Advancing Ahead: Advanced Surpasses Q1 Expectations with Strong Growth and Profitability
Advanced reported a stellar first quarter for 2025, surpassing expectations with impressive growth and profitability. CEO Shane O'Kelly expressed his gratitude to the team for delivering better-than-expected results, citing a challenging start to the year for the industry that was offset by a rebound in demand led by their Pro business.
The company saw its Pro segment grow in the low single-digit range during Q1, with 8 consecutive weeks of positive comparable sales growth in the US. This momentum has continued into the second quarter, driven by Advanced's focus on providing exceptional customer service. In addition to this top-line success, Advanced also reported stronger profitability, achieving near breakeven adjusted operating margins and setting the stage for positive operating margins starting in Q2.
Advanced reaffirmed its full-year 2025 guidance, which takes into account the impacts of tariffs currently in effect as well as planned mitigation strategies. The company believes that its participation in a disciplined industry, combined with an aging and growing vehicle fleet in the US and the relatively nondiscretionary nature of auto part spending, positions it favorably to navigate through volatile times.
In March, Advanced completed a significant strategic milestone with the completion of its store footprint optimization program. Approximately 75% of its store footprint is now concentrated in markets where the company holds the #1 or #2 position based on store density. The next phase of store expansion aims to further strengthen presence in these regions and capture share in the over $150 billion total addressable market.
Over the next three years, Advanced plans to open more than 100 new stores, with a plan to accelerate growth even further in the future. To drive improvements in operational performance, the company is implementing initiatives across strategic pillars of merchandising, supply chain, and stores. These efforts aim to strengthen operational capabilities while building a robust foundation for sustainable, long-term profitable growth and enhanced value for shareholders.
One such initiative is the expansion of parts availability and securing quality products at competitive costs through merchandising. Advanced piloted a new assortment framework in a single designated market area (DMA) last quarter, leading to an estimated uplift of nearly 50 basis points in comparable sales growth within those DMAs after expanding the framework to 10 additional DMAs.
The company is observing increased sales in categories where additional SKUs have been introduced while maintaining relatively stable sales in categories with reduced SKUs. This positive momentum and strategic focus position Advanced well for continued success in the face of industry volatility.
