09/21/2018

Advance Auto Parts Reports Strong Second Quarter

Source: Counterman

Advance Auto Parts reported year-over-year improvements in most second-quarter financial metrics, including a 25 percent increase in adjusted earnings per share (EPS) that delighted Wall Street.

For the quarter, net sales jumped 2.8 percent to $2.3 billion, while comparable store sales increased 2.8 percent. Operating income was up 14.2 percent to $167.5 million.

“As we indicated on our Q1 call, the delayed start of our spring selling season hindered our sales performance in the latter part of the first quarter,” Advance CEO Thomas Greco said during the company’s second-quarter conference call. “Early in Q2, however, we saw increased demand across many categories, which we believe will continue to positively impact AAP for the remainder of 2018 as our DIY business and Professional customers benefit from investments in previously delayed repairs.”

Sales of brakes and batteries were up, and Advance saw “strong growth in spring-related categories” such as lighting, appearance chemicals and maintenance, according to Greco.

“In addition we delivered a substantial improvement in engine management and undercar versus previous run rates as we leveraged long-term vendor partnerships to help with the early deployment of the right inventory leveraging new analytical capabilities,” Greco added.

Compared to the first quarter, sales were up in nearly every region for Advance, especially in the Midwest, Appalachian, Southwest and Gulf Coast regions, which had “the largest sequential improvements.”

“We’re raising our game on execution, which is enabling us to win business, drive growth and significantly narrow the performance gap versus the industry,” Greco said. “In addition, our focus on cost control and working capital enabled bottom-line growth year-over-year and a substantial improvement in cash flow.”

Citing a stronger start to the year and improving demand, Advance ratcheted up its full-year financial guidance, which helped send shares of Advance stock higher.

“Our increased revenue outlook is reflective of the improving industry trends, coupled with our top-line growth, better operational execution and our robust SKU assortment,” Greco said. “ Our team remains dedicated to cost control to enable further margin improvement.”

Advance, which is in the midst of a turnaround plan, closed 20 stores during the quarter, according to Greco. The company also is the process of closing two distribution centers, as it overhauls its supply chain.