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Alberto Abaterusso
Alberto Abaterusso
Articles (1669) 

2 Large Specialty Retailers Announce Earnings

Advance Auto Parts misses on earnings and revenue, while JD.com beats forecasters

August 13, 2019 | About:

Shares of Advance Auto Parts Inc. (NYSE:AAP) dropped 5.95% to $133.70 in premarket trading on Tuesday after missing consensus estimates on earnings for the second quarter of fiscal 2019 by 45 cents. The company posted earnings per diluted share of $1.73, reflecting an 8.8% increase from the prior-year quarter.

Revenue totaled $2.33 billion, increasing 0.2% year-over-year but falling $30 million short of expectations.

The Raleigh, North Carolina-based specialty retailer of auto parts reported flat comparable-store sales and a 42-basis-point drop in adjusted gross margin rate to 43.3%. The decrease in the margin rate was due to sales channel and marketing mix strategies as well as higher costs related to wage investments in the supply chain of the organization.

The company operated 5,062 stores in the second quarter of fiscal 2019, which was 36 fewer stores than in the same quarter of fiscal 2018.

Looking ahead to full fiscal 2019, the company guided for net sales of $9.65 billion to $9.75 billion versus projections of $9.76 billion. Comparable-store sales are expected to grow 1-2%, and the adjusted operating margin rate is anticipated to range between 8% and 8.2%. The company estimates its tax rate will fall between 24% to 26% and that will allocate approximately $250 million to $300 million to capex. Advance Auto Parts also projected free cash flow of $700 million.

On Aug. 7, the board of directors authorized the company to repurchase $400 million of its shares, replacing the $600 million remaining under the previous authorization from August 2018.

The company also announced the payment of a 6-cent cash quarterly dividend per common share on Oct. 4 to shareholders of record Sept. 20. The ex-dividend date is Sept. 19.

The distribution generates a forward dividend yield of 0.17% based on the share price of $142.1 at close Monday. The share price has fallen 9% in the past year through Aug. 12 to below the 200-, 100- and 50-day simple moving average lines. The 52-week range is $139.96 to $186.15, and the market capitalization is $10.19 billion.

Shares of JD.com Inc. (NASDAQ:JD) surged 4.9% to $28.49 in premarket trading Tuesday after beating consensus estimates on earnings for the second quarter of 2019 by 13 cents. The company posted earnings per diluted share of 5 cents versus a net loss of 23 cents per diluted share recorded in the prior-year quarter.

Revenue was $21.9 billion, up nearly 23% year-over-year and exceeding expectations by $970 million.

By segment, net product revenues grew 20.8% to $19.5 billion, and net service revenues went up 42% to $2.4 billion.

The Chinese e-commerce and retail infrastructure services provider also noted an 18.5% jump in operating cash flow to $2.94 billion and 33.7% growth in free cash flow to $2.66 billion.

Further, the adjusted operating margin increased 200 basis points to 2.1%, and the adjusted Ebitda margin moved up 210 basis points to 2.9%.

For the trailing 12 months through June 30, 2019, the number of annual active customer accounts was 321.3 million versus 310.5 million for the comparable period ended March 31, 2019.

“Highlighted by our successful June 18th anniversary sales event, JD’s strong performance in the second quarter further demonstrated the resilience of our superior business model in a highly competitive industry,” Chairman and CEO Richard Liu said. “JD’s commitment to bringing users the best overall shopping experience continues to win over consumer mindshare. We will remain focused on leveraging technology and innovation to enhance our offerings, increase efficiency and drive shareholder value for the long term.”

For the third quarter of 2019, the company forecasted that revenue will be approximately 20% to 24% higher than revenue of $18.5 billion recorded in the same quarter of 2018 and versus projections of $17.87 billion.

The share price was $27.2 at close Monday. The share price has fallen 20% over the past 52 weeks through Aug. 12 to below the100- and 50-day simple moving average lines. The 52-week range is $19.21 to $34.59 and the market capitalization is $45.54 billion.

Disclosure: I have no positions in any security mentioned.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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