Shares of Advance Auto Parts Inc. (AAP) plunged 6.5% in premarket trading on Wednesday following the auto parts seller’s unexpected large fiscal third-quarter loss and its revised full-year outlook. As part of its strategy to recover, the company also announced a cost-cutting plan aimed at saving $150 million annually.
During the quarter ending October 7, Advance Auto Parts reported a loss of $48.6 million, or 82 cents per share, compared to a net income of $115.9 million, or $1.92 per share, in the same period last year. This came as a surprise as analysts had anticipated earnings per share of $1.44, as per FactSet consensus. The decline in the company’s bottom-line results was primarily attributed to a change in estimates for inventory reserves, which had an adverse impact of $119 million, along with higher product and supply chain costs.
Revenue Increase and Positive Same-Store Sales Growth
On a positive note, Advance Auto Parts reported a 2.9% increase in sales, reaching $2.72 billion for the quarter. This surpassed the FactSet consensus of $2.68 billion. Additionally, the company delivered better-than-expected same-store sales growth of 1.2%, exceeding expectations of a 0.3% rise.
In a separate development, Advance Auto Parts stated its intention to explore the divestment of its Worldpac and Canada businesses.
Revised Outlook for Fiscal Year 2023
Looking ahead, the company revised its full-year guidance for fiscal 2023. It now expects earnings per share to be in the range of $1.40 to $1.80, down from the previous range of $4.50 to $5.10. Furthermore, Advance Auto Parts trimmed its sales forecast to a range of $11.25 billion to $11.30 billion, as opposed to the earlier range of $11.25 billion to $11.35 billion.
Since the beginning of the year, Advance Auto Parts’ stock has experienced a significant decline of 60.3%, while the S&P 500 has shown a positive growth of 17.1%.