Why Advance Auto Parts Stock Plummeted Today

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During the trading hours up until 1 p.m. ET on Thursday, the share price of Advance Auto Parts (AAP) dropped by 7.3%, sparking questions from investors about the potential reasons for this decline.

Today, the auto parts retailer shared key points from their Q2 earnings, and the most striking detail is this: The projected Q2 revenue by Wall Street of $1.97 billion is expected to be surpassed and could potentially reach up to $2 billion.

Advance Auto Parts Q2 earnings

You might be wondering if there are any issues, but Advance Auto Parts reports that their turnaround plan is moving forward and they’re seeing better results than anticipated. Their same-store sales could even increase by 0.1% and the adjusted operating margins might reach up to 3%.

However, let me also share some less favorable information: In an effort to continue its transformation, Advance Auto Parts announced today that it will be issuing $1.5 billion in senior unsecured notes (essentially debt) in two parts. The first part will mature in 2030, and the second in 2033. Additionally, they are planning to establish a new asset-based loan revolving credit facility, which is another form of debt.

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Is Advance Auto Parts stock a sell?

Some of the freshly acquired debt will be allocated towards repaying debts falling due in 2026, while the remainder will serve general corporate functions. Given its current cash burn rate exceeding $250 million annually, Advance Auto Parts finds itself in a position where it urgently requires additional funds to meet its financial needs.

It’s unclear whether the interest rate on Advance’s new debt will be higher or lower than the current one, which makes it uncertain if this development is positive for its stock. At this point, what we can confirm is that the company seems to be accumulating more debt in total, and that certainly doesn’t appear to be good news.

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2025-07-24 21:35