Advance Auto: A Turnaround with Grease

by

Advance Auto Parts. The name itself doesn’t exactly sing, does it? But the stock, lately, has been doing a little jig. Up over 28% on the year. A spike today, 5.2% by the time I finished my coffee. The market, it seems, is sniffing around a value play. And sometimes, just sometimes, the scent isn’t a mirage.

The Parts They Need

The story isn’t complicated. It’s about a company that’s been underperforming, plain and simple. They’re chasing the shadow of AutoZone and O’Reilly, companies that know how to squeeze a dime until the buffalo hollers. Advance’s EBITDA margin? Let’s just say it’s currently residing in the basement. Which explains the price-to-sales ratio. It’s low. Very low. And where there’s a low price, a value investor starts to pay attention.

The future for auto parts isn’t exactly paved with gold. 3M’s warning about a slowdown in the aftermarket? A cloud on the horizon. But this isn’t about the tide lifting all boats. This is about a specific engine needing a rebuild. A self-help story, they call it. I call it a gamble. But a calculated one.

Restructuring the Wreckage

Shane O’Kelly, the new CEO, is swinging a wrench. He’s already shuttered over 700 locations. A brutal move, but sometimes you have to tear down to rebuild. He’s focusing on areas where Advance actually leads, a concept that seems revolutionary in these parts. And he’s building these massive hub stores. The idea? Get the right part to the customer, ideally today. A simple concept, really. But in this business, simplicity is a rare commodity.

He’s even launched a loyalty program for the DIY crowd. A smart move. Those weekend mechanics are the lifeblood of this industry. They’ll buy a spark plug and a quart of oil, and suddenly, you’ve got a sale. It’s a slow burn, but it adds up.

There are no guarantees, of course. O’Kelly could crash and burn. But this restructuring feels different. It’s fundamental. It’s not just rearranging the deck chairs on the Titanic. Value investors are starting to notice. We’re giving this company the benefit of the doubt. It’s a long shot, sure. But in this business, sometimes the rustiest parts are the ones with the most potential.

Read More

2026-02-03 20:43