Inside Advance Auto Parts’ 3Q17 Weaker Sales
Advance Auto Parts’ business
Advance Auto Parts (AAP) generates its revenues by selling auto parts and accessories primarily in the US, Puerto Rico, the US Virgin Islands, and Canada. The company provides these auto parts to do-it-yourself customers as well as for professional installation purposes.
In 2015 and 2016, US automakers (FXD) such as Ford (F) and General Motors (GM) benefited from higher US sales of trucks. This positive sales trend also boosted future growth potential for US auto parts sellers including AAP, O’Reilly Automotive (ORLY), and AutoZone (AZO). Now, let’s take a closer look at Advance Auto Parts’ fiscal 3Q17 revenues.
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Fiscal 3Q17 sales fell
In fiscal 3Q17, AAP reported revenues of $2.18 billion, which fell 3.4% from its revenues in fiscal 3Q16. The company also missed analysts’ consensus revenue estimates of $2.21 billion.
AAP’s management noted that Advance Auto Parts’ sales performance in the second half of 2017 is turning out to be as expected amid weak industry-wide sales. In fiscal 2Q17, the company’s management told investors that AAP’s sales could remain weak in the second half of 2017 due to temporary industry-wide softness.
In the first three quarters of 2017, AAP’s sales have fallen 2.0% year-over-year to ~$7.3 billion.
In the last few quarters, Advance Auto Parts has been focusing on inventory optimization efforts to improve its free cash flow condition. Despite these inventory reduction efforts, the company has been trying to improve auto parts’ availability at stores and to provide better customer service in order to increase its sales.
In the next part, we’ll explore how Advance Auto Parts’ profit margins looked in fiscal 3Q17.