Advance Auto Parts, Inc.
CEO : Mr. Thomas R. Greco
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2022 Q4 | 3.2% YoY | 17.4% | 37.4% | 2023-02-28 |
Tom Greco says,
CEO Succession News
- CEO plans to retire at the end of the year
- Timing of leadership transition will allow for the identification of a successor and updating of multi-year strategy
Q4 2022 Results
- Net sales increased 3.2%, and comparable store sales increased 2.1%
- Mid-single digit comp sales growth in DIY omnichannel
- Expanded adjusted operating margin by 146 basis points
- Adjusted diluted earnings per share increased by 39.1%
2022 Performance
- Overall results did not meet expectations
- Improved top-line results in Q4 as a result of expanding footprint, increasing customer loyalty, and leveraging Diehard brand to gain DIY market share
- Returned over $930 million in cash back to shareholders in the form of share buybacks and dividends
Inventory and Pricing Actions
- Disciplined inventory and pricing actions contributed to stronger results in Q4
- Expected improvement in parts availability throughout 2023
- Targeted investments to get more SKUs closer to the customer, particularly with in-stock levels for front room categories and backroom hard parts categories
- Category management strategy led to gross margin expansion, with owned brand penetration ending the year at 50.5% of mix
Digital Capabilities and Customer Loyalty Program
- Investments in digital capabilities in both DIY and Pro, including improved shopability on B2C website and optimization of mobile app
- Speed Perks customer loyalty program increased membership by nearly 1 million members in 2022 and finished the year with 13.6 million active members
Professional Business Strategy
- Positioning enterprise-wide assortment as close to the customer as possible to provide consistent and reliable delivery of the entire job
- Worldpac has leveraged online ordering from its customers to determine assortment and to ensure inventory is positioned in the right place
- Vision to leverage entirety of enterprise assets to provide a superior customer experience within Pro as well as accelerate growth and profitability
Jeff Shepherd says,
Q4 2022 Financial Performance
- Net sales of $2.5 billion increased 3.2% compared to Q4 2021
- Comparable store sales increased 2.1%
- Adjusted gross profit margin expanded slightly to 46.9% compared to 46.8%
- Q4 adjusted SG&A of $943 million was flat compared with the prior year
- Q4 adjusted operating income was $219 million, an increase of 23.6%
- Adjusted OI margin rate was 8.8%, an increase of 146 basis points
- Adjusted diluted earnings per share increased 39.1% to $2.88
Full Year 2022 Financial Performance
- Net sales of $11.2 billion increased 1.4% compared to the prior year
- Adjusted gross profit increased 4.4% and adjusted gross profit margin expanded 135 basis points to 47.3%
- Adjusted SG&A expenses for the full year 2022 increased 4.5%, compared with 2021
- Adjusted operating income increased 4% to $1.1 billion
- Adjusted OI margin expanded 24 basis points to 9.8%
- Adjusted diluted earnings per share of $13.04 increased 8.5%
- Capital expenditures were $424 million compared with $290 million the previous year.
2023 Guidance
- Net sales of $11.4 billion to $11.6 billion
- Comparable store sales of 1% to 3%
- GAAP operating income margin of 7.8% to 8.2%
- Income tax rate of 24% to 25%
- Diluted earnings per share of $10.20 to $11.20
- Capital expenditures of $300 million to $350 million
- Minimum of $400 million in free cash flow
- 60 to 80 new store and branch openings
- Product cost inflation of mid-single digits overall, with moderation throughout the year
Reasons for Q1 2023 to be the most challenging quarter of the year
- Higher product costs year-over-year
- Transformation costs within SG&A
Change in Reporting
- Shift to GAAP measures for the purposes of guidance and will no longer be reporting non-GAAP results beginning in 2023
- Improve comparability with peers
- Enhance transparency and simplify financial reporting going forward
Capital Allocation and Share Repurchases
- Temporarily paused share repurchases under the existing program due to higher payable payments this year and anticipated continued inventory investments
- Not guiding a range of repurchases for the full year
- Remain committed to paying quarterly cash dividends
- Over the long term, remain committed to a balanced capital allocation approach and returning excess cash to shareholders
Q & A sessions,
Company Strategy and Growth
- The company is well positioned to execute the next generation of its go-to-market strategy.
- The vision is to leverage its enterprise assets to provide a superior customer experience and accelerate growth and profitability.
- The company is testing variations of this end-state vision and has successfully done so in Toronto, with the potential to replicate it in markets across North America.
Pro Business Improvement Plan
- The company has identified key areas for improvement in their underperforming Pro business.
- They have made targeted inventory investments to improve availability, including high velocity SKUs and adding coverage to hubs and super hubs.
- The company has made surgical price investments to close the competitive price gap, leading to more top line sales and margin expansion.
- The field is executing a robust customer sales activation plan, leveraging the company’s parts and other offerings.
- Improvement in hard parts categories is expected to accelerate through the year.
California Expansion and Pro Asset Optimization
- The company plans to focus on gaining market share and driving growth in California, as well as continuing to grow new stores.
- They are taking a close look at their asset base to optimize their Pro business and drive growth, potentially impacting future new store openings.
Full Year 2022 Results and CEO Succession Plan
- The company’s overall results in 2022 did not meet expectations, but improvements were seen in Q4.
- Net sales increased 3.2% in Q4, led by mid-single digit comp sales growth in DIY omnichannel.
- Adjusted operating income margin expanded 146 basis points in Q4 and 24 basis points for the full year.
- The company delivered on its four TSR drivers to drive long-term shareholder value.
- The current CEO plans to retire at the end of the year, and the board will conduct a thorough and comprehensive search for a successor.
No bad stock 