Advance Auto Parts (AAP) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales were $2.7 billion, flat year-over-year, with comparable store sales up 0.4%, led by the pro business while DIY remained pressured but improved sequentially.

• Gross profit margin declined to 41.5% due to pricing investments and higher product costs.

• Diluted EPS was $0.75, down from $1.32 in Q2 2023.

• Entered agreement to sell Worldpac for $1.5 billion, with expected net proceeds of $1.2 billion to strengthen the balance sheet and invest in core operations.

• Retained Canadian operations after strategic review, citing strong performance and alignment with U.S. business.

Financial highlights

• Q2 2024 net income was $45.0 million, down from $78.6 million year-over-year.

• SG&A expenses increased to 38.9% of sales, up from 37.8% last year, mainly due to higher labor and professional fees.

• Operating income was $71.8 million (2.7% of sales), down from $125.9 million (4.7%) in Q2 2023.

• Net cash from operating activities was $87.8 million YTD, compared to a $167.1 million outflow last year.

• Free cash flow was an outflow of $4.6 million YTD, improved from a $312 million outflow last year.

Outlook and guidance

• Full-year 2024 sales expected at $11.15–$11.25 billion, including Worldpac, with comparable store sales between -1% and flat.

• Operating income margin forecasted at 2.1%–2.5% for the year, reflecting lower gross margin and higher SG&A deleverage.

• Diluted EPS guidance for the year is $2–$2.50; minimum free cash flow of $100 million expected.

• Capital expenditures guidance unchanged at $200–$250 million.

• Updated guidance for the core business (excluding Worldpac) to be provided after transaction close in Q3.