Advance Auto Parts today announced its financial results for the fourth quarter ended December 31, 2016. Fourth quarter GAAP earnings per diluted share (diluted EPS) were $0.84. Fourth quarter adjusted earnings per diluted share (adjusted EPS) were $1, which exclude $0.08 of amortization of acquired intangible assets and integration and restructuring costs of $0.08 primarily associated with the acquisition of General Parts International, Inc. (General Parts).
“We are pleased with the sequential improvement in our sales performance and positive comparable sales for the quarter. Our top line progress is a direct reflection of sustained investment in the customer. Our stronger sales execution and improved availability enabled us to serve our customers better,” said Tom Greco, President and Chief Executive Officer.
“Our bottom line in the quarter reflects a planned inventory reduction along with sustained investments in the customer to accelerate top line growth. Our first priority is to deliver an outstanding experience for our customers and deliver consistent top line performance. We fully expect to balance our top and bottom line performance over time as we offset investments with a robust productivity agenda,” Greco said.
Fourth quarter and full year 2016 highlights
Total sales for the fourth quarter increased 2.4% to $2.08 billion, as compared with total sales during the fourth quarter of fiscal 2015 of $2.03 billion. The sales increase was driven by the comparable store sales growth of 3.1%, inclusive of the positive impact of the year-over-year comparable benefit from holiday timing and new store and Worldpac branch openings partially offset by the store closures and Carquest store consolidations. Total sales for fiscal 2016 were $9.57 billion compared to fiscal 2015 of $9.74 billion.
The company's gross profit rate was 43.6% of sales during the fourth quarter as compared to 44.7% during the fourth quarter last year. The 114 basis-point decrease was primarily driven by previously capitalized supply chain costs flowing through the income statement and reducing gross profit as a result of the planned reduction of inventory levels. The company's gross profit rate was 44.5% of sales for fiscal 2016 as compared to 45.4% for fiscal 2015.
On a GAAP basis, the company's SG&A rate was 38.5% of sales during the fourth quarter as compared to 39.8% during the same period last year. The 128 basis-point decrease was primarily due to lower integration and restructuring related costs during the fourth quarter compared to last year. Excluding this impact, the company's adjusted SG&A rate was 37.5% of sales during the fourth quarter as compared to 37.0% during the same period last year. The 58 basis-point increase in adjusted SG&A was primarily driven by ongoing customer focused investments. On a GAAP basis, the company's SG&A rate was 36.3% of sales for fiscal 2016 as compared to 36.9% during the same period last year. The company's adjusted SG&A rate was 35.1% of sales during fiscal 2016 as compared to 35.2% during the same period last year.
On a GAAP basis, the company's operating income during the fourth quarter was $106.1 million, an increase of 5.4% versus the fourth quarter of fiscal 2015. On a GAAP basis, the operating income rate was 5.1% during the fourth quarter as compared to 5.0% during the fourth quarter of fiscal 2015. The company's adjusted operating income was $125.6 million during the fourth quarter, a decrease of 20.3% versus the fourth quarter of fiscal 2015. As a percentage of sales, adjusted operating income in the fourth quarter was 6.0% versus 7.7% during the fourth quarter of fiscal 2015. For fiscal 2016, the company's GAAP operating income rate was 8.2% versus 8.5% during fiscal 2015. For fiscal 2016, the company's adjusted operating income was 9.4% versus 10.2% during fiscal 2015.
Operating cash flow decreased approximately 27.4% to $500.9 million in fiscal 2016 from $689.6 million in fiscal 2015. Free cash flow was $241.3 million in fiscal 2016 compared to $454.9 million in fiscal 2015. Capital expenditures in fiscal 2016 were $259.6 million as compared to $234.7 million in fiscal 2015.
As of December 31, 2016, the company operated 5,062 stores and 127 Worldpac branches and served approximately 1,250 independently owned Carquest stores.
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