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Why Auto Part Retailers Ended 2017 in Negative Territory

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Jan. 11 2018, Updated 9:00 a.m. ET

Auto parts retailers

AutoZone (AZO), Advance Auto Parts (AAP), and O’Reilly Auto Parts (ORLY) are the three biggest auto part retail companies in the US market. The stocks of these three auto part retailers touched record highs in 2015 and 2016. However, these companies largely struggled to drive positive sales growth in the first three quarters of 2017, which hurt investors’ sentiments.

Let’s find out how these companies performed on Wall Street compared to the broader market in 2017.

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2017 performance

In 2017, the stocks of auto part retailers reflected underlying weakness in industry fundamentals. AAP, ORLY, and AZO fell ~41.1%, 13.6%, and 9.9% last year, respectively, as of November 21. Meanwhile, America’s two largest automakers (IYK), General Motors (GM) and Ford Motor Company (F), saw rises of 17.7% and 3.0%, respectively.

Recent sales stagnation and weakening profit margins could be key drivers of auto part companies’ dismal year-to-date performances on Wall Street.

Recent recovery

In 4Q17, O’Reilly Auto Parts stock rose ~11.7%, while AutoZone registered a rise of 19.5%. Advance Auto Parts continued to witness mixed movements in 4Q17 and ended the quarter with a 0.5% rise.

In comparison, the S&P 500 Index (SPY) (SPX-INDEX) rose 6.1% in 4Q17. This recent sharp recovery for two out of three major auto part retailers may have been driven by investors’ high expectations for these companies in 2018. We’ll discuss more about these expectations in the next few articles.

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