Advance Auto Parts: A Curious Case

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Now, Advance Auto Parts… a rather rum lot, if you ask me. Their shares took a bit of a tumble recently – a measly 1.5%, mind you – after they’d shown a bit of a bounce this year, leaping about like a frog on a hot griddle. Still, they’re a long way from their glory days back in 2021, when their shares were practically touching the clouds at $241.91. A bit sad, really, like a forgotten balloon.

They have a whopping 4,305 shops, mostly in the United States, but also poking about in Canada, Puerto Rico, and the Virgin Islands. And they boss around another 809 Carquest shops, spreading their influence like a particularly persistent weed. A network, you see. A very large network.

Now, I’ve been sniffing around this company, and here are three reasons why a sensible investor – someone like myself, naturally – might consider taking a peek. But pay attention, because these things aren’t always what they seem.

1. A Spot of Financial Tidying

Their fourth-quarter sales weren’t exactly fireworks, coming in at $1.97 billion – a tiny bit down on last year. But here’s the clever bit: sales in individual shops actually went up by 1.1%. Three quarters in a row, mind you! It’s like they’re slowly, carefully polishing a rather tarnished penny. They even managed to earn 50 cents per share, after losing a truly monstrous $10.20 last year. A proper turnaround, wouldn’t you say?

They’re predicting sales of $8.485 to $8.575 billion in 2026 – a modest increase, but an increase nonetheless. And they’re aiming for a profit margin of 3.8% to 4.5%, which is a world away from the loss they suffered before. They’ve been shutting down the shops that were sucking the life out of the business, focusing on larger ‘hub’ stores that are more efficient. It’s a bit like weeding a garden, really. They plan to open 40 to 45 new shops this year, with 10 to 15 of them being these super-efficient hubs.

They closed over 500 corporate shops and 200 independent ones, saving a tidy $70 million in operating costs. A good bit of pruning, if you ask me. A very good bit of pruning.

2. The Great Car Conundrum

New cars these days cost a king’s ransom – a staggering $50,326 as of December! It’s enough to make a sensible person weep. And that, my friends, is driving up the price of used cars too. The average used car went for $26,043. People are holding onto their old bangers for longer, patching them up and keeping them going. It’s a bit like a desperate attempt to squeeze the last drop of juice from a withered orange.

This means more repairs, of course. More do-it-yourself repairs, and more work for mechanics. And that, naturally, means more sales of auto parts. Competitors like O’Reilly, AutoZone, and Genuine Parts have all been doing rather well, with their shares rising between 5% and 20% this year. A rather greedy bunch, if you ask me, but clever enough to sniff out a good opportunity.

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3. A Reasonably Priced Puzzle

Compared to its rivals, Advance Auto Parts is still a bit of a bargain. Its forward price-to-earnings (P/E) and price-to-sales (P/S) ratios are lower than most. A bit like finding a hidden gem in a dusty old shop. They also pay a dividend, which yields around 1.7% at the current share price. They’ve been paying a dividend since 2006 – a rather consistent habit, I must say.

So, there you have it. A company with a bit of a past, a bit of a present, and a potential future. Is it a sure thing? Of course not. Nothing ever is. But it’s a curious case, and sometimes, the most interesting investments are the ones that require a bit of digging. And perhaps, just perhaps, a little bit of luck.

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2026-02-19 23:12