Advance Auto Parts reported first-quarter net sales of $3.4 billion, a 1.3% year-over-year increase.
Comparable-store sales slipped 0.4% during the quarter, which ended April 22.
Gross profit dipped 2.4% to $1.5 billion. The company’s operating income was $90 million, or 2.6% of net sales, compared with 6% in the first quarter of 2022.
Advance reported diluted earnings per share of 72 cents, down from $2.28 in first-quarter 2022.
“While we anticipated the first quarter would be challenging, our results were below our expectations,” Advance CEO Tom Greco said in a news release. “Net sales grew 1.3% in the quarter. Our operating-margin rate of 2.6% in the quarter was well-below expectations due to higher-than-planned investments to narrow competitive price gaps in the professional sales channel as well as unfavorable product mix.”
On the heels of Advance’s disappointing first quarter, the company revised its full-year outlook and announced a dividend cut.
Advance says it now expects full-year net sales between $11.2 billion and $11.3 billion, down from its previous guidance of net sales between $11.4 billion and $11.6 billion. The company now expects comparable-store sales to be flat or down 1%. Previously, Advance’s full-year guidance was for comparable-store-sales growth between 1% and 3%.
The company lowered its full-year expectations for operating-income margin, free-cash flow and new-store openings.
Advance also downgraded its outlook for diluted earnings per share (EPS). The company now expects full-year diluted EPS between $6 and $6.50, down from its previous guidance of diluted EPS between $10.20 and $11.20.
“We remain focused on improving inventory availability while sustaining competitive price targets to improve top-line sales,” Greco said. “We expect the competitive dynamics we faced in the first quarter to continue, resulting in a shortfall to our 2023 expectations. We have reduced our full-year guidance and our board of directors made the difficult decision to reduce our quarterly dividend.”
Greco, who will retire at the end of 2023, also noted that the board’s independent chair, Gene Lee, “has assumed an expanded role as interim executive chair.”
“Gene will be providing additional operational oversight and support to our management team to enable a seamless CEO transition,” Greco said. “He has helped me immensely during my time as CEO and I look forward to working with him to improve the trajectory of our business in the months ahead.”