Why Advance Auto Parts Stock Dived Today
A credit rating downgrade is a tough blow for any company. After one was meted out to Advance Auto Parts (NYSE: AAP) on Tuesday, the company's share price sank by over 8%. That was notably worse than the S&P 500 index's dip of 0.6%.
That downgrade came from ever-influential credit evaluator S&P Global Ratings. That company has tagged both Advance's issuer credit and unsecured debt with BBB- ratings, one peg below its former estimation of BB+ for the pair. That takes the auto retailer down from S&P Global Ratings' lowest rating of what it considers to be investment-grade debt, to the top tier of speculative grade.
In the press release announcing the downgrade, S&P Global Ratings laid out its reasons for the move. In its opinion, the retailer has not effectively improved its product availability and its inventory. The agency also characterized as "misguided" Advance's attempts to boost its profit margins and pointed out that its sales have been stagnant across the past 18 months. Some competitors, meanwhile, have seen double-digit rises.
Source Fool.com
