Advance Auto Parts gears up for a major comeback in FY24 with promising earnings forecast
AInvestWednesday, Feb 28, 2024 1:25 pm ET
1min read

Advance Auto Parts, Inc. (AAP) has unveiled its Q4 earnings, highlighting a per-share loss of $0.59, missing the expected $0.20 mark. Revenue dipped slightly by 0.4% year over year to $2.46 billion, slightly below the forecasted $2.47 billion. The report also noted a 1.4% drop in fourth-quarter comparable store sales.

In a bold move to bolster its financial health, AAP announced an initiative to cut an additional $50 million in indirect spending annually, adding to the already realized $150 million in annualized SG&A savings achieved in the last quarter. Additionally, the company has revised its revolving credit facility to include certain allowances for inventory and vendor receivables write-downs, securing its adherence to financial covenants as of the end of 2023.

Looking ahead to FY24, Advance Auto Parts sets an optimistic tone with an EPS forecast ranging from $3.75 to $4.25, outpacing the anticipated $3.51. However, revenue projections fall slightly short, with expectations set between $11.3 and $11.4 billion, against the estimated $11.46 billion. Comparable store sales are projected to slightly improve or remain steady, marking a shift from the previous year's 0.3% decline.

The company is also streamlining operations and refocusing its strategy by planning to sell off its Worldpac and Canadian segments. This divestiture is projected to free up $2-$3 billion in capital, reducing its commercial sales exposure and concentrating on its blended box business model and DIY clientele.

Despite the challenges posed by the pandemic and rising competition, AAP's leadership is charting a course toward recovery. With strategies aimed at cost reduction and operational efficiency, the company is poised for a rebound, driven by anticipated demand increases, inflation stabilization, and favorable year-over-year comparisons in FY24.

Advance Auto Parts is on the fast track to revitalizing its operations in FY24, backed by solid earnings prospects and strategic cost-cutting measures. As the company embarks on its restructuring journey, the focus on its fundamental strengths and customer base signals a promising horizon, though the full impact of its turnaround efforts may unfold over the coming quarters.

AAP shares are up over 5% in Wednesday midday trade following the company's premarket release.


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