Advance Auto Parts (AAP) delivered better-than-expected second-quarter results.
The company reported adjusted earnings of $0.69 per share — roughly 23% above Wall Street forecasts — and a modest 0.1% increase in comparable-store sales. The uptick was fueled by ongoing momentum in the Pro segment, which caters to professional installers, and early signs of stabilization in the do-it-yourself (DIY) segment.
Revenue came in at $2.01 billion, down nearly 8% from a year earlier but slightly ahead of analyst estimates. CEO Shane O’Kelly, who has been steering the company’s turnaround since 2023, credited supply chain improvements and a leaner store footprint for the better-than-expected performance.
Profit Outlook Slashed on Higher Debt Costs
The positive headline numbers quickly gave way to a far more sobering reality. Advance Auto lowered its fiscal 2025 adjusted earnings guidance to a range of $1.20 to $2.20 per share — roughly 20% below the previous midpoint — citing increased interest expenses tied to a recent $1.95 billion senior notes offering and persistent cost pressures.
The financing move, combined with a new $1 billion revolving credit facility, gives the retailer liquidity but adds an estimated $0.30 in extra annual interest expense. Rising labor costs and continued weakness in discretionary DIY sales are also weighing on profitability, offsetting gains from operational efficiencies.
Shares plunged 15% to $52.45 following the announcement, erasing much of the year-to-date rally and marking the third straight earnings-driven double-digit swing for the stock.
The positive headline numbers quickly gave way to a far more sobering reality. Advance Auto lowered its fiscal 2025 adjusted earnings guidance to a range of $1.20 to $2.20 per share — roughly 20% below the previous midpoint — citing increased interest expenses tied to a recent $1.95 billion senior notes offering and persistent cost pressures.
The financing move, combined with a new $1 billion revolving credit facility, gives the retailer liquidity but adds an estimated $0.30 in extra annual interest expense. Rising labor costs and continued weakness in discretionary DIY sales are also weighing on profitability, offsetting gains from operational efficiencies.
Shares plunged 15% to $52.45 following the announcement, erasing much of the year-to-date rally and marking the third straight earnings-driven double-digit swing for the stock.
Falling Behind Rivals Despite Pro Segment Strength
While the Pro segment’s resilience is a bright spot — with strong demand for core categories like brakes, filters, and batteries — Advance Auto’s overall growth lags well behind its closest competitors. O’Reilly Automotive posted a 4.1% same-store sales increase in Q2, and AutoZone reported a 5.4% gain in its latest quarter, underscoring AAP’s struggle to regain market share.
The retailer has closed nearly 500 locations over the past year, ending the quarter with 4,292 stores. Management hopes the smaller footprint will lift same-store sales, but results have so far been flat. Over the past three years, AAP shares have lost almost 75% of their value, while peers have delivered strong returns.
Conclusion
Advance Auto Parts’ second-quarter beat underscores progress in its operational overhaul, but the sharp cut to profit guidance reflects a turnaround still facing headwinds. Higher debt costs, sluggish DIY demand, and competitive pressures continue to challenge the company’s recovery. Without a more meaningful rebound in consumer-facing sales, the Pro segment’s gains may not be enough to steer AAP back into the fast lane.
While the Pro segment’s resilience is a bright spot — with strong demand for core categories like brakes, filters, and batteries — Advance Auto’s overall growth lags well behind its closest competitors. O’Reilly Automotive posted a 4.1% same-store sales increase in Q2, and AutoZone reported a 5.4% gain in its latest quarter, underscoring AAP’s struggle to regain market share.
The retailer has closed nearly 500 locations over the past year, ending the quarter with 4,292 stores. Management hopes the smaller footprint will lift same-store sales, but results have so far been flat. Over the past three years, AAP shares have lost almost 75% of their value, while peers have delivered strong returns.
Conclusion
Advance Auto Parts’ second-quarter beat underscores progress in its operational overhaul, but the sharp cut to profit guidance reflects a turnaround still facing headwinds. Higher debt costs, sluggish DIY demand, and competitive pressures continue to challenge the company’s recovery. Without a more meaningful rebound in consumer-facing sales, the Pro segment’s gains may not be enough to steer AAP back into the fast lane.
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