Advance Auto Beats but Earnings Fall – Analyst Blog

Email
    Text size

Advance Auto Parts Inc. (AAP) saw a 7.8% decline in earnings to $1.65 per share in the first quarter of its fiscal year ended Apr 20, 2013 from $1.79 in the same quarter of prior fiscal year. Nevertheless, earnings were higher than the Zacks Consensus Estimate of $1.61 per share. Net earnings fell 8.8% to $121.8 million from $133.5 million in the first quarter of fiscal 2012.

Revenues went up 3.0% to $2.02 billion, nearly meeting the Zacks Consensus Estimate of $2.01 billion. The increase was driven by the acquisition of BWP Distributors and the net addition of 163 new stores in the last 12 months, partially offset by a decline in comparable store sales of 3.2% versus an increase of 2.1% during the first quarter of fiscal 2012.

Comparable store sales in the quarter were hurt by unseasonably warm weather, which had deferred the maintenance on vehicles. Further, payroll tax increases, delayed income tax refunds and a very slow start to the spring selling season led to softer business.

Gross margin was 50.0% during the quarter compared with 50.1% a year ago. The eight basis-point decrease in gross profit rate was driven by planned increases in supply chain costs related to the full operations of the company’s new distribution center and the impact of BWP sales, which have a lower gross margin rate as a result of higher mix of their sales to commercial customers. These were partially offset by improved shrink rates.

SG&A was 39.9% of sales during the quarter compared with 38.6% in the first quarter of fiscal 2012. The 127 basis-point increase was driven by lower expenses due to the company’s 3.2% decline in comparable store sales and increased new store openings. These were partially offset by lower advertising expenses and a decrease in credit card fees because of the in sourcing of the company’s commercial credit program.

Operating income decreased 9.1% to $204.1 million from $224.6 million in the first quarter of fiscal 2012. Operating margin was 10.1% versus 11.5% in the first quarter of fiscal 2012.

Store Openings

During the quarter, Advance Auto Parts acquired 124 BWP stores and opened 56 stores, including 7 Autopart International stores, and closed 5 stores. As of Apr 20, 2013, the company’s total store count stood at 3,969, including 223 Autopart International stores.

Share Repurchase

Advance Auto repurchased about 767 thousand shares of its common stock at an aggregate cost of $58.8 million, implying an average price of $76.72. As of Apr 20, 2013, the company had approximately $434 million available on its $500 million share repurchase program authorized by the Board of Directors on May 14, 2012.

Financial Position

Advance Auto Parts had cash and cash equivalents of $407.7 million as of Apr 20, 2013, an increase from $364.1 million in the corresponding period a year ago. Long-term debt increased to $605.0 million as of the above date compared with $600.6 million as of Apr 21, 2012. The long-term debt-to-capitalization ratio stood at 32.3%, down from 38.0% as of Apr 21, 2012.

In the 16-week period, ended Apr 20, 2013, operating cash flow dipped to $135.3 million from $235.4 million in the year-ago period. The decline in cash flow was primarily attributable to lower earnings and increases in accounts receivable and inventories. Capital expenditures (net) decreased to $63.0 million from $82.3 million a year ago.

Our Take

Advance Auto Parts, a Zacks #3 Rank (Hold) stock, Advance Auto Parts, Inc. operates in the U.S. automotive aftermarket industry and is primarily engaged in selling replacement parts (excluding tires), accessories, maintenance items, batteries and automotive fluids for cars and light trucks.

Advance Auto Parts lowered its earnings outlook for fiscal 2013 due to the short-term softness in sales and the slow start to spring. The company now expects to earn at the lower end of its previously announced outlook of $5.30 and $5.45.per share for the year. Currently, its shares retain a Zacks Rank #3, which translates to a short-term (1 to 3 months) rating of Hold.

The company’s competitors, AutoNation Inc. (AN), O’Reilly Automotive Inc. (ORLY) and CarMax Inc. (KMX) have recently reported their first quarter results.

AutoNation posted a 21.4% rise in earnings per share to 68 cents for the quarter from 56 cents in the same quarter of 2012, topping the Zacks Consensus Estimate by 5 cents. Revenues increased 10.8% to $4.1 billion, nearly tallying the Zacks Consensus Estimate of $4.0 billion.

In the same quarter, O’Reilly Automotive posted a 19.3% increase in earnings to $1.36 per share compared with $1.14 in the year-ago quarter, exceeding the Zacks Consensus Estimate by a penny. Revenues during the quarter scaled up 4% to $1.59 billion from $1.53 billion in the same period a year ago.

Last month, CarMax posted a profit of $107.2 million or 46 cents per share in the fourth quarter of fiscal 2013 ended Feb 28, 2013, barely exceeding the Zacks Consensus Estimate by a penny. Profits increased 12.8% from $95.0 million or 12.2% from 41 cents per share in the prior-year quarter. Net sales and operating revenues in the quarter rose 14% to $2.83 billion, topping the Zacks Consensus Estimate of $2.70 billion.
 

 
ADVANCE AUTO PT (AAP): Free Stock Analysis Report
 
AUTONATION INC (AN): Free Stock Analysis Report
 
CARMAX GP (CC) (KMX): Free Stock Analysis Report
 
O REILLY AUTO (ORLY): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research