Advance Auto Parts (NYSE:AAP) reported its fiscal first-quarter 2025 earnings on May 22, with net sales of $2.6 billion representing a 7% decrease compared to the same period last year. Management completed a rapid store footprint optimization during the period, delivered a near-breakeven adjusted operating margin, and remains focused on supply chain cost leverage, procurement savings, and pro channel strength through 2025 and beyond. It also reaffirmed its full-year guidance for 0.5% to 1.5% of comp sales growth to a range of $8.4 billion to $8.6 billion.
Rapid Execution of Store Footprint Optimization and Market Leadership Shift
The company closed underperforming stores and finalized its optimization program in March, resulting in approximately 75% of its footprint now being concentrated in markets where it ranks No. 1 or No. 2 in store density. This pivot supports its planned expansion of over 100 new stores in the next three years and reduces operational complexity, a structural change not reflected in the company’s recent performance.
“In March, we reached a significant strategic milestone with the completion of our store footprint optimization program. Approximately 75% of our store footprint is now concentrated in markets where we hold the No. 1 or No. 2 position based on store density. We have also embarked on an ambitious new phase of store expansion aimed at further strengthening our presence in these regions to capture share in the more than $150 billion total addressable market.”
— Shane O’Kelly, President and Chief Executive Officer
This shift is expected to enhance resource efficiency and support future same-store sales growth.
Accelerated Rollout of Data-Driven Merchandising and Supply Chain Automation
In the quarter, which ended April 19, the introduction of a new assortment framework led to a 200-basis point sequential improvement in the store availability key performance indicator (KPI), and is expected to cover the 50 largest markets by the end of fiscal 2025; under the previous 12-month to 18 -month timeline, management did not expect to hit that goal until some time in fiscal 2026. Meanwhile, market hubs, averaging 75,000 to 85,000 SKUs, have delivered a 100-basis-point uplift to comparable sales within serviced regions, and supply chain consolidation from 38 distribution centers down to 12 is set to be completed by the end of 2026.
“We plan to complete the rollout in the top 50 DMAs by the end of 2025 with 30 of the 50 markets expected to be live by August. This is faster than our prior 12- to 18-month timeline, which stretched into 2026 … Notably, this KPI improved by approximately 200 basis points sequentially and compares to the low 90% range recorded last year.”
— Shane O’Kelly, President and Chief Executive Officer
Automation and targeted inventory will uplift service levels for both the professional and DIY segments, supporting high-frequency transactions and increasing the probability of share gains in targeted, higher-density markets.
Pro Channel Outperformance and Operational Focus as Growth Engine
The pro (“do-it-for-me” or DIFM) business saw low single-digit percentage growth with 8 consecutive weeks of positive comp sales, outperforming the DIY channel, which continues to decline, a trend expected to persist throughout the year. The company reduced delivery times by approximately 10 minutes year over year and improved transaction-based metrics in the pro channel through revamped compensation and training, aiming to capture greater wallet share from large-scale installer accounts.
“For the quarter, pro grew in the low single-digit range, including 8 consecutive weeks of positive comparable sales growth in the U.S. This positive momentum in pro has continued during the first 4 weeks of Q2, driven by our focus on providing exceptional customer service.”
— Shane O’Kelly, President and Chief Executive Officer
The continuing strength and operational improvements in the pro segment provide both resilience against consumer volatility and a tangible lever for margin recovery as DIY remains pressured by macroeconomic headwinds.
Looking Ahead
Management reaffirmed its fiscal-year guidance, projecting net sales of $8.4 billion to $8.6 billion and an adjusted operating income margin of 2% to 3%, with sequential margin improvements anticipated from Q2 onward. Comparable sales are forecast to grow by 50 to 150 basis points, with the pro channel as the primary driver. DIY sales are expected to remain soft under ongoing inflationary pressures. Adjusted diluted EPS is guided to $1.50–$2.50, with negative free cash flow between $85 million and $25 million, reflecting ongoing investments in store and supply chain optimization, and $150 million in cash expenses factored into the guidance.
Where to invest $1,000 right now
When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 962%* — a market-crushing outperformance compared to 169% for the S&P 500.
They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor.
*Stock Advisor returns as of May 19, 2025
This article was created using Large Language Models (LLMs) based on The Motley Fool’s insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.