Advance Auto Parts Inc. (NYSE:AAP) Q3 2017 Earnings Conference Call Transcript
Nov 14, 2017 • 08:00 am ET
Welcome to the Advance Auto Parts Third Quarter 2017 Conference Call. Before we begin, Prabhakar Vaidyanathan will make a brief statement concerning forward-looking statements that will be made on this call.
Good morning, and thank you for joining us on today's call to discuss our third quarter results. I'm joined this morning by Tom Greco, our President and Chief Executive Officer; Tom Okray, our Executive Vice President and Chief Financial Officer; and Bob Cushing, our Executive Vice President of Professional. Following their prepared remarks, we will turn our attention to answering your questions.
(Forward-Looking Cautionary Statements) Additionally, our comments today include certain non-GAAP financial measures. Please refer to our quarterly press release and accompanying financial statements issued today for important information and additional detail regarding both the forward-looking statements and the reconciliation of non-GAAP financial measures referenced in today's call. The content of this earnings call will be governed by the information contained in our earnings press release and related financial statements. Now let me turn the call over to Tom Greco.
Thomas R. Greco
Thanks, Prabhakar, and good morning, everyone. In the third quarter, our total revenue growth was down 3% and comp sales were negative 3.4%. Our adjusted operating income margin rate was 7.9%, and our adjusted earnings per share was $1.43. Overall, we remain focused on accelerating growth, expanding margins and driving operating cash flow improvement over the long term. In Q3, we made important changes in the organization, which set us up to achieve these goals. Additionally, we made progress on key initiatives that benefited cost control. Finally, we sustained growth in operating cash flow, primarily driven by our inventory optimization efforts.
Let me provide some context on our sales results. As we've outlined previously, 2017 has been a challenging year for the industry. This year, all major players have experienced a slowdown in sales performance on a one and two-year stock basis. We discussed the key drivers of industry softness in detail on our second quarter call, and they've been widely written about. From our vantage point, the second half of 2017 is playing out as expected. While overall the industry growth continued to be below historical levels in Q3, there were businesses and regions at AAP, which performed very well in Q3. On a positive note, our Worldpac business continues to deliver strong growth rates, well above the industry average. Worldpac's value proposition of strong brands and integrated supply chain, best-in-class technology and parts availability continues to be a winning formula, a formula we intend to leverage going forward.
In addition, our independent Carquest business grew throughout the country. Our Canada Carquest business also performed extremely well, with sales growth in high single digits for Q3. In our US-based Advance- and Carquest-owned stores, we had a challenging Q3. This was in part due to the temporary impact of necessary transformation actions we implemented to set the company up for long-term success. It's important to note that these actions were taken only in US Advance and Carquest-owned stores, where