Advance Auto Parts ( NYSE: AAP ) stock slid sharply in Tuesday’s extended trading session after posting a wide miss on profit expectations and paring full-year forecasts.
For the third quarter, the company missed the expectation of $2.84 in earnings per share by $0.51 while flat revenue from the prior year to $2.6B also came up narrowly short of expectations. Additionally, comparable store sales for the third quarter decreased 0.7%, essentially in-line with analyst expectations.
“Our deliberate move to increase owned brand penetration, which carries a lower price point, reduced net sales by approximately 80 basis points and comp sales by approximately 90 basis points,” CEO Tom Greco explained. “We’re reiterating our full year guidance that implies 20 to 40 basis points of adjusted operating income margin expansion, despite margins contracting in the third quarter.”
The North Carolina-based auto parts retailer maintained revenue guidance in the range of $11B to $11.2B, in-line with the consensus of $11.11B. Also, comparable sales guidance in the range of a 1% decline to flat from 2021 was reiterated alongside the margin and sales guidance.
However, profit and free cash flow forecasts were pulled in by CFO Jeff Shepherd.
“We’re updating our adjusted diluted EPS guidance range to reflect the impact of foreign currency,” he commented. “Finally, getting more parts closer to our customers is a top priority. Therefore, we’re making strategic inventory investments to improve our availability, which is an important step to accelerate growth in 2023. Inventory is the primary driver of our reduced free cash flow guidance.”
The company now expects revenue to range from adjusted EPS to range from $12.60 to $12.80, down from a prior $12.75 to $13.25 forecast and well below the consensus of $13.01. Free cash flow was cut from a “minimum of $700M” to a “minimum of $300M” while capital expenditure expectations were raised from a range of $300M to $350M to simply project greater than $350M.
Shares of Advance Auto Parts ( AAP ) fell 9.69% in after hours trading.
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Advance Auto Parts stock breaks down on big earnings miss, lowered guidance