Advance Auto Parts, Inc. (AAP) Accused of Concealing Negative Impact of its Acquisition

According to the shareholder complaint, on October 16, 2013, Advance Auto (NYSE: AAP) announced that it was acquiring General Parts International, Inc., in a "transformative" move "which, by combining the #3 and #4 player in the industry by sales, immediately creates the market leaders."  Despite repeatedly issuing optimistic forecasts, Advance Auto was encountering significant infrastructure issues and inefficiencies in its supply chain.  In came activist investor, Starboard, which acquired a significant stake in the company and promised to return capital to investors.  Starboard took control of Advance Auto's management by pushing out the existing executives and replacing them with handpicked board members.  Nevertheless, the company reported successive quarters of disappointing earnings and negative comp store sales.  In an attempt to turn the company around, Advance Auto executives began making positive statements regarding sales comp growth and increases in operating margin, essentially promising to deliver better results.  In turn, stock prices started to rise.  But, these statements were merely an attempt to buy time and cover up what could not be addressed, and instead of investing in the company to resolve the problems, the board cut labor costs to increase margins.  The cuts were so drastic, customers began leaving.  By this point, Starboard was so committed to its "vision" that it continued to mislead investors.

On August 15, 2017, Advance Auto finally reported substandard results and predicted corresponding negative full-year fiscal 2017 guidance.  The company finally admitted that it "lacked a coherent strategy.  Our frontline turnover was unacceptable.  Our technology platforms were segregated and difficult to navigate.  And our supply chain infrastructure was duplicative and siloed."  The company’s stock price plummeted, falling from $109.32 to close at $87.08 per share on August 15, 2017, erasing $1.64 billion in market capitalization.  Advance Auto stock currently trades significantly below its class period high of $176.41.

Advance Auto Parts, Inc. Shareholders Have Legal Options

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