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Advance Auto Parts Reports 2nd Quarter Fiscal 2017 Results

Second quarter sales increased year-over-year to $2.26 billion.

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Advance Auto Parts Inc. has announced its financial results for the second quarter ended July 15, 2017. Second quarter GAAP earnings per diluted share (diluted EPS) were $1.17. Second quarter adjusted earnings per diluted share (adjusted EPS) were $1.58, which excludes 41 cents of non-GAAP adjustments.

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“We delivered sales growth and continued to close the comp sales performance gap versus the industry in the second quarter while more than doubling year-to-date free cash flow,” said Tom Greco, president and CEO. “Our revised guidance for the year incorporates the impact of industry headwinds in the first half, which we expect to continue in the second half of the year and we are taking the appropriate actions to adapt to this environment. We’ve now assembled a world-class leadership team that is executing our transformation plan to significantly drive growth and long-term shareholder value.”

Second Quarter 2017 Highlights

Total sales for second quarter came in at $2.26 billion, a 0.3 percent increase versus the prior-year period. Comparable store sales for the quarter were flat.

The company’s gross profit margin decreased 91 basis points year-over-year to 43.9 percent. The decline was primarily driven by the non-cash accounting impact of the planned inventory reduction as well as the increase in supply chain costs, unfavorable mix and commodity headwinds. These factors were partially offset by the company’s efforts to drive favorable material cost performance. Excluding the non-cash accounting impact of the inventory reduction, the company’s gross profit margin decreased 65 basis points year-over-year.

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The company’s adjusted operating income of $195.5 million (8.6 percent margin) declined 214 basis points versus prior year, primarily driven by the declines in gross profit and SG&A factors described above. Excluding the non-cash impact of the inventory reduction the Adjusted Operating income would have been $207.3 million (9.2 percent margin), a decline of 188 basis points on a year-over-year basis. On a GAAP basis, the company’s operating income declined 312 basis points.

Operating cash flow increased approximately 28.3 percent to $267.3 million through the second quarter of 2017 from $208.4 million through the second quarter of 2016. Free cash flow was $145 million through the second quarter of 2017 compared to $70.5 million through the second quarter of 2016 primarily driven by inventory reduction efforts.

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