Advance Auto Q1 impacted by Carquest integration
ROANOKE, Va. (May 26, 2015) — Advance Auto Parts Inc.'s net income of $148.1 million for the first fiscal quarter, ended April 25, was essentially on par with the year-ago period, as sales edged up 2.3 percent to $3.04 billion.
The sales increase was driven by the addition of new stores over the past 12 months and a comparable store sales increase of 0.7 percent, the company said. However, sales were unfavorably impacted primarily from integration activities and unfavorable weather, according to Roanoke-based Advance Auto. In January 2014 the firm acquired General Parts International Inc. and its Carquest and Worldpac brands.
“As we enter our second year of the General Parts integration, we remain very confident with the growth, service and earnings potential of the combined companies. We have undertaken the industry's largest acquisition and just completed our heaviest quarter of integration activities to date,” said CEO Darren R. Jackson, adding, “While these results did not meet our high expectations, we remain confident in our integration plan and are focused on executing the foundational work necessary to deliver the full potential of the combination.”
The company's comparable operating income — excluding the General Parts integration and store consolidation costs of $32.7 million and $15.5 million, respectively — increased 8.4 percent to $308.3 million during the first quarter,
Capital expenditures in the first quarter of fiscal 2015 were $57 million, compared with $60.5 million for the first quarter of fiscal 2014.
“Our first quarter results were softer than we expected, primarily driven by the change impacts of our integration activities,” said Mike Norona, Advance's executive vice president and CFO. “Despite the softness, we were pleased that we delivered our synergy expectations and grew our comparable operating income 8.4 percent.”
Advance Auto said its integration activities have progressed to the operational phase of aligning the company's people, processes, systems and capabilities to a common foundation. In the first quarter of 2015, the company made organizational changes, including product and price alignment, integrating field organizational structures, aligning compensation programs and changing aspects of its customer processes. These activities were more taxing on the company and impacted the first quarter results, officials said.
“Turning to the balance of the year, we do expect to see some continued short term business volatility from our integration activities, given that these changes were sequenced throughout the first quarter and our teams were still working through the changes as we exited the quarter,” Mr. Norona said.
As of April 25, the company operated 5,235 stores and 115 Worldpac branches and served approximately 1,300 independently owned Carquest stores.
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