• Advance Auto shares halved since Starboard disclosed stake
  • Servicing complex cars seen as defense against Amazon invasion

Activist investors targeting auto-parts retailers are taking hits to their investments, and Amazon isn’t helping.

When hedge fund Starboard Value LP disclosed a stake in Advance Auto Parts Inc. in 2015, it said the stock, then at $171, could more than double. The retailer’s shares have instead nearly halved since then, after warning weak sales will continue for an industry that’s also drawn interest from billionaire Carl Icahn. Advance Auto’s peers O’Reilly Automotive Inc. and AutoZone Inc. also have also plunged this year amid disappointing demand.

Perhaps the biggest bogeyman weighing on the shares is Amazon.com Inc., which sent shockwaves across the retail industry in June with its $13.7 billion acquisition of Whole Foods Market Inc. The online juggernaut has also been making inroads with autos, launching a car-research site and a parts marketplace last year. While car-part distributors — with their technical expertise, trove of components and ability to quickly deliver to mechanics — are more insulated from e-commerce than other retailers, though they’re not invincible.

“We fear an increased level of price transparency — these companies either more aggressively price or promote their products to drive the same level of sales growth,” Seth Basham, an analyst at Wedbush Securities, said of the auto-parts retailers. “I don’t think it’s a primary driver of what’s been hurting same-store sales in the industry this year, but that doesn’t mean there can’t be a bigger impact going forward.”

Investor Interest

The more immediate challenges dragging on the industry include economic uncertainty for low-income customers, higher gas prices and warmer weather that has eased the wear and tear on consumers’ cars, Advance Auto Chief Executive Officer Tom Greco said Tuesday.

Starboard’s view is that Amazon is a mild headwind — at most — to the industry, a person familiar with its strategy said. The New York-based hedge fund is pleased with Advance Auto’s efforts to cut costs and bolster its online presence and sees earnings improving early next year, said the person, who asked not to be identified because the matter is private.

Further encroachment by online rivals could pose a threat to industry profit margins that are in excess of 20 percent — part of what initially drew investors like Starboard and Icahn to the aftermarket parts business.

With the average age of vehicles on American roads approaching 12 years, investors also are betting an older…