QUOTE AND NEWS
TheStreet.com  May 23  Comment 
Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener. NEW YORK (TheStreet) -- Did you miss last night's "Mad Money" on CNBC? If so, here are Jim Cramer's top takeaways for today's trading. AZO...
Benzinga  May 21  Comment 
Shares of Advance Auto Parts, Inc. (NYSE: AAP) dropped more than 3 percent in pre-market trading after the company reported weaker-than-expected earnings for the first quarter and lowered its earnings forecast for the year. The Roanoke,...
Forbes  May 20  Comment 
Optimism surrounds Advance Auto Parts, as it gets ready to report its first quarter results on Thursday, May 21, 2015. Analysts are expecting the company to book a profit of $2.50 a share, up from $2.25 a year ago.Over the past three months, the...
Benzinga  May 17  Comment 
Last year, Steven Cohen closed his legendary hedge fund SAC Capital, and created a new group of funds called Point72 Asset Management to manage his personal assets, as well as those of certain eligible employees. Same as in the last quarter,...
Market Intelligence Center  Apr 28  Comment 
The patented option-trade picking algorithms that power MarketIntelligenceCenter.com's Artificial Intelligence Center are highlighting two trades on Advance Auto Parts Inc. (AAP) today after it closed at $144.99 on Monday. For more conservative...
Market Intelligence Center  Apr 22  Comment 
After closing Tuesday at $152.40, Advance Auto Parts Inc. (AAP) presents an attractive opportunity to get a 3.66% return in just 58 days, which is an annualized return of 23.05% (for comparison purposes only). To enter this trade, sell one Jun....
Benzinga  Apr 1  Comment 
Cleveland Research commented on Advance Auto Parts, Inc. (NYSE: AAP) Wednesday and said that integration disruptions were becoming a bigger concern. Analysts led by Daryl Boehringer felt that merger-related disruption had lead to a "wider...
Market Intelligence Center  Mar 31  Comment 
Advance Auto Parts Inc. (AAP) was identified by MarketIntelligenceCenter.com’s patented algorithms today after trading between $151.20 and $153.27 on Monday before closing at $152.08. A diagonal spread using a long position in the Jan. '16...




 

Advance Auto Parts (NYSE:AAP) is the second largest US retailer of automotive parts and accessories to do-it-yourself as well as a leader of the do-it-for-me automotive customer segment. Founded in 1929, the company operates 3,420 stores, the vast majority of which are in the United States and which have commercial delivery programs catered toward the independent garages and other commercial customers whose end-user do it for me (DIFM) customers seek maintenance from them.[1] Like most companies in the do it yourself (DIY) segment, AAP targets demographic regions in which they estimate there to exist a large number of old vehicles, given these cars’ propensity for repairs and maintenance.

Operating in a mature and fragmented marketplace, AAP achieved growth in two ways: for its bread-and-butter DIY segment, AAP has opened new stores to fuel growth while the smaller DIFM segment, same store sales grew by double digits. In addition, AAP has been facing pressure in a consolidating auto parts manufacturer industry (related to the woes of the Big Three automakers), which in turn decreases the company's pricing power it enjoys as one of the largest auto parts retailers in the U.S. Finally, in the longer term, the company may see decreased demand in auto parts due to continually rising oil prices, which could decrease the mileage driven by American and thus decrease the demand for car repairs and maintenance.

Company Overview

Business Financials

In 2009, AAP earned a total of $5.41 billion in total revenues, compared to its 2008 total revenues of $5.14 billion. 2009 was AAP's ninth straight year in which revenues have increased. As a result of the increase in revenues, AAP's net income increased as well. Between 2008 and 2009, AAP's net income increased from $238 million in 2008 to $290 million in 2009.[2]

Trends and Risks

The automotive aftermarket for parts has steadily, albeit modestly, increasing demand

In the US, increases in the number and age of vehicles, number of miles driven annually, licensed drivers, and total number of light trucks (which generally require greater upkeep) provide for a relatively steady and growing automotive parts market. The market, however, is mature and unlikely to experience significantly higher rates of growth. Also, increases in the quality of cars may offset the need for secondary purchases of repair equipment and parts.

DIFM is a slowing growth category

The company operates in a domestically mature and fragmented auto parts market, and growth has been respectable, though modest recently and driven almost entirely by new store openings in the DIY category, which accounts for nearly three-fourths of revenue, as opposed to the increase in same store sales driving the DIFM category (one-fourth of revenue).

AAP auto part suppliers have been experiencing a wave of consolidation

Auto part manufacturers, which operate in a generally troubled industry, have been consolidating via mergers or considering consolidation of late.[3] A more concentrated vendor base for auto part retailers, then, limits the number of companies that the firm can purchase inventory from, and may provide suppliers with greater pricing power, putting pressure on AAP’s margins. No supplier, however, represents more than 6% of AAP’s inventory purchases.

Oil Prices continue to rise

As oil prices continue to increase, drivers may begin to purchase newer, more fuel efficient vehicles--including [[hybrid and fuel cell vehicles]--and/or limit their driving mileage. Greater numbers of new car purchases and fewer drivers accumulating heavy mileage mean that consumer demand for repairs and new parts may be hampered, thus diminishing AAP's sales.

Competition and Market Share

The auto-part aftermarket retailer industry is a highly competitive and generally fragmented $118 billion/year market, with an estimated $35 billion represented by the DIY (do-it-yourself) category, $75 billion by the DIFM (do-it-for-me) category, and the rest represented elsewhere. Companies compete on a mix of customer service, product selection, price, and location.

In the DIY segment, AAP competes with other major do-it-yourself retailers, like Advance Auto Parts (AAP) , O'Reilly Automotive (ORLY) , CSK Auto (CAO), Pep Boys-Manny, Moe & Jack (PBY), and AutoZone (AZO). In the DIFM segment, it competes with a highly fragmented base of small, single store mom-and-pop shops, repair destinations, full-service mechanics and other independent automotive destinations that sell parts or repair vehicles.

Footnotes

  1. AAP 10-K 2009 Item 1 Pg. 2
  2. AAP 10-K 2009 Item 6 Pg. 17
  3. AZO Annual Report, “Risk Factors,” pg 12
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