Advance Auto Parts has announced its financial results for the fourth quarter and full year ended Jan. 2, 2021.

“Since the onset of the pandemic, we have prioritized the health, safety and wellbeing of our team members and customers. We are incredibly grateful to our team members and independent partners for their dedication and perseverance. They were an inspiration to all of us as they cared for each other and our customers while balancing numerous obstacles both at work and at home. This enabled us to do our part to keep America moving,” said Tom Greco, president and CEO.

“As a result, Advance delivered another quarter of growth in comp sales, margin expansion and free cash flow as we crossed $10 billion in annual net sales for the first time ever. We believe our DIY omnichannel net sales continued to benefit from the impact COVID-19 had on the economy and resulting consumer behaviors. Meanwhile, we leveraged our scale to differentiate Advance and gain market share in the quarter. This was highlighted by the successful launch of the DieHard® brand, the expansion of our Carquest® brand and continued success from our Advance Same Day™ suite of fulfillment options. We also ramped up execution on our primary initiatives to expand gross margin in the quarter including strategic pricing, owned brand expansion and the streamlining of our supply chain. We believe our actions in the fourth quarter position us well to drive additional top-line growth and further margin expansion in 2021.

“Through the first four weeks of 2021, we are growing comparable store sales low double digits with strength across both DIY omnichannel and Professional. We are also encouraged by improving trends in the Northeast and Mid Atlantic Regions, which are still lagging the country, but closing the gap. In addition, we remain laser focused on the execution of our long-term plan to drive growth at or above industry growth rates, deliver meaningful margin expansion, and return excess cash to shareholders. We look forward to sharing more details in our March release of our third annual Sustainability and Social Responsibility Report, as well as an update on our strategic business plan, which we will share with investors on April 20th.”

Fourth Quarter and Full Year 2020 Operating Results

Fourth quarter 2020 Net sales totaled $2.4 billion, a 12% increase compared to the fourth quarter of the prior year. Comparable store sales growth for the fourth quarter 2020 was 4.7%. For the full year 2020, Net sales were $10.1 billion, an increase of 4.1% from full year 2019 results. Full year 2020 Comparable store sales growth was 2.4%. The fourth quarter and full year 2020 included 13 weeks and 53 weeks compared to 12 week and 52 weeks for the fourth quarter and full year 2019. The additional week in 2020 added $158.5 million to fourth quarter and full year Net sales.

Adjusted gross profit margin was 45.9% of Net sales in the fourth quarter of 2020, a 192 basis point increase from the fourth quarter of 2019. This improvement was primarily driven by price improvements, inventory management, including a reduction in inventory shrink, and supply chain leverage. The company’s GAAP Gross profit margin increased to 45.8% from 44.0% in the fourth quarter of the prior year. Adjusted gross profit margin for the full year 2020 was 44.4%, a 38 basis points improvement from prior year, while full year 2020 GAAP Gross profit margin increased 52 basis points to 44.3%.

Increased costs associated with COVID-19, as well as well as the additional week in the fourth quarter of 2020, resulted in higher SG&A expense compared to the fourth quarter of 2019. Adjusted SG&A as a percent of Net sales increased to 38.6% in the fourth quarter 2020, compared to 36.9% in the prior year. In addition to the COVID-19 related expenses and additional week, the increase in adjusted SG&A as a percent of Net sales was driven by lease termination costs related to the ongoing optimization of our real estate footprint, higher medical claim expenses and investment in marketing in the fourth quarter of 2020. The company’s GAAP SG&A for the fourth quarter 2020 was 39.4% of Net sales compared to 38.0% in the same quarter of the prior year. For the full year 2020, Adjusted SG&A was 36.2%, a 39-basis point increase compared to the full year 2019. The company’s full year 2020 GAAP SG&A was 36.9% of Net sales compared to 36.8% for the full year 2019. The additional week in 2020 contributed $53.5 million to fourth quarter and full year SG&A.

The company generated Adjusted operating income of $171.8 million in the fourth quarter 2020, an increase of 14.6% from prior year results. Fourth quarter 2020 Adjusted operating income margin increased to 7.3% of Net sales, an improvement of 17 basis points from the prior year. On a GAAP basis, operating income was $151.8 million, an increase of 20.4% compared to the fourth quarter of the prior year and Operating income margin was 6.4% of Net sales, which was 45 basis points improved from the prior year. For full year 2020, Adjusted operating income was $827.3 million, an increase of 4.1% from the full year 2019. Full year 2020 Adjusted operating income margin was unchanged from prior year results at 8.2% of Net sales. The company’s full year 2020 GAAP Operating income totaled $749.9 million, 7.4% of Net sales, an increase of 45 basis points compared to the full year 2019. The additional week in 2020 contributed $20.1 million to fourth quarter and full year Operating income.

The company’s Adjusted diluted EPS was $1.87 for the fourth quarter 2020, an increase of 14% compared to the same quarter in the prior year. On a GAAP basis, the company’s Diluted EPS increased 19.6% to $1.65. 

Full year 2020 Adjusted diluted EPS was $8.51, an increase of 3.9% from full year 2019 results. The company’s diluted EPS on a GAAP basis increased 4.4% to $7.14 year over year. The additional week in 2020 contributed $0.23 to the fourth quarter and full year Diluted EPS.

Capital Allocation 

During 2020, the company repurchased a total of 3 million shares of its common stock for an aggregate amount of $458.5 million, or an average price of $150.65 per share. At the end of the fourth quarter of 2020, the company had $432.2 million remaining under the share repurchase program.

On Feb. 10, the company’s board of directors declared a quarterly cash dividend of $0.25 per share to be paid on April 2, 2021 to all common shareholders of record as of March 19, 2021.