Soft sales don't deter Advance Auto's expansion agenda

Advance Auto Parts announced plans to open its 4,000th store on Friday, one day after reporting disappointing sales at its 3,999 locations.

Total sales for the second quarter increased 6.1% to $1.55 billion due largely to the addition of 175 new locations. However, same store sales declined 0.3% on top of a prior year decline of 2.7%.

“We are pleased with our profit improvement despite our comparable store sales being essentially flat,” CEO Darren Jackson said. “The positive comparable sales growth at the start of the quarter was offset by weaker demand in the balance of the quarter including sales shortfalls in key seasonal categories. While the macroeconomic environment continued to impact our customers we continue to be encouraged by the strong long-term fundamentals of our industry and remain focused on improving our sales performance as we continue to improve our profitability.”

Profits increased 17.3% to $116.9 million, compared to $99.6 million. The improved profit performance was driven by sales of higher margin products and strong expense control as SG&A costs declined to 37.7% of sales from 38.3% the year earlier. The 58 basis-point decrease was primarily driven by the timing of last year's company-wide leadership meeting, lower marketing expense, increased labor productivity and lower credit card fees as a result of the insourcing of the company's commercial credit program.

“We are pleased that we were able to exceed our profit expectations for the quarter,” said Mike Norona, executive VP and CFO. “Despite softer sales than we expected in the back half of the quarter, our gross profit improvements and disciplined focus on expense management allowed us to increase our earnings per share 18.7% and our operating margins by 98 bps during the quarter. Our long-term operating income rate goal is to achieve 12% and our progress in the quarter is a solid step in the right direction.”

The 4000th store is set to open on August 14 in Montgomery, N.Y.

 

 

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