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 third quarter ended October 5, 2024, and providing details on it’s three year plan to improve its financial performance

“We are pleased to have made progress on our strategic actions, including the completion of the sale of Worldpac and a comprehensive operational productivity review of our business,” said Shane O’Kelly, president and chief executive officer.

“We are charting a clear path forward and introducing a new three-year financial plan, with a focus on executing core retail fundamentals to improve the productivity of all our assets and to create shareholder value.”

Those plans include closing more than 500 Advance Auto Parts corporate stores in the U.S., exiting some 200 indepenedent locations, consolidating distribution into 13 large DCs by 2026, accelerating new store openings and the opening of 60 market hub locatios by 2027.

On November 1, 2024, the company completed its previously announced sale of Worldpac for aggregate cash consideration of approximately $1.5 billion, as adjusted for working capital and other items. Unless otherwise specified, results are presented on a continuing operations basis.

Third Quarter 2024 Results

Third quarter 2024 net sales from continuing operations totaled $2.1 billion, compared with $2.2 billion in the third quarter of the prior year. Comparable store sales decreased 2.3%.

The company’s gross profit increased 11.0% to $907.9 million, or 42.3% of net sales compared with 36.9% in the third quarter of the prior year. The leverage improvement was primarily due to lapping the one-time impact in the change for inventory reserves in the prior year as well as stabilizing product costs offset by strategic pricing investments.

The company’s SG&A expenses were $907.5 million, or 42.2% of net sales. Adjusted SG&A expenses were $891.2 million, or 41.5% of net sales compared with 40.2% in the third quarter of 2023, primarily due to lower sales.

The company also incurred high labor-related expenses due to wage investments in frontline team members that were partially offset by a reduction in marketing expenses.

The company’s operating income was $403.0 thousand, or zero percent of net sales. Adjusted operating income was $16.7 million, or 0.8% of net sales compared with (3.3)% in the third quarter of 2023. In addition, operating income margin was negatively impacted by approximately 125 basis points of atypical items and headwinds in the period (such as lost revenue from Hurricane Helene and downtime from the CrowdStrike outage) that are not included in non-GAAP adjustments.

The company’s effective tax rate was (58.4)%, compared with 24.5% in the third quarter of 2023. The company’s diluted loss per share for the quarter was $0.42. The company’s adjusted diluted loss per share was $0.04 compared with a loss per share of $1.19 in the third quarter of 2023. The types of unusual headwinds in the quarter noted above, which are not included in the non-GAAP adjustments, negatively impacted the company’s earnings per share by 34 cents.

Net cash provided by operating activities was $81.0 million through the third quarter of 2024 versus $28.3 million of cash used in operating activities in the same period of the prior year. Free cash flow through the third quarter of 2024 was an outflow of $48.7 million compared with an outflow of $202.5 million in the same period of the prior year.

Capital Allocation

On October 29, 2024, the company declared a regular cash dividend of $0.25 per share to be paid on January 24, 2025, to all common stockholders of record as of January 10, 2025.

Full Year 2024 Guidance

For the balance of 2024, the company is providing guidance that includes expectations for continuing operations as well as adjusted metrics that take into account non-GAAP adjustments.

		As of November 14, 2024
($ in millions, except per share data)		Low				High
Net sales from continuing operations		Approx. $9,000
Comparable store sales (1)		Approx. (1.0%)
Adjusted operating income margin from continuing operations			0.25	%			0.75	%
Adjusted diluted EPS from continuing operations		$	(0.60	)		$	0.00
Capital expenditures		$	175			$	225
Free cash flow (2)		Approx. flat (including strategic costs)

Strategic Priorities and Financial Objectives

Strategic Priorities

The company is executing a strategic plan to improve business performance with a focus on core retail improvements. The company has identified opportunities that it believes can improve adjusted operating income margin by more than 500-basis points through fiscal 2027. This strategic plan is anchored on three pillars outlined below to put the company on the path to deliver consistent profitable growth.

• Store operations
  • Reduction in U.S. asset footprint – closing 523 Advance corporate stores, exiting 204 independent locations, and closing four distribution centers.
  • Standardization of store operating model and improving labor productivity.
  • Acceleration in pace of new store openings.
• Merchandising excellence
  • Strategic sourcing to improve first costs and bring parts to market faster.
  • Assortment management to enhance availability of parts.
  • Pricing and promotions management to improve gross margin.
• Supply chain
  • Consolidation of distribution centers to operate 13 large facilities by 2026.
  • Opening of 60 market hub locations by mid-2027.
  • Optimization of transportation routes and freight to lower costs and improve productivity.

Financial Objectives (Advance Auto Parts continuing operations)

The company is introducing new fiscal 2027 financial objectives and providing preliminary fiscal 2025 guidance.

		Preliminary FY 2025 Guidance (53 weeks)		FY 2027 Objectives
Net sales ($ in millions)		$8,400 – $8,600		Approx. $9,000
Comparable sales growth		0.50% – 1.50%		Positive low-single-digit %
New store growth		30 new stores		50 to 70 new stores
Adjusted operating income margin (1)		2.00% – 3.00%		Approx. 7.00%
Leverage Ratio (Adj. debt/ Adj. EBITDAR) (1)		3.0x – 4.0x		Approx. 2.5x

Investor Conference Call

The company detailed its results for the third quarter ended October 5, 2024, via a webcast scheduled to begin at 8 a.m. Eastern Time on Thursday, November 14, 2024. The webcast will be accessible via the Investor Relations page of the company’s website (ir.AdvanceAutoParts.com).

To join by phone, please pre-register online for dial-in and passcode information. Upon registering, participants will receive a confirmation with call details and a registrant ID. While registration is open through the live call, the company suggests registering a day in advance or at minimum 10 minutes before the start of the call. A replay of the conference call will be available on the company’s Investor Relations website for one year.

About Advance Auto Parts

Advance Auto Parts, Inc. is a leading automotive aftermarket parts provider that serves both professional installers and do-it-yourself customers. As of October 5, 2024, Advance operated 4,781 stores primarily within the United States, with additional locations in Canada, Puerto Rico and the U.S. Virgin Islands. The company also served 1,125 independently owned Carquest branded stores across these locations in addition to Mexico and various Caribbean islands. Additional information about Advance, including employment opportunities, customer services and online shopping for parts, accessories and other offerings can be found at www.AdvanceAutoParts.com.