Advance Auto Parts Reports Second Quarter Results

Advance Auto Parts, Inc. (NYSE:AAP), a leading retailer of automotive aftermarket parts, accessories, batteries, and maintenance items, today announced its financial results for the fiscal second quarter ended July 14, 2007.

Earnings per diluted share for the second quarter were $0.64, compared to $0.59 last year, an 8.5% increase. In the second quarter, sales increased to $1.17 billion from $1.11 billion last year.Comparable-store sales increased 1.3% in the quarter, comprised of a 0.1% decrease in do-it-yourself (DIY) and a 5.8% increase in do-it-for-me (DIFM). The 1.3% comparable-store sales increase compares to a 1.2% increase in last year’s second quarter.

“For the second quarter, our comp store sales increase was at the lower end of our low single digit guidance range, which was consistent with our sales trend in the first quarter,” said Jack Brouillard, Chairman, President and CEO. “Our earnings per share of $0.64 came in slightly below our $0.65 to $0.69 guidance."

Second quarter gross margin was 48.1% of sales, a 51 basis point improvement compared to last year’s quarter, primarily reflecting improved procurement and logistics costs.

Second quarter selling, general and administrative (SG&A) expenses were 38.0% of sales, compared to 37.6% in second quarter 2006, a 41 basis point increase. This increase was primarily due to a 50 basis point loss of leverage on rent, depreciation and other fixed costs from modest comparable-store sales.

Year to date sales increased to $2.64 billion from $2.50 billion last year. Year to date comparable-store sales increased 1.2% comprised of a 0.1% decrease in do-it-yourself (DIY) and a 5.4% increase in do-it-for-me (DIFM). The year to date 1.2% comparable-store sales increase compares to a 2.7% increase last year. Year to date earnings per diluted share were $1.35, compared to $1.27 last year.

Year to date gross margin was 48.2% of sales, a 55 basis point improvement compared to last year.

Year to date selling, general and administrative (SG&A) expenses were 38.7% of sales, compared to 38.2% in 2006, a 44 basis point increase.This increase was primarily due to a 60 basis point loss of leverage on rent, depreciation and other fixed costs from modest comparable-store sales.

Store Information

During the second quarter, the Company opened 43 new stores, of which 5 were Autopart International (AI) stores. The Company also relocated 11 existing stores, remodeled 27 stores, and closed 6 stores.

Year to date, the Company has opened 113 new stores, of which 13 were AI stores. The Company has also relocated 19 existing stores, remodeled 61 stores, and closed 8 stores.

Strategy Review Update

The recent business strategy review and related customer research identified a number of key strategies that the Company needed to pursue to drive comp store sales growth, reduce its expense structure, and improve return on invested capital.

To better tailor merchandise offerings to targeted customer segments, the Company has undertaken an initiative to improve parts availability in its stores. The Company expects to increase both DIY and DIFM sales with this initiative. The Company believes it can fund a portion of this initiative with tighter management of its existing inventory.Most of the increase in parts availability is expected to be in stores by year end.

The Company is placing a renewed focus on commercial sales growth with a series of initiatives to take greater advantage of the potential of the large and growing commercial market. These initiatives will be discussed in more detail as they are implemented. All aspects of the commercial program are being reviewed including store staffing and compensation, truck utilization, and merchandising programs.

To better align the Company’s cost structure with the customer segments it is pursuing and increase the return on these investments, the Company announced initiatives that will reduce certain expenses by over $20 million in the second half of 2007 and over $50 million in 2008, and reduce capital expenditures by over $20 million in the second half of 2007 and over $65 million in 2008. These initiatives include:

• Staffing at the store support center and in the field organization has been reduced by 250 positions.
• New store openings will be reduced to 190 to 200 stores for 2007 from the previous guidance of 200 to 210 stores, and to 140 to 150 stores for 2008.
• Store relocations will be reduced to 20 stores in 2008 from 35 in 2007.
• The 2010 store remodel program has been halted and will be reevaluated.
• The Advance TV network in the stores has been discontinued.
• Certain advertising expenditures have been eliminated and other marketing and advertising expenses are being reevaluated.
• All capital expenditure plans in logistics, IT, and other support areas have been evaluated and those investments with inadequate return have been eliminated.

Mr. Brouillard stated, “Over the past three months our team has made significant progress in taking the initial steps to position us to implement the findings from our strategy review and to strengthen our business going forward. Many of the decisions that have been made are difficult and are only the beginning as we take steps to drive our sales and reduce our expenses to more appropriate levels. We appreciate the contributions of the team members who will be leaving our company and we will assist them as they transition to the next phases of their careers.”

2007 Guidance

The Company is providing earnings guidance based on comparable-store sales of (2%) to flat for the third quarter and flat to 2% for the fourth quarter. Quarter-to-date sales results are running within that range. The Company is basing its sales guidance on an expectation that a challenging macroeconomic environment will likely continue for the remainder of the year and that the Company’s sales building initiatives will positively impact sales only to a limited degree in second half 2007 because of their implementation timeframe.

The Company forecasts third quarter 2007 earnings per diluted share in the range of $0.53 to $0.57, which compares to $0.56 in last year’s third quarter. Included in this guidance is $0.04 per diluted share in severance expense and asset write-offs associated with the Company’s expense reduction initiatives. The Company expects full year 2007 earnings per diluted share to be in the range of $2.24 to $2.32, including the previously referenced $0.04 per share.

Capital expenditures are now anticipated to be approximately $230 to $240 million in 2007 as compared to the Company’s prior guidance of $250 to $270 million.

Free cash flow is expected to be $150 to $170 million in 2007 as compared to prior guidance of $125 to $145 million. Free cash flow is expected to grow more than 80% over $83.2 million of free cash flow in 2006.

Share Repurchase Authorization

The Company’s Board of Directors today authorized a $500 million share repurchase program. This new authorization replaces the Company’s $300 million share repurchase program authorized in August 2005, which had been nearly completed. Under the $300 million share repurchase authorization, the Company repurchased 6.2 million shares at an average price of $37.37 per share.

Dividend

The Company’s Board of Directors also today declared a regular quarterly cash dividend of six cents per share to be paid on October 5, 2007 to stockholders of record as of September 21, 2007.

Investor Conference Call

The Company will host a conference call on Thursday August 9, at 8:00 a.m. Eastern Standard Time to discuss its quarterly results. To listen to the live call, please log on to the Company’s Web site, www.AdvanceAutoParts.com, or dial (866) 908-1AAP. The call will be archived on the Company’s Web site until August 9, 2008.

About Advance Auto Parts

Headquartered in Roanoke, Va., Advance Auto Parts is the second-largest retailer of automotive aftermarket parts, accessories, batteries, and maintenance items in the United States, based on store count and sales. As of July 14, 2007, the Company operated 3,187 stores in 40 states, Puerto Rico, and the Virgin Islands. The Company serves both the do-it-yourself and professional installer markets.

Certain statements contained in this release are forward-looking statements, as that statement is used in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address future events or developments, and typically use words such as believe, anticipate, expect, intend, plan, forecast, outlook or estimate. These statements discuss, among other things, expected growth and future performance, including store growth, comparable-store sales, gross margin and SG&A rates, and earnings per share for third quarter 2007 and fiscal year 2007. These forward-looking statements are subject to risks, uncertainties and assumptions including, but not limited to, competitive pressures, demand for the Company’s products, the market for auto parts, the economy in general, inflation, consumer debt levels, the weather, acts of terrorism, availability of suitable real estate, dependence on foreign suppliers and other factors disclosed in the Company’s 10-K for the fiscal year ended December 30, 2006, on file with the Securities and Exchange Commission. Actual results may differ materially from anticipated results described in these forward-looking statements. The Company intends these forward-looking statements to speak only as of the time of this news release and does not undertake to update or revise them, as more information becomes available.

-Financial Tables to Follow-

NOTE: These preliminary condensed consolidated balance sheets have been prepared on a basis consistent with our previously prepared balance sheets filed with the Securities and Exchange Commission for our prior quarter and annual reports, but do not include the footnotes required by generally accepted accounting principles for complete financial statements.

( a ) Average common shares outstanding is calculated based on the weighted average number of shares outstanding for the quarter. At July 14, 2007 and July 15, 2006, we had 106,962 and 105,005 shares outstanding, respectively.

NOTE: These preliminary condensed consolidated statements of operations have been prepared on a basis consistent with our previously prepared statements of operations filed with the Securities and Exchange Commission for our prior quarter and annual reports , but do not include the footnotes required by generally accepted accounting principles for complete financial statements.

( a ) Average common shares outstanding is calculated based on the weighted average number of shares outstanding for the year. At July 14, 2007 and July 15, 2006, we had 106,962 and 105,005 shares outstanding, respectively.

NOTE: These preliminary condensed consolidated statements of operations have been prepared on a basis consistent with our previously prepared statements of operations filed with the Securities and Exchange Commission for our prior quarter and annual reports , but do not include the footnotes required by generally accepted accounting principles for complete financial statements.

NOTE: These preliminary condensed consolidated statements of cash flows have been prepared on a consistent basis with previously prepared statements of cash flows filed with the Securities and Exchange Commission for our prior quarter and annual reports, but do not include the footnotes required by generally accepted accounting principles for complete financial statements.

Note: Management uses free cash flow as a measure of our liquidity and believes it is a useful indicator to stockholders of our ability to implement our growth strategies and service our debt. Free cash flow is a non-GAAP measure and should be considered in addition to, but not as a substitute for, information contained in our condensed consolidated statement of cash flows.

Contacts:

Advance Auto Parts, Inc.
Shelly Whitaker, APR, 540-561-8452
Fax: 540-561-6445
Shelly.whitaker@advanceautoparts.com