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id: 845, Created by Stan Vick, Scout
Advanced Auto Parts (AAP) Pricing Strategy Failure Case
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E.D. North CarolinaCourt
- In May 2023, Advanced Auto Parts reported disappointing financial results and revised downward its 2023 guidance.
- $AAP fell 35% and lost $2.3B of market cap, injuring shareholders.
- Investor suspect AAP and its Executives of misguiding investors about the failure of a new pricing strategy.
On May 31, 2023, Advanced Auto Parts (AAP) held its quarterly earnings call for their Q1 2023 financial results. During that call, its CEO, Thomas R. Greco, conceded, "our financial results in the first quarter were well below expectations."
- Because the Company slashed prices on products, Greco stated "we had less price realization than plans, which put substantially higher pressure on our product margin price."
- Advance Auto Parts' CFO Jeffrey W. Shepherd, revealed during the May call that the Company's strategic pricing program resulted in the Company being "unable to price to cover product costs in the quarter."
- The Company consequently revised downward its 2023 guidance to an operating margin of 5% to 5.3% from the previously announced 7.8% to 9.2% margin.
On this news, $AAP fell 35% and lost over $2.3 billion of its market capitalization, thereby injuring investors.
Taking all representations into account, Investors have reasons to suspect AAP and its Executives of misguiding investors about the failure of a new pricing strategy and purposefully inflating the impact of price reductions, leading to a steep, one-day stock drop after the truth was revealed.
Failure to Disclose,
Shock Event Date
31 May 2023
09 October 2023
Hon. James C. Dever, III