Advance Auto Parts, Inc., a leading automotive aftermarket parts provider in North America, that serves both professional installer and do-it-yourself customers, announced Q2 results led by its professional business, with 5.8% same store sales growth and expanded operating margin.

Its released financial results are for the second quarter ended July 17, 2021.

“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 chief executive officer. “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.

“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.”

As of July 17, 2021, Advance operated 4,748 stores and 215 Worldpac branches in the United States, Canada, Puerto Rico and the U.S. Virgin Islands. The company also serves 1,306 independently owned Carquest branded stores across these locations in addition to Mexico and various Caribbean islands.

Q2 2021 Highlights
(All figures in USD)

• Net sales increased 5.9% to $2.6 billion
• Comparable store sales increased 5.8%; On a two-year stack, Comparable store sales increased 13.3%
• Operating income decreased 6.8% to $244.9 million; Adjusted operating income increased 7.0% to $302.0 million
• Operating income margin decreased by 126 basis points to 9.2%; Adjusted operating income margin expanded 11 basis points to 11.4%
• Diluted EPS of $2.74 was flat compared with the same period of the prior year; Adjusted Diluted EPS increased 15.3% to $3.40
• Year to date Operating cash flow increased to $776.2 million; Free cash flow increased to $646.6 million
• Returned $457.9 million to shareholders through a combination of share repurchases and quarterly cash dividends

Second Quarter 2021 Financial Results

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.

Adjusted SG&A increased $108.7 million to $926.4 million. Adjusted SG&A was 35.0% of Net sales in the second quarter of 2021, which deleveraged 228 basis points compared with the second quarter of 2020. This was driven by higher incentive compensation within professional, wage inflation within store labor, higher delivery costs associated with professional delivery and normalized hours of operation compared to the prior year. These costs were partially offset by a year over year decrease in COVID-19 related expenses. The company’s GAAP SG&A was 35.6% of Net sales in the second quarter of 2021 compared with 33.3% in the second quarter of 2020.

The company’s Adjusted operating income was $302.0 million in the second quarter of 2021, an increase of 7.0% versus the second quarter of the prior year. Adjusted operating income margin increased 11 basis points to 11.4% of Net sales for the second quarter compared with the second quarter of the prior year. On a GAAP basis, the company’s Operating income was $244.9 million, or 9.2% of Net sales, compared with 10.5% in the second quarter of 2020.

The company’s effective tax rate in the second quarter of 2021 and 2020 was 24.8%. The company’s Adjusted diluted EPS was $3.40 for the second quarter of 2021, an increase of 15.3% compared with the second quarter of the prior year. On a GAAP basis, the company’s Diluted EPS of $2.74 was flat compared with the second quarter of 2020.

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.

Capital Allocation

During the twelve weeks ended July 17, 2021, the company repurchased 2.0 million shares of its common stock at an aggregate cost of $393.0 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 August 10, 2021 the company declared a regular cash dividend of $1.00 per share to be paid on October 1, 2021 to all common stockholders of record as of September 17, 2021.

Updated Full Year 2021 Guidance

“We are pleased with our performance during the first half of the year,” said Jeff Shepherd, executive vice president and chief financial officer. “We are providing an update to our financial guidance for full year 2021 to reflect the positive first half results while remaining cognizant that there is the potential for volatility in the back half of the year.”

	Prior Outlook As of June 2, 2021 Full Year 2021		Updated Outlook As of August 24 2021 Full Year 2021
($ in millions)	Low	High	Low	High
Net sales	$10,400	$10,600	$10,600	$10,800
Comparable store sales	4.00%	6.00%	6.00%	8.00%
Adjusted operating income margin (1)	9.00%	9.20%	9.20%	9.40%
Income tax rate	24%	26%	24%	26%
Capital expenditures	$300	$350	$300	$350
Free cash flow (1)	Minimum $575		Minimum $700
Share Repurchases	$300	$500	$700	$900
New store openings	100	150	80	120

(1)

For a better understanding of the company’s adjusted results, refer to the reconciliation of non-GAAP adjustments in the accompanying financial tables included herein. Because of the forward-looking nature of the 2021 non-GAAP financial measures, specific quantification of the amounts that would be required to reconcile these non-GAAP financial measures to their most directly comparable GAAP financial measures are not available at this time.

Investor Conference Call

The company will host a webcast to discuss its results for the second quarter of 2021 and other business updates scheduled to begin at 8 a.m. Eastern Time on Tuesday, August 24, 2021.

The webcast will be accessible via the Investor Relations page of the company’s website (ir.AdvanceAutoParts.com).

To join by phone, please pre-register online for dial-in and passcode information. Upon registering, participants will receive a confirmation with call details and a registrant ID. While registration is open through the live call, the company suggests registering a day in advance or at minimum 10 minutes before the start of the call. A replay of the conference call will be available on the Advance website for one year.

About Advance Auto Parts

Advance Auto Parts, Inc. is a leading automotive aftermarket parts provider that serves both professional installer and do-it-yourself customers. As of July 17, 2021, Advance operated 4,748 stores and 215 Worldpac branches in the United States, Canada, Puerto Rico and the U.S. Virgin Islands. The company also serves 1,306 independently owned Carquest branded stores across these locations in addition to Mexico and various Caribbean islands. Additional information about Advance, including employment opportunities, customer services, and online shopping for parts, accessories and other offerings can be found at www.AdvanceAutoParts.com.