FPA Queens Road Small Cap Value Fund on Advance Auto Parts, Inc.
Thesis
Advance Auto Parts is working through a turnaround in distribution, inventory, merchandising and stores. The fund sees an improved balance-sheet position and a credible management restructuring plan, with initial improvement in operating margins. However, results are inconsistent and the second-quarter earnings report disappointed.
“The balance sheet is in good shape, new management has articulated a credible restructuring plan”
Key risks
- Complex operational restructuring
- Inconsistent financial results
- Risk of further earnings shortfalls