Advance Auto Parts Reports Fourth Quarter and Full Year 2024 Results
Advance Auto Parts, Inc. (NYSE:AAP), a leading automotive aftermarket parts provider in North America, that serves both professional installer and do-it-yourself customers, announced its financial results for the fourth quarter and full year ended December 28, 2024.
"During 2024, we initiated transformative actions to reposition Advance for long-term success and value creation," said Shane O'Kelly, president and chief executive officer. "We strengthened our focus on the blended-box by divesting non-core assets, closing non-strategic stores and right-sizing our organization. Our supply chain and merchandising teams are accelerating efforts to provide faster access to thousands of parts across our network. From a team perspective, we deployed additional resources to support our frontline team members and our customers. Additionally, we augmented our leadership team with talented executives that bring knowledge of core retail fundamentals."
"We ended 2024 with a healthy balance sheet and strong liquidity to navigate our turnaround. The team is acutely focused on execution and driving stronger accountability. We remain committed to delivering an improved operating performance in 2025 and making progress toward our FY27 goal of achieving an adjusted operating margin of approximately 7%."
Fourth Quarter 2024 Results (1,2,3)
Fourth quarter 2024 net sales totaled $2.0 billion, a decrease of 0.9% compared with the prior year. Comparable store sales for the fourth quarter 2024 decreased 1.0%. Comparable store sales does not include store closing sales at more than 500 corporate locations which will be closing under our restructuring plan.
The company's fourth quarter 2024 gross profit was $347.1 million or 17.4% of net sales. Adjusted fourth quarter 2024 gross profit was $778.6 million or 39.0% of net sales, compared with $819.6 million or 40.7% of net sales in the prior year quarter. The deleverage was primarily driven by atypical items and headwinds in the period that are not included in non-GAAP adjustments. These include (1) end of year inventory adjustments associated with an annual review of vendor balances and inventory associated with DCs closed during the year and (2) margin headwind associated with liquidation sales at closing store and DC locations. We estimate these items collectively impacted fourth quarter 2024 gross margin by approximately 280 basis points.
The company's fourth quarter 2024 SG&A was $1.2 billion, or 58.5% of net sales. Adjusted fourth quarter 2024 SG&A was $878.1 million or 44.0% of net sales compared with $850.7 million or 42.2% of net sales in the prior year quarter. This was primarily driven by higher labor-related expenses compared with the prior year.
The company's fourth quarter operating loss was $820.0 million, or (41.1)% of net sales. Adjusted fourth quarter 2024 operating loss was $99.4 million or (5.0)% of net sales, compared with a loss of $31.0 million or (1.5)% of net sales in the prior year quarter. Our fourth quarter 2024 adjusted operating margin was negatively impacted by 280 basis points of atypical items and headwinds in the period that are not included in non-GAAP adjustments.
The company's effective tax rate in the fourth quarter of 2024 was 26.2%. The company's diluted loss per share was $10.16. Adjusted fourth quarter diluted loss per share was $1.18 compared with adjusted diluted loss per share of $0.45 in the prior year quarter. Atypical items and headwinds in the period that are not included in non-GAAP adjustments, accounted for approximately $0.68 of loss per share in the fourth quarter.
_____________________________ (1) All comparisons are based on the same time period in the prior year. The company calculates comparable store sales based on the change in store or branch sales starting once a location has been open for approximately one year and by including e-commerce sales and excluding sales fulfilled by distribution centers to independently owned Carquest locations. Acquired stores are included in the company's comparable store sales one year after acquisition. The company includes sales from relocated stores in comparable store sales from the original date of opening. Closed stores and stores in process of closing under the restructuring plan are not included in the comparable store sales calculation. |
Full Year 2024 Results (1,2,3)
Full year 2024, net sales totaled $9.1 billion, a decrease of 1.2% from 2023. Comparable store sales for full year 2024 decreased 0.7%. Comparable store sales does not include store closing sales at more than 500 corporate locations which will be closing under our restructuring plan.
The company's full year 2024 gross profit was $3.4 billion, or 37.5% of net sales. Adjusted full year 2024 gross profit was $3.8 billion or 42.2% of net sales, compared with $3.9 billion or 41.9% of net sales in the prior year. The gross margin improvement was primarily driven by lapping the one-time impact in the change for inventory reserves in the prior year offset by strategic pricing investments, atypical items and headwinds in the period that are not included in non-GAAP adjustments. These atypical items included end of year inventory adjustments, liquidation sales at closing store and DC locations, lost revenue related to hurricanes and systems outages. We estimate these items collectively impacted full year 2024 gross margin by approximately 90 basis points.
The company's full year 2024 SG&A was $4.1 billion, or 45.3% of net sales. Adjusted full year 2024 SG&A was $3.8 billion, or 41.8% of net sales, compared with $3.8 billion, or 41.3% of net sales, in the prior year. The deleverage was primarily driven by the lower sales volume compared with the prior year. Full year 2024 SG&A also includes atypical items that are not included in non-GAAP adjustments. These include a gain on sale of asset offset by nonrecurring team member assistance expenses and other charges. In aggregate, we estimate these items drove 30 basis points of favorability for the full year.
The company's full year 2024 operating loss was $713.3 million, or (7.8)% of net sales. Adjusted full year 2024 operating income was $35.2 million or 0.4% of net sales, compared with adjusted operating income of $56.3 million or 0.6% of net sales in the prior year. Our full year 2024 adjusted operating margin was negatively impacted by 60 basis points of atypical items and headwinds in the period that are not included in non-GAAP adjustments.
The company's effective tax rate for full year 2024 was 23.6%. The company's full year 2024 diluted loss per share was $9.80. Adjusted full year 2024 diluted loss per share was $0.29 compared with adjusted diluted loss per share of $0.28 in the prior year quarter. Atypical items and headwinds in the period that are not included in non-GAAP adjustments accounted for approximately $0.64 of loss per share for the full year.
Net cash provided by operating activities was $140.5 million for the full year 2024 versus $141.8 million for the prior year. The decrease was primarily driven by lower net income and deferred income taxes offset by higher working capital. Free cash flow for the full year 2024 was an outflow of $40.3 million, compared with an outflow of $83.9 million in the prior year.
Capital Allocation
On February 11, 2025, the company declared a regular cash dividend of $0.25 per share to be paid on April 25, 2025 to all common stockholders of record as of April 11, 2025.
__________________________ |
(1) Adjusted Operating Income Margin is a non-GAAP measure. For a better understanding of the company's non-GAAP adjustments, refer to the reconciliation of non-GAAP financial measures in the accompanying financial tables. |
(2) All comparisons are based on continuing operations for the same time period in the prior year, unless otherwise specified. The company calculates comparable store sales based on the change in store or branch sales starting once a location has been open for approximately one year and by including e-commerce sales and excluding sales fulfilled by distribution centers to independently owned Carquest locations. Acquired stores are included in the company's comparable store sales one year after acquisition. The company includes sales from relocated stores in comparable store sales from the original date of opening. Closed stores and stores in process of closing under the restructuring plan are not included in the comparable store sales calculation. |
(3) On August 22, 2024, the company entered into a definitive purchase agreement to sell its Worldpac Inc. business ("Worldpac"), which reflects a strategic shift in its business. The sale was completed on November 1, 2024. As a result, the company has classified the results of operations and cash flows of Worldpac as discontinued operations in its condensed consolidated statements of operations and condensed consolidated statements of cash flows for all periods presented. |
Strategic Priorities and Financial Objectives (FY25 through FY27)
The company is executing a strategic plan to improve business performance with a focus on core retail improvements. This plan is anchored on three pillars outlined below to put the company on the path to deliver consistent profitable growth.
-
Merchandising excellence
- Strategic sourcing to improve first costs and bring parts to market faster.
- Assortment management to enhance availability of parts.
- Pricing and promotions management to improve gross margin.
-
Supply chain
- Consolidation of distribution centers to operate 12 large facilities by end-2026.
- Opening of 60 market hub locations by mid-2027.
- Optimization of transportation routes and freight to lower costs and improve productivity.
-
Store operations
- Standardization of store operating model.
- Improving labor productivity.
- Accelerate pace of new store openings.
Full Year 2025 Guidance (53 weeks)
|
|
As of February 26, 2025 |
||
($ in millions, except per share data) |
|
Low |
|
High |
Net sales from continuing operations (1) |
|
$8,400 |
|
$8,600 |
Comparable store sales (52 weeks) (2) |
|
0.5% |
|
1.5% |
New store growth |
|
30 new stores |
||
Adjusted operating income margin from continuing operations (4) |
|
2.00% |
|
3.00% |
Adjusted diluted EPS from continuing operations (3,4) |
|
$1.50 |
|
$2.50 |
Capital expenditures |
|
Approx. $300 |
||
Free cash flow (4) |
|
$(85) |
|
$(25) |
(1) Includes approximately $100 to $120 million of net sales in the 53rd week. |
(2) The company calculates comparable store sales based on the change in store or branch sales starting once a location has been open for approximately one year and by including e-commerce sales and excluding sales fulfilled by distribution centers to independently owned Carquest locations. Acquired stores are included in the company's comparable store sales one year after acquisition. The company includes sales from relocated stores in comparable store sales from the original date of opening. Closed stores and stores in process of closing under the restructuring plan are not included in the comparable store sales calculation. |
(3) Includes approximately $0.40 related to interest income for full year 2025 and approximately $0.05 contribution from the 53rd week. |
(4) Adjusted operating income margin from continuing operations, Adjusted diluted EPS from continuing operations and Free cash flow are non-GAAP measures. For a better understanding of the company's non-GAAP adjustments, refer to the reconciliation of non-GAAP financial measures in the accompanying financial tables. The company is not able to provide a reconciliation of these forward-looking non-GAAP measures because it is unable to predict with reasonable accuracy the value of certain adjustments and as a result, the comparable GAAP measures are unavailable without unreasonable efforts. |
First Quarter 2025 Expectations
We are providing select first quarter 2025 expectations, which include the impact of transitory costs associated with closure of stores and DC locations.
($ in millions) |
|
As of February 26, 2025 |
Net sales from continuing operations |
|
Approx. $ 2,500 |
Comparable store sales |
|
Decline approx. 2% |
Adjusted operating income margin from continuing operations |
|
Approx. (2.00)% |
Full Year 2027 Objectives (1)
Our full year 2027 financial objectives are unchanged
|
|
|
Net sales ($ in millions) |
|
Approx. $9,000 |
Comparable store sales |
|
Positive low-single-digit % |
New store growth |
|
50 to 70 new stores |
Adjusted operating income margin (1) |
|
Approx. 7.00% |
Leverage ratio (Adj. debt/ Adj. EBITDAR) (1) |
|
Approx. 2.5x |
(1) Adjusted operating income margin is based on performance of Advance continuing operations. Adjusted operating income margin from continuing operations and Adjusted Debt to Adjusted EBITDAR ratio ("leverage ratio") are non-GAAP measures. For a better understanding of the company's non-GAAP adjustments, refer to the reconciliation of non-GAAP financial measures in the accompanying financial tables. The company is not able to provide a reconciliation of these forward-looking non-GAAP measures because it is unable to predict with reasonable accuracy the value of certain adjustments and as a result, the comparable GAAP measures are unavailable without unreasonable efforts. |
Investor Conference Call
The company will detail its results for the fourth quarter and full year 2024 via a webcast scheduled to begin at 8 a.m. Eastern Time on Wednesday, February 26, 2025. The webcast will be accessible via the Investor Relations page of the company's website (ir.AdvanceAutoParts.com).
To join by phone, please pre-register online for dial-in and passcode information. Upon registering, participants will receive a confirmation with call details and a registrant ID. While registration is open through the live call, the company suggests registering a minimum 10 minutes before the start of the call. A replay of the conference call will be available on the company's Investor Relations website for one year.
About Advance Auto Parts
Advance Auto Parts, Inc. is a leading automotive aftermarket parts provider that serves both professional installer and do-it-yourself customers. As of December 28, 2024, Advance operated 4,788 stores primarily within the United States, with additional locations in Canada, Puerto Rico and the U.S. Virgin Islands. The company also served 934 independently owned Carquest branded stores across these locations in addition to Mexico and various Caribbean islands. Additional information about Advance, including employment opportunities, customer services, and online shopping for parts, accessories and other offerings can be found at www.AdvanceAutoParts.com.
Forward-Looking Statements
Certain statements herein are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are usually identifiable by words such as "anticipate," "believe," "could," "estimate," "expect," "forecast, "guidance," "intend," "likely," "may," "plan," "position," "possible," "potential," "probable," "project," "should," "strategy," "target," "will," or similar language. All statements other than statements of historical fact are forward-looking statements, including, but not limited to, statements about the Company's strategic initiatives, restructuring and asset optimization plans, financial objectives, operational plans and objectives, statements about the sale of the Company's Worldpac business, including statements regarding the benefits of the sale and use of proceeds therefrom, statements regarding expectations for economic conditions, future business and financial performance, as well as statements regarding underlying assumptions related thereto. Forward-looking statements reflect the Company's views based on historical results, current information and assumptions related to future developments. Except as may be required by law, the Company undertakes no obligation to update any forward-looking statements made herein. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements. They include, among others, the Company's ability to hire, train and retain qualified employees, the timing and implementation of strategic initiatives, risks associated with the Company's restructuring and asset optimization plans, deterioration of general macroeconomic conditions, geopolitical factors including increased tariffs and trade restrictions, the highly competitive nature of the industry, demand for the Company's products and services, risks relating to the impairment of assets, including intangible assets such as goodwill, access to financing on favorable terms, complexities in the Company's inventory and supply chain and challenges with transforming and growing its business. Please refer to "Item 1A. Risk Factors" of the company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC"), as updated by the company's subsequent filings with the SEC, for a description of these and other risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements.
Advance Auto Parts, Inc. and Subsidiaries |
||||||
Condensed Consolidated Balance Sheets |
||||||
(in thousands), (unaudited) |
||||||
Assets |
|
December 28, 2024 (1) |
|
December 30, 2023 (1) |
||
Current assets: |
|
|
|
|
||
Cash and cash equivalents |
|
$ |
1,869,417 |
|
$ |
488,049 |
Receivables, net |
|
|
544,040 |
|
|
609,528 |
Inventories |
|
|
3,612,081 |
|
|
3,893,569 |
Other current assets |
|
|
118,002 |
|
|
180,402 |
Current assets held for sale |
|
|
— |
|
|
1,205,473 |
Total current assets |
|
|
6,143,540 |
|
|
6,377,021 |
Property and equipment, net |
|
|
1,334,338 |
|
|
1,555,985 |
Operating lease right-of-use assets |
|
|
2,242,602 |
|
|
2,347,073 |
Goodwill |
|
|
598,217 |
|
|
601,159 |
Other intangible assets, net |
|
|
405,751 |
|
|
419,161 |
Other noncurrent assets |
|
|
73,661 |
|
|
85,988 |
Noncurrent assets held for sale |
|
|
— |
|
|
889,939 |
Total assets |
|
$ |
10,798,109 |
|
$ |
12,276,326 |
|
|
|
|
|
||
Liabilities and Stockholders' Equity |
|
|
|
|
||
Current liabilities: |
|
|
|
|
||
Accounts payable |
|
$ |
3,407,889 |
|
$ |
3,526,079 |
Accrued expenses |
|
|
784,635 |
|
|
616,067 |
Other current liabilities |
|
|
472,833 |
|
|
396,408 |
Current liabilities held for sale |
|
|
— |
|
|
768,851 |
Total current liabilities |
|
|
4,665,357 |
|
|
5,307,405 |
Long-term debt |
|
|
1,789,161 |
|
|
1,786,361 |
Non-current operating lease liabilities |
|
|
1,897,165 |
|
|
2,039,908 |
Deferred income taxes |
|
|
192,671 |
|
|
355,635 |
Other long-term liabilities |
|
|
83,813 |
|
|
83,538 |
Noncurrent liabilities held for sale |
|
|
— |
|
|
183,751 |
Total liabilities |
|
|
8,628,167 |
|
|
9,756,598 |
Total stockholders' equity |
|
|
2,169,942 |
|
|
2,519,728 |
Total liabilities and stockholders' equity |
|
$ |
10,798,109 |
|
$ |
12,276,326 |
(1) |
This condensed consolidated balance sheet has been prepared on a basis consistent with the company's previously prepared balance sheets filed with the Securities and Exchange Commission ("SEC"), but does not include the footnotes required by accounting principles generally accepted in the United States of America ("GAAP"). |
Advance Auto Parts, Inc. and Subsidiaries |
||||||||||||||||
Condensed Consolidated Statements of Operations |
||||||||||||||||
(in thousands, except per share data), (unaudited) |
||||||||||||||||
|
|
Twelve Weeks
|
|
Twelve Weeks
|
|
Fifty-Two Weeks
|
|
Fifty-Two Weeks
|
||||||||
|
|
December 28,
|
|
December 30,
|
|
December 28,
|
|
December 30,
|
||||||||
Net sales |
|
$ |
1,996,025 |
|
|
$ |
2,014,405 |
|
|
$ |
9,094,327 |
|
|
$ |
9,209,075 |
|
Cost of sales |
|
|
1,648,908 |
|
|
|
1,194,776 |
|
|
|
5,685,807 |
|
|
|
5,348,966 |
|
Gross profit |
|
|
347,117 |
|
|
|
819,629 |
|
|
|
3,408,520 |
|
|
|
3,860,109 |
|
Selling, general and administrative expenses, exclusive of restructuring and related expenses |
|
|
879,021 |
|
|
|
851,676 |
|
|
|
3,812,924 |
|
|
|
3,805,235 |
|
Restructuring and related expenses |
|
|
288,098 |
|
|
|
10,308 |
|
|
|
308,902 |
|
|
|
15,987 |
|
Selling, general and administrative expenses |
|
|
1,167,119 |
|
|
|
861,984 |
|
|
|
4,121,826 |
|
|
|
3,821,222 |
|
Operating (loss) income |
|
|
(820,002 |
) |
|
|
(42,355 |
) |
|
|
(713,306 |
) |
|
|
38,887 |
|
Other, net: |
|
|
|
|
|
|
|
|
||||||||
Interest expense |
|
|
(18,906 |
) |
|
|
(18,041 |
) |
|
|
(81,033 |
) |
|
|
(87,989 |
) |
Other income, net |
|
|
13,471 |
|
|
|
1,692 |
|
|
|
26,241 |
|
|
|
1,924 |
|
Total other, net |
|
|
(5,435 |
) |
|
|
(16,349 |
) |
|
|
(54,792 |
) |
|
|
(86,065 |
) |
Loss before provision for income taxes |
|
|
(825,437 |
) |
|
|
(58,704 |
) |
|
|
(768,098 |
) |
|
|
(47,178 |
) |
Provision for income taxes |
|
|
(215,906 |
) |
|
|
(23,514 |
) |
|
|
(181,143 |
) |
|
|
(17,154 |
) |
Net loss from continuing operations |
|
|
(609,531 |
) |
|
|
(35,190 |
) |
|
|
(586,955 |
) |
|
|
(30,024 |
) |
Net income from discontinued operations |
|
|
194,754 |
|
|
|
62 |
|
|
|
251,167 |
|
|
|
59,759 |
|
Net (loss) income |
|
$ |
(414,777 |
) |
|
$ |
(35,128 |
) |
|
$ |
(335,788 |
) |
|
$ |
29,735 |
|
|
|
|
|
|
|
|
|
|
||||||||
Basic loss per common share from continuing operations |
|
$ |
(10.20 |
) |
|
$ |
(0.59 |
) |
|
$ |
(9.84 |
) |
|
$ |
(0.51 |
) |
Basic earnings per common share from discontinued operations |
|
|
3.26 |
|
|
|
— |
|
|
|
4.21 |
|
|
|
1.01 |
|
Basic (loss) earnings per common share |
|
$ |
(6.94 |
) |
|
$ |
(0.59 |
) |
|
$ |
(5.63 |
) |
|
$ |
0.50 |
|
Basic weighted-average common shares outstanding |
|
|
59,743 |
|
|
|
59,504 |
|
|
|
59,647 |
|
|
|
59,432 |
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted loss per common share from continuing operations |
|
$ |
(10.16 |
) |
|
$ |
(0.59 |
) |
|
$ |
(9.80 |
) |
|
$ |
(0.50 |
) |
Diluted earnings per common share from discontinued operations |
|
|
3.24 |
|
|
|
— |
|
|
|
4.19 |
|
|
|
1.00 |
|
Diluted (loss) earnings per common share |
|
$ |
(6.92 |
) |
|
$ |
(0.59 |
) |
|
$ |
(5.61 |
) |
|
$ |
0.50 |
|
Diluted weighted-average common shares outstanding |
|
|
59,978 |
|
|
|
59,675 |
|
|
|
59,902 |
|
|
|
59,608 |
|
(1) |
These preliminary condensed consolidated statements of operations have been prepared on a basis consistent with the company's previously prepared statements of operations filed with the SEC, but do not include the footnotes required by GAAP. |
Advance Auto Parts, Inc. and Subsidiaries |
||||||||
Condensed Consolidated Statements of Cash Flows |
||||||||
(in thousands), (unaudited) |
||||||||
|
|
Fifty-Two Weeks Ended |
||||||
|
|
December 28,
|
|
December 30,
|
||||
Cash flows from operating activities: |
|
|
|
|
||||
Net (loss) income |
|
$ |
(335,788 |
) |
|
$ |
29,735 |
|
Net income from discontinued operations |
|
|
251,167 |
|
|
|
59,759 |
|
Net (loss) income from continuing operations |
|
|
(586,955 |
) |
|
|
(30,024 |
) |
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
||||
Depreciation and amortization |
|
|
291,980 |
|
|
|
269,430 |
|
Share-based compensation |
|
|
42,193 |
|
|
|
40,905 |
|
Write-down on receivables |
|
|
34,176 |
|
|
|
— |
|
Loss on sale and impairment of long-lived assets |
|
|
157,957 |
|
|
|
857 |
|
Provision for deferred income taxes |
|
|
(203,276 |
) |
|
|
(37,175 |
) |
Other, net |
|
|
3,968 |
|
|
|
3,267 |
|
Net change in: |
|
|
|
|
||||
Receivables, net |
|
|
28,952 |
|
|
|
(114,745 |
) |
Inventories |
|
|
270,403 |
|
|
|
(64,146 |
) |
Accounts payable |
|
|
(110,112 |
) |
|
|
57,518 |
|
Accrued expenses |
|
|
126,588 |
|
|
|
94,698 |
|
Other assets and liabilities, net |
|
|
84,630 |
|
|
|
(78,797 |
) |
Net cash provided by operating activities from continuing operations |
|
|
140,504 |
|
|
|
141,788 |
|
Net cash (used in) provided by operating activities from discontinued operations |
|
|
(55,871 |
) |
|
|
145,587 |
|
Net cash provided by operating activities |
|
|
84,633 |
|
|
|
287,375 |
|
Cash flows from investing activities: |
|
|
|
|
||||
Purchases of property and equipment |
|
|
(180,800 |
) |
|
|
(225,672 |
) |
Proceeds from sales of property and equipment |
|
|
13,394 |
|
|
|
6,922 |
|
Net cash used in investing activities from continuing operations |
|
|
(167,406 |
) |
|
|
(218,750 |
) |
Net cash provided by (used in) investing activities from discontinued operations |
|
|
1,522,160 |
|
|
|
(16,739 |
) |
Net cash provided by (used in) investing activities |
|
|
1,354,754 |
|
|
|
(235,489 |
) |
Cash flows from financing activities: |
|
|
|
|
||||
Borrowings under credit facilities |
|
|
— |
|
|
|
4,805,000 |
|
Payments on credit facilities |
|
|
— |
|
|
|
(4,990,000 |
) |
Proceeds from issuance of senior unsecured notes, net |
|
|
— |
|
|
|
599,571 |
|
Dividends paid |
|
|
(59,855 |
) |
|
|
(209,293 |
) |
Purchase of noncontrolling interests |
|
|
(9,101 |
) |
|
|
— |
|
Repurchases of common stock |
|
|
(6,501 |
) |
|
|
(14,518 |
) |
Other, net |
|
|
447 |
|
|
|
(1,493 |
) |
Net cash (used in) provided by financing activities |
|
|
(75,010 |
) |
|
|
189,267 |
|
Effect of exchange rate changes on cash |
|
|
1,569 |
|
|
|
(8,487 |
) |
Net increase in cash and cash equivalents |
|
|
1,365,946 |
|
|
|
232,666 |
|
Cash and cash equivalents, beginning of period |
|
|
503,471 |
|
|
|
270,805 |
|
Cash and cash equivalents, end of period |
|
$ |
1,869,417 |
|
|
$ |
503,471 |
|
|
|
|
|
|
||||
Summary of cash and cash equivalents: |
|
|
|
|
||||
Cash and cash equivalents of continuing operations, end of period |
|
$ |
1,869,417 |
|
|
$ |
488,049 |
|
Cash and cash equivalents of discontinued operations, end of period |
|
|
— |
|
|
|
15,422 |
|
Cash and cash equivalents, end of period |
|
$ |
1,869,417 |
|
|
$ |
503,471 |
|
|
|
|
|
|
||||
Advance Auto Parts, Inc. and Subsidiaries |
||||||||
Condensed Consolidated Statements of Cash Flows (continued) |
||||||||
(in thousands), (unaudited) |
||||||||
|
|
Fifty-Two Weeks Ended |
||||||
|
|
December 28,
|
|
December 30,
|
||||
Supplemental cash flow information: |
|
|
|
|
||||
Interest paid |
|
$ |
75,740 |
|
|
$ |
73,844 |
|
Income tax payments |
|
$ |
37,037 |
|
|
$ |
98,792 |
|
|
|
|
|
|
||||
Non-cash transactions: |
|
|
|
|
||||
Accrued purchases of property and equipment |
|
$ |
14,841 |
|
|
$ |
5,287 |
|
Transfer of property and equipment from (to) assets related to discontinued operations to (from) continuing operations |
|
$ |
7,262 |
|
|
$ |
(1,666 |
) |
(1) |
This condensed consolidated statement of cash flows has been prepared on a basis consistent with the company's previously prepared statements of operations filed with the SEC, but does not include the footnotes required by GAAP. |
Reconciliation of Non-GAAP Financial Measures
The company's financial results include certain financial measures not derived in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Non-GAAP financial measures, including Adjusted Net income, Adjusted EPS, Adjusted SG&A Margin, and Adjusted Operating Income, should not be used as a substitute for GAAP financial measures, or considered in isolation, for the purpose of analyzing our operating performance, financial position or cash flows.
2024 Restructuring Plan
On November 13, 2024, the company's Board of Directors approved a restructuring and asset optimization plan ("2024 Restructuring Plan") designed to improve the Company's profitability and growth potential and streamline its operations. This plan anticipates closure of approximately 500 stores, approximately 200 independent locations and four distribution centers by mid-2025, as well as headcount reductions.
Other Restructuring Initiatives
In November 2023, the company announced a strategic and operational plan which would result in $150.0 million of savings, of which $50.0 million would be reinvested into frontline team members. In addition to a reduction in workforce, this plan streamlines the company's supply chain by configuring a multi-echelon supply chain by leveraging current asset and operating fewer, more productive distribution centers that focus on replenishment and move more parts closer to the customer. In achieving this plan, the company is in process of converting certain distribution centers and stores into market hubs. In addition to providing replenishment to near-by stores, market hubs support retail operations. In addition to the distribution network optimization, other restructuring expenses included Worldpac post transaction-related expenses and other expenses defined below.
The company has presented these non-GAAP financial measures as the company believes that the presentation of the financial results that exclude (1) transformation expenses under the company's turnaround plan, (2) other significant expenses and (3) nonrecurring tax expense are useful and indicative of the company's base operations because the expenses vary from period to period in terms of size, nature and significance. These measures assist in comparing the company's current operating results with past periods and with the operational performance of other companies in the industry. The disclosure of these measures allows investors to evaluate the company's performance using the same measures management uses in developing internal budgets and forecasts and in evaluating management's compensation. Included below is a description of the expenses the company has determined are not normal, recurring cash operating expenses necessary to operate the company's business and the rationale for why providing these measures is useful to investors as a supplement to the GAAP measures.
Transformation Expenses — Expenses incurred in connection with the Company's turnaround plans and specific transformative activities related to asset optimization that the Company does not view to be normal cash operating expenses. These expenses primarily include:
- Restructuring and other related expenses — Expenses relating to strategic initiatives, including severance expense, retention bonuses offered to store-level employees to help facilitate the closing of stores, incremental reserves related to the collectibility of receivables resulting from contract terminations with certain independents associated with the 2024 Restructuring Plan and third-party professionals assisting in the development and execution of the strategic initiatives.
- Inventory write-down — Expenses relating to the incremental write-down of inventory to net realizable value due to liquidation sales and streamlining inventory assortment due to store and distribution center closures associated with the 2024 Restructuring Plan.
- Impairment and write-down of long-lived assets - Expenses relating to the impairment of operating lease ROU assets and property and equipment, incremental depreciation as a result of accelerating long-lived assets over a shorter useful life, and incremental lease abandonment expenses as a result of accelerating ROU asset amortization for leases the Company expects to exit before the end of the contractual term, net of gains on lease terminations, in connection with the 2024 Restructuring Plan and Other Restructuring Plan.
- Distribution network optimization — Expenses primarily relating to the conversion of the stores and distribution centers to market hubs, including temporary labor, incremental depreciation as a result of accelerating long-lived assets over a shorter useful life, nonrecurring professional service fees and team member severance.
Other Expenses — Expenses incurred by the Company that are not viewed as normal cash operating expenses and vary from period to period in terms of size, nature, and significance. These expenses primarily include:
- Other professional service fees — Expenses relating to nonrecurring services rendered by third-party vendors engaged to perform a strategic business review, including the Company's transformation initiatives.
- Worldpac post transaction-related expenses — Expenses primarily relating to non-recurring separation activities provided by third-party professionals subsequent to the sale of Worldpac.
- Executive turnover — Expenses associated with the hiring search for leadership positions and compensation.
- Material weakness remediation — Incremental expenses associated with the remediation of the Company's previously-disclosed material weaknesses in internal control over financial reporting.
- Cybersecurity incident— Expenses related to the response and remediation of a cybersecurity incident.
Nonrecurring Tax Expense — Income tax incurred by the Company from the book to tax basis difference in the Worldpac Canada stock directly resulting from the sale of Worldpac.
The following tables include reconciliations of this information to the most comparable GAAP measures:
Reconciliation of Adjusted Net Income and Adjusted EPS:
|
Twelve Weeks Ended |
Fifty-Two Weeks Ended |
||||||||||
(in thousands, except per share data) |
December 28,
|
December 30,
|
December 28,
|
December 30,
|
||||||||
Net loss from continuing operations (GAAP) |
$ |
(609,531 |
) |
$ |
(35,190 |
) |
$ |
(586,955 |
) |
$ |
(30,024 |
) |
Cost of sales adjustments: |
|
|
|
|
||||||||
Transformation expenses: |
|
|
|
|
||||||||
Inventory write-down |
|
431,529 |
|
|
— |
|
|
431,529 |
|
|
— |
|
Selling, general and administrative adjustments: |
|
|
|
|
||||||||
Transformation expenses: |
|
|
|
|
||||||||
Restructuring and other related expenses (1) |
|
60,682 |
|
|
7,516 |
|
|
60,682 |
|
|
7,835 |
|
Impairment and write-down of long-lived assets (2) |
|
204,156 |
|
|
— |
|
|
204,156 |
|
|
— |
|
Distribution network optimization (3) |
|
5,769 |
|
|
— |
|
|
19,713 |
|
|
— |
|
Other expenses: |
|
|
|
|
||||||||
Other professional service fees |
|
10,233 |
|
|
— |
|
|
15,533 |
|
|
— |
|
Worldpac post transaction-related expenses |
|
7,258 |
|
|
— |
|
|
7,258 |
|
|
— |
|
Executive turnover |
|
— |
|
|
2,792 |
|
|
1,561 |
|
|
8,152 |
|
Material weakness remediation |
|
930 |
|
|
1,009 |
|
|
4,579 |
|
|
1,438 |
|
Cybersecurity incident |
|
— |
|
|
— |
|
|
3,491 |
|
|
— |
|
Other income adjustments: |
|
|
|
|
||||||||
TSA services |
|
(2,537 |
) |
|
— |
|
|
(2,537 |
) |
|
— |
|
Provision for income taxes on adjustments (4) |
|
(179,505 |
) |
|
(2,829 |
) |
|
(186,491 |
) |
|
(4,356 |
) |
Nonrecurring tax expense (5) |
|
— |
|
|
— |
|
|
10,000 |
|
|
— |
|
Adjusted net loss (Non-GAAP) |
$ |
(71,016 |
) |
$ |
(26,702 |
) |
$ |
(17,481 |
) |
$ |
(16,955 |
) |
|
|
|
|
|
||||||||
Diluted loss per share from continuing operations (GAAP) |
$ |
(10.16 |
) |
$ |
(0.59 |
) |
$ |
(9.80 |
) |
$ |
(0.50 |
) |
Adjustments, net of tax |
|
8.98 |
|
|
0.14 |
|
|
9.51 |
|
|
0.22 |
|
Adjusted loss per share from continuing operations (Non-GAAP) |
$ |
(1.18 |
) |
$ |
(0.45 |
) |
$ |
(0.29 |
) |
$ |
(0.28 |
) |
(1) Restructuring and other related expenses included transactional expenses due to incremental receivable reserves resulting from contract terminations with certain independents as part of the 2024 Restructuring Plan of $24.7 million, severance and other labor related costs of $15.2 million as part of the 2024 Restructuring Plan, and nonrecurring services rendered by third-party vendors assisting with the 2024 Restructuring Plan of $20.8 million. (2) During the fifty-two weeks ended December 28, 2024, the Company recorded impairment charges for ROU assets and property and equipment of $171.4 million and incremental accelerated depreciation and amortization for property and equipment and ROU assets of $32.7 million. December 28, 2024 (3) Distribution network optimization includes incremental depreciation as a result of accelerating long-lived assets over a shorter useful life of $5.0 million. (4) The income tax impact of non-GAAP adjustments is calculated using the estimated tax rate in effect for the respective non-GAAP adjustments. (5) Income tax incurred by the Company from the book to tax basis difference in the Worldpac Canada stock directly resulting from the sale of Worldpac. |
||||||||||||
Reconciliation of Gross Profit
|
Twelve Weeks Ended |
Fifty-Two Weeks Ended |
||||||
(in thousands) |
December 28,
|
December 30,
|
December 28,
|
December 30,
|
||||
Gross Profit (GAAP) |
$ |
347,117 |
$ |
819,629 |
$ |
3,408,520 |
$ |
3,860,109 |
Gross Profit adjustments |
|
431,529 |
|
— |
|
431,529 |
|
— |
Adjusted Gross Profit (Non-GAAP) |
$ |
778,646 |
$ |
819,629 |
$ |
3,840,049 |
$ |
3,860,109 |
Reconciliation of Adjusted Selling, General and Administrative Expenses
|
Twelve Weeks Ended |
Fifty-Two Weeks Ended |
||||||
(in thousands) |
December 28,
|
December 30,
|
December 28,
|
December 30,
|
||||
SG&A (GAAP) |
$ |
1,167,119 |
$ |
861,984 |
$ |
4,121,826 |
$ |
3,821,222 |
SG&A adjustments |
|
289,028 |
|
11,317 |
|
316,973 |
|
17,425 |
Adjusted SG&A (Non-GAAP) |
$ |
878,091 |
$ |
850,667 |
$ |
3,804,853 |
$ |
3,803,797 |
Reconciliation of Adjusted Operating Income:
|
Twelve Weeks Ended |
Fifty-Two Weeks Ended |
|||||||||
(in thousands) |
December 28,
|
December 30,
|
December 28,
|
December 30,
|
|||||||
Operating (loss) income (GAAP) |
$ |
(820,002 |
) |
$ |
(42,355 |
) |
$ |
(713,306 |
) |
$ |
38,887 |
COGS adjustments |
|
431,529 |
|
|
— |
|
|
431,529 |
|
|
— |
SG&A adjustments |
|
289,028 |
|
|
11,317 |
|
|
316,973 |
|
|
17,425 |
Adjusted operating (loss) income (Non-GAAP) |
$ |
(99,445 |
) |
$ |
(31,038 |
) |
$ |
35,196 |
|
$ |
56,312 |
NOTE: Adjusted gross profit, Adjusted gross margin (calculated by dividing Adjusted gross profit by Net sales), Adjusted SG&A, Adjusted SG&A as a percentage of Net sales, Adjusted operating income and Adjusted operating income margin (calculated by dividing Adjusted operating income by Net sales) are non-GAAP measures. Management believes these non-GAAP measures are important metrics in assessing the overall performance of the business and utilizes these metrics in its ongoing reporting. On that basis, management believes it is useful to provide these metrics to investors and prospective investors to evaluate the company's operating performance across periods adjusting for these items (refer to the reconciliations of non-GAAP adjustments above). These non-GAAP measures might not be calculated in the same manner as, and thus might not be comparable to, similarly titled measures reported by other companies. Non-GAAP measures should not be used by investors or third parties as the sole basis for formulating investment decisions, as they may exclude a number of important cash and non-cash recurring items. |
Reconciliation of Free Cash Flow: |
|
|
|
|
||||
|
|
Fifty-Two Weeks Ended |
||||||
(in thousands) |
|
December 28,
|
|
December 30,
|
||||
Cash flows from operating activities |
|
$ |
140,504 |
|
|
$ |
141,788 |
|
Purchases of property and equipment |
|
|
(180,800 |
) |
|
|
(225,672 |
) |
Free cash flow |
|
$ |
(40,296 |
) |
|
$ |
(83,884 |
) |
Adjusted Debt to Adjusted EBITDAR Ratio: (1) |
|
|
|
|
||||
|
|
Four Quarters Ended |
||||||
(in thousands, except adjusted debt to adjusted EBITDAR ratio) |
|
December 28,
|
|
December 30,
|
||||
Total GAAP debt |
|
$ |
1,789,161 |
|
|
$ |
1,786,361 |
|
Add: Operating lease liabilities |
|
|
2,358,693 |
|
|
|
2,423,183 |
|
Adjusted debt |
|
$ |
4,147,854 |
|
|
$ |
4,209,544 |
|
|
|
|
|
|
||||
GAAP Net income |
|
$ |
(586,955 |
) |
|
$ |
(30,024 |
) |
Depreciation and amortization |
|
|
291,980 |
|
|
|
269,430 |
|
Interest expense |
|
|
81,033 |
|
|
|
87,989 |
|
Other income, net |
|
|
(26,242 |
) |
|
|
(1,924 |
) |
Provision for income taxes |
|
|
(181,143 |
) |
|
|
(17,154 |
) |
Rent expense |
|
|
587,845 |
|
|
|
533,693 |
|
Share-based compensation |
|
|
44,596 |
|
|
|
45,647 |
|
Other nonrecurring charges (2) |
|
|
27,179 |
|
|
|
12,419 |
|
Transformation related charges (3) |
|
|
742,458 |
|
|
|
29,719 |
|
Adjusted EBITDAR |
|
$ |
980,751 |
|
|
$ |
929,795 |
|
|
|
|
|
|
||||
Adjusted debt to adjusted EBITDAR ratio |
|
|
4.2 |
|
|
|
4.5 |
|
| (1) | The four quarters ended December 30, 2023 reflect the corrected results, which include the correction of non-material errors the company discovered in previously reported results. |
|
| (2) | The adjustments to the four quarters ended December 28, 2024 include expenses associated with the company's material weakness remediation efforts and executive search charges and the adjustments to the four quarters ended December 30, 2023 represent charges incurred resulting from the early redemption of the company's 2023 senior unsecured notes. |
|
| (3) | Transformation related charges include transformation plans designed to improve the company's profitability and growth potential and streamline its operations. These charges primarily relate to inventory write-down charges and impairments on long-lived assets. |
|
| NOTE: Management believes its Adjusted Debt to Adjusted EBITDAR ratio ("leverage ratio") is a key financial metric for debt securities, as reviewed by rating agencies, and believes its debt levels are best analyzed using this measure. The company's goal is to maintain an investment grade rating. The company's credit rating directly impacts the interest rates on borrowings under its existing credit facility and could impact the company's ability to obtain additional funding. If the company was unable to maintain its investment grade rating, this could negatively impact future performance and limit growth opportunities. Similar measures are utilized in the calculation of the financial covenants and ratios contained in the company's financing arrangements. The leverage ratio calculated by the company is a non-GAAP measure and should not be considered a substitute for debt to net earnings, net earnings or debt as determined in accordance with GAAP. The company adjusts the calculation to remove rent expense and to add back the company's existing operating lease liabilities related to their right-of-use assets to provide a more meaningful comparison with the company's peers and to account for differences in debt structures and leasing arrangements. The company's calculation of its leverage ratio might not be calculated in the same manner as, and thus might not be comparable to similarly titled measures by other companies. | ||
Store Information:
During the fifty-two weeks ended December 28, 2024, 42 stores were opened and 40 were closed, resulting in a total of 4,788 stores as of December 28, 2024, compared with a total of 4,786 stores as of December 30, 2023.
The below table summarizes the changes in the number of company-operated stores during the twelve and fifty-two weeks ended December 28, 2024:
|
|
Twelve Weeks Ended |
|||||||
|
|
AAP |
|
CARQUEST |
|
Total |
|||
October 5, 2024 |
|
4,492 |
|
|
289 |
|
|
4,781 |
|
New |
|
18 |
|
|
— |
|
|
18 |
|
Closed |
|
(5 |
) |
|
(6 |
) |
|
(11 |
) |
Converted |
|
2 |
|
|
(2 |
) |
|
— |
|
December 28, 2024 |
|
4,507 |
|
|
281 |
|
|
4,788 |
|
|
|
Fifty-Two Weeks Ended |
|||||||
|
|
AAP |
|
CARQUEST |
|
Total |
|||
December 30, 2023 |
|
4,484 |
|
|
302 |
|
|
4,786 |
|
New |
|
41 |
|
|
1 |
|
|
42 |
|
Closed |
|
(22 |
) |
|
(18 |
) |
|
(40 |
) |
Converted |
|
4 |
|
|
(4 |
) |
|
— |
|
December 28, 2024 |
|
4,507 |
|
|
281 |
|
|
4,788 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20250225874494/en/
Investor Relations Contact:
Lavesh Hemnani
T: (919) 227-5466
E: [email protected]
Media Contact:
Nicole Ducouer
T: (984) 389-7207
E: [email protected]