Advance Auto Parts Shares Slide On Q2 Earnings Miss, FY22 Outlook Cut

Advance Auto Parts, Inc. AAP reported second-quarter net sales growth of 0.6% year-over-year to $2.67 billion, missing the consensus of $2.75 billion.

Comparable store sales decreased 0.6%, driven by a decrease in consumer demand within DIY omnichannel and an increase in owned brands. Advance Auto opened 43 new stores in the second quarter.

Adjusted EPS improved to $3.74 from $3.40 in 2Q21, missing the consensus of $3.76.

The adjusted gross margin expanded by 166 bps to 48%. Adjusted operating income increased by 3.6% Y/Y to $312.8 million, and margin expanded by 34 bps to 11.7%.

AAP's net provided by operating activities was $308.5 million for the second quarter, compared to $776.2 million a year ago; free cash flow was $97.3 million.

The adjusted debt-to-adjusted EBITDAR ratio was 2.4 compared to 2.1.

The company returned $291 million to shareholders through share repurchases and cash dividends.

"In consideration of how macroeconomic factors have developed in recent months and our expectations for the balance of the year, we are providing updated guidance for the full year 2022," commented Jeff Shepherd, executive vice president, and chief financial officer.

FY22 Outlook: Advance Auto Parts expects sales of $11 billion to $11.2 billion (prior expectations of $11.2 billion to $11.5 billion) versus a consensus of $11.34 billion and a comparable sales increase of -1% to 0%.

AAP sees an adjusted operating income margin of 9.8% to 10% (prior 10% to 10.2%) in FY22 and an adjusted diluted EPS of $12.75 to $13.25 (prior $13.30 to $13.85) versus a consensus of $13.60.

The company sees a free cash flow of a minimum of $700 million and expects to open between 125 and 150 new stores and branches.

Price Action: APP shares are trading lower by 6.14% at $186.86 during the post-market session on Tuesday.

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