Advance Auto Parts Inc. ( AAP ) is facing a scorching sell-off, with shares plummeting in premarket trading, as a disappointing second-quarter earnings miss, a slashed FY24 outlook, and the announcement of its $1.5 billion Worldpac sale shake investor confidence.

The company reported earnings per share of 75 cents, missing the street view of $1.07. Quarterly sales of $2.683 billion beat the street view of $2.679 billion.

Revenues remained flat, while comparable store sales increased 0.4%. The company’s gross profit decreased by 2.3%, totaling $1.1 billion. The gross profit margin declined to 41.5% from 42.5% in the previous year’s second quarter. This drop was mainly due to strategic pricing investments and increased product costs.

Also Read: Advance Auto Parts Probes Potential Cyber Incident Linked To Snowflake

The company’s operating income was $71.8 million, or 2.7% of net sales, compared with 4.7% in the second quarter of 2023.

On August 7, 2024, the company declared a regular cash dividend of $0.25 per share. This dividend will be paid on October 25 to all common stockholders of record as of October 11.

The company exited the quarter with cash and equivalents worth $479.418 million. Inventories, net totaled $4.903 billion at quarter-end. The company’s long-term debt at the quarter end stood at $1.787 billion.

Sale Of Worldpac: In a separate press release, the company has confirmed a definitive agreement to sell Worldpac, Inc., its automotive parts wholesale distribution business, to funds managed by global investment firm The Carlyle Group Inc. ( CG ) for $1.5 billion in cash.

The transaction is anticipated to be finalized by the end of the year. As of the end of the second quarter of 2024, the Worldpac business generated around $2.1 billion in revenue and approximately $100 million in EBITDA over the past twelve months. Advance Auto Parts ( AAP ) anticipates net proceeds of about $1.2 billion after accounting for taxes and transaction fees.

Outlook Lowered: Advance Auto Parts ( AAP ) has revised its FY24 outlook, lowering its earnings per share forecast to $2.00 – $2.50 from the previous range of $3.75 – $4.25, which contrasts with the $3.63 estimate.

Additionally, the company adjusted its sales projection to $11.15 billion – $11.25 billion, down from $11.30 billion – $11.50 billion, versus the $11.30 billion estimate.

Price Action: AAP shares are trading lower by 11.2% to $54.99 premarket at last check Thursday.

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