Advance Auto Parts: Risks to FY27 Margin Target

Goldman Sachs maintains a Sell rating on Advance Auto Parts following 4Q results that showed a significant free cash flow miss and lowered confidence in achieving FY27 margin targets. Despite an earnings beat, structural supply chain adjustments and weak comp guidance suggest a prolonged recovery period.

Key Takeaways

• 1.Free cash flow missed expectations due to a reduction in the supply chain financing program and timing of payables.
• 2.Management warned that the FY27 adjusted operating margin might miss the 7% target due to slow progress on strategic initiatives and soft top-line growth.
• 3.FY26 comparable sales guidance was set at 1%-2%, coming in below consensus expectations.

Table of Contents

• Key Takeaways
• Estimate Changes
• Valuation & Risks
• Disclosure Appendix
• Price target and rating history chart(s)
• Regulatory disclosures
• Ratings, coverage universe and related definitions
• Global product; distributing entities
• General disclosures

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