Auto and industrial parts retailer Genuine Parts (NYSE:GPC) fell short of analysts' expectations in Q3 FY2023, with revenue up 2.63% year on year to $5.82 billion. Turning to EPS, Genuine Parts made a non-GAAP profit of $2.49 per share, improving from its profit of $2.23 per share in the same quarter last year.

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"Our third quarter performance was highlighted by double digit earnings growth, driven by benefits from the mix and geographic diversity of our businesses as well continued progress on our strategic initiatives," said Paul Donahue, Chairman and Chief Executive Officer.

Largely targeting the professional customer, Genuine Parts (NYSE:GPC) sells auto and industrial parts such as batteries, belts, bearings, and machine fluids.

Auto Parts Retailer

Cars are complex machines that need maintenance and occasional repairs, and auto parts retailers cater to the professional mechanic as well as the do-it-yourself (DIY) fixer. Work on cars may entail replacing fluids, parts, or accessories, and these stores have the parts and accessories or these jobs. While e-commerce competition presents a risk, these stores have a leg up due to the combination of broad and deep selection as well as expertise provided by sales associates. Another change on the horizon could be the increasing penetration of electric vehicles.

Sales Growth

Genuine Parts is one of the larger companies in the consumer retail industry and benefits from economies of scale, enabling it to gain more leverage on fixed costs and offer consumers lower prices.

As you can see below, the company's annualized revenue growth rate of 6.58% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was mediocre.

This quarter, Genuine Parts grew its revenue by 2.63% year on year, falling short of Wall Street's estimates. Looking ahead, the analysts covering the company expect sales to grow 5% over the next 12 months.

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Same-Store Sales

Same-store sales growth is a key performance indicator used to measure organic growth and demand for retailers.

Genuine Parts's demand within its existing stores has generally risen over the last two years but lagged behind the broader consumer retail sector. On average, the company's same-store sales have grown by 9.13% year on year. Given its flat store count over the same period, this performance stems from increased foot traffic at existing stores or higher e-commerce sales as the company shifts demand from in-store to online.

In the latest quarter, Genuine Parts's year on year same-store sales growth was flat, or 0.5%. By the company's standards, this growth was a meaningful deceleration from the 12.7% year-on-year increase it posted 12 months ago. One quarter fluctuations aren't material for the long-term prospects of a business, but we'll watch Genuine Parts closely to see if it can reaccelerate growth.

Key Takeaways from Genuine Parts's Q3 Results

With a market capitalization of $20.9 billion, a $654.6 million cash balance, and positive free cash flow over the last 12 months, we're confident that Genuine Parts has the resources needed to pursue a high-growth business strategy.

Revenue missed, driven by a same store sales miss. Additionally, gross margin missed analysts' expectations. On the other hand, EPS exceeded expectations. As for full year guidance, it was largely kept the same as the previous outlook. Overall, this was a mixed quarter for Genuine Parts. The company is down 3.25% on the results and currently trades at $143.87 per share.

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The author has no position in any of the stocks mentioned in this report.