Advance Auto Parts today announced its financial results for the first quarter ended April 22, 2017. First quarter GAAP earnings per diluted share (Diluted EPS) were $1.46. First quarter Adjusted earnings per diluted share (Adjusted EPS) were $1.60, which exclude $0.14 of non-GAAP adjustments.
“Our first quarter comparable store sales declined 2.7%. As expected, comparable store sales were unfavorably impacted by the shift in New Year’s Day to the first quarter of 2017 as well as the significant shift of winter related demand into December. These factors pulled sales forward into the fourth quarter of 2016 and reduced comparable store sales in the first quarter. Taking into account these shifts and normalizing for their impact across the 28 week period including the fourth quarter of 2016 and first quarter of 2017, we delivered positive sequential improvement in comparable store sales performance of approximately 70 basis points versus the third quarter of 2016. This steady improvement demonstrates that we are making progress to improve our top line performance by taking decisive and consistent actions across the organization as we refocus the company on the customer,” said Tom Greco, President and Chief Executive Officer.
“As in the past several quarters, our operating margin reflects our deliberate choices to restore investments in the customer and improve overall service and delivery. In addition to making these critical customer investments, we are increasing and accelerating our initial gross productivity target of $500 million over 5 years to $750 million over 4 years. While some of this cost benefit will be used to fund growth initiatives, much of it will drive margin improvement. Our sustained focus on the customer will position us to deliver sequential top line improvement in comparable store sales and improved profitability as our productivity agenda accelerates in the second half of 2017.”
First quarter 2017 highlights
The sales decrease of 3.0% was primarily driven by the comparable store sales decline of 2.7%, which reflects the sequential timing impacts from the fourth quarter related to the shift in holiday timing, the seasonal demand shifts that occurred between quarters together with overall industry macro headwinds, partially offset by positive first quarter growth at Worldpac.
The company's Gross Profit rate decrease was primarily driven by investments in the customer, inventory optimization efforts and supply chain expense deleverage due to the comparable store sales decline.
The company's SG&A increase was in-line with company expectations and reflects the incremental customer focused investments and expense deleverage due to the comparable store sales decline. In contrast to the first quarter of 2016, which included the impact of aggressive cost reduction actions that negatively impacted customer service, the company is refocusing its priorities to put the customer first and is reinvesting to restore and enhance critical customer capabilities.
Overall, the company's Operating Income decline was primarily driven by investments in the customer, expense deleverage due to the comparable store sales decline and inventory optimization efforts as outlined.
Operating cash flow decreased approximately 60.3% to $35.1 million through the first quarter of 2017 from $88.4 million through the first quarter of 2016. Free cash flow was negative $30.2 million through the first quarter of 2017 compared to negative $0.7 million through the first quarter of 2016 primarily driven by lower sales, partially offset by lower capital expenditures of $65.3 million versus $89.1 million in 2016.
As of April 22, 2017, the company operated 5,059 stores and 130 Worldpac branches and served approximately 1,250 independently owned Carquest stores.
On May 16, 2017, the company's Board of Directors declared a regular quarterly cash dividend of $0.06 per share to be paid on July 7, 2017 to stockholders of record as of June 23, 2017.
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