Auto Parts Retailers Dismantled
Advance Auto Parts (AAP) warned investors Thursday that high gas prices and rising interest rates were weighing on its customers and slowing second-quarter sales growth.
Shares of the auto parts retailer were recently down $6, or 17%, to $29.90. Meanwhile, its competitors were also moving lower on the news. AutoZone (AZO) was recently trading down $3.75, or 4.1%, to $88.52; while Pep Boys (PBY) fell 62 cents, or 5.3%, to $11.05. O'Reilly Automotive (ORLY) sank $2.66, or 8.1%, to $30.36.
Advance Auto Parts said it now expects its second-quarter same-store sales, or sales at stores open at least a year, to rise 1% to 2% over the same period last year. Previously, the company projected same-store sales growth of 3% to 5%. Last year it recorded a 9% same-store sales gain in its second quarter.
"We believe that macroeconomic factors, including higher energy prices, ever-higher interest rates and higher required credit card payments are further reducing discretionary income for our lower- and middle-income customers and has unfavorably impacted customer traffic," Advance Auto Parts said in a press release.Even if current sales trends persist, the retailer continues to expect EPS growth for 2006, but said that growth will be slower than it previously expected. Wall Street expects Advance Auto Parts to post earnings of 66 cents a share for the quarter ending July 15, according to Thomson First Call. That would mark an increase of last year's earnings of 60 cents a share for the period. For the year, analysts expect the company to earn $2.40 a share, up from last year's $2.13. Advance Auto Parts' warning plays into broader concerns on Wall Street that sparked a steep selloff throughout the financial markets in May. Investors fear that consumers might start to run out of spending power if interest rates keep climbing, and the persistence of high crude oil prices in recent years is starting to juice up inflationary pressures that could force the Federal Reserve to keep raising rates and slow the economy.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV