Advance Auto Parts, a leading auto parts retailer, found itself in a challenging position after S&P Global Ratings downgraded its credit rating to junk territory. The company's rating was lowered by one notch to BB-plus, indicating a noninvestment grade status. This downgrade comes as a result of strategic execution challenges, leading to underperformance and a decline in competitive position.
Over the past 18 months, Advance Auto has experienced stagnating sales while its competitors have recorded growth. This has resulted in a loss of market share and weakened competitive standing for the company. Despite these setbacks, S&P Global maintains a stable outlook for Advance Auto, expecting gradual improvements in sales and profitability.
A response from the company regarding this credit rating downgrade is currently unavailable.
Wall Street reacted negatively to the news, as Advance Auto stock (ticker: AAP) plummeted 5.8% to $58.91 in afternoon trading. This decline puts the stock on track for its lowest close since October 2011.
In addition to the credit rating downgrade, S&P Global also expressed concerns about Advance Auto's broader strategy. The company's efforts to enhance inventory and product availability have been hindered by inconsistent execution. Furthermore, S&P Global believes that Advance Auto's decision to prioritize margin expansion over price competition has diminished its value proposition.