Advance Auto Parts Inc. (AAP - Free Report) reported on May 24 a 36% decline in adjusted earnings to $1.60 per share in the first quarter of fiscal 2017 (ended Apr 22, 2017) from $2.51 earned in the prior-year quarter. The figure also missed the Zacks Consensus Estimate of $2.12. Adjusted net earnings declined to $118.4 million from $186 million in the first quarter of fiscal 2016.

Revenues declined 3% year over year to $2.89 billion and lagged the Zacks Consensus Estimate of $2.93 billion. The year-over-year decline was primarily due to the comparable store sales (comps) decline of 2.7% which was impacted by the shift in New Year’s Day to the first quarter of 2017 as well as the significant shift of winter-related demand into December. However, growth in Worldpac in the quarter was a minor offset.

Gross profit declined to $1.27 billion in the reported quarter from $1.35 billion a year ago. Gross margin declined to 44% from 45.3% in the prior year quarter mainly due to investments in the customer, inventory optimization efforts and supply chain expense deleverage due to comps decline.

Adjusted selling, general and administrative (SG&A) expenses totaled $1.07 billion or 36.9% of sales in the quarter under review, compared with $1.03 billion or 34.7% in the first quarter of fiscal 2016. The SG&A was in line with the company’s expectations and reflects the incremental customer focused investments and expense deleverage due to comps decline. 

Adjusted operating income fell 35% to $204.9 million from $315 million in the prior-year quarter. Adjusted operating margin was 7.1%, down from 10.6% a year ago.

Advance Auto Parts Inc Price, Consensus and EPS Surprise

Advance Auto Parts Inc Price, Consensus and EPS Surprise | Advance Auto Parts Inc Quote

Dividend

On May 16, 2017, the board of directors of Advance Auto Parts declared a regular quarterly dividend of 6 cents per share. The dividend will be paid on Jul 7, 2017, to stockholders on record as of Jun 23, 2017.

Financial Position

Advance Auto Parts had cash and cash equivalents of $126.1 million as of Apr 22, 2017, down from $135.2 million as of Dec 31, 2016. Total long-term debt was $1.07 billion as of Apr 22, 2017, compared with $1.04 billion as of Dec 31, 2016.

For the fiscal first quarter, operating cash flow was $35.1 million compared with $88.4 million in the year-ago period. Cash flow from operating activities in the quarter declined to $35.1 million from $88.5 million in the prior-year period. Capital expenditures amounted to $65.3 million in the quarter compared with $89.1 million a year ago.

Store Update

In the fiscal first quarter, the company’s total store count was 5,059, including 130 Worldpac branches. Advance Auto Parts served roughly 1,250 independently owned Carquest stores as of that date.

Advance Auto Parts has underperformed the Zacks categorized Retail/Wholesale-Auto Parts industry over the past six months. The company’s shares have lost 17.68% over this period compared with 15.02% decline of the industry.

Zacks Rank & Stocks to Consider

Advance Auto Parts currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the auto space include Allison Transmission Holding Inc. (ALSN - Free Report) , Cummins Inc. (CMI - Free Report) and Dana Incorporated (DAN, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Allison Transmission has long-term expected growth rate of 11%.

Cummins has long-term expected growth rate of 11.65%.

Dana has long-term expected growth rate of 3%.