Advance Auto Targets E-Commerce

Advance Auto Parts (AAP - Analyst Report) has launched its own e-commerce website, AdvanceAutoParts.com, to sell its products online for the first time since its dissolution with Phoenix-based auto retailer CSK Auto during the first quarter of 2009. The website will allow customers to purchase more than 100,000 parts and accessories. It will also allow free shipping on purchases of $75 or more as well as free in-store pickup.

The Roanoke, VA-based auto retailer previously operated a similar website called PartsAmerica.com in partnership with CSK Auto. However, it had to close down the website after CSK was acquired by Springfield, MO-based auto retailer O’Reilly Automotive (ORLY - Analyst Report). At that time, Advance Auto only operated an online merchandise lookup feature.

In 2007, Advance Auto targeted e-commerce as a potential growth channel. The company now aims to take it to the next level. Last month, the company opened an e-commerce office in Campbell, CA, near Silicon Valley. The headcount in the office (currently constituting 20 employees) will be doubled as the company ramps up the new website.

Advance Auto is primarily engaged in selling replacement parts (excluding tires), accessories, maintenance items, batteries and automotive fluids for cars and light trucks. It is the second leading retailer catering to the Do-It-Yourself (DIY) and Do-It-For-Me (DIFM) or commercial customers.

Advance Auto primarily targets the DIY market, which accounts for 75% of the annual revenue. The remaining 25% is generated from the DIFM segment through the commercial delivery program. As of July 18, 2009, the company’s total store count was 3,407.

We recommend the shares of Advance Auto as Neutral with a target price of $44.