Advance Auto Reports Sales Growth, Important Acquisition In Q3'12
By Anna Rose Welch, Editorial & Community Director, Advancing RNA
Company’s latest acquisition of General Parts International to bring in $9.2 billion in annual sales
Advance Auto released the results of its third quarter ended October 5, 2013. Once again, the company’s performance exceeded its executives’ expectations, with sales increasing 4.3 percent to $1.52 billion, compared to $1.46 billion in Q3’12, and operating income increasing 13.5 percent. Similarly, the growth profit rate reached 50.2 percent, a 42 basis-point increase because of lower acquisition costs in response to increased supply chain costs. Total sales growth is being attributed to the acquisition of BWP Distributors, and the net addition of 170 new stores over the past year.
The company doesn’t plan to stop here, however. The acquisition of BWP, which was announced in December 2012, led Advance Auto to operate 124 company-owned BWP stores and two distribution centers in Massachusetts and New Jersey. This acquisition set Advance Auto up to continue growing in the Northeast region, CEO and president, Darren Jackson, said.
In addition, the company announced mid-October that it plans to acquire General Parts International for roughly $2 billion. General Parts is the owner of Carquest and Worldpac, two of the largest automotive retail parts suppliers in North America, which boasted sales of $2.9 billion in the last year. The acquisition of General Parts will strengthen the company’s presence coast-to-coast in North America, where parts sales have declined due to a larger number of Americans buying new cars.
Of this acquisition, Credit Suisse analyst, Simeon Gutman, says: “We view Advance Auto’s decision as a smart strategic acquisition that vaults the company into a much stronger position in the faster growing and more attractive do-it-for-me segment and gives them a crown jewel in Worldpac.”
For one, this move is important for the company’s overall goal of expanding and improving its presence in the commercial repair industry. CEO Jackson estimates that commercial sales will jump to 55 percent of total revenue from 35 percent after the General Parts deal. This increase is also expected because of the rising numbers of young car-owners and because of advancements in the auto industry. Stifel Nicolaus analyst, David Schick, says, “We continue to expect industry sales to commercial customers will outpace do-it-yourself (DIY) long term as cars get more complicated, baby boomers age, and younger demographics are less involved with DIY repairs.”
Beyond capturing more commercial sales, however, this acquisition has created a more competitive company: one that will earn $9.2 billion in annual sales and will save around $160 million annually within three years of the deal’s close. In fact, with this merger completed, the company looks to have a higher total of annual sales than its current biggest competitor, AutoZone, which announced adjusted sales of about $9 billion for the year ended August 31. This deal is expected to close late 2013 or early 2014.