An FBR Capital Markets analyst downgraded Advance Auto Parts Inc. Monday, saying the auto parts retailer's earnings in the fourth quarter and next year may fall short of investor expectations as sales growth slows.
Costly initiatives put in place under CEO Darren Jackson, who took the over the company in January 2008, have not stopped commercial sales growth from slowing since the first quarter, said analyst Stephen Chick in a note to investors.
"We debate the payoff and linearity of management's investments," Chick said, lowering his rating to "Underperform" from "Market Perform."
Chick projected profit of 44 cents per share in the fourth quarter and profit of $2.97 per share in 2010.
On average, analysts polled by Thomson Reuters expect profit of 46 cents per share in the fourth quarter and $3.27 per share in 2010.
In November, Advance Auto said sales at stores open at least a year rose 4.7 percent in its third quarter. The commercial sales division's sales measure grew 11.8 percent, while the do-it-yourself unit's sales metric grew 1.7 percent.
Do-it-yourself sales make up the bulk of Advance Auto Parts' revenue.
Chick cautioned that in 2010, the metric could slow to the mid-single digits for commercial sales and decline for do-it-yourself sales. Sales at stores open at least a year are seen as an important retail performance indicator because they measure growth from existing stores rather than newly opened ones.
The analyst also said the chain's per-store sales target was too aggressive.