Why advance auto parts stock reversed this week
Advance Auto Parts's second-quarter earnings
As previously noted, second-quarter earnings saw a severe contraction in profit margins due to the increased costs of implementing its strategic plans (which now include selling its Worldpac business for $1.5 billion to shore up the balance sheet) and higher product costs.
However, that's not the only negative because things aren't getting better anytime soon. The company also slashed its full-year guidance across the board:
The midpoint of full-year sales guidance of $11.2 billion, compared to $11.35 billion previously
The midpoint of full-year operating margin guidance of 2.3%, compared to 3.35% previously
The midpoint of diluted earnings-per-share (EPS) guidance of $2.25, compared to $4 previously
After attracting criticism last year for trying to hold pricing to maintain margin, the company is now investing in pricing changes to "improve our price perception in the industry," according to CFO Ryan Grimsland.
It's part of O'Kelly's turnaround. Still, the company has a long way to go before achieving the operational metrics its peers enjoy (shown below), including working capital management.
