Stocks: Auto-Parts Retailers Face Market Selloff -- WSJ
August 14 2019 - 3:02AM
Dow Jones News
By Jessica Menton
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 14, 2019).
Shares of auto-parts retailers are tapping the brakes a bit
after ramping higher than the broader market for the past year.
Two big sellers of replacement parts have posted disappointing
sales of late, worrying some investors. Advance Auto Parts Inc. cut
its sales outlook for the year on Tuesday while reporting mixed
second-quarter earnings. Shares ticked up less than 0.1% after
sliding as much as 9.3% in premarket trading. O'Reilly Auto Parts
Inc. also reported mixed earnings last month and gave
weaker-than-expected profit guidance for the year.
Since the end of July, shares of Advance, O'Reilly and AutoZone
Inc. are down 5.6%, 1.9% and 3.7%, falling more than the S&P
500's 1.8% decline. AutoZone is expected to report earnings next
month.
Some investors don't expect these companies to thrive with a
backdrop of a slowing global economy, said Brian Sterz, portfolio
manager at Miracle Mile Advisors, which has $1.7 billion in assets
under management.
"The consumer has been resilient, but that looks like the last
leg standing as we begin to see some signs of strain with
credit-card and mortgage defaults beginning to tick up," Mr. Sterz
said. "With record unemployment in the U.S., it's hard to see how
it gets better from here."
Those declines are largely a reversal from how parts sellers
have performed over the past year. They have marched higher,
largely able to avoid the steep declines suffered by traditional
bricks-and-mortar retailers. O'Reilly and AutoZone are up 19% and
48%, respectively, over the past 12 months, outperforming the
S&P 500's 3.7% rise. Advance has fallen 1.8%.
One reason parts sellers have done well over the past year,
analysts say, is because Americans are keeping their cars longer,
which has helped service shops and parts makers. The average age of
cars and light trucks in 2019 rose to 11.8 years old, according to
IHS Markit. The firm, which collects vehicle-registration data,
estimates a record level of more than 278 million light vehicles
are in operation.
"People are owning their cars longer and that's going to lead to
a trend of self maintenance, whereas new cars are typically handled
through dealers," Mr. Sterz said.
Write to Jessica Menton at Jessica.Menton@wsj.com
(END) Dow Jones Newswires
August 14, 2019 02:47 ET (06:47 GMT)
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