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Advance Auto Parts Reports Q2 2021 Results

Net sales increased 5.9% to $2.6 billion.

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Advance Auto Parts has announced its financial results for the second quarter ended July 17, 2021.

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Net sales for the second quarter of 2021 were $2.6 billion, a 5.9% increase versus the second quarter of the prior year. Comparable store sales for the second quarter of 2021 increased 5.8%. The increase was led by a strong recovery in the company’s professional business.

Adjusted gross profit increased 11.7% to $1.2 billion. Adjusted gross profit margin was 46.4% of Net sales in the second quarter of 2021, a 239 basis point increase from the second quarter of 2020. This was driven by improvements in category management initiatives, including strategic sourcing, strategic pricing and owned brand expansion as well as favorable inventory related costs compared to the prior year. These improvements were partially offset by inflationary costs within supply chain and unfavorable channel mix. The company’s GAAP Gross profit margin increased to 44.9% from 43.8% in the second quarter of 2020.

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Year-to-date operating cash flow was $776.2 million through the second quarter of 2021 versus $448.2 million in the same period of the prior year, an increase of 73.2%. The increase was primarily driven by an improvement in net sales and increased cash generated from operations, as well as other working capital improvements. Free cash flow through the second quarter of 2021 more than doubled to $646.6 million from $308.1 million in the same period of the prior year.

“Advance’s second quarter results highlight the strength of our team and diversified asset base as we continue to make progress on our long-term strategic objectives,” said Tom Greco, president and CEO. “I’d like to thank all our team members and independent partners for their relentless focus on execution. In the second quarter, we delivered a 5.8% increase in comparable store sales and 13.3% on a two-year stack. Our top-line improvement was led by the professional business with a recovery in miles driven fueling demand as we lapped double-digit DIY omnichannel growth in the prior year. Our Adjusted operating income margin expanded 11 basis points to 11.4%. When compared with the second quarter of 2019, our Adjusted operating income margin increased 227 basis points demonstrating progress against our margin expansion initiatives. Adjusted diluted EPS increased 15.3% to $3.40 compared with the second quarter of 2020 and increased 56.7% compared with 2019. Our commitment to improving working capital and protecting our balance sheet throughout the pandemic enabled a more than doubling of our Free cash flow when compared with the same period of 2020. Year to date through the second quarter of 2021, Free cash flow of $646.6 million, increased 70% versus the same period of 2019.

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“We’re committed to a balanced approach in returning cash to shareholders as we remain focused on driving total shareholder return. In Q2, we returned a record $457.9 million to our shareholders through a combination of share repurchases and our quarterly cash dividend. As we continue into the second half of 2021, we continue to prioritize the health, safety and wellbeing of our team members and customers as we have throughout the COVID-19 pandemic. We’re confident our ongoing focus to serve our customers with care and speed will enable us to successfully execute against our long-term strategy. This includes growth at or above the industry, capitalizing on our unique margin expansion opportunity and the return of excess cash to shareholders.”

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Capital Allocation

During the 12 weeks ended July 17, 2021, the company repurchased 2 million shares of its common stock at an aggregate cost of $393 million, or an average price of $197.52 per share, in connection with its share repurchase program. At the end of the second quarter of 2021, the company had $868.8 million remaining under the share repurchase program.

On Aug. 10, 2021, the company declared a regular cash dividend of $1 per share to be paid on October 1, 2021, to all common stockholders of record as of Sept. 17, 2021.

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