Advance Auto Parts First Quarter Comparable Store Sales Increase 8.2%; Free Cash Flow Increases 34% to $201 Million
ROANOKE, Va.Advance Auto Parts, Inc. , a leading retailer of automotive aftermarket parts, accessories, batteries, and maintenance items, today announced its financial results for the first quarter ended April 25, 2009.>First quarter earnings per diluted share were $0.98 including a $0.04 charge related to store divestures which were not included in, and continue to be excluded from, the Company’s 2009 annual outlook. Excluding the impact of the store divestures, diluted earnings per share (EPS) increased 19% to $1.02 which was a $0.16 increase over the prior year.First Quarter Highlights
Total sales for the first quarter increased 10.3% to $1.68 billion, compared with total sales of $1.53 billion in the first quarter of fiscal year 2008. The sales increase reflected the net addition of 114 new stores in the past 12 months and a comparable store sales increase of 8.2% during the quarter compared to an increase of 0.6% during the first quarter last year.The comparable store sales gain was comprised of a 17.5% increase in Commercial sales and a 4.4% increase in do-it-yourself (DIY) sales.This compares to a 10.6% increase in Commercial and a 3.0% decrease in DIY during the first quarter last year.As a result of the 53rd week in fiscal 2008, the Company experienced a calendar shift in fiscal 2009 which added approximately 100 basis-points to the Company’s total comparable stores sales increase during the first quarter.The calendar shift will reverse and reduce the Company’s total comparable store sales growth during the back half of 2009.
The Company’s gross profit rate was 48.8% of sales in the first quarter as compared to 47.5% in the prior year, which reflects a 133 basis-point improvement.The 133 basis-point improvement was primarily due to continued investments in pricing capabilities, merchandising capabilities and parts availability, combined with changes to better align Team Member incentives resulting in better store execution.
The Company’s first quarter SG&A rate was 39.5% of sales in the first quarter as compared to 38.0% last year.The 142 basis-point increase was driven by higher incentive compensation, store divesture expenses and continued strategic capability investments to improve the Company’s gross profit rate and accelerate the Commercial business.The higher incentive compensation and store divestiture expenses drove over 100 basis-points of the increase during the quarter.These increases were partially offset by occupancy and advertising expense leverage as a result of the Company’s 8.2% comparable store sales increase.
Operating cash flow for the quarter increased 37% to $292.7 million from $213.6 million in the first quarter 2008.Free cash flow for the quarter increased 34% to $201.4 million from $150.5 million in first quarter 2008.This increase was primarily driven by improved working capital management, an increase in net income and a decrease in capital expenditures.As a result of the increased free cash flow, the Company paid down debt by $176.1 million during the first quarter. Capital expenditures were $50.2 million for the quarter. This compares to $58.9 million in 2008, a decrease of $8.7 million primarily due to the timing of new store development.
“Our strong start to 2009 is traced directly back to our 49,000 Team Members,” said Darren R. Jackson, Chief Executive Officer. “Our commitment and focus on the customer and our four strategies compel us to increase our investments to transform our business.Our commitment to our customers, confidence in our Team Members and our strong results allow us to move forward at an accelerated pace.”
“Based on our first quarter results, we remain confident in our strategic initiatives to accelerate growth and improve profitability. As a result, we will continue to accelerate our rate of investment to strengthen our core strategic capabilities.We now expect each 1% increase in comparable store sales will add approximately $0.05 in EPS on an annual basis and a 10 basis-point improvement in operating margin is still expected to add approximately $0.03 of EPS to our comparable fiscal 2008 EPS of $2.65,” said Mike Norona, Executive Vice President and Chief Financial Officer.
During the first quarter, the Company opened 46 stores, including 11 Autopart International stores.The Company also closed 9 stores and relocated 3 stores.As of April 25, 2009, the Company’s total store count was 3,405, including 135 Autopart International stores.
2009 Store Divestitures
During the first quarter, the Company completed a thorough examination of its entire real estate store portfolio based on profitability, cash flow, strategic market importance, operating income, store sales potential and current lease rates.As a result of this examination, the Company closed four stores during the quarter and expects to divest a total of 40 to 55 unprofitable stores in 2009 that are delivering unacceptable strategic or financial results.In the first quarter, the Company recorded a $0.04 EPS charge due to asset impairments for certain stores that were identified as part of this initiative and expenses associated with the four stores that were closed during the quarter.As disclosed in the fourth quarter 2008 earnings release, the incremental store divesture costs were not included in the Company’s 2009 annual outlook.Currently, the Company estimates that the incremental store divestures will result in a $0.15 to $0.22 charge to EPS in fiscal 2009, with the majority of the expenses occurring during the second and third quarters.
On May 19, 2009, the Company’s Board of Directors declared a regular quarterly cash dividend of six cents per share to be paid on July 10, 2009 to stockholders of record as of June 26, 2009.
The Company will host a conference call on Thursday, May 21, 2009 at 10:00 a.m. Eastern Daylight Time to discuss its quarterly results.To listen to the live call, please log on to the Company’s website,