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Earnings Calls: 
Advance Auto Parts Second Quarter Earnings Call
Author: 123jump.com Staff
123jump.com
Last Update: 4:42 PM EDT August 17 2007

The auto parts retailer reported revenue increase of 5.6% to $1.17 billion, failing to meet the analysts’ expectation of $1.19 billion. As part of a business strategy review, the company reduced staffing at its store support center and in its field organization by a total of 250 positions. Comparable store sales increase was at the lower end of low single digit guidance range. New store openings in 2007 will be reduced to 190 to 200 stores from the previous outlook of 200 to 210 stores.

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Source: Company filings    Q1:March  Q2:June  Q3:September  Q4:December
 
This summary is based on the second quarter fiscal 2007 earnings call conducted by Advance Auto Parts, Inc. (AAP: chart) on August 9, 2007.

Sr. VP, General Counsel and Secretary: Eric M. Margolin
Interim Chairman of the Board, President and CEO: Jack Brouillard
EVP, Business Development: Jim L. Wade
Sr. VP, Controller: Jill A. Livesay
EVP, Merchandising, Supply Chain and Technology: Elwyn G. Murray III

Key Investors Issues

- EPS were 64 cents a share compared to 59 cents a share last year.
- Net income was $68.4 million compared to $62.9 million during the year-ago period.
- Revenue rose to $1.17 billion from $1.11 billion a year ago.

Second Quarter Highlights

Comparable store sales came in at the low end of guidance at 1.3% compared to 1.2% last year.

Sales challenges were consistent with what the company had experienced in the first quarter.

On a geographic basis, sales continue to be stronger in the North and Midwest and weaker in Florida and the Gulf Coast market.

Certainly, a portion of the weakness in Florida and the Gulf Coast relates to the cycling of the post-hurricane sales surge.

DIY comparable store sales were a negative point 0.1% compared to a negative 1% last year.

- Commercial comparable store sales were 5.8% over 9.1% last year. This comparison was consistent with the first quarter.
- Commercial sales, including AI, represented 26.1% of total sales. Total commercial sales were $305.2 million, an 11.5% increase over last year.

The company added 32 new commercial programs, most of which were on new stores, bringing the total number of Advance stores with commercial programs to 2525.

About 82% of Advance stores have commercial programs, the same percentage as last year.

AI celebrated recently the opening of their 100th store with another new store in New Jersey as well as their 50th year in business.

AI contributed $33.9 million in sales.

- The company opened 43 new stores. 38 of these new stores opened as Advance Auto Parts and 5 as Autopart International.
- The company closed 6 stores.
- New store productivity remained comparable to last year.
- With real estate activity in 2007, the company ended the quarter with 3087 Advance Auto Part stores and 100 Autopart International stores for a total store count of 3187 stores.

Earnings per share were 64 cents per share, which was below earnings guidance of 65 cents per share to 69 censt per share.

Earnings guidance did not include costs of 1 cent per share related to the CEO transition and other severance costs.

Gross margin was 48.1%, a 51 basis point improvement over last year.

This reflects improved procurement costs and lower logistics expense.
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