Advance Auto Parts Reports First Quarter 2025 Results and Reaffirms Full-Year Guidance
Advance Auto Parts, a leading North American automotive aftermarket parts supplier, serving both professional installers and do-it-yourself (DIY) customers, today announced its financial results for the first quarter ended April 19, 2025. The company provided a comprehensive update on its operational performance, financial metrics, and outlook for the remainder of the year, underscoring continued progress on its strategic initiatives despite challenging economic conditions.
Strong Start to 2025 Despite Market Headwinds
Shane O’Kelly, President and CEO of Advance Auto Parts, expressed cautious optimism as he highlighted the team’s solid execution during the quarter. “The Advance team delivered better-than-expected sales and profitability in the first quarter, and I want to thank them for their hard work and commitment to serving our customers,” O’Kelly said. He further noted that the company successfully completed its store footprint optimization ahead of schedule, a significant milestone in Advance’s broader turnaround strategy.
The store optimization effort involved closing more than 500 corporate locations, aimed at improving overall profitability and focusing resources on higher-performing stores. This initiative, coupled with other strategic measures, has begun to show positive results in the company’s professional (Pro) customer segment, where the business achieved eight consecutive weeks of comparable sales growth in the U.S.
However, O’Kelly acknowledged that recent tariff implementations have created a dynamic and uncertain economic environment. “Despite these challenges, our team remains focused on our turnaround efforts and the path ahead,” he said. Reflecting this confidence, the company reaffirmed its full-year 2025 guidance, considering current performance, ongoing strategic progress, and mitigation actions addressing tariff impacts.
First Quarter Financial Highlights
For the first quarter of fiscal 2025, Advance Auto Parts reported net sales of $2.6 billion, down from $2.8 billion in the same period last year. This decline was partly influenced by the store closures during the ongoing footprint optimization program. Comparable store sales, which exclude the closed stores, decreased by 0.6% in the quarter.
Despite the slight decline in sales, gross profit remained robust at $1.1 billion, representing a gross margin of 42.9%. This compares to $1.2 billion or 43.4% gross margin in the prior year’s first quarter. The margin contraction of approximately 90 basis points was primarily attributed to liquidation sales at the closing stores, which tend to generate lower margins.
Selling, general, and administrative (SG&A) expenses totaled $1.2 billion, or 48.0% of net sales, an increase from $1.2 billion or 41.5% of net sales a year ago. Adjusted SG&A expenses, which exclude certain one-time costs, stood at $1.1 billion or 43.2% of net sales, compared with $1.1 billion or 41.4% in the prior year’s first quarter. The increase in SG&A expenses was driven mainly by higher labor costs, reflecting wage inflation and staffing needs.
Operating results revealed an operating loss of $131 million, or -5.1% of net sales, compared with an operating income of $53 million (1.9% margin) in the first quarter of 2024. On an adjusted basis, excluding certain charges, the company posted a slight operating loss of $8 million (-0.3% margin), down from adjusted operating income of $56 million (2.0% margin) a year earlier. The adjusted operating margin was also negatively affected by liquidation sales at closing stores, which are excluded from non-GAAP adjustments but impact profitability.
Tax Benefit and Earnings Per Share
Advance Auto Parts benefited from a significant tax advantage during the quarter, with an effective tax rate benefit of 118.3%. This contrasts with the 41.4% tax expense rate reported in the first quarter of 2024. The extraordinary tax benefit of $126 million was related to discrete items impacting the tax provision, positively influencing the company’s bottom line for the period.
Diluted earnings per share (EPS) for the quarter were $0.40, an increase over the $0.29 EPS reported in the first quarter of 2024. However, adjusted diluted earnings per share, which exclude certain items such as restructuring charges and tax effects, showed a loss of $0.22 per share, compared to adjusted earnings of $0.33 per share in the prior year period.
Cash Flow and Capital Allocation
Cash flow from operating activities for the quarter was a use of $156 million, significantly higher than the $3 million cash outflow in the first quarter of 2024. This reflects working capital investments and other operational factors. Free cash flow, which includes capital expenditures, was a negative $198 million, compared with a negative $49 million a year ago. These cash outflows are influenced by the company’s store optimization program and investments in strategic initiatives designed to support long-term growth.
In terms of capital allocation, Advance Auto Parts declared a regular quarterly cash dividend of $0.25 per share on May 13, 2025. The dividend will be paid on July 25, 2025, to shareholders of record as of July 11, 2025. This move reflects the company’s confidence in its financial position and commitment to returning value to shareholders despite the current economic uncertainties.
Outlook and Full-Year 2025 Guidance
Advance Auto Parts reaffirmed its full-year 2025 guidance, assuming that current tariffs remain in place throughout the remainder of the year. While the company faces headwinds from tariffs and economic volatility, it expects ongoing progress from its turnaround initiatives, including store footprint optimization, improving Pro segment performance, and operational efficiencies.
The guidance factors in both the risks and opportunities inherent in the dynamic market environment. By executing planned mitigation strategies against tariff impacts and continuing to enhance its customer focus, Advance Auto Parts aims to return to sustained profitability and revenue growth.
Strategic Focus and Future Plans
The company’s strategic priorities remain centered on several key areas:
- Optimizing Store Footprint: The recent accelerated completion of store closures allows the company to focus resources on high-potential locations and improve overall profitability.
- Enhancing Pro Customer Engagement: The Pro segment has demonstrated encouraging trends, with sustained comparable sales growth highlighting successful customer retention and service enhancements.
- Tariff Mitigation: Proactively managing the cost impacts from tariffs through supply chain adjustments, pricing strategies, and cost controls.
- Operational Efficiency: Leveraging technology and process improvements to reduce costs and improve customer service.
- Digital and E-commerce Expansion: Investing in online capabilities to better serve both professional and DIY customers, meeting evolving market demands.
Management Commentary
Shane O’Kelly emphasized the company’s commitment to navigating the current economic challenges with resilience and focus. “While tariffs and macroeconomic uncertainty present hurdles, our team is executing against a clear plan,” he said. “We are proud of the progress made so far in 2025 and confident in our ability to deliver value for customers, employees, and shareholders through disciplined execution and strategic investments.”
Advance Auto Parts’ first quarter 2025 financial results reflect a company in the midst of transformation—balancing short-term pressures with long-term growth initiatives. Although net sales and profitability faced some headwinds from store closures and tariffs, the company’s operational discipline and strategic focus are helping to stabilize performance.
The reaffirmation of full-year guidance underscores management’s confidence that the business is on the right track, supported by strong Pro segment momentum and completed footprint optimization. With ongoing efforts to mitigate tariff impacts and improve efficiency, Advance Auto Parts aims to return to profitable growth and strengthen its leadership position in the North American automotive aftermarket industry.
