On May 29, 2024, Advance Auto Parts Inc (AAP, Financial) released its 8-K filing detailing its financial results for the first quarter of 2024. Advance Auto Parts is a leading retailer of aftermarket automotive parts, tools, and accessories in North America, serving both do-it-yourself customers and third-party vehicle repair facilities. As of April 20, 2024, the company operated 4,777 stores and 320 Worldpac branches, with additional locations in Canada, Puerto Rico, and the U.S. Virgin Islands.
Performance Overview
Advance Auto Parts Inc (AAP, Financial) reported net sales of $3.4 billion for the first quarter of 2024, a slight decrease of 0.3% compared to the same period last year. Comparable store sales also saw a decline of 0.2%. The company's gross profit fell by 2.2% to $1.4 billion, with a gross profit margin of 42.0%, down 82 basis points from the previous year. This decline was primarily due to increased costs that were not fully offset by pricing actions.
Financial Achievements and Challenges
Despite the challenges, the company managed to reduce its Selling, General, and Administrative (SG&A) expenses to $1.3 billion, improving to 39.4% of net sales from 39.9% in the first quarter of 2023. This improvement was driven by cost control efforts, including reduced corporate expenditures and a significant reduction in marketing expenses. However, these gains were partially offset by reinvestments in field wages and training, as well as typical expense inflationary pressures.
Operating income for the quarter was $86.0 million, or 2.5% of net sales, compared to 2.9% in the first quarter of 2023. The company's effective tax rate increased to 33.2% from 28.5% in the previous year, primarily due to a discrete charge for share-based compensation. Diluted earnings per share (EPS) were $0.67, down from $0.81 in the first quarter of 2023.
Income Statement Highlights
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Net Sales | $3.4 billion | $3.4 billion |
| Gross Profit | $1.4 billion | $1.5 billion |
| SG&A Expenses | $1.3 billion | $1.4 billion |
| Operating Income | $86.0 million | $97.9 million |
| Net Income | $40.0 million | $48.3 million |
| Diluted EPS | $0.67 | $0.81 |
Balance Sheet and Cash Flow
As of April 20, 2024, Advance Auto Parts Inc (AAP, Financial) reported total assets of $12.2 billion, slightly down from $12.3 billion at the end of 2023. The company's cash and cash equivalents stood at $451.0 million, a decrease from $503.5 million at the end of the previous year. Net cash provided by operating activities was $2.7 million, a significant improvement from the $382.5 million cash outflow in the same period last year. However, free cash flow remained negative at $46.3 million, compared to an outflow of $472.5 million in the prior year.
Commentary and Future Outlook
"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. "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."
Advance Auto Parts Inc (AAP, Financial) faces a pivotal year as it navigates through supply chain consolidations and market adjustments. The company's efforts to reduce costs and reinvest in its core business fundamentals are crucial for its long-term success. However, the challenges of increased costs and slower market conditions may continue to impact its financial performance in the near term.
For more detailed insights and a comprehensive analysis of Advance Auto Parts Inc (AAP, Financial)'s financial performance, visit GuruFocus.com.
Explore the complete 8-K earnings release (here) from Advance Auto Parts Inc for further details.
