Advance Auto Parts Profit Falls on Weak Revenue
19 May 2016 - 10:00PM
Dow Jones News
Advance Auto Parts Inc. reported its profit fell 7.2% in the
most recent quarter as sales skidded on availability and service
shortfalls.
Results were worse than expected and shares, which have fallen
6% over the past 12 months, lost another 9.6% premarket to
$129.99.
"Our first quarter results did not meet our expectations," said
Chief Executive Tom Greco, who took the helm last month.
The seller of automotive parts named Mr. Greco, a former PepsiCo
Inc. executive, its CEO as it works to increase profitability under
activist investor pressure.
"I am confident our focus and commitment around delivering
improved service for our customers will translate into increased
profitability and shareholder value," said Mr. Greco.
Starboard Value LP, whose stake in the company was revealed in
September by The Wall Street Journal, has pushed the company to
improve its bottom line, which the hedge fund has said trails peers
AutoZone Inc. and O'Reilly Automotive Inc. In November, Advance
Auto, by the New York hedge fund's urging, said then-chief
executive Darren Jackson would retire in January.
Those moves came after Starboard built a stake in Advance Auto
and said the company didn't do a good enough job of stocking its
shelves every day, which the fund said can cost it sales.
On Thursday, Mr. Greco said "we are moving forward with urgency
to drive improved performance."
"We are elevating our intensity to get the right parts to the
right place at the right time," he said.
For the first quarter, the company said it earned $158.8
million, or $2.14 a share, up from $148.1 million, or $2 a share, a
year earlier. Results were dented 11 cents a share by amortization
of acquired intangible assets and 26 cents a share by integration
and restructuring costs, primarily associated with the acquisition
of General Parts International Inc. Excluding those items, adjusted
earnings rose to $2.51 a share from $2.39 but below analysts'
forecasts for $2.60 a share.
Revenue slipped 1.9% to $2.98 billion—below analysts'
expectations for $3 billion—driven by a 1.9% decrease in same-store
sales due to availability and service shortfalls as well as lower
demand due to unfavorable weather.
Gross margin narrowed to 45.3% from 45.9% in the quarter a year
ago, mostly the result of comparable-store sales declines.
On Wednesday, Advance Auto said Starboard CEO Jeffrey Smith, who
was appointed to its board as part of the November deal, was named
chair.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
May 19, 2016 07:45 ET (11:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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