Advance Auto Parts (AAP) Q4 2024 earnings summary

Executive summary

• 2024 was a transformative year with divestitures, major store and DC closures, and organizational restructuring to reposition for long-term value creation and a renewed focus on core retail fundamentals and customer service.

• Leadership changes and a new three-year strategic plan aim to deliver adjusted operating margins of ~7% by 2027, with clear milestones and KPIs.

• The company is executing on merchandising, supply chain, and store operations to drive profitable growth and improve customer experience.

• Ended 2024 with a healthy balance sheet and strong liquidity, aiming for improved performance in 2025 and a 7% adjusted operating margin by FY27.

Financial highlights

• Q4 2024 net sales from continuing operations were $2B, down 1% year-over-year; comparable store sales declined 1%.

• Q4 adjusted gross profit was $779M (39% margin), with gross margin contracting 170 bps due to inventory adjustments and liquidation sales.

• Q4 adjusted operating loss from continuing operations was $99M (negative 5% margin).

• Full-year 2024 net sales from continuing operations were $9.1B, down 1.2% year-over-year; adjusted operating income was $35M (0.4% margin).

• Adjusted diluted loss per share for Q4 was $1.18; full-year adjusted diluted loss per share was $0.29.

• Negative free cash flow of $40M for the year, improved from $83.9M outflow in 2023; would have been positive excluding $90M in closure-related expenses.

Outlook and guidance

• 2025 net sales expected at $8.4–$8.6B, down 5–8% due to store closures; comparable sales growth of 0.5–1.5% on a 52-week basis.

• Adjusted operating income margin guidance for 2025 is 2–3%, with sequential improvement expected through the year.

• Adjusted diluted EPS expected at $1.50–$2.50; free cash flow guidance is negative $25M to $85M, with positive free cash flow excluding closure costs.

• Leverage ratio targeted to improve to 3.5–4x in 2025 and 2.5x by end of 2027.

• 2027 goal is adjusted operating margin of ~7%, driven by mid-40s gross margin and SG&A below 40% of sales.