Why Advance Auto Parts, Inc.(NYSE: AAP) stock is going gangbusters today

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Advance Auto Parts, Inc.(NYSE: AAP) stock surged over 18.4% on November 14th, 2017 boosted by their better than expected third quarter of 2017 performance. The shares of AAP has been under pressure in this year to date which lost over 51.4% (as of November 13th, 2017; Source: Google finance)

Advance Auto Parts Adjusted Operating Income reached $172.2 million, or 7.9% of net sales, which lost 178 basis points against pcp hurt by gross profit pressure and SG&A factors.

The group’s Operating cash flow fell 6.1% yoy to $401.0 million in the third quarter of 2017 as compared to $427.0 million in pcp. Free cash flow rose 7.7% yoy to $240.0 million during the period from $222.8 million in the pcp boosted by inventory optimization efforts. Advance Auto Parts Gross Profit margin lost 51 basis points to 43.4% on a yoy basis hurt by rising supply chain costs. Moreover, the non-cash impact of inventory optimization efforts was hurt by gross margins by 23 basis points.

The group’s overall sales fell 3% yoy to $2.18 billion during the quarter while Comparable store sales fell 3.4% on a yoy basis. The group reported a regular quarterly cash dividend of $0.06 per share which would be paid on January 5, 2018 for shareholders with December 22, 2017 record date.

The group’s Adjusted SG&A reached 35.5% of net sales, which is a rise of 127 basis point on a year-over-year basis. The rise is mainly on the 131 basis points of higher labor, medical and insurance claims. Moreover, the group’s rising marketing expenses accounted for 26 basis points, which were partially offset by third-party fee reductions in addition to improvements in utility, maintenance and repair costs. Advance Auto Parts GAAP SG&A was 36.3% of net sales, which is a rise of 93 basis points to $791.1 million on a yoy basis.

For 2017, the group expects to open 60-65 new stores. Their Comparable Store Sales for 2017 is expected to fall in the range of 3% to 1%. On the other hand, the group expects to deliver a Free Cash Flow of a minimum $300 million.


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