The car retail sector received quite a shock today as Advance Auto Parts (AAP) scaled back its full-year outlook and cut its quarterly dividend payout. The CEO, Tom Greco, warned of ongoing competitive pressures that are likely to impact the company’s 2023 performance.
Gross sales declined by 162 basis points compared to last year, largely due to rising product costs not being fully offset by price increases. Supply chain troubles and an unfavorable product mix also played a part in the downturn in gross margin this quarter. Furthermore, operating income came in at a mere 2.6% of sales, compared to 6.0% a year ago, thanks to sales and cost challenges.
As a result, the auto retail sector experienced some turbulence in today’s trading. At the time of writing:
- Advance Auto Parts was down a significant 34.87%
- AutoZone (AZO) experienced a 3.89% decrease.
- CarMax (KMX) dipped by 3.72%.
- O’Reilly Automotive (ORLY) dropped 3.42%.
- AutoNation (AN) shed 6.61%.
Following today’s price drop it would appear that AAP has the most upside potential of the aforementioned stocks at 91.41%. However, it’s possible that the current average price target of $139.88 will change following today’s earnings results.
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