ORLY O Reilly Automotive Inc

Advance Auto Parts Inc. (AAP) posted 32.6% increase in its first quarter 2012 earnings per share to $1.79 from $1.35 reported in the year-ago quarter. However, it missed the Zacks Consensus Estimate of $1.85 per share.

The company’s revenues for the quarter came at $1.96 billion, up 3.1% compared with $1.90 billion in the year-ago quarter. The improvement in sales was attributable to a comparable-store sales gain of 2.1% compared with 1.4% during the first quarter of 2011 along with addition of 82 new stores in the last 12 months. Meanwhile, it missed the Zacks Consensus Estimate of $2.01 billion.

The company’s gross margin deteriorated by 38 basis point to 50.1% of sales from 50.5% of sales in the first quarter of 2011. The decline in gross margin was driven by higher supply chain cost due to slow pace of inventory growth, which was partially offset by improvement in labor and transport costs.

The company’s selling, general and administrative (SG&A) rate fell 205 basis points to 38.6% of sales from 40.7% a year ago. The decline in SG&A rate can be attributable to reduction in overall administrative support costs and improvement in store labor productivity.

Operating income rose 20.7% to $224.6 million (11.5% of sales) from $185.9 million (9.8%) in the year-ago period. Operating income per store increased to $193 from $167 in the corresponding quarter of last year.

Store Opening

During the first quarter, Advance Auto Parts opened 25 new stores. Among them, three were Autopart International stores. However, the company closed five Autopart International stores in the quarter. As of April 21, 2012 the company had 3,682 stores, with 200 Autopart International stores.

Share Repurchase

The Board of Directors of Advance Auto Parts authorized share repurchase of $500 million on May 14, 2012. This new authorization replaces the former $300 million share repurchase authorization in August 2011. Out of this, share repurchases of $200 million was outstanding at the end of the fourth quarter of 2011.

Financials

Advance Auto Parts had cash and cash equivalents of $364.1 million as of April 21, 2012 compared with $53.7 million as of April 23, 2011. Long-term debt was $599.8 million as of April 21, 2012, compared to $430.8 million as of April 23, 2011.

In the sixteen-week period ended April 21, 2012, operating cash flow went down to $235.4 million from $272.5 million in the year-ago period. Capital expenditure was $82.5 million compared to $88.9 million in the year-ago period. As a result, free cash flow for the quarter was $153.1 million compared to $152.9 million a year ago.

2012 Guidance

For the fiscal year 2012 Advance Auto Parts anticipates earnings per share in the range of $5.55 to $5.75. The company further expects that comparable store sales gain of low to single digits for the year.

Advance Auto Parts, Inc. operates in the U.S. automotive aftermarket industry and is primarily engaged in selling replacement parts (excluding tires), accessories, maintenance items, batteries and automotive fluids for cars and light trucks. It is the second leading retailer catering to the DIY and DIFM (or Commercial) customers.

The major competitors of the company are AutoZone Inc. (AZO), O’Reilly Automotive Inc. (ORLY) and Pep Boys-Manny, Moe & Jack (PBY). Currently, it retains a Zacks #3 Rank on its shares, which translates into a short-term Hold rating.

 
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