Bullish Investors Driving Up Auto Parts Retailers’ Stocks

Chart of Auto Parts Retailers Stocks Performance (AAP, ORLY, AZO)

What’s with auto parts retailers’ stocks in the past year or so? Category-killers like Amazon (AMZN) and Walmart (WMT) were supposed to have put these very specialized retailers out of business. Instead, these companies have managed to fend off the retail giants … for now.

A Tale of Three Auto Parts Retailers

Below are the three primary market leaders in the auto parts retail space. All three of the stocks have either done exceptionally well or, at the very least, beaten the S&P 500 this year (which is now slightly negative year-to-date).

  • Advance Auto Parts (AAP)
  • O’Reilly Automotive (ORLY)
  • AutoZone (AZO)

The chart above shows the three stocks ordered from top to bottom by performance (labeled with price and percentage performance on the y-axis) against the S&P 500 ETF – SPY.

Another key auto parts distributor, Genuine Parts Company (GPC), owns the NAPA Auto Parts brand. It was excluded from this comparison because it caters less to retail customers and more to professional mechanics. Also, GPC’s stock has not done nearly as well this year as the three auto parts retailers that we highlight here.

Strong Performance, But …

Usually, if a stock and its industry are both strong, we would consider looking into it more closely for potential investing or trading opportunities. For example, Advance Auto Parts seems to be doing exceptionally well within an apparently strong auto parts retail industry.

The problem here is what we’ve alluded to above. Amazon and Walmart (especially Amazon) have been continuously stepping up their game in the auto parts space. Clearly, the biggest threat that Amazon poses is to direct-to-consumer sales, rather than sales to professional mechanics. For the three auto parts retailers, the approximate percentage of direct-to-consumer sales out of total sales for each is listed below:

  • Advance Auto Parts – Around 40% consumer sales
  • O’Reilly Automotive – Around 60% consumer sales
  • AutoZone – Around 80% consumer sales

It’s quite interesting to see that the one with the lowest percentage consumer sales – Advance Auto Parts – has seen its stock perform the best of the three this year. At the same time, the one with the highest percentage consumer sales – AutoZone – has seen its stock perform the worst (though still very respectably).

So what’s the takeaway here? Well, it’s not if, but when Amazon will eventually dominate auto parts retailing – just like the retail behemoth has dominated so many other business verticals in the past several years. Because of AutoZone’s high percentage of consumer sales, it stands to be the most threatened of the three. But the other two are also not safe. In short, investors should be extra wary about delving into these potentially endangered retailers.


IMPORTANT: The information above should not be construed as investment advice and should not be considered as a solicitation to buy or sell securities. Past performance is not indicative of future results. Trading and investing in the financial markets involves substantial risk of loss, and may not be suitable for all investors.

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