QUOTE AND NEWS
Benzinga  Aug 19  Comment 
Advance Auto Parts, Inc. (NYSE: AAP), the largest automotive aftermarket parts provider in North America, serving both do-it-yourself and professional installer customers, today announced that John F. Ferraro, who currently serves as Global Chief...
SeekingAlpha  Aug 18  Comment 
By The Value Investor: Advance Auto Parts (AAP) posted solid results this week as the company continues to make progress on the integration of General Parts in order to deliver on promised cost synergies going forwards. This deal, and the great...
Benzinga  Aug 15  Comment 
In a report published Friday, Credit Suisse analyst Gary Balter reiterated an Outperform rating on Advance Auto Parts (NYSE: AAP), and raised the price target from $150.00 to $160.00. In the report, Credit Suisse noted, “Merger economics are...
TheStreet.com  Aug 15  Comment 
NEW YORK (TheStreet) -- Nomura increased its price target on Advance Auto Parts  to $135, increased its estimates and set a "neutral" rating given the company's new guidance. The stock closed at $131.59 on Thursday. Must Read: 3D Printing...
Benzinga  Aug 14  Comment 
Shares of Advance Auto Parts (NYSE: AAP) rose 2.9% in pre-market trading after the company reported upbeat second-quarter results and lifted its profit forecast for the full year. The Roanoke, Virginia-based company posted a quarterly profit of...
newratings.com  Aug 14  Comment 
WASHINGTON (dpa-AFX) - Advance Auto Parts, Inc. (AAP) posted higher second-quarter 2014 reported net income of $139.49 million, or $1.89 per share, versus the previous year's $116.87 million, or $1.59 per share. Excluding items, comparable...
Forbes  Aug 12  Comment 
Optimism surrounds Advance Auto Parts, as it gets ready to report its second quarter results on Thursday, August 14, 2014. Analysts are expecting the company to book a profit of $2.01 a share, up from $1.59 a year ago.For the fiscal year, analysts...
Market Intelligence Center  Aug 5  Comment 
Advance Auto Parts Inc. (AAP) is an excellent choice for either a diagonal spread or a covered call expiring in Dec. '14 at the $120.00 level according to MarketIntelligenceCenter.com’s patented algorithms.A covered call on Advance Auto Parts...
SeekingAlpha  Jul 31  Comment 
By The Kitchen Sink: Introduction We are looking at Advance Auto Parts (NYSE:AAP) because of the company's consistent growth recently and what is stands to benefit from a growing economy. We believe current valuation metrics do not reflect...
Benzinga  Jul 9  Comment 
Advance Auto Parts, Inc. (NYSE: AAP), the largest automotive aftermarket parts provider in North America, serving both the do-it-yourself and professional installer markets, today announced the appointment of David Allen as Senior Vice President,...




 

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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