Advance Auto Parts, Inc. reported its financial results for the twelve and forty weeks ended October 5, 2024, highlighting a mixed performance amid strategic changes and market challenges.

For the twelve weeks ended October 5, 2024, net sales decreased to $2,148 million from $2,218 million in the same period of 2023, reflecting a decline of 3.2%. However, gross profit increased to $908 million, up from $818 million, resulting in a gross profit margin of 42.3%, an improvement of 541 basis points year-over-year. Operating income showed significant recovery, reaching $403 thousand compared to an operating loss of $78.6 million in the prior year. The net loss narrowed to $25.4 million from $74.2 million, with basic loss per share improving to $(0.10) from $(1.05).

For the forty weeks ended October 5, 2024, net sales also fell to $7,098 million from $7,195 million, a decrease of 1.3%. Gross profit for this period increased slightly to $3,061 million, with a gross profit margin of 43.1%. Net income rose to $78.99 million, compared to $64.86 million in the previous year, with basic earnings per share increasing to $1.33 from $1.09.

The company undertook a significant strategic move by selling its Worldpac business for $1.5 billion, with the transaction closing on November 1, 2024. This sale is expected to provide net proceeds of approximately $1.2 billion, which will be utilized for general corporate purposes, including working capital and debt repayment. The results from Worldpac are classified as discontinued operations in the financial statements.

Advance Auto Parts is also implementing a restructuring plan aimed at enhancing profitability, which includes closing approximately 500 stores and reducing headcount. The estimated costs associated with this restructuring are projected to be between $300 million and $500 million.

Cash flows from operating activities improved significantly, with $81 million generated for the forty weeks ended October 5, 2024, compared to a cash outflow of $28 million in the prior year. The company ended the reporting period with cash and cash equivalents of $490.97 million, up from $316.55 million a year earlier.

The company’s credit rating remains stable, but there are concerns about potential downgrades that could affect financing terms. Additionally, the company is addressing internal control weaknesses identified in its financial reporting processes, with significant progress noted in remediation efforts.

Overall, while Advance Auto Parts faces challenges in sales and profitability, strategic divestitures and restructuring initiatives are expected to position the company for future growth.