The Ratings Game: DieHard brand will give Advance Auto Parts sales at Walmart a jolt

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Buying the popular battery brand Die Hard will drive growth for Advance Auto Parts Inc., including sales through its partnership with Walmart Inc., analysts say.

Sears holding company Transform Holdco LLC announced Monday that it had sold DieHard, the popular battery brand, to Advance Auto Parts for $200 million.

Advance Auto Parts AAP, +0.38%   and Walmart WMT, +0.40%   announced in October 2018 that the two companies had partnered in an automotive store that launched earlier this year. The launch began on the Walmart e-commerce site and was intended to roll out in phases.

Wedbush analysts say sales have accelerated since the launch in the second quarter. Moreover, many customers coming to Advance Auto Parts through the Walmart site are new to the automotive retailer.

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“In the second phase of the partnership (goal of completion by 2021), Advance Auto Parts plans to enable additional customer fulfillment options including buying online at and picking up in-store at Advance Auto locations,” Wedbush analysts led by Seth Basham wrote.

“Given that customers often prefer to pick up batteries in stores, prospective customers will be able to utilize Advance Auto Parts’ in-store solutions and parking lot services (e.g., free battery installation, parts diagnostics) to purchase the right products necessary for their respective vehicles with the possibility of driving incremental add-on sales at the store.”

Stifel rates Advance Auto Parts stock outperform with a $180 price target.

Analysts also say the deal will benefit Advance Auto Parts’ do-it-yourself (DIY) business.

“While Advance Auto Parts’ business today focuses more on ‘do-it-for-me’ (DIFM) customers (58% of sales), we view DieHard more of a DIY brand, and an attempt to help drive incremental sales in the higher margin DIY segment,” wrote Wells Fargo analysts led by Zachary Fadem.

However, Wells Fargo said Advance Auto Parts and investors should be prepared for the DieHard brand to lose some of its strength, even at Walmart.

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“Advance Auto Parts’ battery sales grew double-digit percentage in Q3 and we believe the DieHard brand could be additive despite likely losing value over the years from historically only being available at Sears,” analysts wrote.

“Today some DieHard products are available on Amazon (Prime eligible) AMZN, -0.21%   and Walmart (via third parties), but we believe these products could cease to be available on Amazon going forward. With Walmart already offering DieHard products, it is unclear how much incremental sales Advance Auto Parts will generate from DieHard with its new Walmart partnership.”

Wells Fargo rates Advance Auto Parts stock equal weight.

Advance Auto Parts stock has rallied 7.8% over the past year while the S&P 500 index SPX, -0.02%   is up 37.1% for the period.

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