Customer vehicles sit parked outside an Advance Auto Parts automotive supply store in La Grange, Kentucky.
Luke Sharrett | Bloomberg | Getty Images
Shares of Advance Auto Parts plummeted roughly 30% during early trading Wednesday after the corporate’s fiscal first-quarter earnings significantly missed Wall Street’s expectations and executives slashed the retailer’s yearly guidance and quarterly dividend.
The Raleigh, North Carolina-based auto parts supplier blamed its dismal results and bleaker outlook on higher-than-expected costs for its skilled sales, inflationary pressure, supply chain problems and an unfavorable product mix.
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The corporate’s earnings per share for the period got here in at just 72 cents, compared with an expected $2.57 per share, in response to average analyst estimates compiled by Refinitiv. Its quarterly revenue of $3.42 billion barely missed expectations of $3.43 billion.
“We expect the competitive dynamics we faced in the primary quarter to proceed, leading to a shortfall to our 2023 expectations. Now we have reduced our full-year guidance and our board of directors made the difficult decision to scale back our quarterly dividend,” CEO Tom Greco said in a press release.
Shares of other auto parts suppliers resembling O’Reilly Automotive and AutoZone were also lower Wednesday. Nonetheless, some Wall Street analysts consider Advanced Auto Parts’ problems may very well be more operational than industrywide.
“In our view, AAP issues are, likely, largely its own, and will suggest improved market share opportunities for Outperform-rated AutoZone (AZO) and O’Reilly Auto (ORLY),” Oppenheimer analyst Brian Nagel said in an investor note Wednesday.
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Shares of Advance Auto Parts because the company’s shares peaked in early January 2022 at greater than $244 per share during intraday trading.
In its quarterly release, Advance Auto Parts declared a dividend of 25 cents per share to be paid out in July. In its prior-quarter earnings, Advance Auto Parts declared a dividend of $1.50 per share.
The corporate also cut its full-year profit outlook and now expects earnings per share of between $6 and $6.50, down from a previously stated range of $10.20 to $11.20. That is despite lowering its net sales expectations by a variety of just $200 million to $300 million, signaling operational problems with margins.
For the primary quarter, the corporate’s net sales rose 1.3% to $3.4 billion compared with a yr ago. Its gross profit declined by 2.4% to $1.5 billion.
Net income for the period was $42.7 million, or 72 cents per share, down from $139.8 million, or, $2.28 per share, a yr earlier.
“While we anticipated the primary quarter can be difficult, our results were below our expectations,” Greco said.
Shares of auto parts suppliers greatly benefited lately amid inflated prices of recent and used vehicles as a result of tight supplies. Tight inventories and better prices, resulting from production stoppages from the coronavirus pandemic and provide chain issues, led many automobile owners to maintain their vehicles for longer, meaning more repairs and maintenance.
Shares of Advance Auto Parts peaked at greater than $244 per share in January 2022. They’ve steadily declined since then. Wednesday marks the primary time since April 2020 that the stock traded for below $100 per share. It opened Wednesday at $79.23 per share.
“Now we have followed AAP and the auto parts retail sector for a few years. Now we have consistently maintained the view that underlying, likely structural issues impact the AAP business model and forestall even solid operational teams from driving sustained sales and profit expansion on the chain,” Nagel said.
UBS analyst Michael Lasser, in an investor note Wednesday, said Advance Auto Parts’ results “reflect the challenges of attempting to catch up in an industry that’s competitive and full of good operators.”
– CNBC’s Michael Bloom contributed to this report.
Correction: Average analyst estimates were compiled by Refinitiv. An earlier version misspelled the firm’s name.
