Advance Auto Parts Inc.AAP reported third-quarter FY23 sales growth of 2.9% year-on-year to $2.719 billion, beating the analyst consensus of $2.68 billion.
The company reported an EPS loss of $(0.82), missing the analyst consensus of $1.45.
Comparable store sales increased to 1.2%. Gross profit decreased 16.3% to $1 billion.
Gross profit margin was 36.3%, significantly lower than 44.6% a year ago, primarily driven by a change in estimate for inventory reserves that resulted in a one-time impact of approximately $119 million.
In addition, the company incurred higher product costs that were not fully covered by pricing actions and elevated supply chain costs.
The company's operating loss was $(43.7) million, or (1.6)% of net sales, compared with 6.5% in the year-ago period.
AAP exited the quarter with cash and equivalents worth $317.52 million.
"We are launching a new cost reduction program that we expect will generate at least $150 million in savings on an annualized basis," said Shane O'Kelly, president and chief executive officer.
"We expect to reinvest up to $50 million of these savings in our team members with a clear focus on improving the retention of our frontline team members," O'Kelly added.
Divestment Plans: The company has initiated separate sale processes for Worldpac and its Canada business. The company has not set a timetable for the conclusion of the sale processes.
On October 31, 2023, the company declared a regular cash dividend of $0.25 per share to be paid on January 26, 2024, to all common stockholders of record as of January 12, 2024.
Management Churn - New CFO: AAP appointed Ryan Grimsland as executive vice president and chief financial officer, effective November 27, 2023.
Tony Iskander, who has served as interim chief financial officer since August 2023, will continue in his role as senior vice president, finance and treasurer.
Outlook: The company lowered the FY23 EPS outlook to $1.40-$1.80 versus the $4.65 estimate (Prior View: $4.50-$5.10).
The company revised the FY23 revenue outlook to $11.250 billion-$11.300 billion versus the $11.27 billion estimate (Prior View: $11.25 billion - $11.35 billion ).
Comparable store sales are expected to grow in the range of (0.5)%-0.0%, against the prior view of (0.5)%-0.5%.
Tony Iskander, interim chief financial officer, said, "Our updates include the impact of non-recurring expenses in Q3 as well as continued pressure in Q4 from higher product costs that we do not expect to offset with price."
Price Action: AAP shares are trading lower by 5.65% at $55.10 in premarket on the last check Wednesday.
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