Advance Auto Parts has announced its financial results for the second-quarter ended July 14, 2018.
Total net sales for the second quarter of 2018 were $2.3 billion, a 2.8 percent increase versus the second quarter of the prior year. Comparable store sales for the second quarter of 2018 increased 2.8 percent.
The company’s Adjusted operating income was $205.3 million in the second quarter of 2018, an increase of 5 percent versus the second quarter of the prior year. Adjusted operating income margin improved versus the same quarter of the prior year by 19 basis points to 8.8 percent of net sales for the second quarter of 2018. On a GAAP basis, the company’s operating income was $167.5 million, 7.2 percent of net sales, an increase of 72 basis points from the second quarter of 2017.
The company’s effective tax rate in the second quarter of 2018 was 25.2 percent, compared to 36 percent in the second quarter of the prior year. The company’s Adjusted EPS was $1.97 for the second quarter of 2018, an increase of 24.7 percent compared to the second quarter of the prior year. On a GAAP basis, the company’s Diluted EPS increased 35.9 percent to $1.59.
Operating cash flow was $444 million through the second quarter of 2018 versus $267.3 million in the same period of the prior year, an increase of 66.1 percent. Free cash flow through the second quarter of 2018 was $382.2 million, an increase of 163.6 percent compared to the same period of the prior year.
“Our relentless focus on strengthening our customer value proposition while embracing an owner’s mindset on cost and cash resulted in improved sales and profit performance in the second quarter. I am encouraged by the progress our team made during the first half of 2018 and confident in our ability to drive growth throughout the balance of 2018,” said Tom Greco, president and CEO.
Share Repurchase Authorization
“I am pleased with our ability to manage working capital and build cash balances that provide enhanced value for our shareholders. In line with our financial priorities, we are delighted to announce our target to return $100 million to $200 million to our shareholders through the new share repurchase program during the second half of 2018. This reinforces our confidence in the strength of our balance sheet and the level of liquidity achieved through the disciplined execution of our strategic plan,” said Greco.
On Aug. 8, the company’s board of directors authorized a $600 million share repurchase program. This new authorization replaces the company’s $500 million share repurchase program authorized in May 2012, which had $415 million remaining.
On Aug. 8, the Advance board of directors declared a regular quarterly cash dividend of 6 cents per share, to be paid on Oct. 5 to all common shareholders of record as of Sept. 21, 2018.
Key Additions to Executive Leadership Team and Board of Directors
Advance today also announced the appointments of Jeffrey Shepherd to executive vice president, chief financial officer (CFO) and Reuben Slone to executive vice president, supply chain. In addition, Nigel Travis, executive chairman of Dunkin Brands, was appointed to the company’s board of directors.
Since April, Shepherd served as Advance’s interim CFO in addition to his responsibilities as controller and chief accounting officer. He joined Advance during the first quarter of 2017 from General Motors, where he served most recently as controller for General Motors Europe. Prior to that role, Shepherd served in various accounting and finance leadership roles at General Motors. A certified public accountant, Shepherd also worked at Ernst & Young for more than 15 years and was a partner with the firm. Shepherd’s CFO appointment was effective Aug. 12.
“After conducting an extensive search for a CFO, I am thrilled to have Jeff taking on this important role,” said Tom Greco, president and CEO, Advance Auto Parts. “During his time at Advance, Jeff has been a tremendous thought partner and trusted adviser to me and the entire leadership team. In addition to Jeff’s impressive global finance background, he is a highly respected leader throughout our organization and has played an integral role in building a talented and highly cohesive finance organization. I am confident Jeff is the right leader for this critical position, and the entire team and I look forward to continuing to work closely with him.”
Slone, who will join Advance on Oct. 3, will be responsible for the company’s supply chain and procurement functions. He will assume the supply chain responsibilities as Leslie Starr Keating, executive vice president, supply chain strategy and transformation, will be retiring at the end of the year. In the coming months, Keating and Slone will work together to ensure a seamless transition, the company says.
Slone joins Advance from Walgreens, where he most recently served as senior vice president, supply chain, and was responsible for inventory management and replenishment, imports, transportation, distribution center operations and logistics. Prior to Walgreens, Slone served in a number of senior supply chain and operational leadership roles at OfficeMax, General Motors and Federal-Mogul, among others. He also has served as a member of Advance’s board of directors since 2016. With his new appointment, Slone will resign from his role on Advance’s board, effective Oct. 3.
“We are extremely excited to have Reuben join our executive leadership team at this point in our transformation,” said Greco. “After serving for more than two years on our board of directors, Reuben has a deep understanding of our business and our strategic vision for the future. This knowledge, coupled with his proven track record in leadership roles as well as his extensive omnichannel fulfillment experience, will be a great addition to our already strong supply chain team.”
“After serving on Advance’s board of directors, I am even more confident in the opportunities that lie ahead,” said Slone. “I am delighted to join this experienced management team and look forward to working with Advance’s talented Team Members as we continue on our transformation journey. In addition, I am grateful to have worked with Leslie as she developed the supply chain strategy and I look forward to working even more closely with her during the next few months until her retirement.”
Greco added, “Leslie came out of retirement early in 2017 to join Advance at my request to help build our end-to-end supply chain strategy, strengthen our supply chain leadership team and ultimately, help us find her successor. She has delivered flawlessly against all of these objectives and positioned us well for continued success. We thank her for her numerous contributions and wish her nothing but the best in her retirement.”
Nigel Travis, who currently serves as Dunkin Brands’ executive chairman, recently retired from his CEO position at the company after serving as chairman and CEO. Previously, Travis also served in executive leadership roles at several global companies within the retail and restaurant industries.’
“Adding Nigel to the board is wonderful for Advance, our shareholders and our customers,” said Jeffrey Smith, chair of the board of directors. “He is a highly respected global executive who will complement what is already an extremely talented board. While at Dunkin Brands, Nigel architected what is viewed as one of the more successful turnaround stories in recent history and we look forward to leveraging his wealth of experience as we continue our own transformation at Advance.”