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Advance Auto Parts Inc (AAP)
NYSE:AAP
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Advance Auto Parts Inc
(NYSE:AAP)
45Neutral
Positive Factors
Leadership and Strategy
CEO Shane O'Kelly has properly identified and is addressing AAP’s challenges, and now, having met his executive team, the quality and focus are impressive.
Market Performance
Comparable sales decline was 75 basis points better than the Street expectations.
Store Closures
Store closures are proceeding ahead of plan, with lease termination costs tracking favorably.
Negative Factors
Financial Performance
Advance Auto Parts shares are taking another hit as Q4 profitability shifted lower and Q1-to-date comp trends are running below expectations.
Revenue and Margin
Revenue declined by approximately 1% to $2.0B, with weakening gross margin tracked 200 bps below consensus.
Sales Trends
The first quarter sales started off slower than expected, raising concerns about meeting yearly guidance.
Advance Auto Parts Inc (AAP) vs. S&P 500 (SPY)
Market Cap
$1.97B
Dividend Yield3.04%
Average Volume (3M)2.72M
Price to Earnings (P/E)59.6
Beta (1Y)0.70
Revenue Growth-9.34%
EPS Growth-852.37%
CountryUS
Employees33,200
SectorConsumer Cyclical
Sector Strength61
IndustrySpecialty Retail
Share Statistics
EPS (TTM)-5.62
Shares Outstanding59,833,138
10 Day Avg. Volume3,051,428
30 Day Avg. Volume2,719,573
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.22
Price to Cash Flow (P/CF)-7.60
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$41.62Price Target Upside28.50% Upside
Rating ConsensusHold
Number of Analyst Covering16
Advance Auto Parts Inc Business Overview & Revenue Model
Company DescriptionAdvance Auto Parts, Inc. is a leading automotive aftermarket parts provider based in the United States. The company operates in the retail and distribution sectors, primarily focusing on offering a wide range of automotive parts, accessories, batteries, and maintenance items for both professional installers and do-it-yourself (DIY) customers. With a comprehensive network of stores and an extensive online presence, Advance Auto Parts serves a diverse customer base across North America.
How the Company Makes MoneyAdvance Auto Parts makes money through the sale of automotive parts and accessories, targeting both professional customers and DIY enthusiasts. The company's key revenue streams include the retail sales of replacement parts such as brake pads, batteries, and engine components, as well as accessories like floor mats and seat covers. Additionally, Advance Auto Parts benefits from a robust commercial segment that supplies parts directly to professional mechanics and repair shops. The company also generates revenue through its e-commerce platform, which complements its physical stores by providing customers with convenient online shopping options. Significant partnerships with automotive manufacturers and suppliers enhance its product offerings, contributing to its revenue growth.
Advance Auto Parts Inc Financial Statement Overview
Summary
Advance Auto Parts faced a challenging year with declining revenues, profitability, and cash flows. The company is experiencing operational and financial difficulties, as evidenced by negative net income and cash flow figures. While the balance sheet displays increased leverage, it remains stable in terms of assets. Strategic focus on improving operational efficiency and revenue growth is crucial moving forward.Income Statement
Advance Auto Parts has experienced a significant decline in revenue and profitability. The gross profit margin decreased from 40.08% in 2023 to 37.48% in 2024, and the company recorded a net loss in 2024, resulting in a negative net profit margin of -3.69%. The revenue growth rate was -19.48% from 2023 to 2024, reflecting a considerable drop in sales. Additionally, both EBIT and EBITDA margins turned negative, indicating operational challenges.45
Neutral
Balance Sheet
The company's financial leverage has increased, with a debt-to-equity ratio of 1.70 in 2024 compared to 1.59 in 2023. The equity ratio also declined from 20.52% in 2023 to 20.10% in 2024, indicating decreased asset financing through equity. Return on equity was negative at -15.47% due to the net loss, highlighting profitability issues. The balance sheet shows increased financial risk but remains relatively stable in asset base.55
Neutral
Cash Flow
The operating cash flow decreased significantly to $84.63 million in 2024 from $287.38 million in 2023. Free cash flow was negative at -$96.17 million. The operating cash flow to net income ratio was -0.25, and the free cash flow to net income ratio was -0.29, both indicating weak cash generation relative to earnings. The overall cash flow performance reflects liquidity challenges.50
Neutral
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Mar 2022 | Mar 2021 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 9.09B | 11.29B | 11.15B | 11.00B | 10.11B | Gross Profit |
| 3.41B | 4.52B | 4.96B | 4.93B | 4.48B | EBIT |
| -713.31M | 114.38M | 714.15M | 838.72M | 749.91M | EBITDA |
| -395.08M | 426.36M | 939.22M | 1.10B | 947.98M | Net Income Common Stockholders |
| -335.79M | 29.73M | 464.40M | 596.62M | 493.02M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 1.87B | 503.47M | 270.81M | 601.43M | 834.99M | Total Assets |
| 10.80B | 12.28B | 11.99B | 12.19B | 11.84B | Total Debt |
| 3.69B | 4.00B | 3.65B | 3.37B | 3.05B | Net Debt |
| 1.82B | 3.50B | 3.38B | 2.77B | 2.21B | Total Liabilities |
| 8.63B | 9.76B | 9.39B | 9.07B | 8.28B | Stockholders Equity |
| 2.17B | 2.52B | 2.60B | 3.13B | 3.56B |
| Cash Flow | Free Cash Flow | |||
| -96.17M | 44.96M | 296.26M | 822.62M | 701.88M | Operating Cash Flow |
| 84.63M | 287.38M | 722.22M | 1.11B | 969.69M | Investing Cash Flow |
| 1.35B | -235.49M | -424.45M | -287.31M | -266.90M | Financing Cash Flow |
| -75.01M | 189.27M | -620.70M | -1.06B | -286.00M |
Advance Auto Parts Inc Technical Analysis
Negative
32.39
Price Trends
38.95
Negative
41.71
Negative
44.41
Negative
Market Momentum
-1.86
Positive
38.63
Neutral
33.87
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AAP, the sentiment is Negative. The current price of 32.39 is below the 20-day moving average (MA) of 35.78, below the 50-day MA of 38.95, and below the 200-day MA of 44.41, indicating a bearish trend. The MACD of -1.86 indicates Positive momentum. The RSI at 38.63 is Neutral, neither overbought nor oversold. The STOCH value of 33.87 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for AAP.
Advance Auto Parts Inc Risk Analysis
Advance Auto Parts Inc disclosed 23 risk factors in its most recent earnings report. Advance Auto Parts Inc reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Advance Auto Parts Inc Peers Comparison
Overall Rating
UnderperformOutperform
Sector (60)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
73 Outperform | $61.57B | 24.36 | -14.95% | ― | 4.72% | 4.69% | |
71 Outperform | $10.90B | 16.12 | 11.33% | 2.85% | 3.53% | -25.71% | |
70 Outperform | $80.95B | 34.78 | -174.09% | ― | 5.67% | 5.40% | |
70 Outperform | $10.10B | 11.01 | 18.50% | 2.93% | 3.14% | -11.22% | |
68 Neutral | $15.99B | 17.81 | 20.69% | 3.47% | 1.71% | -30.78% | |
60 Neutral | $7.23B | 11.55 | 3.67% | 4.04% | 2.96% | -13.54% | |
45 Neutral | $1.97B | 59.62 | -23.45% | 3.04% | -9.34% | -852.37% |
* Consumer Cyclical Sector Average
Performance Comparison
AAP
Advance Auto Parts Inc
32.39
-37.52
-53.67%
AZO
AutoZone
3,631.17
720.90
24.77%
GPC
Genuine Parts Company
114.31
-25.89
-18.47%
LKQ
LKQ
41.63
-5.41
-11.50%
ORLY
O'Reilly Auto
1,397.93
308.42
28.31%
PAG
Penske Automotive Group
150.70
4.29
2.93%
Advance Auto Parts Inc Earnings Call Summary
Earnings Call Date: Feb 26, 2025 | % Change Since: -28.84% | Next Earnings Date: May 28, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted strategic initiatives, such as store closures and enhanced vendor relationships, aimed at improving the company's financial position and operational efficiency. However, the financial results for both the quarter and the full year reflected challenges, including declining sales and negative profitability, with ongoing volatility in early 2025. Despite positive steps taken, the overall environment remains challenging.Highlights
Strategic Store Closures and Improved Liquidity
Advance Auto Parts successfully closed approximately 500 corporate stores and 200 independent locations, with liquidations largely complete and lease terminations tracking favorably. The closure process was ahead of schedule, enhancing the company's liquidity position, bolstered by proceeds from the Worldpac sale.
Enhanced Vendor Relationships and Cost Improvements
The company reported strong vendor partnerships, resulting in improved product costs and promotional pricing. These enhancements are expected to drive gross margin improvements throughout 2025, particularly in the latter half of the year.
Market Hub Expansion Showing Positive Results
The expansion of market hub stores contributed to above-target comparable sales growth. With 19 market hubs operational and plans for further openings, these hubs are increasing same-day parts availability, supporting stronger future sales growth.
Remediation of Material Weaknesses
Advance Auto Parts successfully remediated all outstanding material weaknesses by the end of 2024, indicating an improved control environment and enhanced financial reporting reliability.
Lowlights
Decline in Quarterly and Annual Sales
Fourth quarter net sales decreased by 1% year-over-year, with comparable store sales down 1%. Full-year net sales declined by 1%, with comparable sales down 0.7%, attributed to a deceleration in the second half and consumer spending softness.
Negative Profitability and Operating Margin Challenges
The company reported an adjusted operating loss of $99 million in Q4, with a negative operating margin of 5%. Full-year adjusted operating income was only $35 million, with operating margin at 0.4%, impacted by transitory costs and strategic actions.
Higher Labor Costs and SG&A Deleverage
Adjusted SG&A expenses increased, resulting in a deleverage of 175 basis points in Q4 and 50 basis points for the full year, primarily due to higher labor-related expenses.
Volatility and Weak Start to 2025
The company experienced week-to-week volatility in Q1 2025, with net sales expected to decline and comparable sales projected to fall by approximately 2% due to closures and a pressured consumer environment.
Company Guidance
In the guidance provided during the Advance Auto Parts' Fourth Quarter and Full Year 2024 Earnings Conference Call, the company outlined several key metrics and strategic initiatives aimed at improving future performance. For the fiscal year 2025, Advance Auto Parts expects net sales to range between $8.4 billion to $8.6 billion, reflecting a reduction of 5% to 8% year-over-year due to store closures. The company anticipates comparable sales growth of 50 to 150 basis points on a 52-week basis. Additionally, adjusted operating income margin is projected to be between 2% to 3%, with adjusted diluted EPS ranging from $1.50 to $2.50. The guidance also includes an expected 53rd week contribution of approximately $100 million to $120 million in sales. The company aims to achieve gross margin expansion through product cost savings and improvements in supply chain and labor productivity. Key strategic initiatives include enhancing merchandising excellence, optimizing the distribution network with 12 large DCs by 2026, and focusing on improving speed of service at stores. These efforts are expected to support the company’s goal of achieving adjusted operating margins of approximately 7% by 2027.Advance Auto Parts Inc Corporate Events
Executive/Board Changes
Advance Auto Parts EVP Herman Word to Retire
Neutral
Mar 20, 2025
Herman L. Word, Jr., Executive Vice President of Professional, Independents and Canada at Advance Auto Parts, Inc., will retire effective April 15, 2025, and will remain in a transition role until May 16, 2025. The company acknowledges Mr. Word’s over 20 years of service and will provide him with a resignation payment as per his amended employment agreement.
Executive/Board Changes
Advance Auto Parts Announces Executive Retirement Plan
Neutral
Feb 6, 2025
Tammy M. Finley, Executive Vice President, General Counsel and Corporate Secretary of Advance Auto Parts, will retire on March 2, 2025, serving in an advisory role until May 2, 2025, to facilitate a smooth transition. Her departure triggers a termination without due cause payment, and the company acknowledges her over 25 years of service in legal and human resources roles.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.