The year has been kind to most auto parts retailers, but for Advance Auto Parts, it has been a different story. The company's latest quarterly report has disappointed investors once again, causing its shares to plummet.

In its third-quarter report, delivered on Wednesday, Advance Auto Parts revealed a surprising loss and significantly reduced its full-year earnings outlook. The company cited nonrecurring charges as one of the reasons for the disappointing results. To address these challenges, Advance Auto Parts has implemented a cost-savings strategy, appointed a new chief financial officer, and expressed its intention to sell its wholesale distributor Worldpac and Canadian businesses.

Not surprisingly, the stock has taken a hit. It fell by 7% in recent trading and experienced a 4.6% decline on Wednesday. However, this decline may not be as severe as it appears since Advance Auto Parts' shares have already decreased by over 60% this year prior to the release of the quarterly report.

The company's turnaround efforts, which were initiated before the pandemic, have encountered numerous hurdles. In May, Advance Auto Parts experienced a significant drop of around 30% in its stock price—the largest one-day percentage decline in its history. This was due to disappointing first-quarter results, missed full-year guidance, and a dividend reduction.

What makes Advance Auto Parts' struggles even more apparent is the relatively favorable industry environment in recent years. With the high costs of vehicles and an aging American fleet, more people have turned to repairing their cars rather than buying new ones. This has benefited competitors such as AutoZone and O'Reilly Automotive, whose stock prices have increased by approximately 10% and 16% respectively this year.

Given these challenges, it's not surprising that another downgrade followed the release of Advance Auto Parts' quarterly report. Analyst Elizabeth Suzuki from BofA Securities downgraded the stock to "Underperform" from "Neutral" and lowered the price target to $43 from $60. She believes that there is still a lot of work to be done and that the company's cash flow will continue to be under pressure for the next year at least.

Overall, Advance Auto Parts' transformation is proving to be a complex journey, necessitating additional time and effort before it becomes an attractive investment.

A New Direction for Advance Auto

Only one out of the 27 analysts tracked by FactSet holds a bullish outlook for Advance Auto, while the average target price has fallen by more than half since May, now standing at less than $60.

Despite the substantial decline, the shares currently trade at just over 13 times forward earnings, making it an attractive option for bargain hunters.

However, potential investors should exercise caution. Truist Securities analyst Scot Ciccarelli highlights the company's worrying issues, such as declining profitability and financial strain, which are "way too much for our taste." Retail turnarounds are notoriously challenging, further adding to the hesitation.

Nevertheless, the stock's relatively modest reaction on Wednesday could signify that the worst is behind it.

It's worth noting that the Worldpac acquisition, announced in 2013, never lived up to investors' expectations. As a result, its absence may not generate much disappointment. Additionally, the lowered profit outlook includes one-time items. Moreover, with a new management team led by Chief Executive Shane O'Kelly, a former Home Depot (HD) executive who joined this summer, strategic changes and the appointment of a new CFO are likely to be embraced.

However, both analysts maintain a neutral stance on the stock.

Ultimately, Advance Auto must enact significant changes to reinvigorate its turnaround. While strategic shifts are welcome, it is crucial to ensure that profit forecasts do not continue their dramatic decline. Whether or not this represents the stock's low point remains uncertain.

At some stage, it may become clearer that the worst is truly over. But for now, following the timeless advice for car-buying seems applicable: buyer beware.