ADVANCE AUTO PARTS (-) : A (margin) bridge too far: pricing in perfection

Research evidence excerpt

ADVANCE AUTO PARTS (-) : A (margin) bridge too far: pricing in perfection

EQUITIES

GENERAL RETAIL

ADVANCE AUTO PARTS UNDERPERFORMPRICE* USD58.0  TARGET PRICE USD35 (DOWNSIDE 40%)

A (margin) bridge too far: pricing in perfection

It’s not us, it’s them (AutoZone and O’Reilly)26 MAY 2026

Securities Research Report AutoZone (+) and O’Reilly (+) are two of the best run companies we’ve ever encountered. They’ve

Production time: 11:10* (London time) been able to sustain best in class op. margins while sustaining incremental growth in commercial

Research Analysts & Publishing Entities despite considerable secular/competitive pressure in their core DIY market from AMZN and WMT.

Chris Bottiglieri, CFA They’ve done this through a virtuous flywheel of market share gains begetting scale allowing for best

BNP Paribas Securities Corp1 product cost and then re-investment into store growth, labor, and distribution to increase market(+1) 646 342 2463

christopher.bottiglieri@us.bnpparibas.com share and allowing the cycle to repeat. Conversely, through numerous rounds of activist interest, we

believe AAP has been on a hamster wheel - focusing on margin rate leading to lower labor andIan Davis

BNP Paribas Securities Corp1 investment, store and distribution network closures, resulting in market share loss that repeats the

(+1) 212 710 9784 cycle.

ian.m.davis@us.bnpparibas.com

Hunter Lawson The margin gap revisited

BNP Paribas Securities Corp1 Since AAP’s acquisition of Carquest in 2013 and multiple rounds of activist involvement, AAP’s non-

+1 934-233-7189 GAAP operating margins have declined from 10.7% in 2013 to 2.5% in 2025. The company has

hunter.lawson@us.bnpparibas.com

taken numerous successful steps to stabilize margins including pairing back its distribution network,