Tags: Advance | Auto | parts | AAP

Advance Auto Parts Cashing In as Cars Age

By    |   Tuesday, 13 March 2012 08:32 AM

Advance Auto Parts (AAP) is doing huge business in the automotive aftermarket, cashing in as Americans cars and trucks age. "We believe that 2012 will be another strong year," says Mike Norona, executive vice president and chief financial officer.

The company has forecast diluted earnings per share of between $5.55 and $5.75 this year, which would be an increase from $5.21 last year. Advance also expects to open between 120 and 140 new stores and to achieve a percentage growth rate for comparable-store sales in the "low to mid-single digits."

The Roanoke, Va., retailer had 3,662 stores in 39 states, Puerto Rico and the Virgin Islands at the end of 2011. The company operates mainly in the Northeast, Southeast and Midwest regions of the United States.

Most stock analysts following Advance have hold ratings on the company, although several recommend buying its dividend-yielding shares. The company's board of directors this month declared a regular quarterly cash dividend of 6 cents per share to be paid April 6.

AutoZone (AZO) and O'Reilly Automotive (ORLY) are two of Advance's biggest competitors. AutoZone is a Memphis, Tenn., company that had 4,832 stores as of Nov. 19. O'Reilly Automotive of Springfield, Mo., had 3,707 stores as of Sept. 11.

All three retailers have benefited from the increasing length of ownership of U.S. vehicles. Market research firm R.L. Polk & Co. in Southfield, Mich., this month reported that the average length of ownership of U.S. cars and trucks rose in the third quarter to 71 months for vehicles purchased new and to 50 months for vehicles purchased used, both record highs.

Huge advantage

"The trend toward increased length of ownership has been a huge advantage for major auto parts stores such as AutoZone, O'Reilly Automotive and Advance Auto Parts, whose stock prices have outpaced the S&P 500 Index since late 2007," Polk reported. "The trend of longer length of ownership will likely continue for at least the next few years."

Advance has increased its sales and profitability throughout the recession that began in the United States in 2007 and the slow economic recovery that followed. Net income flattened in 2008 before rising, along with sales, in each of the last three years.

Net income rose to $394 million last year, about 14 percent more than in 2010. Sales grew about 4 percent, year over year, to $6.17 billion in 2011.

Advance Auto will report its first quarter financial results May 17.

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Tuesday, 13 March 2012 08:32 AM
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