Advance Auto Parts Inc.AAP

Morningstar Rating

Stock Research and Analysis

by Zoe Tan

With more than 3,400 stores, Advance Auto is the second-largest automotive retailer in the United States. While industry leader AutoZone AZO (4,000 stores) dominates the automotive retail market, we believe Advance has gained significant ground in the Read more

Bulls Say

Advance Auto has the second-largest store network among the auto-parts retailers, which gives it a scale advantage in buying power and leveraging fixed costs. The company should be able to use its growing network of stores to build capabilities catering to professional installers.

With the average age of cars on the road at 9.5 years and rising, the $200 billion automotive aftermarket should benefit from increased demand. Sluggish new-car sales amid the uncertain economic climate also bode well for this trend.

Despite cyclical swings in the aftermarket industry, demand for automotive parts has proved to be relatively stable over the long haul as it is driven primarily by necessary maintenance, rather than discretionary purchases. Read more

Bears Say

Technological improvements have extended the quality and useful life of automotive parts, resulting in less frequent replacement and maintenance.

Higher energy costs, food inflation, tighter credit, and a slumping housing market have weighed on consumer spending, which could result in further deferrals of vehicle maintenance in the near term.

Advance Auto still trails behind industry leader AutoZone in store productivity. The firm delivered $211 in sales per square foot in 2008, compared with $239 for AutoZone. Read more

Strategy

Advance Auto plans to boost sales to professional installers as growth in its retail business moderates. To effectively compete in the commercial segment of the auto-parts aftermarket, the company is Read more

Management

Darren Jackson, a director since 2004, assumed the role of CEO in January 2008. Prior to Advance Auto, Jackson served as Best Buy's BBY CFO for seven years. Advance Auto's chairman John Brouillard was also a member of the board since 2004 and was subsequently Read more

Profile

Advance Auto Parts is the second-largest specialty retailer of automotive parts and accessories to do-it-yourself customers and professional installers. The company operates Read more

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