of Advance Auto Parts (AAP 100.21 +17.93) are surging higher this morning following quarterly
earnings results, including profit beat, and forward guidance.
This morning before the open, the company reported third quarter earnings of $1.43 per share, excluding non-recurring items, which easily topped expectations. On the top line, revenues fell 3.0% year/year to $2.18 billion, which fell a little short of expectations.
The company's gross profit margin decreased 51 basis points year-over-year to 43.4%, which slightly beat expectations.
The year/year decline was primarily driven by increased supply chain costs and shrink, which negatively impacted margins by 44 basis points.
In addition, the non-cash impact of inventory optimization efforts negatively impacted gross margins by 23 basis points. These were partially offset by 17 basis points in favorable material cost improvements.
Meanwhile, Adjusted SG&A was 35.5% of net sales, a 127 basis point increase year-over-year.
The increase was primarily driven by 131 basis points of higher labor, medical and insurance claims. Additionally, increased marketing expenses accounted for 26 basis points. These increases were partially offset by third-party fee reductions in addition to improvements in utility, maintenance and repair costs.
Free cash flow rises...
- Operating cash flow decreased 6.1% to $401.0 million through the third quarter of 2017 from $427.0 million through the third quarter of 2016. Free cash flow was $240.0 million through the third quarter of 2017 compared to $222.8 million in the prior-year period, an increase of 7.7%, primarily driven by inventory optimization efforts.
Looking ahead... The company reaffirmed the following FY17 guidance:
- New Stores 60-65 new stores
- Comparable Store Sales -3% to -1%
- Adjusted Operating Income Rate 200 to 300 basis points year over year reduction
- Free Cash Flow Minimum $300 million
Following the open, the stock keeps hitting new highs for the day, and are now sitting near the day's high just over $100/share.