Advance Auto Parts reported first-quarter net sales of $2.7 billion, down from $2.95 billion in first-quarter 2019, as the company felt the effects of stay-at-home orders in March and April.
Comparable-store sales were down 9.3%.
Advance’s top-line sales “were significantly impacted by COVID-19 in the quarter,” CEO Tom Greco said during the company’s May 19 conference call.
“While an extremely warm winter led to a softer start to the quarter, we saw sales improvement in early March,” Greco said. “However, as COVID-19 stay-at-home orders were implemented broadly, we experienced significant reductions in both professional car counts and DIY retail traffic beginning in mid-March and impacting the remaining six weeks of the quarter. This led to fewer miles driven, and as a result, our top line meaningfully declined, as we detailed in our early-April pre-release.”
Greco thanked all Advance associates and independent Carquest partners for adapting to the situation and “making tremendous sacrifices to keep our customers on the road.” To protect Advance employees and customers, the company installed plexiglass barriers at the counters, began offering curbside pick-up and ramped up its cleaning practices, among other measures. Advance also supplied more than 1 million face coverings for its team members, according to Greco.
“All of this reinforces that when we say nothing is more important than the health and safety of our people and customers, we’re supporting this statement with concrete actions,” Greco added.
During the quarter, Advance increased its balance-sheet liquidity by $1 billion, and in February announced an increase in the quarterly cash dividend from 6 cents to 25 cents. Like many companies grappling with the economic uncertainty caused by the coronavirus pandemic, Advance recently withdrew its full-year financial guidance.
Sales during the week ending April 4 were down 28%, according to Greco. Since then, however, sales have been improving sequentially each week, he noted.
“Through the first four weeks of Q2, our comparable-store sales are approximately in line with the prior year, and our DIY omnichannel business is growing double digits, significantly outperforming professional,” Greco added. “While there are a number of factors here, from an industry perspective, the DIY business tends to perform well during economic downturns, as unemployment increases, new-car sales decline, the car parc ages and more customers do their own maintenance and repairs. We also believe the combination of stimulus benefits and the strong execution of our DIY marketing and sales plans have been two additional drivers helping our recent sales performance.”
During the quarter, Advance formed a crisis task force “to help ensure that we’re in an even stronger position to compete following the crisis.”
“We have re-prioritized initiatives, updated goals, improved collaboration and increased speed of decision-making in spite of the environment,” Greco explained. “We are now more agile and responsive and deploying timely, relevant and innovative solutions to help meet the rapidly evolving needs of our team members and customers. Now that many states have begun to gradually lift restrictions, we’re helping pro customers ramp up and assisting DIY customers to get back to work and daily life.
“Our task force is looking at the very best ways for us to serve our professional customers, based on developing guidelines, while being mindful of the ongoing need for safety and social distancing. For our store teams, we’re adapting and updating our standard operating procedures for customer interaction, curbside delivery and parking lot services. Historically, we know this industry has been counter-cyclical, and we’re beginning to see signs of this. We’re working hard to be ready to serve our customers better than ever regardless of the environment.”