Advance Auto Parts Q2 Profit Beats View; Affirms 2015 Earnings Outlook

(RTTNews) - Auto parts retailer Advance Auto Parts, Inc. (AAP) on Thursday reported an 8 percent increase in profit for the second quarter from last year on higher revenues that were driven by the addition of new stores and increase in comparable store sales.

Comparable cash earnings per share for the quarter beat analysts' estimates. Looking ahead, the company affirmed its comparable cash earnings outlook for fiscal 2015, but also projected an increase in one-time expenses for the year due to store closures.

Darren Jackson, Chief Executive Officer of Advance Auto parts said, "Our second quarter comparable store sales increased 1.0% and Comparable Cash EPS grew 9.1% to $2.27. These results were in-line with our expectations given the continuing demands of the General Parts integration. Our integration continues to be on-track overall along with our sales and profitability."

The Roanoke, Virginia-based company's net income for the second quarter was $150.00 million or $2.03 per share, up from $139.49 million or $1.89 per share in the previous-year quarter.

The latest quarter's results include $0.08 per share of amortization of acquired intangible assets and integration costs of $0.16 per share primarily associated with the acquisition of General Parts International, Inc.

Excluding these items, comparable cash earnings for the quarter were $2.27 per share, compared to $2.08 per share in the year-ago period. On average, 20 analysts polled by Thomson Reuters expected the company to report earnings of $2.25 per share for the quarter. Analysts' estimates typically exclude special items.

Comparable results for the latest quarter include an unfavorable impact of $0.03 per share from foreign currency.

Net sales for the quarter grew 1 percent to $2.37 billion from $2.35 billion in the same quarter last year. Analysts had a consensus revenue estimate of $2.38 billion for the quarter.

The company attributed the increase in sales to addition of new stores over the past 12 months and a comparable store sales increase, partially offset by changes in the company's independent store count.

Comparable store sales for the quarter increased 1.0 percent, compared to an increase of 2.6 percent in the year-ago period. Comparable store sales for the quarter were negatively impacted by 34 basis points due to foreign currency fluctuations from the company's Canadian operations.

Gross profit margin expanded 64 basis points from last year to 45.9 percent, primarily due to lower product acquisition costs, inclusive of the company's ongoing merchandise cost synergy savings.

As at the end of the second quarter, Advance Auto Parts operated 5,252 stores and 117 Worldpac branches, and served about 1,300 independently-owned Carquest stores.

On August 12, the company's board of directors declared a regular quarterly cash dividend of $0.06 per share, to be paid on October 2 to stockholders of record as of September 18.

For fiscal 2015, Advance Auto Parts affirmed its forecast for comparable cash earnings in a range of $8.10 to $8.30 per share. The Street expects the company to report earnings of $8.26 per share for the year.

As part of its on-going process of store evaluations, Advance Auto Parts plans to close 50 stores in the latter part of 2015, in line with its accelerated efforts to achieve 12 percent comparable operating profit target in 2016.

However, the company expects the one-time expense impact of these closures to be between $16 and $20 million in 2015. This will effectively increase the 2015 full-year estimates for one-time expenses to a range of $91 million to $105 million, from the original outlook of $75 million to $85 million disclosed in the company's fourth-quarter 2014 earnings release.

AAP closed Wednesday's trading at $172.00. In Thursday's pre-market activity, the stock is up $0.59 or 0.34 percent to $172.59.