Advance Auto Parts announced its financial results for the fourth-quarter and full year ended December 30, 2017.
“Through the strong dedication of our entire team, we continued to close the performance gap versus the industry and our laser focus on working capital enabled a 56% increase in free cash flow in a difficult sales environment," said Tom Greco, President and Chief Executive Officer. "As we enter the second year of our transformation plan, we still have a lot that we want to accomplish. We remain steadfast in our commitment to strengthen our customer value proposition, deliver market share improvement and execute our productivity agenda to drive margin expansion.”
Fourth quarter and full-year 2017 highlights
Total net sales for the fourth quarter came in at $2.04 billion, a 2.2% decrease versus the prior-year period. Comparable store sales for the quarter decreased 2.6%. Net Sales for full year 2017 were $9.37 billion, versus $9.57 billion in 2016. Comparable store sales for the full year decreased 2.0%.
The company's Gross Profit margin decreased 69 basis points in the fourth quarter to 42.9% from 43.6% in the same time period in the prior year. The decline was primarily driven by increased supply chain costs. In addition, the non-cash impact of inventory optimization negatively affected gross margins by 20 basis points in the fourth quarter. Continued material cost improvement in the quarter helped partially offset these costs. Total Gross Profit margin for full year 2017 was 43.6% compared to full year 2016 of 44.5%.
Adjusted SG&A was 37.3% of net sales for the fourth quarter, a 24 basis point favorable improvement from the fourth quarter 2016. Continued progress in expense management during the quarter, including labor and third-party fee reductions were partially offset by higher medical costs and insurance claims. The company's GAAP SG&A was 38.6% of net sales, 13 basis points unfavorable for the fourth quarter versus 38.5% for the comparable prior-year period. The company's Adjusted SG&A rate was 36.3% of net sales during Full Year 2017 as compared to 35.1% during the same period the previous year. On a GAAP basis, the company's full year 2017 SG&A rate was 37.5% of net sales compared to full year 2016 of 36.3%.
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The company's Adjusted Operating Income was $113.7 million, 5.6% of net sales for the quarter. This represented a decline of 45 basis points versus the prior-year period, primarily driven by the declines in revenue and gross profit as well as the SG&A factors described above. On a GAAP basis, the company's Operating Income was $87.2 million, 4.3% of net sales, a decline of 82 basis points. For full year 2017, the company's Adjusted Operating Income was 7.3% versus 9.4% during full year 2016. The company's GAAP Operating Income rate was 6.1% compared to 8.2% for full year 2016.
The impact of recently signed tax reform resulted in a lower federal tax rate for the company in the fourth quarter. The company reported Adjusted EPS of $0.77 for the quarter. On a GAAP basis, the company's diluted EPS was $2.49, which includes a benefit of $1.94 related to the tax reform.
Operating cash flow increased 14.8% to $600.8 million for full year 2017 from $523.3 million for full year 2016. Free cash flow was $411.0 million for full year 2017 compared to $263.7 million in the prior-year period, an increase of 55.9%. This increase was primarily driven by optimization of working capital and disciplined capital spending.
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