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Advance Auto Parts stock sinks toward 12-year low after credit cut to 'junk' status at S&P Global Ratings

Shares of Advance Auto Parts Inc. (AAP) dropped 3.7% toward a 12-year low in morning trading Tuesday, after S&P Global Ratings downgraded the auto parts retailer's credit to "junk" status, saying the company's efforts to improve inventory and product availability have "languished" due to inconsistent execution. The credit rating agency cut the company's issuer-credit rating to BB+, which is the highest speculative-grade rating, from BBB-, while revising the outlook to stable from negative. S&P also criticized the company for its "misguided strategic decision" to try to preserve and expand margins while its competitors cut prices. "Over the past eighteen months, Advance's sales have largely been flat, while its peers' revenues have grown in a low-teen percent," S&P said in a research note. "We believe Advance has ceded market share and its competitive standing in the industry has weakened." The stock, which is on track for its lowest close since October 2011, has tumbled 59.0% year to date. In comparison, shares of rivals AutoZone Inc. (AZO) have gained 3.8% this year and of O'Reilly Automotive Inc. (ORLY) have gained 10.7%, while the S&P 500 has advanced 16.6%.

-Tomi Kilgore

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09-12-23 1007ET

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