Advance Auto Parts Earnings Hit the Brakes

Advance Auto Parts Inc. (NYSE: AAP | AAP Price Prediction) released its second-quarter financial results before the markets opened on Tuesday. The auto parts retailer said that it had $2.00 in earnings per share (EPS) and $2.33 billion in revenue, which compares with consensus estimates of $2.21 in EPS and $2.36 billion in revenue. In the same period of last year, the retailer said it had $1.97 in EPS and $2.33 billion in revenue.

During the most recent quarter, comparable sales remained flat year over year. Year to date, though, comparable sales increased 1.5%.

Adjusted gross profit margin was 43.3% of net sales in the quarter, a 42-basis-point decrease from the second quarter of 2018. That decrease was driven primarily by channel and product mix, in addition to planned supply chain wage investments in the second quarter.

Looking ahead to the 2019 fiscal full year, the company expects to see net sales in the range of $9.65 billion to $9.75 billion, with comparable sales of 1.0% to 2.0%. Consensus estimates call for $8.16 in EPS and $9.76 billion in revenue for the year.

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Tom Greco, president and CEO, commented:

While the second quarter was challenging, we continue to make progress, including building a differentiated Customer Value Proposition in both Professional and DIY Omnichannel in addition to driving productivity for the long term. We remain committed to our disciplined approach to increasing comparable store sales, expanding margins and delivering significant cash flow in the back half of 2019. This, combined with a strong industry backdrop, gives us confidence that our transformation plan is on track. Importantly, we continue to make meaningful improvements in working capital and free cash flow and are pleased to announce a new $400 million share repurchase authorization.

Shares of Advance Auto closed Monday at $142.16, in a 52-week range of $139.96 to $186.15. The consensus price target is $188.31. Following the announcement, the stock was down nearly 7% at $132.75 in early trading indications Tuesday.

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