ROANOKE – Advance Auto Parts (NYSE:AAP), Inc. has unveiled a comprehensive strategy to address its recent financial challenges, including a surprising third-quarter loss. During the earnings call, the company reported an unexpected Q3 loss with an earnings per share (EPS) of $-0.82, sharply contrasting with the anticipated $1.43 EPS.
Interim CFO Tony Iskander highlighted a 2.9% increase in net sales year-over-year during today's Q3 results and full-year outlook segment. Despite this growth, gross profit margin suffered due to factors like an excess inventory reserve impact of approximately $119 million and higher product costs around $80 million. Iskander updated the company's guidance for 2023, projecting net sales between $11.25 billion and $11.3 billion, with comparable store sales ranging from a 0.5% decrease to flat. The adjusted forecast also includes a GAAP operating income margin of 1.8% to 2%, an income tax rate of 25%, diluted earnings per share between $1.40 and $1.80, capital expenditures from $200 million to $250 million, and positive free cash flow between $50 million to $100 million.
CEO Shane O’Kelly announced five key actions to revitalize the company: selling Worldpac and Canadian businesses, significant cost reductions, reinvestment of about $50 million of savings back into the business, appointing Ryan Grimsland as the new CFO later in the month, and reorganizing the leadership team to enhance collaboration and accountability.
O'Kelly also emphasized the importance of vendor partnerships at the Annual Partner Growth Summit while addressing the company's third-quarter performance. Interim CFO Tony Iskander spoke about the net sales increase compared to last year's third quarter and an accounts payable (AP) ratio expansion to 79.8%. He acknowledged ongoing efforts to remediate material weakness in financial reporting and declared a $150 million cost reduction program, assuring the maintenance of their supply chain finance program.
The updated guidance includes expectations for new store and branch openings numbering between 55 and 65 for the year. These initiatives are part of Advance Auto Parts' broader effort to streamline its strategy and improve execution amid challenging market conditions.
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