S&P: Auto parts retailers to be pressured

Standard & Poor's said in a report that while long-term fundamentals for auto parts retailers have not changed, near-term softness is expected due to the more difficult environment for consumers affected by rising fuel prices.

Companies expected to fare well during a short period of industry softness are Advance Auto Parts Inc. (BB+/positive) and AutoZone Inc. (BBB+/stable/A-2), according to the report.

"While Advance Auto Parts has some cushion in its current ratings, given its adequate credit metrics, the timing for consideration of an upgrade will likely be extended," said S&P credit analyst Stella Kapur.

"AutoZone's flexibility comes from its free cash flow generation, which provides an ability to reduce debt, if needed, to maintain its credit metrics."

In contrast, there is limited room in current ratings for CSK Auto Inc. (B+/Watch negative) and Keystone Automotive Operations Inc. (B+/negative) to withstand slower demand in the near term, the agency said, adding that ratings for Pep Boys-Manny, Moe & Jack (B-) remain on CreditWatch developing until a decision is made regarding strategic alternatives.

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