
|
|
|
5,166 |
|
|
Adjustments to reconcile net income to net cash used in operating activities: |
|
|
|
|||||
Depreciation and amortization |
|
217,197 |
|
|
|
206,658 |
|
|
Share-based compensation |
|
33,810 |
|
|
|
33,777 |
|
|
(Gain) Loss on sale and impairment of long-lived assets |
|
(14,273 |
) |
|
|
1,886 |
|
|
Provision for deferred income taxes |
|
24,289 |
|
|
|
(27,811 |
) |
|
Other, net |
|
2,986 |
|
|
|
2,436 |
|
|
Net change in: |
|
|
|
|||||
Receivables, net |
|
(60,383 |
) |
|
|
(161,629 |
) |
|
Inventories, net |
|
(152,229 |
) |
|
|
(110,871 |
) |
|
Accounts payable |
|
(25,225 |
) |
|
|
(77,336 |
) |
|
Accrued expenses |
|
30,794 |
|
|
|
171,117 |
|
|
Other assets and liabilities, net |
|
1,477 |
|
|
|
(71,707 |
) |
|
Net cash provided by (used in) operating activities from continuing operations |
|
81,019 |
|
|
|
(28,314 |
) |
|
Net cash provided by operating activities from discontinued operations |
|
76,917 |
|
|
|
57,148 |
|
|
Net cash provided by operating activities |
|
157,936 |
|
|
|
28,834 |
|
|
Cash flows from investing activities: |
|
|
|
|||||
Purchases of property and equipment |
|
(129,714 |
) |
|
|
(174,186 |
) |
|
Proceeds from sales of property and equipment |
|
13,232 |
|
|
|
2,001 |
|
|
Net cash used in investing activities of continuing operations |
|
(116,482 |
) |
|
|
(172,185 |
) |
|
Net cash used in investing activities of discontinued operations |
|
(7,988 |
) |
|
|
(13,015 |
) |
|
Net cash used in investing activities |
|
(124,470 |
) |
|
|
(185,200 |
) |
|
Cash flows from financing activities: |
|
|
|
|||||
Borrowings under credit facilities |
|
— |
|
|
|
4,805,000 |
|
|
Payments on credit facilities |
|
— |
|
|
|
(4,990,000 |
) |
|
Borrowings on senior unsecured notes |
|
— |
|
|
|
599,571 |
|
|
Dividends paid |
|
(44,882 |
) |
|
|
(194,322 |
) |
|
Purchases of noncontrolling interests |
|
(9,101 |
) |
|
|
— |
|
|
Proceeds from the issuance of common stock |
|
2,995 |
|
|
|
3,045 |
|
|
Repurchases of common stock |
|
(5,601 |
) |
|
|
(14,237 |
) |
|
Other, net |
|
(1,143 |
) |
|
|
(5,010 |
) |
|
Net cash (used in) provided by financing activities |
|
(57,732 |
) |
|
|
204,047 |
|
|
|
Forty Weeks Ended |
|||||||
|
October 5, 2024 |
|
October 7, 2023 |
|||||
Effect of exchange rate changes on cash |
|
11,766 |
|
|
|
(1,932 |
) |
|
|
|
|
|
|||||
Net (decrease) increase in cash and cash equivalents |
|
(12,500 |
) |
|
|
45,749 |
|
|
Cash and cash equivalents, beginning of period |
|
503,471 |
|
|
|
270,805 |
|
|
Cash and cash equivalents, end of period |
$ |
490,971 |
|
|
$ |
316,554 |
|
|
|
|
|
|
|||||
Summary of cash and cash equivalents: |
|
|
|
|||||
Cash and cash equivalents of continuing operations, end of period |
$ |
464,492 |
|
|
$ |
308,804 |
|
|
Cash and cash equivalents of discontinued operations, end of period |
|
26,479 |
|
|
|
7,750 |
|
|
Cash and cash equivalents, end of period |
$ |
490,971 |
|
|
$ |
316,554 |
|
(1) |
The condensed consolidated statement of cash flows for the forty weeks ended October 7, 2023, reflects the correction of non-material errors the company discovered in previously reported results. |
Restatement of Previously Issued Financial Statements
During the fiscal year ended December 30, 2023, the company identified errors primarily impacting cost of sales, selling, general and administrative costs and other income/expenses, net, incurred in prior years but not previously recognized. The company evaluated the errors and determined that the related impacts were not material to the previously issued consolidated financial statements for any prior period. A summary of the corrections to the impacted financial statement line items in the company's Condensed Consolidated Statement of Operations for the twelve and forty weeks ended October 7, 2023, and the company's Condensed Consolidated Statement of Cash Flows for the forty weeks ended October 7, 2023, included in the company's previously filed Annual Report on Form 10-K are presented below:
Condensed Consolidated Statement of Operations |
|||||||||||||||||||
October 7, 2023 |
|||||||||||||||||||
|
Twelve Weeks Ended |
||||||||||||||||||
(in thousands) |
As Previously Reported |
|
Adjustments |
|
As Corrected |
|
Discontinued Operations |
|
As Corrected, after Discontinued Operations |
||||||||||
Cost of sales |
$ |
1,732,420 |
|
|
$ |
16,379 |
|
|
$ |
1,748,799 |
|
|
$ |
348,161 |
|
$ |
1,400,638 |
|
|
Gross profit |
|
986,659 |
|
|
|
(16,379 |
) |
|
|
970,280 |
|
|
|
152,713 |
|
|
817,567 |
|
|
Selling, general and administrative expenses |
|
1,030,355 |
|
|
|
878 |
|
|
|
1,031,233 |
|
|
|
135,088 |
|
|
896,145 |
|
|
Operating (loss) income |
|
(43,696 |
) |
|
|
(17,257 |
) |
|
|
(60,953 |
) |
|
|
17,625 |
|
|
(78,578 |
) |
|
(Loss) Income before provision for income taxes |
|
(64,319 |
) |
|
|
(17,257 |
) |
|
|
(81,576 |
) |
|
|
16,682 |
|
|
(98,258 |
) |
|
Provision for income taxes |
|
(15,686 |
) |
|
|
(3,853 |
) |
|
|
(19,539 |
) |
|
|
4,533 |
|
|
(24,072 |
) |
|
Net (loss) income |
$ |
(48,633 |
) |
|
$ |
(13,404 |
) |
|
$ |
(62,037 |
) |
|
$ |
12,149 |
|
$ |
(74,186 |
) |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic (loss) earnings per share |
$ |
(0.82 |
) |
|
$ |
(0.23 |
) |
|
$ |
(1.05 |
) |
|
$ |
0.20 |
|
$ |
(1.25 |
) |
|
Diluted (loss) earnings per common share |
$ |
(0.82 |
) |
|
$ |
(0.22 |
) |
|
$ |
(1.04 |
) |
|
$ |
0.20 |
|
$ |
(1.24 |
) |
Condensed Consolidated Statement of Operations |
||||||||||||||||
October 7, 2023 |
||||||||||||||||
|
Forty Weeks Ended |
|||||||||||||||
(in thousands) |
As Previously Reported |
|
Adjustments |
|
As Corrected |
|
Discontinued Operations |
|
As Corrected, after Discontinued Operations |
|||||||
Cost of sales |
$ |
5,220,200 |
|
$ |
29,877 |
|
|
$ |
5,250,077 |
|
$ |
1,095,887 |
|
$ |
4,154,190 |
|
Gross profit |
|
3,602,538 |
|
|
(29,877 |
) |
|
|
3,572,661 |
|
|
532,181 |
|
|
3,040,480 |
|
Selling, general and administrative expenses |
|
3,407,445 |
|
|
2,272 |
|
|
|
3,409,717 |
|
|
450,479 |
|
|
2,959,238 |
|
Operating income (loss) |
|
195,093 |
|
|
(32,149 |
) |
|
|
162,944 |
|
|
81,702 |
|
|
81,242 |
|
Income (loss) before provision for income taxes |
|
124,894 |
|
|
(32,149 |
) |
|
|
92,745 |
|
|
81,219 |
|
|
11,526 |
|
Provision for income taxes |
|
34,649 |
|
|
(6,766 |
) |
|
|
27,883 |
|
|
21,523 |
|
|
6,360 |
|
Net income (loss) |
$ |
90,245 |
|
$ |
(25,383 |
) |
|
$ |
64,862 |
|
$ |
59,696 |
|
$ |
5,166 |
|
|
|
|
|
|
|
|
|
|
|
|||||||
Basic earnings (loss) per share |
$ |
1.52 |
|
$ |
(0.43 |
) |
|
$ |
1.09 |
|
$ |
1.00 |
|
$ |
0.09 |
|
Diluted earnings (loss) per common share |
$ |
1.51 |
|
$ |
(0.42 |
) |
|
$ |
1.09 |
|
$ |
1.00 |
|
$ |
0.09 |
Condensed Consolidated Statement of Cash Flows |
||||||||||||||||||||
Forty Weeks Ended October 7, 2023 |
||||||||||||||||||||
(in thousands) |
As Previously Reported |
|
Adjustments |
|
As Corrected |
|
Discontinued Operations |
|
As Corrected, after Discontinued Operations |
|||||||||||
Net income |
$ |
90,245 |
|
|
$ |
(25,383 |
) |
|
$ |
64,862 |
|
|
$ |
59,696 |
|
|
$ |
5,166 |
|
|
Provision for deferred income taxes |
|
(33,059 |
) |
|
|
5,248 |
|
|
|
(27,811 |
) |
|
|
— |
|
|
|
(27,811 |
) |
|
Other, net |
|
1,499 |
|
|
|
937 |
|
|
|
2,436 |
|
|
|
— |
|
|
|
2,436 |
|
|
Net change in: |
|
|
|
|
|
|
|
|
|
|||||||||||
Receivables, net |
|
(170,371 |
) |
|
|
(9,519 |
) |
|
|
(179,890 |
) |
|
|
(18,261 |
) |
|
|
(161,629 |
) |
|
Inventories, net |
|
(41,025 |
) |
|
|
15,442 |
|
|
|
(25,583 |
) |
|
|
85,288 |
|
|
|
(110,871 |
) |
|
Accounts payable |
|
(191,871 |
) |
|
|
28,500 |
|
|
|
(163,371 |
) |
|
|
(86,035 |
) |
|
|
(77,336 |
) |
|
Accrued expenses |
|
145,704 |
|
|
|
21,521 |
|
|
|
167,225 |
|
|
|
(3,892 |
) |
|
|
171,117 |
|
|
Other assets and liabilities, net |
|
(45,015 |
) |
|
|
(38,316 |
) |
|
|
(83,331 |
) |
|
|
(11,624 |
) |
|
|
(71,707 |
) |
|
Net cash provided by (used in) operating activities |
|
30,404 |
|
|
|
(1,570 |
) |
|
|
28,834 |
|
|
|
57,148 |
|
|
|
(28,314 |
) |
|
Other, net (1) |
|
(4,073 |
) |
|
|
(937 |
) |
|
|
(5,010 |
) |
|
|
— |
|
|
|
(5,010 |
) |
|
Net cash provided by financing activities |
|
204,984 |
|
|
|
(937 |
) |
|
|
204,047 |
|
|
|
|
|
|||||
Effect of exchange rate changes on cash |
|
(1,942 |
) |
|
|
10 |
|
|
|
(1,932 |
) |
|
|
|
|
|||||
Net increase (decrease) in cash and cash equivalents |
|
48,246 |
|
|
|
(2,497 |
) |
|
|
45,749 |
|
|
|
|
|
|||||
Cash and cash equivalents, beginning of period |
|
269,282 |
|
|
|
1,523 |
|
|
|
270,805 |
|
|
|
50,670 |
|
|
|
220,135 |
|
|
Cash and cash equivalents, end of period |
$ |
317,528 |
|
|
$ |
(974 |
) |
|
$ |
316,554 |
|
|
$ |
7,750 |
|
|
$ |
308,804 |
|
(1) |
The summary of corrections table above inadvertently omitted disclosure for proceeds from the issuance of common stock as follows: |
Reconciliation of Non-GAAP Financial Measures
The company's financial results include certain financial measures not derived in accordance with accounting principles generally accepted in
The company has presented these non-GAAP financial measures as the company believes that the presentation of the financial results that exclude (1) transformation expenses under the company’s turnaround plan, (2) other significant costs and (3) nonrecurring tax expense are useful and indicative of the company's base operations because the expenses vary from period to period in terms of size, nature and significance. These measures assist in comparing the company’s current operating results with past periods and with the operational performance of other companies in the industry. The disclosure of these measures allows investors to evaluate the company’s performance using the same measures management uses in developing internal budgets and forecasts and in evaluating management’s compensation. Included below is a description of the expenses the company has determined are not normal, recurring cash operating expenses necessary to operate the company’s business and the rationale for why providing these measures is useful to investors as a supplement to the GAAP measures.
Transformation Expenses — Costs incurred in connection with the company's turnaround plan and specific transformative activities related to asset optimization that the company does not view to be normal cash operating expenses. These expenses primarily include:
- Distribution network optimization — Costs primarily relating to the conversion of the stores and DCs to market hubs, including temporary labor, team member severance, long-lived asset write off charges and incremental depreciation, as a result of accelerating depreciation of long-lived assets over a shorter useful life as a result of the optimization plans.
- Third-party professional services — Costs relating to non-recurring services rendered by third-party vendors assisting with the turnaround initiatives.
Other Expenses — Costs incurred by the company that are not viewed as normal cash operating expenses and vary from period to period in terms of size, nature, and significance, including but not limited to executive turnover and incremental costs associated with remediating the company's previously-disclosed material weaknesses in internal control over financial reporting.
Nonrecurring Tax Expense — Income tax incurred by the company from the book to tax basis difference in the Worldpac Canada stock directly resulting from the sale of Worldpac.
The following tables include reconciliations of this information to the most comparable GAAP measures:
Reconciliation of Adjusted Net Income and Adjusted EPS: |
||||||||||||||||
|
Twelve Weeks Ended |
|
Forty Weeks Ended |
|||||||||||||
(in thousands, except per share data) |
October 5, 2024 |
|
October 7, 2023 |
|
October 5, 2024 |
|
October 7, 2023 |
|||||||||
Net (loss) income from continuing operations (GAAP) |
$ |
(25,363 |
) |
|
$ |
(74,186 |
) |
|
$ |
22,576 |
|
|
$ |
5,166 |
|
|
Selling, general and administrative adjustments: |
|
|
|
|
|
|
|
|||||||||
Transformation expenses: |
|
|
|
|
|
|
|
|||||||||
Distribution network optimization |
|
8,909 |
|
|
|
— |
|
|
|
13,943 |
|
|
|
— |
|
|
Third-party professional services |
|
3,582 |
|
|
|
50 |
|
|
|
5,301 |
|
|
|
320 |
|
|
Other charges: |
|
|
|
|
|
|
|
|||||||||
Executive turnover |
|
87 |
|
|
|
3,799 |
|
|
|
1,561 |
|
|
|
5,360 |
|
|
Material weakness remediation |
|
1,293 |
|
|
|
429 |
|
|
|
3,649 |
|
|
|
429 |
|
|
Other significant costs(1) |
|
2,394 |
|
|
|
— |
|
|
|
3,491 |
|
|
|
— |
|
|
Provision for income taxes on adjustments(2) |
|
(4,066 |
) |
|
|
(1,070 |
) |
|
|
(6,986 |
) |
|
|
(1,527 |
) |
|
Nonrecurring tax expense |
|
10,000 |
|
|
|
— |
|
|
|
10,000 |
|
|
|
— |
|
|
Adjusted net (loss) income (Non-GAAP) |
$ |
(3,164 |
) |
|
$ |
(70,978 |
) |
|
$ |
53,535 |
|
|
$ |
9,748 |
|
|
|
|
|
|
|
|
|
|
|||||||||
Diluted (loss) earnings per share from continuing operations (GAAP) |
$ |
(0.42 |
) |
|
$ |
(1.24 |
) |
|
$ |
0.38 |
|
|
$ |
0.09 |
|
|
Adjustments, net of tax |
|
0.38 |
|
|
|
0.05 |
|
|
|
0.52 |
|
|
|
0.08 |
|
|
Adjusted EPS (Non-GAAP) |
$ |
(0.04 |
) |
|
$ |
(1.19 |
) |
|
$ |
0.90 |
|
|
$ |
0.17 |
(1) |
During the twelve and forty weeks ended October 5, 2024, the Company recorded expense of |
|
(2) |
The income tax impact of non-GAAP adjustments is calculated using the estimated tax rate in effect for the respective non-GAAP adjustments. |
Reconciliation of Adjusted Selling, General and Administrative Expenses |
||||||||||||
|
Twelve Weeks Ended |
|
Forty Weeks Ended |
|||||||||
(in thousands) |
October 5, 2024 |
|
October 7, 2023 |
|
October 5, 2024 |
|
October 7, 2023 |
|||||
SG&A (GAAP) |
$ |
907,495 |
|
$ |
896,145 |
|
$ |
2,954,707 |
|
$ |
2,959,238 |
|
SG&A adjustments |
|
16,265 |
|
|
4,278 |
|
|
27,945 |
|
|
6,109 |
|
Adjusted SG&A (Non-GAAP) |
$ |
891,230 |
|
$ |
891,867 |
|
$ |
2,926,762 |
|
$ |
2,953,129 |
Reconciliation of Adjusted Operating Income: |
|||||||||||||
|
Twelve Weeks Ended |
|
Forty Weeks Ended |
||||||||||
(in thousands) |
October 5, 2024 |
|
October 7, 2023 |
|
October 5, 2024 |
|
October 7, 2023 |
||||||
Operating income (GAAP) |
$ |
403 |
|
$ |
(78,578 |
) |
|
$ |
106,697 |
|
$ |
81,242 |
|
SG&A adjustments |
|
16,265 |
|
|
4,278 |
|
|
|
27,945 |
|
|
6,109 |
|
Adjusted operating income (Non-GAAP) |
$ |
16,668 |
|
$ |
(74,300 |
) |
|
$ |
134,642 |
|
$ |
87,351 |
NOTE: |
Adjusted SG&A, Adjusted SG&A as a percentage of Net sales, Adjusted operating income and Adjusted operating income margin (calculated by dividing Adjusted operating income by Net sales) are non-GAAP measures. Management believes these non-GAAP measures are important metrics in assessing the overall performance of the business and utilizes these metrics in its ongoing reporting. On that basis, management believes it is useful to provide these metrics to investors and prospective investors to evaluate the company’s operating performance across periods adjusting for these items (refer to the reconciliations of non-GAAP adjustments above). These non-GAAP measures might not be calculated in the same manner as, and thus might not be comparable to, similarly titled measures reported by other companies. Non-GAAP measures should not be used by investors or third parties as the sole basis for formulating investment decisions, as they may exclude a number of important cash and non-cash recurring items. |
Reconciliation of Free Cash Flow: (1) |
|
|
|
|||||
|
Forty Weeks Ended |
|||||||
(in thousands) |
October 5, 2024 |
|
October 7, 2023 |
|||||
Cash flows provided by operating activities of continuing operations |
$ |
81,019 |
|
|
$ |
(28,314 |
) |
|
Purchases of property and equipment |
|
(129,714 |
) |
|
|
(174,186 |
) |
|
Free cash flow |
$ |
(48,695 |
) |
|
$ |
(202,500 |
) |
Adjusted Debt to Adjusted EBITDAR: (1) |
|
|
|
|||||
|
Four Quarters Ended |
|||||||
(In thousands, except adjusted debt to adjusted EBITDAR ratio) |
October 5, 2024 |
|
December 30, 2023 |
|||||
Total GAAP debt |
$ |
1,788,513 |
|
|
$ |
1,786,361 |
|
|
Add: Operating lease liabilities |
|
2,711,578 |
|
|
|
2,660,827 |
|
|
Adjusted debt |
$ |
4,500,091 |
|
|
$ |
4,447,188 |
|
|
|
|
|
|
|||||
GAAP Net income |
$ |
50,819 |
|
|
$ |
29,735 |
|
|
Depreciation and amortization |
|
309,566 |
|
|
|
306,454 |
|
|
Interest expense |
|
80,559 |
|
|
|
88,055 |
|
|
Other expense, net |
|
(16,174 |
) |
|
|
(5,525 |
) |
|
Provision for income taxes |
|
23,843 |
|
|
|
2,112 |
|
|
Rent expense |
|
638,232 |
|
|
|
613,859 |
|
|
Share-based compensation |
|
46,557 |
|
|
|
45,647 |
|
|
Other charges (2) |
|
40,091 |
|
|
|
12,419 |
|
|
Transformation related charges |
|
27,131 |
|
|
|
29,719 |
|
|
Adjusted EBITDAR |
$ |
1,200,624 |
|
|
$ |
1,122,475 |
|
|
|
|
|
|
|||||
Adjusted Debt to Adjusted EBITDAR |
|
3.7 |
|
|
|
4.0 |
|
(1) |
The four quarters ended October 5, 2024, includes the correction of non-material errors the company discovered in previously reported results. |
|
(2) |
The adjustments to the four quarters ended October 5, 2024, and December 30, 2023, include expenses associated with the company's material weakness remediation efforts and executive turnover. |
|
|
|
|
NOTE: |
Management believes its Adjusted Debt to Adjusted EBITDAR ratio (“leverage ratio”) is a key financial metric for debt securities, as reviewed by rating agencies, and believes its debt levels are best analyzed using this measure. The company’s goal is to maintain an investment grade rating. The company's credit rating directly impacts the interest rates on borrowings under its existing credit facility and could impact the company's ability to obtain additional funding. If the company was unable to maintain its investment grade rating, this could negatively impact future performance and limit growth opportunities. Similar measures are utilized in the calculation of the financial covenants and ratios contained in the company's financing arrangements. The leverage ratio calculated by the company is a non-GAAP measure and should not be considered a substitute for debt to net earnings, as determined in accordance with GAAP. The company adjusts the calculation to remove rent expense and to add back the company’s existing operating lease liabilities related to their right-of-use assets to provide a more meaningful comparison with the company’s peers and to account for differences in debt structures and leasing arrangements. The company’s calculation of its leverage ratio may not be calculated in the same manner as other companies, and thus may not be comparable to similarly titled measures used by other companies. |
Store Information
During the forty weeks ended October 5, 2024, 23 stores were opened and 29 were closed, resulting in a total of 4,781 stores as of October 5, 2024, compared with a total of 4,786 stores as of December 30, 2023.
The below table summarizes the changes in the number of company-operated stores during the twelve and forty weeks ended October 5, 2024:
|
|
Twelve Weeks Ended |
|||||||
|
|
AAP |
|
CARQUEST |
|
Total |
|||
July 15, 2024 |
|
4,484 |
|
|
292 |
|
|
4,776 |
|
New |
|
9 |
|
|
— |
|
|
9 |
|
Closed |
|
(2 |
) |
|
(2 |
) |
|
(4 |
) |
Converted |
|
1 |
|
|
(1 |
) |
|
— |
|
October 5, 2024 |
|
4,492 |
|
|
289 |
|
|
4,781 |
|
|
|
Forty Weeks Ended |
|||||||
|
|
AAP |
|
CARQUEST |
|
Total |
|||
December 30, 2023 |
|
4,484 |
|
|
302 |
|
|
4,786 |
|
New |
|
23 |
|
|
— |
|
|
23 |
|
Closed |
|
(17 |
) |
|
(12 |
) |
|
(29 |
) |
Converted |
|
2 |
|
|
(1 |
) |
|
1 |
|
October 5, 2024 |
|
4,492 |
|
|
289 |
|
|
4,781 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20241113582088/en/
Investor Relations Contact:
Lavesh Hemnani
T: (919) 227-5466
E: invrelations@advance-auto.com
Media Contact:
Darryl Carr
T: (984) 389-7207
E: AAPCommunications@advance-auto.com
Source: Advance Auto Parts, Inc.
FAQ
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