Amazon (AMZN) Will Likely Go On to Crush Auto Parts Retailers That Are Already Tanking - TheStreet

Auto parts stocks have taken quite the hit. 

TheStreet's founder and Action Alerts PLUS Portfolio Manager Jim Cramer said the auto space parts business hasn't declined because of Amazon (AMZN) - Get Report , as the tech giant has only just moved into the space.

"It's too hard to own anything that's related to auto, auto parts," Cramer still reasoned.

Advanced Auto Parts (AAP) - Get Report shares crashed 22% on Tuesday amid weak quarterly earnings. Autozone AZO slumped 3% in sympathy. 

All of this begs the question. Should Walmart (WMT) - Get Report jump into the auto parts space on the cheap to head off Amazon?

"In this sector, companies can exercise considerable pricing pressure over their vendors, which is what Walmart does well. If you have a competence in distribution like Walmart, it can be very successful," Brian Sponheimer, research analyst at Gabelli & Company told TheStreet in a recent interview.

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"The automotive after-market [which sells vehicle parts, chemicals, equipment, and accessories after the owner buys the vehicle] is unique, and delivery is much more important than in other areas. People need their cars, so parts delivery has to not only be the same day, but within a matter of hours, and it requires bricks-and-mortar stores and distribution networks like Walmart."

Analyst John Birk of Morningstar told TheStreet, "I think it [the acquisition of Advance Auto Parts] makes sense first to continue to drive as much volume as they [Walmart] can through their system. They are trying to garner traffic and bring more to The auto parts [buy] would make sense."

Advance, which sells to both professionals and do-it-yourself mechanics, according to its website, has more than 5,200 stores, over 100 Worldpac branches and serves some 1,300 independently owned CARQUEST branded stores in the United States, Puerto Rico, the U.S. Virgin Islands and Canada. The company bought CARQUEST in 2014 for $2 billion, and noted Sponheimer, it has been tough meshing two entities that have different cultures and customer bases.

Wedbush analyst Seth Basham told TheStreet that such a purchase by Walmart has a "low probability," but noted that the mega-retailer has recently exhibited an appetite for the "hard parts" customer. It has beefed up its online offerings of vehicle-related merchandise by selling hard parts, essentially parts made of steel that go under the hood.

Walmart spokesman Lorenzo Lopez told TheStreet in an email, "We often get asked to speculate about possible acquisitions, and we simply don't comment on those kinds of questions."

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