Customer vehicles are parked outside an Advance Auto Parts auto shop in La Grange, Kentucky.
Luke Sharrett | Bloomberg | Getty’s paintings
Actions Advanced automotive parts fell about 30% on early trading Wednesday after the corporate’s fiscal first quarter earnings fell well in need of Wall Street expectations and management cut the retailer’s annual guidance and quarterly dividend.
The Raleigh, North Carolina-based auto parts supplier blamed its dismal performance and bleak outlook on higher-than-expected costs for skilled sales, inflationary pressures, supply chain issues and an unfavorable product mix.
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In line with average analyst estimates compiled by Refinitiv, the corporate’s earnings per share for the period were just 72 cents, compared with an expected $2.57 per share. Its quarterly revenue of $3.42 billion barely exceeded expectations of $3.43 billion.
“We expect the competitive momentum we saw within the first quarter to proceed, bringing it down from our expectations for 2023. We have now reduced our full-year guidance and our management has made the difficult decision to cut back our quarterly dividend.” — CEO Tom Greek he said in an announcement.
Stocks of other auto parts suppliers corresponding to O’Reilly Automotive AND Autozone were also lower on Wednesday. But some Wall Street analysts imagine Advanced Auto Parts’ problems could also be more operational than industry-wide.
“In our view, the AAP’s problems are likely largely self-contained and will suggest higher market share opportunities for the outperforming AutoZone (AZO) and O’Reilly Auto (ORLY),” Oppenheimer analyst Brian Nagel said in a note to investors on Wednesday.
Advance Auto Parts shares for the reason that company’s shares peaked in early January 2022, topping $244 a share during intraday trading.
In its quarterly release, Advance Auto Parts declared a dividend payment of 25 cents per share in July. In its earnings for the previous quarter, Advance Auto Parts declared a dividend of $1.50 per share.
The corporate also lowered its full-year earnings guidance and now expects earnings per share of $6 to $6.50, down from a previously reported range of $10.20 to $11.20. That is despite lowering net sales expectations by just $200-300 million, signaling operational margin issues.
Within the first quarter, the corporate’s net sales rose 1.3% to $3.4 billion in comparison with last yr. Its gross profit fell 2.4% to $1.5 billion.
Net income for the period was $42.7 million, or 72 cents per share, in comparison with $139.8 million, or $2.28 per share, a yr earlier.
“While we expected the first quarter to be difficult, our results fell in need of our expectations,” said Greco.
Stocks of auto parts suppliers have gained significantly in recent times on account of inflated prices of latest and used vehicles on account of limited supplies. Limited inventories and better prices on account of production shutdowns on account of the coronavirus pandemic and provide chain issues have led many automotive owners to keep up their vehicles longer, which implies more repairs and maintenance.
Advance Auto Parts stock hit a high of over $244 a share in January 2022. It has been steadily declining since then. On Wednesday, the share price fell below $100 a share for the first time since April 2020. It opened Wednesday at $79.23 a share.
“We have now been following AAP and the auto parts retail sector for a few years. We consistently maintain the view that fundamental probable structural issues impact AAP’s business model and stop even robust operations teams from driving sustained sales and profit growth across the network,” said Nagel.
UBS analyst Michael Lasser, in a note to investors on Wednesday, said Advance Auto Parts’ results “reflect the challenges of attempting to catch up in an industry that’s competitive and stuffed with good operators.”
– CNBC Michael Bloom contributed to this report.
Correction: Average analyst estimates are provided by Refinitiv. The sooner version contained an error in the corporate name.