Advance Auto Parts, a prominent player in the automotive aftermarket industry, has announced a significant restructuring plan that involves the closure of several stores and distribution centers in the United States by mid-2025. This decision comes as part of the company’s efforts to enhance operational efficiency and address declining sales. The move marks a pivotal shift in Advance Auto Parts’ strategy, reflecting its intent to focus more on core retail functions and improve shareholder value.
In recent developments, Advance Auto Parts revealed its plan to shut down 523 corporate and 204 independently owned Carquest stores, along with four distribution centers. This announcement follows the completion of the sale of its wholesale arm, Worldpac, which consummated a deal valued at $1.5 billion. The strategic pivot aims to streamline operations and concentrate resources on improving the productivity of existing assets. Earlier reports highlighted the company’s challenges with declining comparable sales, which decreased by 2.3% in the third quarter, alongside a dip in net sales.
Why Is Advance Auto Parts Closing Stores?
Advance Auto Parts’ decision to close a substantial number of its outlets is primarily driven by its desire to optimize store operations, enhance labor productivity, and accelerate new store openings. By reducing its asset footprint, the company seeks to standardize its store operations and improve its operating margins. The restructuring plan is expected to bolster its adjusted operating income margin by over 500 basis points through fiscal 2027. This approach intends to address challenges faced in maintaining sales growth and profitability in a competitive market.
What Are the Strategic Objectives?
The company’s strategic objectives focus on refining its merchandising and supply chain capabilities. This includes efforts to bring parts to market faster and improve gross margins by managing pricing and promotions. In the supply chain domain, Advance Auto Parts plans to consolidate its distribution centers, expand market hub locations, and optimize transportation routes. These measures aim to enhance part availability and support the company’s goal of delivering consistent, profitable results.
“We are charting a clear path forward and introducing a new three-year financial plan,” stated Advance Auto Parts President and CEO Shane O’Kelly, emphasizing the focus on core retail fundamentals and shareholder value creation.
In addition to its restructuring efforts, Advance Auto Parts’ recent actions indicate a broader strategy to simplify its business model. The sale of Worldpac has allowed the company to concentrate more on its blended-box business, which integrates retail and commercial operations. This simplification is expected to elevate the performance of core operations and further align with the company’s financial objectives.
Advance Auto Parts’ restructuring initiative reflects its ongoing adaptation to market conditions and internal challenges. By closing underperforming stores and refining its operations, the company aims to achieve a leaner, more efficient business model. As it navigates the complexities of the automotive aftermarket sector, the company remains focused on improving performance and delivering value to its stakeholders. This strategic shift, while significant, highlights the evolving nature of retail operations in a dynamic market environment.
