Shares of Advance Auto Parts (AAP +0.45%) plunged on Thursday after the automotive aftermarket parts supplier warned of a slowdown in consumer spending.
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DIY customers are curtailing their spending
Advance Auto Parts' net sales were flat year over year at $2 billion in its fiscal second quarter, which ended on July 18.
The company's comparable store sales, which measure revenue from stores open for at least a year, declined by 0.5%.
CEO Shane O'Kelly said Advance Auto Parts saw low-single-digit growth in its Pro channel, which serves professional automotive service providers. But sales to do-it-yourself customers lagged "as tighter household budgets constrained spending more than we anticipated, especially during the last four weeks of the quarter."
NYSE: AAP
Key Data Points
Still, tariff refunds helped drive Advance Auto Parts' adjusted operating income up more than 80% to $112 million. Its adjusted diluted earnings per share, in turn, increased 49% to $1.03.
Advance Auto Parts also generated positive free cash flow of $120 million over the twenty-eight weeks ended July 18, a notable improvement after two years of outflows.
This higher cash flow production enabled the automotive parts purveyor to pay down roughly $30 million in debt.
Short-term pain should transition into long-term gains
Despite acknowledging that it's currently facing a "volatile demand environment," Advance Auto Parts reiterated its full-year financial forecast, including:
- Net sales of roughly $8.5 billion
- Comparable store sales growth of 1% to 2%
- Free cash flow of $100 million
"The consumer is stressed, but think a little bit longer term, because I don't think we're going to be permanently in this state of affairs," O'Kelly said during a conference call with analysts. "If you think longer term, the backdrop of the industry that we're in remains very attractive."
