Advance Auto Parts today announced its financial results for the third-quarter ended October 7, 2017.
“We continue to take steps to build the foundation for future growth. We executed key transformational initiatives, including a complete restructure of our field operations and professional sales leadership teams. This important step in our journey sets us up well for the future. In the third quarter, we delivered improvements in cost initiatives while positioning the business for future success. We remain on track to deliver our 2017 guidance,” said Tom Greco, President and Chief Executive Officer.
Third Quarter 2017 Highlights
Total net sales for the third quarter came in at $2.18 billion, a 3.0% decrease versus the prior-year period. Comparable store sales for the quarter decreased 3.4%.
The company's Gross Profit margin decreased 51 basis points year-over-year to 43.4%. The decline was primarily driven by increased supply chain costs and shrink, which negatively impacted margins by 44 basis points. In addition, the non-cash impact of inventory optimization efforts negatively impacted gross margins by 23 basis points. These were partially offset by 17 basis points in favorable material cost improvements.
Adjusted SG&A was 35.5% of net sales, a 127 basis point increase year-over-year. The increase was primarily driven by 131 basis points of higher labor, medical and insurance claims. Additionally, increased marketing expenses accounted for 26 basis points. These increases were partially offset by third-party fee reductions in addition to improvements in utility, maintenance and repair costs. The company's GAAP SG&A was 36.3% of net sales, a 93 basis points increase year-over-year to $791.1 million versus the prior-year period.
The company's Adjusted Operating Income was $172.2 million, 7.9% of net sales, which declined 178 basis points versus the prior-year period, primarily driven by the declines in gross profit and SG&A factors described above. On a GAAP basis, the company's Operating Income was $156.6 million, 7.2% of net sales, a decline of 144 basis points.
Operating cash flow decreased 6.1% to $401.0 million through the third quarter of 2017 from $427.0 million through the third quarter of 2016. Free cash flow was $240.0 million through the third quarter of 2017 compared to $222.8 million in the prior-year period, an increase of 7.7%, primarily driven by inventory optimization efforts.
2017 Annual Outlook
The company reaffirmed the following full year 2017 guidance.
|
New Stores |
60-65 new stores |
|
Comparable Store Sales |
-3% to -1% |
|
Adjusted Operating Income Rate |
200 to 300 basis points year over year reduction |
|
Income Tax Rate |
37.5% to 38.0% |
|
Integration & Transformation Expenses |
Approximately $100 to $150 million |
|
Capital Expenditures |
Approximately $250 million |
|
Free Cash Flow |
Minimum $300 million |
|
Diluted Share Count |
Approximately 74 million shares |
On November 7, 2017, the company's Board of Directors declared a regular quarterly cash dividend of $0.06 per share to be paid on January 5, 2018 to stockholders of record as of December 22, 2017.
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