Advance Auto Parts, Inc. has reported a decline in comparable-store sales for the fourth quarter and fiscal year ended Dec. 29, 2007. The decrease was caused by a downturn in do-it-yourself sales and an increase in do-it-for-me sales, which also happened during the fourth quarter of 2006. This left the company with flat sales, a result of higher selling margins that were offset by higher shrinkage expense. "The fourth quarter and fiscal year 2007 came up short of our financial expectations," says Darren Jackson, the company's president and chief executive officer. "That being said, we made significant progress in building the strategic roadmap to become a more customer-driven company." Fourth quarter selling, general and administrative (SG&A) expenses were 41.0 percent of sales compared to 40.8 percent last year, an increase of 24 basis points due to lower than anticipated sales and higher related occupancy expenses. The company reported quarterly interest expense of $8.2 million in the quarter compared to $7.8 million last year. During the fourth quarter, two million Advance shares or 2 percent of the outstanding shares were repurchased for $75 million at an average price of $37.10. Fourth quarter earnings per diluted share were $0.35 compared to $0.33 in the same quarter last year. For the year, total revenue increased to $4.8 billion from $4.6 billion last year. The total year comparable-store sales increase of 0.8 percent, comprised of a 1.0 percent decrease in DIY sales and a 6.7 percent increase in DIFM sales, compares to a 2.1 percent increase last year. For the year, gross margin was 47.9 percent of sales, a 23 basis-point improvement from last year. SG&A expenses were 39.3 percent of sales as compared to 39.0 percent in 2006. Total year earnings per diluted share were $2.28, compared to $2.16 last year, an increase of 5.6 percent. The company repurchased 8.3 million shares or 8 percent of its outstanding shares during fiscal year 2007 at an aggregate cost of $286 million, or $34.27 per share. Since the end of 2007, the company has repurchased another 4.6 million shares at an average price of $34.04 for a total expenditure of $155 million. Total sales growth decreased compared to the prior fourth quarter and year due to lower comparable store sales and fewer new stores. Lower comparable store sales for the fourth quarter resulted from a significant deceleration in DIY sales during the holiday season. The Florida and Gulf Coast sales results continued to be difficult. DIY accessories and motor oil sales experienced the largest declines in the quarter. DIFM sales remained consistently strong through the fourth quarter as a result of the renewed focus on this business and the initiatives that are driving greater parts availability. All regions experienced solid DIFM growth in the quarter ranging from 5 percent to 11 percent. Parts and chemicals experienced the largest gains in the quarter. The combined lower comparable store sales resulted in sales per square foot being relatively flat. SG&A expenses per store declined modestly in the quarter and for the year. The SG&A reductions offset higher inflation costs. Overall inventory investment per store declined slightly for the year as increased parts availability was offset by the removal of less productive inventory. "Our strategic initiatives are beginning to take hold," says Elwyn Murray, the company's executive vice president and customer development officer."Our parts availability commercial trends are solid despite a tough economic environment." The guidance for 2008 fiscal year is based on the prevailing economic environment where the company believes it is prudent to forecast comparable store sales to be flat until company trends demonstrate consistent and sustainable improvement. Operating income, as a percentage of sales, is expected to be approximately flat compared to 2007. Gross margin is expected to improve modestly from continued lower costs and leverage of the logistics network. The SG&A rate will modestly increase from higher occupancy and other fixed costs. The SG&A rate would be expected to leverage were the company to achieve 1 percent comparable store sales. With these assumptions, earnings per diluted share are anticipated to be approximately $2.55 in 2008 compared to $2.28 in 2007, or an increase of 12 percent. It is anticipated that a 1 percent improvement in comparable store sales versus guidance would add approximately $0.10 to earnings per diluted share. A 10 basis point improvement in operating margin rate would be expected to add approximately $0.03 earnings per diluted share. Fiscal year 2008 includes 53 weeks and guidance is for that period. The 53rd week is anticipated to have an approximate $0.10 positive impact on 2008 earnings per diluted share results. "Our 2008 fiscal year guidance reflects our actual trends and the economic uncertainty which we believe is prudent," said Mike Norona, the company's executive vice president and chief financial officer. "However, we are focused on achieving higher levels of sales and earnings growth based on our strategic priorities." For more information about Advance Auto Parts, Inc., visit the company's Web site. | 
