Recent Pullback In Advance Auto Parts Creates Buying Opportunity For 'Self-Help Story'

Last week, Advance Auto Parts, Inc. AAP announced more key management changes.

With management changes now complete and key performance indicators improving, the risk/reward for the company appears favorable, Wedbush’s Seth Basham said in a report.

While maintaining an Outperform rating and a price target of $185, Basham commented that the recent pressure on shares had created “a buying opportunity for this self-help story.”

Recent Positive Developments

Advance Auto Parts has announced the resignation of Charles Tyson, EVP of Merchandising, Marketing and Replenishment. Basham believes that the company has replaced Tyson with “a new head merchant and new head of supply chain, both of whom have track records of success and one who has deep industry experience.”

Related Link: Advance Auto Parts Needs To Put The Pedal To The Metal In 2017

The new heads will play a key role in improving part availability and revamping the company’s supply chain, resulting in improved profitability from 2018 onwards.

Advance Auto Parts has won a US Communities supply contract worth about $100 million annually. This could boost comps by as much as 1 percent and is indicative of the company’s “ability to effectively serve national accounts with increased geographic and product breadth provided by CarQuest,” the analyst mentioned.

Basham cited improving fill rates, in stocks, order-to-delivery times and employee turnover rates as the other key indicators of the company’s improved execution and sales in recent months.