Advance Auto Parts (AAP) Q1 2025 earnings summary

Executive summary

• First quarter 2025 net sales were $2.6 billion, down 6.8% year-over-year, with comparable store sales declining 0.6% due to over 500 store closures as part of a completed store optimization program.

• Gross profit was $1.11 billion (42.9% of sales), with gross margin contracting 50 basis points year-over-year, impacted by liquidation sales at closing stores.

• Diluted EPS from continuing operations was $0.40, up from $0.29 in Q1 2024, aided by a discrete $126 million tax benefit; adjusted diluted loss per share was $0.22.

• Operating loss was $131 million (5.1% of net sales), compared to operating income of $53 million last year, driven by $118 million in restructuring expenses; adjusted operating loss was $8 million.

• Strategic initiatives in merchandising, supply chain, and store operations are accelerating, aiming for sustainable, profitable growth.

Financial highlights

• Net income from continuing operations was $24 million, compared to $17 million in Q1 2024, due to a discrete tax benefit.

• Net cash used in operating activities was $156 million, primarily due to restructuring-related payments and working capital changes.

• Free cash flow was negative $198 million, impacted by $90 million in store optimization expenses and $100 million in inventory investments.

• Adjusted SG&A expenses were $1.12 billion (43.2% of net sales), deleveraging 180 basis points year-over-year.

• Cash and cash equivalents at quarter-end were $1.67 billion.

Outlook and guidance

• Full-year 2025 guidance reaffirmed: net sales of $8.4–$8.6 billion, comparable sales growth of 0.5%–1.5%, adjusted operating income margin of 2.0%–3.0%, and adjusted diluted EPS of $1.50–$2.50.

• Free cash flow expected between negative $85 million and negative $25 million; capital expenditures expected to be approximately $300 million.

• Additional restructuring expenses of $75–$100 million expected by year-end 2025, mainly for lease terminations and exit costs.

• Guidance incorporates tariff impacts and mitigation strategies, with sequential improvement in sales and margins expected in the second half.

• Plans for 30 new store openings and 10 new market hub openings in 2025.