Advance Auto Parts’ Q1 profit plunges
Advance Auto Parts reported a tough first quarter with a big profit miss as its cut its full-year outlook and slashed its dividend.
The automotive parts retailer reported that its net income dropped to $42.7 million, or $0.72 a share, for the quarter ended April 22, from $139.8 million, or $2.26 a share, in the year-ago period. Analysts had expected earnings of $2.56 a share.
Sales rose 1.3% to $3.42 billion, just below estimates of $3.43 billion. Same-store sales inched down 0.4%.
The company’s operating margin rate of 2.6% was also well below expectations amid to higher than planned investments to narrow competitive price gaps in the professional sales channel as well as unfavorable product mix.”
“While we anticipated the first quarter would be challenging, our results were below our expectations,” said president and CEO Tom Greco, who is set to retire at the end of the year. (As previously reported, Advance has hired an executive search firm to assist in its search for a new chief.)
Looking ahead, Greco said the company remains focused on improving inventory availability while sustaining competitive price targets to improve topline sales.
"We expect the competitive dynamics we faced in the first quarter to continue, resulting in a shortfall to our 2023 expectations,” he said.
In connection with his pending retirement, Greco said the board’s independent chair, Gene Lee, has taken on an expanded role as interim executive chair.
“Gene will be providing additional operational oversight and support to our management team to enable a seamless CEO transition,” Greco said.
Given the shortfall experienced in the first quarter, CFO Jeff Shepherd said Advance was reducing its full-year 2023 guidance.
“In addition, our board of directors made the decision to reduce our quarterly cash dividend to provide enhanced financial flexibility,” he said. “We are committed to improving our operational performance and driving increased profitability."
The retailer cut its full-year guidance earnings range to $6.00 to $6.50 from its previous range of $10.20 to $11.20. Sales are now expected to range from $11.20 billion to $11.30 billion, down from from $11.40 billion to $11.60 billion.
The company cut its quarterly dividend by 83.3%, to $0.25 a share from $1.50 a share.
As of April 22, Advance operated 4,778 stores and 318 Worldpac branches primarily within the United States, with additional locations in Canada, Puerto Rico and the U.S. Virgin Islands.