Advance Auto Parts, Inc. has announced its financial results for the second quarter ended July 16, 2016. Second quarter GAAP earnings per diluted share (Diluted EPS) were $1.68. Second quarter adjusted earnings per diluted share (Adjusted EPS) were $1.90 which exclude $0.08 of amortization of acquired intangible assets and integration and restructuring costs of $0.14, primarily associated with the acquisition of General Parts International, Inc. (General Parts).
“Our second quarter results were not acceptable and we are moving thoughtfully and swiftly to make the necessary changes across a number of critical areas within the organization to alter the trajectory of the business and improve our operating performance,” said Tom Greco, chief executive officer. “There’s a heightened sense of urgency and accountability throughout the organization and we are taking decisive actions to deliver near-term improvement with a focus on accelerating our commercial growth and improving our execution.” Greco continued, “I continue to be energized by the immense opportunity for improvement. The actions we need to take are well within our control and we are focused on building the right foundation for the long term. We are hard at work constructing a comprehensive strategic plan, which will help us reliably and consistently deliver industry leading performance and unparalleled customer service going forward. We remain confident in our business, our people and the opportunity that lies ahead to create long-term value.”
Second Quarter 2016 Highlights Total sales for the second quarter decreased 4.8% to $2.26 billion, as compared with total sales during the second quarter of fiscal 2015 of $2.37 billion. The sales decline was driven by the comparable store sales decrease of 4.1%, the store closures in 2015 and the effect of Carquest consolidations. The sales decline was partially offset by new store and Worldpac branch openings. The Company’s Gross Profit rate was 44.8% of sales during the second quarter as compared to 45.9% during the second quarter last year. The 110 basis-point decrease in gross profit rate was primarily the result of supply chain expense deleverage due to the comparable store sales decline and higher supply chain operating expenses. On a GAAP basis, the Company’s SG&A rate was 35.2% of sales during the second quarter as compared to 35.0% during the same period last year. The 14 basis-point increase was driven primarily by fixed cost deleverage due to our comparable store sales decline and higher self-insurance expense partially offset by lower incentive compensation costs and the Company’s continued cost reduction initiatives and expense reduction actions to offset lower sales. The Company’s Adjusted SG&A rate was 34.0% of sales during the second quarter as compared to 33.8% during the same period last year. On a GAAP basis, the Company’s operating income during the second quarter of $216.7 million decreased 15.7% versus the second quarter of fiscal 2015. On a GAAP basis, the Operating Income rate was 9.6% during the second quarter as compared to 10.8% during the second quarter of fiscal 2015. The Company’s Adjusted Operating Income was $243.1 million during the second quarter, a decrease of 14.8% versus the second quarter of fiscal 2015. As a percentage of sales, Adjusted Operating Income in the second quarter was 10.8% versus 12.0% during the second quarter of fiscal 2015.
Operating cash flow decreased approximately 41.7% to $192.9 million through the second quarter of fiscal 2016 from $330.8 million through the second quarter of fiscal 2015. Free cash flow was $55.0 million through the second quarter of fiscal 2016 compared to $216.3 million through the second quarter of fiscal 2015. Capital expenditures through the second quarter of fiscal 2016 were $137.9 million as compared to $114.5 million through the second quarter of fiscal 2015.
As of July 16, 2016, the Company operated 5,066 stores and 126 Worldpac branches and served approximately 1,300 independently owned Carquest stores.