ROANOKE, Va. — Advance Auto Parts has announced its financial results for the third quarter ended Oct. 10. Third quarter earnings per diluted share (EPS) were 65 cents which included a 4 cent charge related to store divestitures. Excluding the impact of the store divestitures, EPS increased 19 percent to 69 cents. On a year-to-date basis and excluding the 15 cent impact of store divestitures, EPS increased 17 percent to $2.61 on top of a 16 percent increase in EPS last year.
Total sales for the third quarter increased 6.3 percent to $1.26 billion, compared with total sales of $1.19 billion in the third quarter of fiscal year 2008. The sales increase reflected the net addition of 66 new stores during the past 12 months and a comparable store sales gain of 4.7 percent compared to a decrease of 0.1 percent during the third quarter last year. Adjusting for the calendar shift due to the 53rd week last year, third quarter comparable store sales increased approximately 5.2 percent. The 4.7 percent comparable store sales gain was comprised of an 11.8 percent increase in Commercial and a 1.7 percent increase in do-it-yourself (DIY). This compares to a 10.8 percent increase in Commercial and a 4.1 percent decrease in DIY during the third quarter last year. Year-to-date comparable store sales increased 6.1 percent driven by a 14.9 percent increase in Commercial and a 2.4 percent increase in DIY.
The company’s gross profit rate was 49.2 percent of sales during the third quarter as compared to 47.3 percent in the prior year, which reflects a 190 basis-point improvement. The 190 basis-point improvement was primarily due to continued investments in pricing and merchandising capabilities, parts availability, decreased inventory shrink and improved store execution. Year-to-date, the company’s gross profit rate was 49.1 percent, or 167 basis points favorable to the same period in fiscal 2008.
“I am very proud of our Team Members’ ability to drive continuous improvements in customer satisfaction and Team Member engagement. Their ability to revitalize our core values and actions to drive our four strategies resulted in strong top line growth, a 53 percent increase in free cash flow and a 100 basis-point increase on our return on invested capital,” said Darren Jackson, chief executive officer.
The company’s SG&A rate was 40.9 percent of sales during the third quarter as compared to 39.3 percent during the third quarter last year. Excluding the impact of store divestitures, the company’s SG&A rate increased 110 basis points. This increase was driven by higher incentive compensation, increased investments in store labor and Commercial Sales force, higher medical expenses and continued investments to improve the company’s gross profit rate and to launch the company’s new E-commerce website. The SG&A rate increase was partially offset by lower advertising expenses and occupancy expense leverage as a result of the company’s 4.7 percent comparable store sales increase. Year-to-date, the company’s SG&A rate was 39.8 percent versus 38.1 percent during the same period last year. Excluding the impact of store divestitures, the year-to-date SG&A rate was 39.3 percent.
Operating cash flow through the third quarter increased 67 percent to $628.5 million from $375.8 million through the same period last year. Free cash flow through the third quarter was $414 million or a 53 percent increase through the same period last year. This increase was primarily driven by an improvement in working capital management, increased deferred taxes and an increase in net income. The increase in free cash flow, allowed the company to decrease its total outstanding bank debt by $192 million over the past year. Capital expenditures were $132.6 million through the third quarter. This compares to capital expenditures of $137 million in 2008, a decrease of $4.4 million primarily due to the timing of new store development, partially offset by routine spending on existing stores and Information Technology investments.
“Our third quarter marked our seventh consecutive quarter of double-digit Commercial comp sales growth, our third consecutive quarter of positive DIY comps and our fourth consecutive quarter of strong gross profit rate improvements. These results fueled our third consecutive quarter of double-digit operating income and EPS growth on a comparable basis. We are pleased with the $414 million year-to-date free cash flow we generated and the fact that we continued to strengthen our balance sheet while making solid progress on our goal to obtain investment grade ratings,” said Mike Norona, executive vice president and chief financial officer.
Under the company’s share repurchase authorization plan, the company repurchased 879,910 shares of its common stock during the third quarter at an aggregate cost of $35.2 million, or an average price of $40 per share. At the end of the third quarter, the company had $139.4 million available from the $250 million share repurchase authorization approved by the board of directors in May 2008.
