Download PDF

1. Company Snapshot

1.a. Company Description

Advance Auto Parts, Inc.provides automotive replacement parts, accessories, batteries, and maintenance items for domestic and imported cars, vans, sport utility vehicles, and light and heavy duty trucks.The company offers battery accessories; belts and hoses; brakes and brake pads; chassis and climate control parts; clutches and drive shafts; engines and engine parts; exhaust systems and parts; hub assemblies; ignition components and wires; radiators and cooling parts; starters and alternators; and steering and alignment parts.


It also offers air conditioning chemicals and accessories; air fresheners; antifreeze and washer fluids; electrical wires and fuses; electronics; floor mats, seat covers, and interior accessories; hand and specialty tools; lighting products; performance parts; sealants, adhesives and compounds; tire repair accessories; vent shades, mirrors and exterior accessories; washes, waxes and cleaning supplies; and wiper blades.In addition, the company offers air filters; fuel and oil additives; fuel filters; grease and lubricants; motor oils; oil filters, part cleaners and treatments; and transmission fluids for engine maintenance.Further, it offers battery and wiper installation; engine light scanning and checking; electrical system testing; video clinic; oil and battery recycling; and loaner tool program services.


Additionally, the company sells its products through its website.It serves professional installers and do-it-yourself customers.The company operates stores under the Advance Auto Parts, Autopart International, and Carquest brands, as well as branches under the Worldpac name.


As of April 23, 2022, it operated 4,687 stores and 311 branches in the United States, Puerto Rico, the U.S. Virgin Islands, and Canada; and served 1,318 independently owned Carquest branded stores in Mexico, Grand Cayman, the Bahamas, Turks and Caicos, and the British Virgin Islands.The company was founded in 1929 and is based in Raleigh, North Carolina.

Show Full description

1.b. Last Insights on AAP

Advance Auto Parts' recent performance is driven by its successful turnaround efforts, with Q4 margins rebounding sharply due to inventory optimization, cost cuts, and store closures. The company's gross margin expanded 520bps to 44.2% in Q4. AAP's balance sheet is stable with a net leverage of 2.4x, supporting restructuring and a secure 1.7% dividend. The company is pushing for margin recovery plans, store expansion, and supply-chain overhaul. Notably, H Partners recently invested $19 million in AAP, showing confidence in its turnaround. (Source: company reports, analyst upgrades)

1.c. Company Highlights

2. Advance Auto Parts' Q4 Earnings: A Step in the Right Direction

Advance Auto Parts reported Q4 net sales of $2 billion, a 1% decline year-over-year, primarily due to store optimization. However, comparable sales grew 1.1%, driven by operational stability and progress in improving coverage and availability of hard parts. The company's adjusted gross profit was $873 million, or 44.2% of net sales, with nearly 530 basis points of gross margin expansion. Adjusted SG&A was $800 million, or 40.5% of net sales, with nearly 340 basis points leverage. The company's actual EPS came out at $0.86, beating estimates of $0.41.

Publication Date: Feb -23

📋 Highlights
  • Q4 Net Sales Decline with Comps Growth:: Net sales fell 1% YoY to $2 billion due to store optimization, while comparable sales rose 1.1%.
  • 2025 Margin Expansion:: Adjusted operating income margin expanded over 200 bps, driven by $70 million in cost savings from underperforming location exits.
  • 2026 Guidance:: Expects 1-2% comparable sales growth, 3.8-4.5% adjusted operating margin, and $100 million in free cash flow, with 40-45 new stores and 10-15 market hubs.
  • Gross Margin Leverage:: Achieved 44.2% gross margin (44.2% of net sales) in Q4, with 530 bps expansion and a 45% target by mid-term.
  • Supply Chain Optimization:: Reduced distribution centers from 16 to 15 by year-end 2026, with $300 million in CapEx for store and hub expansions.

Operational Highlights

The company's Pro business grew in the low single-digit range, while DIY declined in the low single-digit range. The company achieved $70 million in operating cost savings by exiting underperforming locations. For 2026, Advance Auto Parts expects comparable sales growth of 1-2%, adjusted operating income margin of 3.8-4.5%, and approximately $100 million in free cash flow.

Guidance and Outlook

The company expects net sales to decline slightly year-over-year due to nonrecurring items from 2025, but underlying net sales are expected to grow in the range of approximately 1% to 2%. The company plans to open 40-45 stores and 10-15 market hubs, and has set medium-term targets of 7% adjusted operating income margin and a mid-40% gross margin. Analysts estimate next year's revenue growth at -0.3%.

Valuation Metrics

With a P/E Ratio of 76.19 and an EV/EBITDA of 16.75, the company's valuation appears to be stretched. However, the company's ROE of 2.0% and ROIC of 0.16% indicate some room for improvement. The Dividend Yield is 1.79%, which may be attractive to income investors. The company's Net Debt / EBITDA ratio is 9.45, which is relatively high.

Key Priorities

The company's key priorities for 2026 include merchandising excellence, supply chain optimization, and store operations improvements. The company has made significant strides in gross profit margin, reaching 45%, driven by merchandising organization efforts. The company expects to generate approximately $100 million in free cash flow for 2026 and increase capital expenditures to approximately $300 million.

Segment Performance

The Pro segment remains positive, even excluding certain expectations. The company expects Pro and DIY to contribute positively to comp growth, with Pro outpacing DIY. DIY trends have remained stable, and improvement was seen sequentially throughout Q1. The company has over 20 market hubs converted from Carquest DCs, with plans to add 10 greenfield locations.

3. NewsRoom

Card image cap

2 Auto Retail Parts Stocks Still Worth Tracking in a Slowing Market

Mar -31

Source: zacks.com

Card image cap

Here's Why Advance Auto Parts Stock Popped Today

Mar -23

Source: fool.com

Card image cap

Advance Auto Parts vs. Monro: Two Auto Service Stocks at a Crossroads

Mar -13

Source: 247wallst.com

Card image cap

H Partners Buys Another $19 Million in Advance Auto Parts Amid Stock's Ongoing Turnaround

Mar -12

Source:

Card image cap

Auto Parts Stock Up 42% in a Year, but One Investor Cashed Out a $6 Million Stake Last Quarter

Mar -12

Source: fool.com

Card image cap

Dimensional Fund Advisors LP Reduces Stock Position in Advance Auto Parts, Inc. $AAP

Mar -12

Source: defenseworld.net

Card image cap

Advance Auto Parts, Inc. (AAP) Presents at UBS Global Consumer and Retail Conference Transcript

Mar -11

Source: seekingalpha.com

Card image cap

Advance Auto Parts Appoints Cynthia Jamison to Board of Directors

Mar -10

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (1.80%)

6. Segments

Parts and Batteries

Expected Growth: 1.8%

Advance Auto Parts' 1.8% growth in Parts and Batteries is driven by increasing demand for DIY and professional repair services, expansion of online sales channels, and strategic partnerships with key suppliers. Additionally, the company's focus on improving inventory management and supply chain efficiency has enabled it to better meet customer needs and capitalize on market opportunities.

Accessories and Chemicals

Expected Growth: 1.5%

Advance Auto Parts, Inc.'s Accessories and Chemicals segment growth of 1.5% is driven by increasing demand for DIY car maintenance, rising average vehicle age, and growing popularity of e-commerce platforms. Additionally, the company's strategic investments in digital capabilities, expanded product offerings, and strong supplier relationships contribute to the segment's growth.

Engine Maintenance

Expected Growth: 2.2%

The 2.2% growth in Engine Maintenance from Advance Auto Parts, Inc. is driven by increasing vehicle age, rising miles driven, and growing demand for DIY repair and maintenance. Additionally, the company's strategic initiatives, such as its loyalty program and online platform enhancements, contribute to the segment's growth.

Other

Expected Growth: 1.9%

Advance Auto Parts, Inc.'s 1.9% growth in 'Other' segment is driven by increasing demand for DIY and commercial vehicle repair services, expansion of online platforms, and strategic partnerships with key suppliers. Additionally, the company's focus on improving customer experience and investing in digital capabilities have contributed to this growth.

7. Detailed Products

Auto Parts

Replacement parts for vehicles, including batteries, brakes, belts, and hoses

Accessories

Add-on products to enhance vehicle appearance and functionality, such as floor mats, seat covers, and steering wheel covers

Chemicals and Fluids

Lubricants, coolants, and other chemicals for vehicle maintenance and repair

Tools and Equipment

Hand tools, power tools, and diagnostic equipment for DIY and professional mechanics

Performance and Racing

High-performance parts and accessories for enthusiasts and racing applications

Collision Repair

Parts and materials for repairing and refinishing vehicles after accidents or damage

Commercial and Fleet Solutions

Customized solutions for commercial fleets, including parts, maintenance, and repair services

8. Advance Auto Parts, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Advance Auto Parts, Inc. faces moderate threat from substitutes, as customers can opt for alternative sources for auto parts, such as online retailers or salvage yards. However, the company's strong brand recognition and wide range of products mitigate this threat to some extent.

Bargaining Power Of Customers

Advance Auto Parts, Inc. has a large customer base, which reduces the bargaining power of individual customers. Additionally, the company's wide range of products and services makes it difficult for customers to switch to alternative suppliers.

Bargaining Power Of Suppliers

Advance Auto Parts, Inc. relies on a large network of suppliers for its products. While the company has some bargaining power due to its size, suppliers may still exert some pressure on prices and delivery terms.

Threat Of New Entrants

The auto parts retail industry has high barriers to entry, including significant capital requirements and complex logistics. This makes it difficult for new entrants to compete with established players like Advance Auto Parts, Inc.

Intensity Of Rivalry

The auto parts retail industry is highly competitive, with several established players competing for market share. Advance Auto Parts, Inc. faces intense rivalry from competitors like O'Reilly Automotive and AutoZone, which can lead to pricing pressure and advertising wars.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 46.97%
Debt Cost 3.95%
Equity Weight 53.03%
Equity Cost 10.22%
WACC 7.27%
Leverage 88.56%

11. Quality Control: Advance Auto Parts, Inc. passed 1 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Ulta Beauty

A-Score: 5.3/10

Value: 2.9

Growth: 7.7

Quality: 6.3

Yield: 0.0

Momentum: 9.0

Volatility: 6.0

1-Year Total Return ->

View Full Report
Stock-Card
Etsy

A-Score: 5.3/10

Value: 7.0

Growth: 7.8

Quality: 7.1

Yield: 0.0

Momentum: 6.0

Volatility: 3.7

1-Year Total Return ->

View Full Report
Stock-Card
Advance Auto Parts

A-Score: 5.0/10

Value: 9.4

Growth: 1.4

Quality: 4.1

Yield: 5.0

Momentum: 8.0

Volatility: 2.3

1-Year Total Return ->

View Full Report
Stock-Card
Wayfair

A-Score: 4.3/10

Value: 5.7

Growth: 4.6

Quality: 4.0

Yield: 0.0

Momentum: 9.5

Volatility: 2.3

1-Year Total Return ->

View Full Report
Stock-Card
Carvana

A-Score: 4.0/10

Value: 0.4

Growth: 7.4

Quality: 6.4

Yield: 0.0

Momentum: 8.0

Volatility: 1.7

1-Year Total Return ->

View Full Report
Stock-Card
RH

A-Score: 2.2/10

Value: 3.8

Growth: 2.9

Quality: 3.4

Yield: 0.0

Momentum: 1.0

Volatility: 2.0

1-Year Total Return ->

View Full Report

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

51.83$

Current Price

51.83$

Potential

-0.00%

Expected Cash-Flows