Advanced auto parts announced its financial results for the first quarter ended April 24, 2021.
“In the first quarter of 2021, we achieved record sales growth across our business, as DIY and professional customers turned to Advance for their automotive needs in a strong industrial environment,” said Tom Greco, President and CEO. “I would like to thank all of our team members and independent partners for their tireless focus on execution during the quarter. In addition to the positive macroeconomic environment, our significant investments in the company and in our team over the past few years have improved the customer experience and increased margins. We saw first quarter comparable store sales growth of 24.7% and an increase in adjusted operating margin of 478 basis points. Strong consumer demand, continued cost control and operational improvements enabled both gross margin and SG&A expense leverage, resulting in a record quarterly adjusted diluted EPS.
“Our commitment and actions to protect the financial strength of the business during the pandemic resulted in first quarter free cash flow of $ 259 million. In addition, we returned $ 204 million to our shareholders through the combination of share buybacks and our quarterly cash dividend of $ 0.25 per share. Based on the health of our balance sheet and confidence in our continued cash generation, our board of directors recently approved an additional $ 1 billion share buyback authorization and a significant increase in our cash dividend. quarterly. We are committed to taking a balanced approach to returning liquidity to shareholders and our recent actions demonstrate this commitment. Building on the strength of our brands and our diverse base of digital and physical assets, we remain focused on executing the long-term strategy we discussed in April to generate total returns for shareholders for the years to come. come. “
First quarter 2021 operating results
Net sales for the first quarter of 2021 were $ 3.3 billion, an increase of 23.4% from the first quarter of the previous year. Comparable store sales for the first quarter of 2021 increased 24.7%.
Adjusted gross margin increased 26% to $ 1.5 billion. Adjusted gross profit margin was 44.8% of net sales in the first quarter of 2021, an increase of 91 basis points from the first quarter of 2020, driven by an increase in net sales, improvements in leverage of supply chain, pricing actions, a mix of channels as well as material cost optimization. These improvements were slightly offset by unfavorable inventory costs, product mix and headwinds associated with shrinkage and defective products. The company’s GAAP gross profit margin increased to 44.6% from 43.5% in the first quarter of 2020.
Adjusted selling and administrative expenses increased by $ 121.9 million to $ 1.2 billion. Adjusted selling, general and administrative expenses represented 35.8% of net sales in the first quarter of 2021, an improvement of 387 basis points compared to the first quarter of 2020. This improvement is due to the effect of fixed cost lever mainly linked to payroll and rents as well as to the drop in insurance and claims. expenses related to the company’s ongoing security efforts. The savings were partially offset by an increase in field bonuses, marketing investments as well as an increase in third party and service contracts related to IT transformation plans. The company’s GAAP selling and administrative expenses represented 37.0% of net sales in the first quarter of 2021, compared to 40.6% in the first quarter of 2020.
The company’s adjusted operating income was $ 298.8 million in the first quarter of 2021, including approximately $ 16 million in expenses related to COVID-19, compared to $ 113.2 million in the first quarter of the year. last year. The adjusted operating margin of 9.0% of net sales in the first quarter of 2021 increased by 478 basis points for the first quarter of 2021 compared to the first quarter of the previous year. On a GAAP basis, the company’s operating income was $ 252.1 million, or 7.6% of net sales, an increase of 466 basis points from the first quarter of 2020.
The company’s effective tax rate in the first quarter of 2021 was 24.3%, compared to 27.6% in the first quarter of the previous year. The company’s adjusted diluted EPS was $ 3.34 for the first quarter of 2021, an increase of 234.0% from the first quarter of the previous year. Based on GAAP, the company’s diluted EPS increased 346.0% to $ 2.81.
Year-to-date operating cash flow was $ 329.9 million in the first quarter of 2021, compared to $ 10.9 million in the same period last year. The increase is primarily due to increased cash flow from operations and other improvements in working capital. Free cash flow in the first quarter of 2021 was $ 259.0 million.
On April 19, 2021, the company’s board of directors approved an additional $ 1 billion share buyback authorization. During the first quarter of 2021, the company repurchased approximately 1.1 million common shares for a total amount of approximately $ 170.4 million, for an average price of $ 157.84 per share. At the end of the first quarter of 2021, the company had approximately $ 1.3 billion remaining under the share buyback program.
On April 19, 2021, the company’s board of directors declared a regular cash dividend of $ 1 per share payable on July 2, 2021 to all common shareholders of record on June 18, 2021.
Forecast update for the year 2021
“We continue to see strong sales growth in the first few weeks of the second quarter of 2021,” said Jeff Shepherd, executive vice president and chief financial officer. “In the first four weeks of Q2, our compositions sales continue to evolve into mid-teens and over a two-year stack is comparable to our 15.4% increase in Q1 2021. Although we We still expected significant volatility throughout the remainder of the year due to macroeconomic factors, we are again updating our full year forecast to reflect this continued revenue momentum.