Advance Auto Parts shares fall after dismal Q1

Shares of Advance Auto Parts fell about 30% in early trading Wednesday after the company’s first-quarter earnings significantly missed Wall Street’s expectations and executives cut the retailer’s annual guidance and quarterly dividend.

The Raleigh-based auto parts supplier blamed its poor first-quarter results and higher-than-expected costs on its professional sales, inflationary pressures, supply chain issues and a low, unfavorable product mix.

The company’s earnings per share were just 72 cents in the period, according to average analyst estimates compiled by Refintiv that had expected $2.57 per share. Its quarterly revenue was $3.42 billion, slightly missing expectations of $3.43 billion.

“We expect the competitive dynamics we faced in the first quarter to continue, resulting in a shortfall to our 2023 expectations. We have lowered our full-year guidance and our board of directors has made the difficult decision to reduce our quarterly dividend,” CEO Tom Greek said. said in a statement.

Shares of other auto parts suppliers such as O’Reilly Automotive and AutoZone also fell on Wednesday. However, some Wall Street analysts believe the problems with advanced auto parts are more active than the industry as a whole.

“In our view, AAP’s issues can largely stand on its own and suggest improved market share opportunities for better-rated AutoZone ( AZO ) and O’Reilly Auto ( ORLY ),” Oppenheimer analyst Brian Nagel said in an investor note Wednesday. .

In its quarterly release, Advance Auto Parts announced a dividend of 25 cents per share for July. In its previous quarterly earnings call, Advance Auto Parts declared a dividend of $1.50 per share.

The company cut its full-year profit outlook and now expects earnings per share of between $6 and $6.50, down from the $10.20 to $11.20 previously reported. Although it lowered its net sales expectations by just $200 million to $300 million, it indicated operational problems with margins.

In the first quarter, the company’s net sales rose 1.3% from a year ago to $3.4 billion. Its gross profit fell 2.4% to $1.5 billion.

Net income for the period was $42.7 million, or 72 cents per share, compared with $139.8 million, or $2.28 per share, a year earlier.

“Although we expected the first quarter to be challenging, our results fell short of our expectations,” Greco said.

Stocks of auto parts suppliers have benefited greatly in recent years due to higher prices of new and used vehicles, due to tight supply. Tight inventories and high prices, a result of production shutdowns from the coronavirus pandemic and supply chain issues, have led many car owners to keep their vehicles for longer, which means more repairs and maintenance.

In January 2022, shares of Advance Auto Parts rose to more than $244 per share. After that they gradually decrease. Wednesday marked the first time since April 2020 that the stock traded below $100 a share. It opened at $79.23 a share on Wednesday.

“We have followed AAP and the auto parts retail industry for many years. We continue to maintain the view that fundamental, potential structural issues are affecting the AAP business model and preventing even solid operations teams from expanding sustainable sales and profitability across the chain.” Nagel said.

UBS analyst Michael Lazer said in an investor note Wednesday that Advance Auto Parts’ results “reflect the challenges of trying to navigate an industry full of competition and good operators.”

– CNBC Michael Bloom contributed to this report.