Online Retailers May Have Caused Advance Shares to Fall 22 Percent

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Aug. 15, 2017—Year over year, Advance Auto Parts Inc. reported shares were down 21.9 percent to $85.35 in midday trading Tuesday.

Advance missed analysts' second quarter earnings expectations and lowered its full year guidance thanks in part to persistent industry headwinds. The company reported second quarter earnings of $1.58 per share, seven cents short of expectations, while revenue of $2.26 billion was in line with estimates. 

The New York Times noted how part of the fall is due to the fact that competition from online retailers is growing. Advance's competitors held up far better, as AutoZone shares sank 2.9 percent and O'Reilly Automotive's fell 1.6 percent.

Advance reported a 16.8 percent decline in adjusted earnings to $1.58 per share in the second quarter of fiscal 2017 (which ended July 15, 2017) from $1.90 earned in the prior-year quarter, NASDAQ reports. The figure also missed the Zacks Consensus Estimate of $1.65. Adjusted net income declined to $117 million from $141 million in the second quarter of fiscal 2016. 

Advance came up with revenues of $2.26 billion, almost in line with the Zacks Consensus Estimate. Revenues were 0.3% higher than the year-ago quarter figure. During the quarter, comparable store sales (comps) were almost flat year over year. 

Gross profit declined to $993.1 million in the reported quarter from $1.01 billion a year ago. Gross margin declined to 43.9 percent from 44.8 percent in the prior-year quarter primarily due to the non-cash accounting impact of the planned lowering down of the inventory, rise in supply chain costs, and unfavorable mix and commodity headwinds, which were partly offset by the company's initiatives to boost material cost performance. 

Adjusted selling, general and administrative (SG&A) expenses totaled $797.6 million or 35.2 percent of sales in the quarter under review compared with $767.1 billion or 34 percent in the second quarter of fiscal 2016. 

Adjusted operating income fell to $195.5 million from $243.1 million in the prior-year quarter. 


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