Advance Auto Parts (AAP, Financial) touched an all-time high in January. The company recently reported its fourth quarter results with year-over-year growth in both revenue and profits. Although the numbers failed to match the street expectations, the company seems poised to do even better in the days ahead. Starting with its numbers, let’s see in detail what its future prospects are.
Strong results
During the quarter its revenue rose 48.1% from a year ago period to $2.09 billion, while adjusted earnings increased to $101 million compared to $68.7 million last year. The numbers were driven by a strong performance of General Parts, which was acquired by Advance Auto Parts in the beginning of 2014. Along with this, new store additions were also among the key factors that contributed to its growth during the quarter.
And going forward, the company will continue to use the same strategies. The macroeconomic factors also look balanced with improving jobs data and lower gasoline prices that should propel its growth through the year. Additionally, the industry fundamentals also compliment the former with steady improvement in miles driven, which should increase spending in select discretionary maintenance categories over time.
During the quarter, Advance Auto had an outstanding performance in its commercial business and the company intends to carry this in the current fiscal as well. It will continue to focus on the structural program improvements to further accelerate its sales in this segment. With this in mind, the company is launching a combination of product, brand and service initiatives that will differentiate its value proposition. It will be focused on sustained improvements in its DIY business through its Speed Perks launch and omnichannel work.
Smart strategies
In addition, its CARQUEST Advance volume is at steady-state and is becoming part of its standard market availability. The management is taking all steps to catch the customer’s attention. In this direction it will replace the CARQUEST POS system with Advance's as both will live in its environment for several years. Going forward, the management has planned five initiatives to drive its growth.
First, it will successfully execute the product, SKU, brand, price harmonization across Advance and CARQUEST businesses; second, it will complete the corporate office consolidation and relocations and increasing efficiencies within these functions. Third, the company will integrate and assimilate the Advance Auto Parts and CARQUEST field and commercial sales teams, which it launched at the beginning of the year.
Fourth, it will achieve the critical customer capabilities in the supply chain and IT integration work; and lastly, continue the integration activities in optimizing its assets through the market conversions and consolidation activities. These are significant moves that will translate to both its top and bottom line in the days ahead. Therefore in the light of these facts, Advance Auto Parts seems to be a good investment option.
