Advance Auto Parts (NYSE:AAP) shares are down 25% in pre-market Wednesday after the company was forced to meaningfully lower its full-year profit following a weak set of Q1 results.
AAP posted a profit of 72 cents on revenue of $3.4 billion in the first quarter. Analysts were looking for EPS of $2.56 on revenue of $3.43 billion. Sales rose 1.3% year-over-year while comparable sales fell 0.4%, a negative surprise given that Street was looking for an increase of 0.7%.
“While we anticipated the first quarter would be challenging, our results were below our expectations. Net sales grew 1.3% in the quarter. Our operating margin rate of 2.6% in the quarter was well below expectations due to higher than planned investments to narrow competitive price gaps in the professional sales channel as well as unfavorable product mix,” said Tom Greco, president and chief executive officer.
As a result, the company slashed its full-year outlook for profit and sales. AAP now sees FY23 revenue in the range of $11.2-11.3B, down from the prior forecast for $11.4-11.6B. Analysts were expecting $11.43B.
“We expect the competitive dynamics we faced in the first quarter to continue, resulting in a shortfall to our 2023 expectations,” Greco added.
On the EPS front, the FY forecast now calls for $6-6.50, a decrease of over 40% compared to the prior outlook that called for $10.20-11.20. The Street consensus was $10.64.
Comparable sales are seen falling 0-1%, a haircut compared to the prior forecast of +1-3%. The company also expects to open fewer shops (40-60 vs the prior 60-80).
AAP also said it cut its quarterly cash dividend “to provide enhanced financial flexibility.”
“We are committed to improving our operational performance and driving increased profitability," said CFO Jeff Shepherd.