ROANOKE - Advance Auto Parts (NYSE:AAP) disclosed a third quarter loss of $0.82 per share today, a stark contrast to the earnings of $1.92 per share in the same quarter last year and falling short of analyst expectations of $1.44 per share. Despite the loss, the company reported a 2.9% increase in net sales to $2.7 billion and a 1.2% rise in comparable store sales.
The automotive parts provider is undertaking significant strategic changes, including the divestiture of Worldpac and its Canadian business catering to commercial clients. CEO Shane O’Kelly announced a cost reduction program expected to save at least $150 million annually.
O'Kelly also confirmed that Ryan Grimsland will step into the role of Executive Vice President and Chief Financial Officer starting November 27, while Tony Iskander will continue as Senior Vice President, Finance, and Treasurer.
The company's operating performance faced challenges in the third quarter with an operating loss of $43.7 million, a sharp decline from the 6.5% operating income margin reported in the previous year. The downturn was attributed to one-time inventory reserve adjustments and increased costs which led to a gross profit margin reduction to 36.3%.
In light of these challenges, Advance Auto Parts has revised its full-year 2023 guidance downward. The company now expects revenues to range between $11.25 billion and $11.3 billion, with diluted earnings per share estimated between $1.40 and $1.80, down from the earlier forecast of $4.50 to $5.10 per share.
Financial figures reveal that as of October 7, total assets slightly increased to $12.24 billion from $12.01 billion at the end of 2022. However, net cash from operating activities plummeted to $30.4 million from last year's $483.1 million, and free cash flow turned negative with an outflow of $156.8 million.
Despite these financial setbacks, AAP remains committed to shareholder returns, declaring a regular cash dividend of $0.25 per share payable on January 26, 2024.
The company's strategic refocus includes improving workforce retention rates by leveraging the passion and knowledge of its frontline teams, alongside the cost-saving measures and divestitures being facilitated by Centerview Partners.
InvestingPro Insights
As per InvestingPro data, Advance Auto Parts (AAP) has a market capitalization of $3,460M and a P/E ratio of 10.09. The company's revenue for the last twelve months as of Q2 2023 stands at $11,218.75M, with a growth of 1.46%. Despite the challenges, AAP has maintained its dividend payments for 18 consecutive years, with a current dividend yield of 1.71%.
InvestingPro Tips highlight that AAP operates with a significant debt burden and has experienced a declining trend in earnings per share. However, the management has been aggressively buying back shares, reflecting their confidence in the company's future. Also, despite the recent decline in net income, analysts predict the company will be profitable this year.
For more in-depth information and additional tips, consider exploring the InvestingPro platform, which offers a wealth of knowledge and insights into various companies and their financial performances.
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