Advance Auto profit rises but margins fall

CHICAGO (Reuters) - Advance Auto Parts Inc (AAP.N), the No. 2 U.S. retail parts chain, reported on Wednesday that quarterly earnings rose on higher sales from previously announced initiatives, but said its margins were down.

Net income increased to $59.0 million, or 57 cents per share, for its third quarter ended October 6, from $58.9 million, or 56 cents per share, a year earlier.

Excluding one-time items, earnings per share amounted to 61 cents. Analysts, on average, expected Roanoke, Virginia-based Advance Auto to report earnings of 58 cents per share, according to Reuters Estimates.

Revenue rose to $1.16 billion from $1.10 billion. Analysts had expected sales of $1.14 billion.

"We are pleased to report that we are on track with the initiatives that we announced at the end of our last quarter," Chief Executive Jack Brouillard said in a statement.

Third-quarter gross margin fell by 28 basis points to 47.9 percent of sales. The company cited a less favorable merchandise mix than in the same quarter in 2006.

Advance Auto Parts said it now expects earnings in the fourth quarter to be in a range of 36 cents to 40 cents per share.

Analysts, on average, were looking for EPS for the current quarter of 38 cents.