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Advance Auto Parts stock has fallen about 60% so far this year.
David Paul Morris/Bloomberg
Advance Auto Parts
stock was on track for its lowest close in more than a decade after S&P Global Ratings lowered its credit rating on the auto parts retailer into junk territory.
S&P Global lowered Advance Auto’s rating by one notch to BB-plus, which is considered noninvestment grade, from BBB-minus on Tuesday.
The company’s “strategic execution challenges have led to persistent underperformance, diminishing its competitive position and pressuring credit protection metrics,” S&P Global said in a news release.
Advance Auto (ticker: AAP) has seen sales mostly flatline over the past 18 months, while its peers have seen an uptick, the ratings firm said. In turn, Advance “has ceded market share and its competitive standing in the industry has weakened,” S&P Global added. However, the firm still gave Advance Auto a stable outlook, as it expects sales and profitability to improve gradually.
In August, the retailer posted worse-than-expected second-quarter earnings and saw same-store sales fall 0.6% from a year earlier—slightly worse than the 0.4% decline recorded in its first quarter.
The company emailed a statement to Barron’s, saying that it “is taking deliberate actions to improve execution, drive margins and cash flow, while positioning the company for long-term success and value creation.”
“Advance believes that a balance sheet of $277 million in cash on hand and $1.1 billion available on its revolving credit facility will support the execution of near-term operational improvements to benefit the company’s cost structure and working capital,” continued the letter from an Advance Auto spokesperson.
Advance Auto stock slid 7.3% to $57.96 in afternoon trading, putting them on pace for their lowest close since October 2011, according to Dow Jones Market Data.
S&P Global also highlighted concerns with the company’s broader strategy.
“The company’s efforts to improve its inventory and product availability have
languished due to inconsistent execution,” the firm wrote. “Furthermore, we believe the company’s misguided strategic decision to preserve and attempt to expand margins while its competitors invested in price has eroded its value
proposition.”
Write to Emily Dattilo at emily.dattilo@dowjones.com