Advance Auto Parts Inc. (NYSE:AAP) reported third-quarter adjusted loss per share of 4 cents, compared with the street view for EPS of 49 cents. Quarterly sales of $2.15 billion missed the analyst consensus of $2.65 billion. Comparable store sales decreased 2.3%.
On November 1, 2024, the company successfully completed the sale of Worldpac for total cash consideration of approximately $1.5 billion, subject to adjustments for working capital and other items.
The company’s gross profit increased 11.0% to $907.9 million. This represents 42.3% of net sales, compared to 36.9% in the third quarter of the prior year.
The improvement in leverage was mainly due to lapping the one-time inventory reserve adjustment from the previous year. Additionally, stabilizing product costs helped, though this was offset by strategic pricing investments.
The company is implementing a strategic plan to improve business performance, focusing on core retail improvements. It has identified opportunities that could increase adjusted operating income margin by more than 500 basis points by fiscal 2027. The plan is built on three main areas: store operations, merchandising, and supply chain.
For store operations, the company will reduce its U.S. asset footprint by closing 523 Advance corporate stores, exiting 204 independent locations, and shutting down four distribution centers. It will also standardize the store operating model and improve labor productivity. Additionally, the company plans to accelerate new store openings.
In merchandising, the company aims to improve sourcing to lower first costs and bring products to market faster.
For the supply chain, the company plans to consolidate distribution centers and operate 13 large facilities by 2026. It will also open 60 market hub locations by mid-2027 and optimize transportation routes and freight to reduce costs and improve productivity.
The company exited the quarter with cash and equivalents worth $464.49 million.
Outlook: Advance Auto Parts expects FY24 net sales from continuing operations to be approximately $9 billion, with adjusted EPS from continuing operations ranging from $(0.60) to $0.00.
The company aims to achieve over 500 basis points of operating margin growth by fiscal 2027, focusing on core retail improvements.
Advance Auto Parts has provided preliminary guidance for FY25, expecting net sales of $8.40 billion to $8.60 billion and comparable sales growth of 0.50% to 1.50%.
Price Action: AAP shares are trading higher by 2.34% to $41.90 premarket at last check Thursday.
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