Advance Auto Parts Inc
Q3 2024 Earnings
Market Reaction
S&P 500 over the same 30 days: +1.84%.
Did AAP Beat Earnings? Q3 2024 Results
Advance Auto Parts delivered a deeply disappointing third quarter, with adjusted diluted EPS of negative $0.04 missing the $0.54 consensus estimate by 107.44% and revenue of $2.15 billion falling 19.59% short of expectations while declining 3.2% year over year, as the auto parts retailer grappled with a 2.3% comparable store sales decline compounded by roughly 125 basis points of atypical headwinds from Hurricane Helene and the CrowdStrike outage that alone weighed $0.34 on EPS. The results arrived alongside one of the most sweeping restructuring announcements in the company's recent history, with plans to shutter 523 corporate stores, exit 204 independent locations, and close four distribution centers by mid-2025, effectively withdrawing from the Western U.S. to concentrate on stronger eastern markets. Management's three-year recovery plan targets approximately $9.00 billion in net sales and roughly 7% adjusted operating income margin by 2027, while preliminary 2025 guidance calls for net sales of $8.40 billion to $8.60 billion and adjusted operating income margin of 2.00% to 3.00%.
- Gross margin expanded to 42.3% from 36.9% YoY due to lapping one-time inventory reserve changes and stabilizing product costs
- Comparable store sales decreased 2.3%
- Approximately 125 basis points of negative operating income margin impact from Hurricane Helene lost revenue and CrowdStrike outage downtime
- Higher labor-related expenses due to frontline wage investments partially offset by reduced marketing expenses
- SG&A deleveraged due to lower sales
“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. 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.”
Advance Auto Parts CEO, on the earnings call
Forward Guidance & Outlook
For full year 2024, the company expects net sales from continuing operations of approximately $9.0 billion, comparable store sales decline of approximately 1.0%, adjusted operating income margin of 0.25%-0.75%, adjusted diluted EPS of ($0.60) to $0.00, capital expenditures of $175-$225 million, and approximately flat free cash flow including strategic costs. For preliminary FY 2025 (53 weeks), the company guides net sales of $8.4-$8.6 billion, comparable sales growth of 0.50%-1.50%, 30 new stores, adjusted operating income margin of 2.00%-3.00%, and leverage ratio of 3.0x-4.0x. FY 2027 financial objectives target approximately $9.0 billion in net sales, positive low-single-digit comparable sales growth, 50-70 new stores, approximately 7% adjusted operating income margin, and approximately 2.5x leverage ratio, representing over 500 basis points of operating margin expansion opportunity.
AAP YoY Financials
Figures from SEC filings and company reports. Not investment advice.