What happened

Investors in Advance Auto Parts (AAP 0.58%) must have heaved a sigh of relief this morning when the stock rallied soon after the market's opening. Unfortunately, their excitement lasted only so long, with the stock giving up those gains as the day progressed. Advance's stock was trading 1% lower as of noon E.T. on Wednesday, down considerably from the high of 6.2% earlier in the day.

The automotive parts retailer announced its quarterly numbers and has appointed a new CEO. While the market perhaps considers the latter as a positive move, it's taking a cautious stand given Advance Auto Parts' latest numbers and outlook.

So what

Here are some important numbers from Advance Auto Parts' second-quarter earnings report (all changes are year over year):

  • Revenue was up 0.8%, driven by new store openings.
  • Gross margin was down to 42.7% from 44.5%.
  • Earnings per share (EPS) fell to $1.43 from $2.38.
  • Free cash flow (FCF) was negative $309.4 million, down from a positive FCF of $97.3 million.

Those bleak numbers have reminded investors, yet again, about the retailer's ongoing struggles. In May, the company not only cut its outlook for the full year but also slashed its quarterly dividend drastically to $0.25 per share from $1.50.

Unfortunately, things seem to have gotten worse since, as Advance Auto Parts has further downgraded its 2023 operating margin outlook by a percentage point to a range of 4% to 4.3%. That's nearly half of what the company projected in February this year.

The aftermarket parts retailer also expects only $4.50 to $5.10 in earnings per share (EPS) this year, down significantly from its original EPS guidance of $10.20 to $11.20.

Now what

Advance Auto Parts' recent performance under CEO Tom Greco has clearly left much to be desired. That explains why the stock rose earlier today, with the company saying it is initiating an "operational and strategic review" of its business and has announced a new leader. Greco will retire and be replaced by Shane O'Kelly, effective Sept. 11.

O'Kelly is currently the CEO of Home Depot's HD Supply unit, and investors are hopeful he will turn Advance Auto Parts around. However, with the company also expecting a challenging year ahead, investors aren't willing to bet on a potential turnaround just yet.