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Advance Auto's Earnings & Sales Beat - Analyst Blog

By: Zacks.com
Posted: 8/13/2013 9:35:00 AM
Referenced Stocks: AAP;AZO;KMX;ORLY

Advance Auto Parts Inc. ( AAP ) saw an 18.7% rise in earnings to $1.59 per share in the second quarter of fiscal 2013 (ended Jul 13, 2013) from $1.34 per share in the same quarter of prior fiscal year. It also beat the Zacks Consensus Estimate of $1.48. Earnings benefited from higher gross margin and efficient cost control measures. Net earnings escalated 17.3% to $116.9 million from $99.6 million the second quarter of fiscal 2012.

Revenues went up 6.1% to $1.55 billion, beating the Zacks Consensus Estimate of $1.59 billion. The increase was driven by the acquisition of BWP Distributors and the net addition of 175 new stores in the last 12 months, partially offset by a decline in comparable store sales of 0.3% versus a decrease of 2.7% during the second quarter of fiscal 2012.

Gross profit increased 6.9% to $779.2 million or 50.3% of sales in the quarter compared with $728.9 million or 49.9% of sales a year ago. The increase in gross profit was driven by higher merchandise margins due to lower acquisition costs and a favorable product mix. This was partially offset by higher supply chain costs due to full operations of the new distribution center and the impact of BWP sales, which had higher mix of Commercial sales, resulting in lower gross margin.

SG&A expense was $584.5 million or 37.7% of sales in the quarter, compared with $559.7 million or 38.3% in the second quarter of fiscal 2012. The decline was driven by lower marketing expense, increased labor productivity and lower credit card fees, partially offset by higher incentive compensation and expense owing to decline in comparable store sales and increase in new store openings.

Operating income increased 15.1% to $194.7 million from $169.2 million in the second quarter of fiscal 2012. Operating margin was 12.6% versus 11.6% a year ago.

Store Openings

During the quarter, Advance Auto opened 26 stores, including 5 Autopart International stores, and closed 5 stores. As of Jul 13, 2013, the company's total store count stood at 3,990, including 227 Autopart International stores.

Recently, Advance Auto opened its 4,000th store. The store is based in Montgomery, N.Y., a strategic location to support the company to expand its footprint. The new store will provide customers with a wide range of parts and recognized national brands along with several free services.

Share Repurchase

Advance Auto repurchased about 1 million shares at an aggregate cost of $74.5 million, implying an average price of $77.38. As of Jul 13, 2013, the company had roughly $418 million available on its $500 million share repurchase program authorized by its Board on May 14, 2012.

Financial Position

Advance Auto had cash and cash equivalents of $521 million as of Jul 13, 2013, an increase from $448.6 million as of Jul 14, 2012. Long-term debt increased to $605 million as of Jul 13, 2013, from $600.5 million as of Jul 14, 2012. The long-term debt-to-capitalization ratio stood at 30.6%, versus 36.1% as of Jul 14, 2012.

In the 28-week period, ended Apr 20, 2013, operating cash flow dipped to $310.1 million from $411.4 million in the year-ago period. The decline in cash flow was due to increases in accounts receivable and inventories.

Outlook

Advance Auto continues to expect earnings between $5.30 and $5.45 per share for 2013 with modest increase in gross profit.

Advance Auto, which is a prominent player in the automotive replacement parts and accessories industry along with AutoZone Inc. ( AZO ), O'Reilly Automotive Inc. ( ORLY ) and CarMax Inc. ( KMX ), retains a Zacks Rank #3 (Hold).



ADVANCE AUTO PT (AAP): Free Stock Analysis Report

AUTOZONE INC (AZO): Free Stock Analysis Report

CARMAX GP (CC) (KMX): Free Stock Analysis Report

O REILLY AUTO (ORLY): Free Stock Analysis Report

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