Advance Auto Parts’ fourth-quarter net income dropped 30 percent on an inventory write-down, but strong commercial sales and an extra week helped the company post a double-digit sales increase.
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The company said it intends to aggressively renegotiate rents and move or close stores to improve profitability. Between 40 and 55 unprofitable stores could be closed in 2009.
"We are pleased with our commercial results and encouraged by the improvement in our DIY [Do It Yourself] results during the fourth quarter," said President Jim Wade.
He predicted the company could see double-digit growth in commercial same-store sales in 2009, which would be partially offset by a decrease in the low single digits in DIY same-store sales.
While the recession has put the Detroit auto makers on life support, the market for auto parts has been holding up as cash-strapped Americans patch up their cars rather than shop for new ones.
The second-largest U.S. auto-parts retailer reported net income of $24.4 million, down from $34.8 million a year earlier.
Revenue climbed 14 percent to $1.19 billion, helped by 107 new stores, the extra week and an increase in same-store sales.
Same-store sales rose 3 percent, excluding the extra week, with sales to do-it- yourself customers down 1.1 percent but sales to commercial repair shops climbing 14 percent.
Gross margin fell to 45.4 percent from 47.1 percent on the inventory write-down. Without the extra week, gross margin would have been 48.5 percent.
The company noted that the write-down is related to a change in inventory management that is expected to increase inventory turns, sales and margins.
During the fourth quarter, Advance opened 26 stores, closed 10 and moved two. As of Jan. 3, the total store count was 3,368.
