Advance Auto Parts’ first quarter was marked by early signs of progress in its turnaround strategy, as management cited improvements in the Pro segment and operational execution. CEO Shane O’Kelly attributed the better-than-expected results to the rebound in Pro demand late in the quarter and the successful completion of a major store footprint optimization. He noted, “Pro grew in the low single-digit range, including 8 consecutive weeks of positive comparable sales growth in the U.S.” The company also benefited from improved parts availability and service levels, particularly in markets where it now holds a leading store density position.
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Advance Auto Parts (AAP) Q1 CY2025 Highlights:
- Revenue: $2.58 billion vs analyst estimates of $2.50 billion (6.8% year-on-year decline, 3.2% beat)
- Adjusted EPS: -$0.22 vs analyst estimates of -$0.69 (68% beat)
- Adjusted EBITDA: $81 million vs analyst estimates of $90.34 million (3.1% margin, 10.3% miss)
- The company reconfirmed its revenue guidance for the full year of $8.5 billion at the midpoint
- Management reiterated its full-year Adjusted EPS guidance of $2 at the midpoint
- Operating Margin: -5.1%, down from 1.9% in the same quarter last year
- Locations: 4,285 at quarter end, down from 4,777 in the same quarter last year
- Same-Store Sales were flat year on year, in line with the same quarter last year
- Market Capitalization: $3.09 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Advance Auto Parts’s Q1 Earnings Call
- Simeon Gutman (Morgan Stanley) asked whether the mix between Pro and DIY performance had changed, and CFO Ryan Grimsland clarified that Pro is expected to drive results going forward, with DIY remaining pressured.
- Seth Sigman (Barclays) inquired about the impact of store closures on comparable sales. Grimsland responded that the comp difference from closing stores was not material, with most sales transfer occurring in the Pro segment as planned.
- Chris Horvers (JPMorgan) pressed for details on tariff-related inflation and its impact on gross margins. Grimsland explained that Q1 inflation was immaterial and that a range of outcomes is built into current guidance given tariff uncertainty.
- Michael Lasser (UBS) questioned the company’s ability to meet long-term margin targets if DIY sales remain flat. CEO O’Kelly responded that ongoing initiatives and market share gains in core regions should support targets even with modest DIY growth.
- Steven Forbes (Guggenheim) asked about early results from the new store operating model. O’Kelly said the company is encouraged by initial findings but is not yet ready to share specific performance metrics.
Catalysts in Upcoming Quarters
In the next few quarters, our team will focus on (1) the pace and effectiveness of new assortment framework rollouts and their impact on sales in key markets, (2) measurable gains in supply chain productivity and delivery times as distribution center consolidation progresses, and (3) the ability to offset tariff-related cost pressures through vendor negotiations and pricing strategies. Progress in restoring profitability within the DIY segment and execution of planned store openings will also be closely monitored.
Advance Auto Parts currently trades at $52.21, up from $31.28 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).
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