AZO - Why Shares in Advance Auto Parts Slumped in September
2023-10-03 10:35:13 ET
Shares in auto parts retailer Advance Auto Parts (NYSE: AAP) fell 18.7% in September, according to data provided by S&P Global Market Intelligence . There are two reasons for the fall. First, in September, S & P Global Ratings cut the company's debt rating to "junk" status. Second, one of its major rivals, AutoZone (NYSE: AZO) , gave earnings that could be construed negatively for Advance Auto Parts.
The credit rating downgrade included criticism of Advance's "misguided" approach of holding pricing to maintain profit margin. It's an action seen as leading to market share erosion and, ultimately, weak sales growth. In addition, it didn't do much for Advance's consistently poor margin performance anyway.
Turning to the connection to AutoZone's earnings, it's somewhat nuanced, so bear with me. Going back to Advance's second-quarter earnings (which ended in mid-July), management lauded the slight improvement in sales it had seen in the last four weeks of the quarter (mid-June to mid-July), which led to low-single-digit year-over-year (YOY) growth in the first four weeks of the third quarter (mid-July to mid-August).
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Why Shares in Advance Auto Parts Slumped in September