Automotive aftermarket parts provider Advance Auto Parts, Inc. , announced its financial results for the first quarter ended April 23, 2022, marking it’s eighth consecutive quarter of growth, though weather and stimulus shifts drove down DIY results.
“In the first quarter of 2022, we delivered our 8th consecutive quarter of comparable store sales, adjusted operating income and adjusted earnings per share growth,” said Tom Greco, president and chief executive officer of Advance Auto Parts, Inc.
“We started 2022 with strong mid-single digit comp growth through the first ten weeks of our 16-week quarter. During the final six weeks, we experienced comp declines driven by our DIY omnichannel business. This was primarily a result of headwinds from the expected lap of the DIY sales boost from the 2021 stimulus as well as a slower start to the spring selling season due to cooler temperatures and higher precipitation. These headwinds have subsided during the first four weeks of our second quarter with comparable sales growth within our full-year guidance range.
“We believe the investments we’ve made in the company, our team members as well as our supplier partners are enabling us to capitalize on emerging opportunities while staying focused on the disciplined execution of our long-term strategic plan. Consistent with this, we continue to build and strengthen a differentiated customer offering behind improved parts availability, industry leading innovation and an enhanced online and in-store experience.
“This includes today’s announcement that Advance Auto Parts is the first to market with our exclusive DieHard EV battery for hybrid and battery electric vehicles. This innovative 12-volt battery will provide improved and longer-lasting battery performance for the increasing power demands of hybrid and electric vehicles.
“We also returned over $400 million of cash to shareholders in the quarter through a combination of cash dividends and share repurchases. Consistent with our balanced approach to returning cash to shareholders, our Board also approved a quarterly cash dividend of $1.50 per share. We believe we’re well positioned to execute our strategic initiatives throughout the balance of 2022 to deliver profitable growth and top-quartile total shareholder returns over the long-term.”
Advance Auto Parts First Quarter 2022 Results(1)
All figures in USD.
- Net sales increased 1.3% to $3.4 billion
- Comparable store sales(2) increased 0.6%; Comparable store sales increased 25.3% on a two-year stack
- Gross profit increased 1.5% to $1.5 billion; Adjusted gross profit(3) increased 6.6% to $1.6 billion
- Gross profit margin was flat; Adjusted gross profit margin(3) increased 231 basis points to 47.1% of Net sales
- SG&A increased 5.7% to $1.3 billion; Adjusted SG&A(3) increased 7.8% to $1.3 billion
- SG&A was 38.6% of Net sales compared with 37.0% of Net sales; Adjusted SG&A(3) deleveraged 229 basis points to 38.1% of Net sales
- Operating income decreased 19.4% to $203.3 million; Adjusted operating income(3) increased 1.6% to $303.6 million
- Operating income margin decreased by 155 basis points to 6.0%; Adjusted operating income margin(3) was flat
- Diluted EPS decreased 19.6% to $2.26 compared with $2.81 in the first quarter of 2021; Adjusted diluted EPS(3) increased 6.9% to $3.57 compared with the first quarter of 2021
- Net cash used in operating activities was $54.9 million; Free cash flow(3) was an outflow of $169.8 million
- Returned $403 million to shareholders through a combination of share repurchases and cash dividends
- Opened 35 new stores in the first quarter
First quarter of 2022 Net sales totaled $3.4 billion, a 1.3% increase compared with the first quarter of the prior year. This was driven primarily by year over year growth in our professional and independent businesses. Comparable store sales for the first quarter of 2022 increased 0.6%.
The company’s GAAP Gross profit margin of 44.6% was flat compared with the first quarter of the prior year. Adjusted gross profit increased 6.6% to $1.6 billion. Adjusted gross profit margin was 47.1% of Net sales in the first quarter of 2022, a 231 basis point increase from the first quarter of 2021. This was primarily driven by improvements in category management, including strategic pricing and owned brand expansion. These improvements were partially offset by inflationary costs and unfavorable channel and product mix.
The company’s GAAP SG&A was 38.6% of Net sales in the first quarter of 2022 compared with 37.0% in the first quarter of 2021. Adjusted SG&A increased to $1.3 billion from $1.2 billion in the first quarter of the prior year.
As a percent of Net sales, Adjusted SG&A was 38.1% in the first quarter of 2022, which deleveraged 229 basis points compared with the first quarter of 2021. This was primarily driven by inflationary headwinds including store labour, fuel costs as well as start-up costs associated with new store openings and channel mix.
These costs were partially offset by a year over year decrease in COVID-19 related expenses and incentive compensation as well as savings associated with SG&A reduction efforts.
On a GAAP basis, the company’s Operating income was $203.3 million, or 6.0% of Net sales, compared with 7.6% in the first quarter of 2021. The company’s Adjusted operating income was $303.6 million in the first quarter of 2022, an increase of 1.6% versus the first quarter of the prior year. Adjusted operating income margin of 9.0% of Net sales was flat in the first quarter compared with the first quarter of the prior year.
The company’s effective tax rate in the first quarter of 2022 was 23.7%, compared with 24.3% in the first quarter of 2021. On a GAAP basis, the company’s Diluted EPS was $2.26 compared with $2.81 in the first quarter of 2021. The company’s Adjusted Diluted EPS was $3.57 for the first quarter of 2022, an increase of 6.9% compared with the first quarter of the prior year.
Net cash used in operating activities was $54.9 million through the first quarter of 2022 versus Net cash provided by operating activities of $329.9 million in the same period of the prior year. The decrease was primarily driven by lower Net income and working capital. Free cash flow through the first quarter of 2022 was a cash outflow of $169.8 million compared with a cash inflow of $259.0 million in the first quarter of the prior year.
|(1)||All comparisons are based on the same time period in the prior year.|
|(2)||Comparable store sales exclude sales to independently owned Carquest locations.|
|Advance Auto Parts, Inc. and Subsidiaries|
|Condensed Consolidated Statements of Operations|
|(In thousands USD, except per share data) (unaudited)||Sixteen Weeks Ended|
|April 23, 2022 (1)||April 24, 2021 (1)|
|Cost of sales, including purchasing and warehousing costs||1,867,690||1,845,444|
|Selling, general and administrative expenses||1,303,250||1,232,797|
|Loss on early redemptions of senior unsecured notes||(7,408)||—|
|Other income, net||136||4,836|
|Total other, net||(20,140)||(6,355)|
|Income before provision for income taxes||183,130||245,774|
|Provision for income taxes||43,339||59,844|
|Basic earnings per common share||$2.28||$2.83|
|Weighted-average common shares outstanding||61,261||65,688|
|Diluted earnings per common share||$2.26||$2.81|
|Weighted-average common shares outstanding||61,732||66,102|
|(1)||These preliminary condensed consolidated statements of operations have been prepared on a basis consistent with the company’s previously prepared consolidated statements of operations filed with the SEC, but do not include the footnotes required by GAAP.|
During the first quarter of 2022, the company repurchased 1.1 million shares of its common stock at an aggregate cost of $248.2 million, or an average price of $231.41 per share, in connection with its share repurchase program. At the end of the first quarter of 2022, the company had $1.3 billion remaining under the share repurchase program.
On May 18, 2022 the company declared a regular cash dividend of $1.50 per share to be paid on July 1, 2022 to all common stockholders of record as of June 17, 2022.
Full Year 2022 Guidance
“We continue to execute against our long-term plans, despite volatility within the broader macro environment,” said Jeff Shepherd, executive vice president and chief financial officer. “Based on our Q1 results and 2022 outlook, we’re reaffirming our 2022 guidance including comparable store sales growth, adjusted operating margin expansion and double-digit adjusted earnings per share growth. Importantly, we’re slightly increasing our Adjusted diluted EPS guidance range reflecting year to date share repurchases.”
|Full Year 2022 Guidance||2022|
|($ in millions, except per share data)||Low||High|
|Comparable store sales||1.0%||3.0%|
|Adjusted operating income margin||10.0%||10.2%|
|Income tax rate||24.0%||26.0%|
|Adjusted diluted EPS (2, 3)||$13.30||$13.85|
|Free cash flow||Minimum $775|
|New store and branch openings||150|
|(2)||As of February 14, 2022, the company’s Adjusted diluted EPS guidance was a range between $13.20 and $13.75.|
|(3)||Assumes weighted-average shares outstanding as of May 20, 2022, including 0.5 million shares repurchased subsequent to April 23, 2022 and excludes any future share repurchases made by the company.|
Investor Conference Call
The company detailed its results for the first quarter ended April 23, 2022 via a webcast scheduled at 8 a.m. Eastern Time on Tuesday, May 24, 2022. The webcast will be accessible via the Investor Relations page of the company’s website (ir.AdvanceAutoParts.com).
A replay of the conference call will be available on the company’s Investor Relations website for one year.
About Advance Auto Parts
Advance Auto Parts, Inc. is a leading automotive aftermarket parts provider that serves both professional installer and do-it-yourself customers. As of April 23, 2022 Advance operated 4,687 stores and 311 Worldpac branches primarily within the United States, with additional locations in Canada, Puerto Rico and the U.S. Virgin Islands. The company also served 1,318 independently owned Carquest branded stores across these locations in addition to Mexico and various Caribbean islands. Additional information about Advance, including employment opportunities, customer services, and online shopping for parts, accessories and other offerings can be found at www.AdvanceAutoParts.com.
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