Advance Auto Parts reports Q1 2019 results

by | May 22, 2019 | 0 comments

Advance Auto Parts, Inc., a leading automotive aftermarket parts provider in North America, reports financial metrics up across the board in the first quarter of 2019, ended April 20, 2019.

“We delivered our fourth consecutive quarter of increased top line sales and gross profit expansion,” said Tom Greco, President and Chief Executive Officer.

“Our free cash flow improved by nearly 20% as a result of our continued disciplined approach to cash management. The early progress against our strategic transformation agenda is becoming more evident throughout our culture and in our improving results. We saw positive improvement in our comp sales performance while we continue to drive margin expansion.

“Despite inflationary headwinds, our team’s diligent efforts on operational improvement to reduce costs is evident in our first quarter SG&A results where we continued to leverage store labour in the quarter and further reduce insurance and claims expense through improved safety initiatives.

“I am confident our more than 70,000 Team Members will enable continued success for AAP throughout 2019 and beyond through their focus and commitment to our Mission: Passion for Customers…Passion for Yes!”

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First Quarter Highlights

All figures in U.S. dollars.

  • Net sales increased 2.7% to $3.0B; Comparable store sales       (a)  increased 2.7%
  • Operating income increased 4.9% to $207.9M; Operating income margin expansion of 15 bps to 7.0%
  • Adjusted operating income (a) increased 8.7% to $243.6M; Adjusted operating income margin expansion of 46 bps to 8.3%
  • Diluted EPS increased 7.6% to $1.98; Adjusted Diluted EPS (a) increased 17.1% to $2.46

(a) Comparable store sales exclude sales to independently owned Carquest locations. 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.

Net sales for the first quarter of 2019 were $3.0 billion, a 2.7% increase versus the first quarter of the prior year. Comparable store sales for the first quarter of 2019 increased 2.7%.

Adjusted gross profit margin was 44.6% of Net sales in the first quarter of 2019, a 37 basis point increase from the first quarter of 2018. The increase was primarily driven by favourable product margin and improved inventory management, partially offset by supply chain headwinds due to planned wage investments.

The company’s GAAP Gross profit margin decreased to 44.2% from 44.3% in the first quarter of the prior year.

Adjusted SG&A was 36.4% of Net sales in the first quarter of 2019, an improvement of 8 basis points as compared to the first quarter of 2018.

The improvement was driven by leveraging store labour and lower insurance and claims expenses, which were partially offset by an increase in professional fees related to investments in IT infrastructure. The company’s GAAP SG&A of 37.2% of Net sales improved from 37.4% in the same quarter of the prior year.

The company’s Adjusted operating income was $243.6 million in the first quarter of 2019, an increase of 8.7% versus the first quarter of the prior year. Adjusted operating income margin improved to 8.3% of Net sales for the first quarter, an increase of 46 basis points compared to the first quarter of the prior year. On a GAAP basis, the company’s Operating income was $207.9 million, 7.0% of Net sales, an increase of 15 basis points from the first quarter of 2018.

The company’s effective tax rate in the first quarter of 2019 was 25.3%, compared to 24.5% in the first quarter of the prior year. The company’s Adjusted Diluted EPS was $2.46 for the first quarter of 2019, an increase of 17.1% compared to the first quarter of the prior year.

On a GAAP basis, the Company’s Diluted EPS increased 7.6% to $1.98.

Operating cash flow was $204.5 million in the first quarter of 2019 versus $154.0 million in the same period of the prior year, an increase of 32.8%. Free cash flow in the first quarter of 2019 was $143.2 million, an increase of 19.9% compared to the same period of the prior year.

            Full Year 2019         

($ in millions)         Low      High
Net sales $9,650 $9,800
Comparable store sales 1.0% 2.5%
Adjusted operating income margin (a) 8.0% 8.4%
Income tax rate 24% 26%
Transformation expenses (a) $80 $100
Capital expenditures $250 $ 300
Free cash flow (a) Minimum$650

(a) 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 2019 non-GAAP financial measures, specific quantifications 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.

Capital Allocation

On August 8, 2018, the company’s Board of Directors authorized a $600 million share repurchase program. Under this program, the Company repurchased 0.8 million shares of its common stock for $127.2 million during the first quarter. At the end of the first quarter of 2019, the Company had $200 million remaining under the share repurchase program.

On May 14, 2019, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.06 per share to be paid on July 5, 2019 to all common shareholders of record as of June 21, 2019.

On February 28, 2019, the Company redeemed all of the $300.0 million aggregate principal amount of its outstanding 2020 senior unsecured notes. The Company incurred charges relating to a make-whole provision and debt issuance costs of $10.1 million and $0.7 million resulting from the early redemption of the 2020 senior unsecured notes.

Investor Conference Call

The company discussed its results for the first quarter of 2019 via a webcast scheduled at 8 a.m. Eastern Time on Wednesday, May 22, 2019. The webcast will be accessible via the Investor Relations page of the Company’s website (www.AdvanceAutoParts.com).

For individuals unable to access the webcast, the event will be available by dialing (844) 877-5989 and referencing conference identification number 1584508. A replay of the conference call will be available on the company’s website for one year.

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