Despite what CEO Tom Greco called “some weather-related volatility,” Advance Auto Parts reported a 2.7% jump in both first-quarter net sales and comparable store sales.
Advance reported Q1 revenue of nearly $3 billion, up from nearly $2.9 billion in Q1 2018. Operating income increased nearly 5% to $208 million.
Greco said the company saw “broad-based positive comp sales, with the highest growth coming from our Midwest, Mid-Atlantic, Appalachia, Carolinas and Central regions.” Comparable store sales grew for the professional and DIY segments, according to the Greco.
“From a category perspective, we saw strong growth in brakes, motor oil and batteries,” Greco added.
As part of the company’s efforts to improve profit margins, Advance closed or consolidated 38 stores during the first quarter “while reducing the cost of our overall rent obligation as we rightsized our asset base,” Greco noted. Advance also opened three new retail stores and three WorldPac branches during the quarter, resulting in a total of 5,077 stores as of April 20.
During Advance’s May 22 conference call, Greco highlighted the company’s efforts to reduce costs by focusing on workplace safety. He said Advance has seen “meaningful improvements in our incident rates,” which has led to costs savings in workers’ compensation insurance and claims.
“We’re committed to further improvement as we continue executing on our detailed health and safety agenda,” he added.
Selling, general and administrative expenses (SG&A) were $1 billion in the first quarter, up $26 million from Q1 2018. Advance CFO Jeff Shepherd attributed the uptick in SG&A to wage increases at the company’s distribution centers; fuel and transportation expenses supporting its cross-banner initiatives; and investments in IT and e-commerce.
Greco highlighted several IT and e-commerce initiatives that aim to drive sales in the professional and DIY segments, including the expansion of the new Advance Pro catalog to support Carquest stores, enhancements to its TechNet program and improvements in DIY customers’ “digital experience.”
He also spoke at length about Advance’s efforts to update its in-store technology as part of the “Next-Gen Store Network.”
“Several of our legacy systems and capabilities create delays and frustration for our front-line team members when they’re not able to easily view or rapidly toggle between necessary tools such as our catalog, delivery dashboards and training modules,” Greco explained. “Our Next-Gen Network significantly increases speed and reliability, including a new connected phone system that allows us to serve customers better than ever. As one example, our team members can look up parts much faster, with an average 85% improvement in the speed of catalog look-ups, ultimately providing faster and more reliable service for our customers.”
He said the initiative is part of a broader effort to reduce “non-value-added tasks” and free up employees to focus on customer service.
“We expect these investments will not only improve productivity in our stores and our customer support centers, but we’re also confident these initiatives will reduce turnover rates, as we make it easier for all our team members to do their job,” Greco added.
