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Auto parts retailer powers ahead

New York -- Advance Auto Parts achieved record sales, profits and store expansion last year and with many of the economic factors that contributed to its 2011 success, expected to remain in place this year expectations are high that 2012 will be another one for the record books.
 
“Once again, our team reached many record strategic and financial milestones in 2011 including sales of over $6 billion, continued improvement in customer satisfaction, and record profitability, free cash flow and returns on invested capital,” said president and CEO Darren Jackson. “Based on our team’s focus on execution combined with strong industry fundamentals, we expect 2012 will be another successful year.”

Fourth quarter earnings increased 58% to $90 and full year earnings increased 29.4% to $5.11. Fourth quarter sales increased 4.5% to $1.33 billion, compared with total sales of $1.27 billion during the fourth quarter of fiscal 2010. The 4.5% sales increase reflects the net addition of 99 new stores and a same store sales increase of 2.9%. If the comp increase seems light, it’s because the company was up against an 8.9% increase during the fourth quarter the prior year. A similar situation existed with the full-year comp increased of 2.2%, which compared to an 8% comp increase the prior year.

The company’s gross profit rate declined slightly to 49% from 49.4%, but expenses as a percent of sales fell much further so profits didn’t suffer. The company’s expense rate in the fourth quarter was 40.6%, well below the prior year figure of 42.8%.

A lot of the company’s performance metrics looked good, but none more so that it ability to generate cash. The company generated $828.8 million in operating cash flow and a record $507.2 million of free cash flow, with the latter driven by a significant decrease in inventory, net of payables, and strong growth in net income, partially offset by an increase in capital expenditures. Capital expenditures were $268.1 million for fiscal 2011 as compared to $199.6 million in fiscal 2010.

“As a direct result of our team’s ability to respond, adapt and provide outstanding service, our operating income rate increased to a record 10.8% of sales in fiscal 2011 and our diluted EPS increased 29.4% on top of a 31.7% EPS increase in 2010,” said CFO Mike Norona.

The strong results means Advance Auto Part can maintain its strong rate of expansion this year by adding between 120 and 140 new stores with an expectation that full-year earnings will fall in the range of $5.55 to $5.75.
 

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