Advance Auto Parts Faces Challenges Ahead Despite Focused Leadership, Oppenheimer Says

Advance Auto Parts (AAP) faces significant near- and longer-term hurdles even as the company's new leadership demonstrates a "strategic focus and energy," Oppenheimer said after a meeting with senior executives Thursday.

"We continue to advise clients to remain on the sidelines with AAP until evidence of a sustained, positive fundamental turn at the company turns much clearer," Oppenheimer said in a note Friday.

Chief Executive Shane O'Kelly emphasized that streamlining the supply chain and developing product hubs as a network are essential in improving connectivity and operational efficiency. The company's leadership also discussed focusing on core merchandising and pricing disciplines, which was not the focus of prior management, Oppenheimer said.

Advance Auto Parts management is also evaluating closing around 4700 stores with plans to focus more on "top performing units and markets," according to Oppenheimer.

"Leadership of AAP is looking optimistically towards the forthcoming divestiture of WorldPac and plans to redeploy sale proceeds to further solidify the company's capital position and support further, aggressive strategic re-positioning at the chain," Oppenheimer said.

Shares of Advance Auto Parts were up 3.3% in recent Friday trading.

Price: 40.76, Change: +1.28, Percent Change: +3.25