DOW JONES NEWSWIRES
Advance Auto Parts Inc.'s (AAP) fourth-quarter net income dropped 30% on an inventory write-down, but strong commercial sales and an extra week helped the company post a double-digit sales increase.
The company said it intends to aggressively renegotiate rents and move or close stores to improve profitability. Between 40 and 55 unprofitable stores could be closed in 2009.
"We are pleased with our commercial results and encouraged by the improvement in our DIY [Do It Yourself] results during the fourth quarter," said President Jim Wade.
He predicted the company could see double-digit growth in commercial same-store sales in 2009, which would be partially offset by a decrease in the low single digits in DIY same-store sales.
While the recession has put the Detroit auto makers on life support, the market for auto parts has been holding up as cash-strapped Americans patch up their cars rather than shop for new ones.
The second-largest U.S. auto-parts retailer, after AutoZone Inc. (AZO), reported net income of $24.4 million, or 26 cents a share, down from $34.8 million, or 35 cents a share, a year earlier. Excluding an inventory write-down of 25 cents a share, earnings rose to 51 cents a share. The extra week added 10 cents a share to earnings.
Revenue climbed 14% to $1.19 billion, helped by 107 new stores, the extra week and an increase in same-store sales.
Analysts' estimates were for per-share earnings of 37 cents on revenue of $1.15 billion, according to a poll by Thomson Reuters.
Same-store sales rose 3%, excluding the extra week, with sales to do-it-yourself customers down 1.1% but sales to commercial repair shops climbing 14%.
Gross margin fell to 45.4% from 47.1% on the inventory write-down. Without the extra week, gross margin would have been 48.5%.
The company noted that the write-down is related to a change in inventory management that is expected to increase inventory turns, sales and margins.
During the fourth quarter, Advance opened 26 stores, closed 10 and moved two. As of Jan. 3, the total store count was 3,368.
Advance's shares were unchanged in after-hours trading from the Wednesday closing price of $32.63, up 1.5%. The stock price has fallen 28% in five months.
-By Kathy Shwiff, Dow Jones Newswires; 201-938-5975; Kathy.Shwiff@dowjones.com