Advance Auto Parts (AAP) met its Q1 goals and showed signs of operational improvement, but RBC Capital Markets said more evidence is needed before turning more positive, given the company's long history of challenges.

Key performance indicators are trending in the right direction, RBC said in a note Thursday, and management delivered on its Q1 guidance. However, the investment firm emphasized a wait-and-see stance before recommending the stock.

Advance Auto expects to realize more than 50 basis points of annualized cost savings starting in H2, aided by improved vendor relationships, according to the note.

A merchandising pilot aimed at expanding in-store parts assortments showed about a 50 basis point lift in comparable sales over the first nine weeks across 10 new test markets. The company plans to expand the program to its top 50 markets by year-end.

Management guided to positive operating margins starting in Q2, supported by lower product costs and improved supply chain leverage.

The company shut down about 500 stores in March and is now focused on markets where it holds a leading store presence, according to the note.

RBC said roughly half of the projected $60 million to $80 million in annualized cost savings from store and distribution center closures should begin impacting the P&L in Q2.

The firm maintained its $44 price target with a sector perform rating on Advance Auto Parts.

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