AAP - NYSE
Advance Auto Parts, Inc.
AAP·NYSE
$57.12
-3.7%Consumer CyclicalSpecialty Retail
Advance Auto Parts, Inc. provides automotive replacement parts, accessories, batteries, and maintenance items for domestic and imported cars, vans, sport utility vehicles, and light and heavy duty trucks. The company offers battery accessories; belts and hoses; brakes and brake pads; chassis and climate control parts; clutches and drive shafts; engines and engine parts; exhaust systems and parts; hub assemblies; ignition components and wires; radiators and cooling parts; starters and alternators; and steering and alignment parts. It also offers air conditioning chemicals and accessories; air fresheners; antifreeze and washer fluids; electrical wires and fuses; electronics; floor mats, seat covers, and interior accessories; hand and specialty tools; lighting products; performance parts; sealants, adhesives and compounds; tire repair accessories; vent shades, mirrors and exterior accessories; washes, waxes and cleaning supplies; and wiper blades. In addition, the company offers air filters; fuel and oil additives; fuel filters; grease and lubricants; motor oils; oil filters, part cleaners and treatments; and transmission fluids for engine maintenance. Further, it offers battery and wiper installation; engine light scanning and checking; electrical system testing; video clinic; oil and battery recycling; and loaner tool program services. Additionally, the company sells its products through its website. It serves professional installers and do-it-yourself customers. The company operates stores under the Advance Auto Parts, Autopart International, and Carquest brands, as well as branches under the Worldpac name. As of April 23, 2022, it operated 4,687 stores and 311 branches in the United States, Puerto Rico, the U.S. Virgin Islands, and Canada; and served 1,318 independently owned Carquest branded stores in Mexico, Grand Cayman, the Bahamas, Turks and Caicos, and the British Virgin Islands. The company was founded in 1929 and is based in Raleigh, North Carolina.
At a Glance
Live SnapshotMarket Cap$3.45B
EPS0.7300
P/E Ratio78.25
Earnings Date08/13/2026
Earnings Call Transcript
AAP • 2025 • Q1
Operator
Welcome to the Advance Auto Parts First Quarter 2025 Earnings Conference Call. I would now like to turn it over to Lavesh Hemnani, Vice President of Investor Relations.
Operator
[Operator Instructions]. And our first question comes from Simeon Gutman from Morgan Stanley.
Simeon Gutman
Maybe my first question, if you think about the 0.5% to 1.5% comp, you have an implicit mix of DIY versus DIFM performance within that. I don't think you've shared that with us. But can you tell us now that the first quarter is in the bag? Can you tell us what that expectation, how it's changed? Do you have any difference in how you think the year will play out based on how it's performing so far? And then I have one follow-up.
Simeon Gutman
And the follow-up, if we take the full year guidance and look at the complexion with gross margin and SG&A. The first quarter was better on gross. It looks like you're going to have some tailwinds because the liquidation goes away. You talked, Shane, about the product cost that should improve throughout the year. It feels like that was built into the way you built your outlook, I think. And -- but can you talk about is there more upward pressure than you thought. And then on SG&A, even with some of the cost removal, it doesn't look like there's a lot of upside to the SG&A forecast. Can you just -- I don't know -- I know you're not changing guidance, and I'm not trying to put words in your mouth, but it feels like the guidance range still looks relatively appropriate even with some of the upside drivers. It looks like you've kind of captured that in the guidance for the rest of the year. If you can comment on that, please.
Operator
Next question comes from Seth Sigman from Barclays.
Seth Sigman
Sounds like progress in a lot of areas. I'm trying to figure out with the improvement in comps this quarter, how much of that was from closing stores that were previously dragging on the comps? Maybe you could give us a sense of how much those stores were under comping previously, so we could try to understand the dynamics there. And then as we think about the closings this quarter, I assume there is some sales transfer to the remaining stores, particularly on the Pro side of the business. So if you could help quantify some of that would be great.
Operator
The next question comes from Chris Horvers from JPMorgan.
Christopher Horvers
So I'll take that [baton] on tariffs and what's going on there. At this point, how much inflation was -- did you have on the same SKU basis in the first quarter? Is any of that tariff pricing? And will that accelerate as you move forward from here? And then historically, if I recall, on the LIFO side, prior sort of methodology was you would actually write up inventory and it would create sort of these LIFO benefits early in the inflation process? So can you also talk about how that influences the P&L on the gross margin side?
Christopher Horvers
Got it. That makes a ton of sense. And a couple of margin questions. So first on the gross, if I look at sort of like the underlying trend, it seems like we'll be in this like mid-single-digit range as we -- sorry, mid-40s range as you get towards the end of the year. There -- is there anything that you're seeing or whether it's with tariffs or just the operational side of the business that deters that potential? And then on the SG&A front, that $70 million of cost savings from asset optimization, is it right to just take the SG&A from 1Q back out to 70 and that's sort of the underlying base that we build from based on seasonality and top line?
Ryan Grimsland
Yes, Chris, just on the $70 million, it's not SG&A, it's more COGS related. And Q1 is a tough one because yes, like from a liquidation piece, it's more sales liquidation impact that $70 million and due to the DCs, DCs really follow up into our COGS. So I would put that more on the gross profit line. From an SG&A standpoint, though, the rest of the year, you're going to see that down year-over-year as we get through that cost. And you will see closer to that mid-40s margin rate. From a tariff standpoint, one thing that Shane alluded to earlier is that while we ultimately want to maintain rate, as the costs come in, we're going to be focused on operating profit improvement as well. So managing the elasticity and the flow-through on the operating income side. So while when we looked at those range of outcomes in our guidance, we looked at all of those from elasticity, what we can pass on COGS price. And so I think our guidance really contemplates the ranges of outcomes that can happen in the rest of the year from what we know today, and Shane alluded to the complexities of all the different types of tariffs that are in their byproduct category.
Operator
The next question comes from Michael Lasser from UBS.
Ryan Grimsland
Yes. And Michael, I'd just remind you, I think we're looking at low single-digit comp growth to get to our 7%. So we're not looking for a large top line growth here. And by the way, that low single-digit, our growth is really led by DIFF. So we're not expecting major DIY growth to get to that 7% or even large top line growth. In fact, I think that's probably even below some of the market explanations to get to that 7%. That 7% is really built out the things we control. And that's our merch excellence work that we're doing, our supply chain productivity and the store productivity that we're driving. And so we can get to that 7% with low single-digit comp growth in that outlook.
Michael Lasser
My follow-up question, and I apologize for it making -- being very short term in nature, but you're pointing to a flat comp for the second quarter. It sounds like the Pro side continues to perform well or within your expectations, DIY is volatile. Do you need to see an acceleration in the overall business in order to hit that flat for the quarter. And as you think about the back half of the year, are there other drivers to get what would seem to be a low single-digit overall comp that's embedded in the outlook outside of just lapping some of the price investments and other factors.
Operator
The next question comes from
Zachary Fadem
Good morning. Now that the store optimization is largely behind us. Can you walk us through your expectations for non-GAAP adjustments for the rest of the year? It looks like about $100 million on SG&A this quarter. So as you look ahead, is there any color you can give on GAAP versus non-GAAP operating margins and EPS expectations for '25.
Ryan Grimsland
We're not guiding necessarily GAAP. But I think in Q1, we had the benefit of the tax piece that happened in Q1 from a GAAP standpoint. But from a cash expense standpoint, we had $150 million this year, $90 million is already done. So hopefully, that's helpful.
Ryan Grimsland
On the second piece, just on industry specific, there's lots of scenarios that play out on tariffs and what that impact would be. So we don't have exactly where that's going to land. Our guidance has all the different scenarios we think that will happen, and it contemplates those in that range. But going in low single digit is probably somewhere where we're thinking. But that range could obviously change quickly overnight. I mean it's still quite volatile. We're only halfway through the 90-day pause on one of them. So there's a lot that can take place over the next 9 months.
Zachary Fadem
And on the vendor financing piece?
Ryan Grimsland
The vendor financing piece, nothing material from a change. Supply chain finance, we're sitting at $3.5 billion of capacity. We're using at advance about $3 billion of that. And that's just an uptick in normal seasonal buys. We expect long term to be somewhere between $2.8 billion to $2.6 billion on that. And that's going to obviously fluctuates quarter-to-quarter as you have buys that go into there and then you run down the payables. So we still use it. There's nothing material where we've had vendors come off and it's a material impact to our COGS, but we always evaluate. Supply chain finance is a good tool, but we evaluate what's the better return for us.
Operator
The next question comes from Scot Ciccarelli from Truist.
Scot Ciccarelli
So it sounds like the benefits from better procurement costs are expected to be relatively modest, I think, Ryan referenced 50 basis points. I guess I would have assumed that procurement cost was going to be your biggest gross margin opportunity, and yet you're still expecting gross margins to improve during the course of the year. So can you provide any more color on what specifically and kind of the gross margin line is going to be the driver for the balance of the year? Is it just supply chain savings? Or are there other factors in there?
Ryan Grimsland
Yes. Thanks, Scot. Yes. So procurement cost of 50 plus keep in mind that those are contracts that we sign. And when those contracts go into effect has an impact on the amount. We are seeing SG&A down. We do have some fixed expense that we're leveraging as we get more volume in the back half of the year. So we are getting significant improvement in SG&A year-over-year. Some of that's coming from the store closures as well as we look at the drag that those had on our business. And then the bulk of our gross margin is going to be coming from COGS improvement, and that's both the first cost work that our vendors are doing and also the leverage on supply chain.
Scot Ciccarelli
Is there anything within the gross margin on that procurement side that isn't sustainable or it was onetime-ish? Or is this kind of like an existing run rate here?
Ryan Grimsland
The 50 bps is going to be an existing run rate. I mean these are contracts we're signing with our vendors, and those will continue, and that will grow over time as we continue to execute that strategy. It will increase in the future.
Operator
Next question is from Steven
Steven Zaccone
Okay. Then the follow-up I had, just drilling down in the second quarter with comps expected to be flattish. How should we think about the build of transactions versus ticket in that second quarter?
Operator
Our final question today comes from Steven Forbes from Guggenheim.
Transcript from May 22, 2025
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