Sometimes the fear of pain is worse than the pain itself.
There are plenty of reasons that Advance Auto Parts
As I just said, this was a challenging quarter for the company. Sales were up a bit less than 11%, with 3.9% same-store growth (versus better than 9% a year ago). While the do-it-yourself business was even more of a laggard, with same-store sales up 0.5%, the do-it-for-me side was up more than 16% on a similar basis.
A lot of your common retail bugaboos were blamed for the result -- adverse weather, higher interest rates, and higher gas prices. Though I love nothing more than slamming retailers who offer feeble excuses for sluggish sales performance, I actually buy this story this time. You don't see a lot of Jaguar owners working on their car in the driveway, so I do believe it's entirely valid to think that higher interest rates (on credit cards, not just mortgages) and such could hurt the buying power of the company's core customers.
Margin performance was likewise not great, but not a horrorshow either. Gross margins were flat, and operating margins were down slightly, after adjusting for the added expense from stock compensation. And though talk is admittedly cheap, management continues to look to improve operating efficiency; it's still targeting margins of 11% to 12% by 2008 (as opposed to roughly 9.5% this quarter).
I've generally been a bigger fan of AutoZone
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).