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Advance Auto Parts Sales Gains Slow to a Crawl

By Demitri Kalogeropoulos – Feb 18, 2020 at 9:57AM

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Yet the retailer sees a brightening profit outlook for 2020.

Advance Auto Parts (AAP 2.23%) had a sluggish finish to its 2019 fiscal year. The leading auto parts retailer on Tuesday announces surprisingly weak fourth-quarter sales results while issuing a mixed outlook for 2020.

A man shops for auto supplies.

Image source: Getty Images.

What happened?

Sales gains at existing stores, or comps, slowed to a flat result in the quarter, compared to 1.2% in the prior quarter. The sluggish result surprised management, who cited a "challenging demand environment" in a press release to investors. Comps landed at 1.1% for the full year compared to over 2% in 2018.

On the other hand, Advance Auto Parts noted increase profit margins despite heavy spending in areas like the e-commerce business. Adjusted operating profit rose 6% for the full year, up to $677 million.

What's next?

CEO Tom Greco and his team issued a mixed outlook for 2020. Comps are predicted to range from flat to a 2% increase, which leaves open the possibility of a second straight year of decelerating sales growth. The consumer retailer's expense discipline and pricing power, meanwhile, should contribute to solid earnings gains as operating profit margin rises to between 8.4% and 8.7% compared to 8.2% in fiscal 2019.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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