Advance Auto Parts Lowers Guidance for 2019

Advance Auto Parts (AAP) made slightly negative revisions to 2019 guidance projections after a downbeat second quarter that included disappointments on margins and comparable-store sales.

Shares in the aftermarket car-part supplier were weaker on Tuesday after it said comps were flat in the second quarter and net sales rose just 0.2% to $2.3 billion. The consensus on Capital IQ was for almost 1.8% growth in comps and sales of $2.36 billion.

The adjusted gross profit margin fell 42 basis points from a year earlier 43.3% of net sales, with the slide “driven by channel and product mix, in addition to planned supply chain wage investments,” the Raleigh, NC-based company said.

Adjusted earnings rose to $2 a share from $1.97 a year earlier, but that was also below the Street’s consensus for $2.21 a share. The stock was down 2.2% in early afternoon trading on Tuesday.

Pressure from the channel mix and wage investments may persist into the second half of 2019, according to Wedbush Securities.

“AAP comps likely suffered from unfavorable weather in 2Q19,” said analysts Seth Basham and Nathan Friedman. “But a possibly better finish to the quarter and only a small guide down signal confidence in the 2H19 outlook as underlying demand trends remain solid and the company’s transformation plan remains on track.”

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