Since hitting its all-time high on January 5th, 2022, Advance Auto Parts, which reports earnings this week, has grossly underperformed the stock market overall, even as its two most well-known competitors, Autozone Inc. and O’Reilly Automotive Inc., outperformed significantly. O’Reilly has seen a total return of almost 78%, Autozone nearly 53%, and the S&P 500 more than 33%. Meanwhile, AAP has fallen more than 80%. Although Advance Auto was the smallest of the three at the end of 2021, these companies, ostensibly selling similar products, were within the same order of magnitude as of 2021. Advance did about $11 billion in revenues and operated ~ 5,000 retail locations with about 40,000 employees. Autozone, the largest of the three, did ~ $14.5 billion in revenues and operated ~7,000 retail locations with about 70,000 employees. O’Reilly had just under 5,800 stores. Revenues at both Autozone and O’Reilly have grown by high single-digit percentages per year since, with profit margins of ~ 14.5%. But the Advance topline has stagnated - actually declining on an inflation-adjusted basis, with net income margins of 1% or less, barely turning a profit.
