Advance Auto Parts, Inc., a leading automotive aftermarket parts provider in North America that serves both professional installer and do-it-yourself customers, announced its financial results for the first quarter ended April 20, 2024.

“Our team continues to execute against our decisive actions, including commencing our supply chain consolidation and making meaningful progress toward the potential sale of Worldpac,” said Shane O’Kelly, president and chief executive officer.

“We are very pleased to have healthy interest and we are looking to conclude the process before we report our second quarter results. As a reminder, we previously discussed the potential sale of our Canadian business and will evaluate that once the Worldpac sale is complete.

During the Q&A portion of the conference call, O’Kelly politely pushed back when pressed for more information, asking analysts to “repect the process,” and reiterated that when there was an announcement to make, they would make it. He added that in his experience of more than 40 transactions, “it’s not a deal until it’s a deal.”

While the sale of WorlTalk of the potential sale of Carquest

“While the industry experienced a slower start to 2024 compared with our expectations, the actions we began in the back half of last year will help us streamline our operations for the long term. Our leadership team and I continue to focus on improving the core fundamentals of our business while reducing costs, which is reflected in our year-over-year SG&A reduction. As previously announced, we are reinvesting a portion of the savings back into the foundation of our business, including frontline compensation and training. We also made progress on our other decisive actions, including beginning three of our DC to market hub conversions.

“We continue to work on improving our overall performance by removing complexities and distractions to increase our value proposition and deliver shareholder value. We recognize we still have significant work ahead of us, however the actions we’re taking will put us on the path to delivering improved results. I want to thank all our team members for their continued commitment to serving our customers as we navigate through this pivotal year for Advance.”

Highlights from the results conference call:

• Pricing on some 8,500 SKUs being made more competitive;
• Have all but one of the 14 planned 550,00 square-foot “unified network” DCs now;
• During the sixteen weeks ended April 20, 2024, 7 stores and branches were opened and 17 were closed;
• Hub locations will have approximately 80,000 SKUs, 20 expected by end of 2024;
• Expected Worldpac sale is in process but no further announcement;
• Potential sale process for Carquest Canada will be addressed following Worldpac sale announcement;
• Bruce Starnes joins Advance June 24 from the Target Corporation to lead merchandising strategy.

First Quarter 2024 Results ^(1,2)

First quarter 2024 net sales totaled $3.4 billion, a 0.3% decrease compared with the first quarter of the prior year. Comparable store sales decreased 0.2%.

The company’s gross profit decreased 2.2% to $1.4 billion. Gross profit margin of 42.0% decreased 82 basis points compared with the first quarter of the prior year. This was primarily driven by increased costs that were not fully covered by pricing actions. These were partially offset by supply chain productivity.

SG&A expenses were $1.3 billion, which improved to 39.4% of net sales compared with 39.9% in the first quarter of 2023. This was primarily driven by the cost control efforts initiated at the end of 2023, including reduced corporate expenditures from the decrease in headcount and significant reduction of marketing expenses as well as a net gain on asset sales. These were partially offset by the reinvestment in field wages and training as well as typical expense inflationary pressure.

The company’s operating income was $86.0 million, or 2.5% of net sales, compared with 2.9% in the first quarter of 2023.

The company’s effective tax rate was 33.2%, compared with 28.5% in the first quarter of 2023. The higher effective income tax rate was due to a discrete charge for share-based compensation. The company’s diluted EPS was $0.67 compared with $0.81 in the first quarter of 2023.

Net cash provided by operating activities was $2.7 million through the first quarter of 2024 versus $382.5 million of cash used in operating activities in the same period of the prior year. Free cash flow through the first quarter of 2024 was an outflow of $46.3 million compared with an outflow of $472.5 million in the same period of the prior year.

Capital Allocation

On May 21, 2024, the company declared a regular cash dividend of $0.25 per share to be paid on July 26, 2024 to all common stockholders of record as of July 12, 2024.

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(1)	All comparisons are based on the same time period in the prior year. Comparable store sales include locations open for 13 complete accounting periods and exclude sales fulfilled by distribution centers to independently owned Carquest locations.
(2)	As reported in the company’s fourth quarter and full year 2023 earnings release, the company corrected non-material errors in certain previously reported financials. All comparisons are based on the corrected historical results as presented in the company’s prior earnings release dated February 29, 2024.

Full Year 2024 Guidance

		As of May 29, 2024
($ in millions, except per share data)		Low				High
Net sales		$	11,300			$	11,500
Comparable store sales(1)			0.0	%			1.0	%
Operating income margin			3.2	%			3.5	%
Diluted EPS		$	3.75			$	4.25
Capital expenditures		$	200			$	250
Free cash flow (2)		Minimum $250

(1)		Comparable store sales include locations open for 13 complete accounting periods and exclude sales fulfilled by distribution centers to independently owned Carquest locations.
(2)		Free cash flow is a non-GAAP measure. For a better understanding of the company’s non-GAAP adjustments, refer to the reconciliation of non-GAAP financial measures in the accompanying financial tables included herein.

Investor Conference Call

The company will detail its results for the first quarter ended April 20, 2024 via a webcast was held 8 a.m. Eastern Time on Wednesday, May 29, 2024. A replay of the conference call will be available on the company’s Investor Relations website for one year. (ir.AdvanceAutoParts.com).