Advance Auto Parts Stock Slips After Q1 Results

Advance Auto Parts, Inc. AAP reported first-quarter net sales growth of 1.3% year-over-year to $3.37 billion, missing the consensus of $3.38 billion.

Comparable store sales increased 0.6%; comparable store sales increased 25.3% on a two-year stack. Advance opened 35 new stores in the first quarter.

The gross margin was flat at 44.6%. The operating income declined by 19.4% Y/Y to 203.27 million and the margin contracted by 155 bps to 6%. The adjusted gross profit margin increased 231 bps to 47.1%, and the adjusted operating margin was flat.

Adjusted EPS improved by 6.9% Y/Y to $3.57, in line with the consensus of $3.57.

AAP’s net cash used in operating activities was $54.9 million for the first quarter, compared to cash generated of $329.93 million a year ago; free cash flow was an outflow of $169.8 million.

The adjusted debt-to-adjusted EBITDAR ratio was 2.3 compared to 2.1 in the first quarter of 2021.

The company returned $403 million to shareholders through share repurchases and cash dividends.

“We started 2022 with strong mid-single-digit comp growth through the first 10 weeks of our 16-week quarter. During the final six weeks, we experienced comp declines driven by our DIY omnichannel business," said Tom Greco, president and CEO.

"This was primarily a result of headwinds from the expected lap of the DIY sales boost from the 2021 stimulus and a slower start to the spring selling season due to cooler temperatures and higher precipitation. These headwinds have subsided during the first four weeks of our second quarter with comparable sales growth within our full-year guidance range.”

FY22 Outlook: Advance Auto Parts expects sales of $11.2 billion to $11.5 billion versus a consensus of $11.4 billion and a comparable sales increase of 1% to 3%.

AAP sees an adjusted operating income margin of 10% to 10.2% in FY22 and an adjusted diluted EPS of $13.30 to $13.85 versus a consensus of $13.70.

The company sees a free cash flow of a minimum of $775 million and expects to open between 125 and 150 new stores and branches.

AAP Price Action: On Monday after market close, shares were down 2.04% at $179.50.