Revamping Auto Parts Revival: Advance Auto Parts Accelerates Turnaround with 200 Store Closures
Advance Auto Parts, a prominent automotive parts retailer, is embracing a less is more approach as it embarks on a mission to shrink its nationwide store presence by closing over 200 locations. This move is part of a broader strategic initiative to strengthen business performance and boost profitability.
Last November, Advance Auto announced its plans to close 523 corporate and 204 independent locations, with an estimated cost range of $350 million to $750 million. This strategic overhaul, focused on core retail enhancements, is aiming for long-term growth and profitability turnaround.
Based in Raleigh, North Carolina, Advance Auto boasts around 4,500 corporate stores across the United States. The company has enlisted professional assistance in this matter, appointing corporate recovery specialist Hilco Real Estate to manage the sale of its real estate assets, comprising both owned and leased outlets scattered across 46 U.S. states.
Hilco will initially oversee the disposal of over 200 leased and 24 owned locations following Advance Auto's initiatives to revive its business and shift towards profitability. In November, the company struck a $1.5 billion deal to sell automotive parts wholesaler Worldpac to global investment firm Carlyle, marking a critical step in its business model rationalization.
Advance Auto Parts Q3 Financial Performance
During its third quarter, Advance Auto Parts managed to narrow its net losses to $6 million, or $0.10 per share, marking a significant improvement compared to the $62 million, or $1.04 per share, loss in the prior year's quarter. Despite these promising figures, net sales fell 3.2% to $2.15 billion, falling short of analyst expectations of $2.62 billion. Even comparable-store sales dipped by 2.3%, underperforming Street expectations.
Due to these results, Advance Auto Parts revised its full-year outlook for the second quarter in a row, lowering its comparable-store sales guidance by approximately 1%. At the time, President and CEO Shane O'Kelly expressed optimism regarding the implementation of its strategic actions and the outlook for the company.
Advance Auto Parts Turnaround Plan
O'Kelly outlined the company's turnaround plan during a November earnings call, emphasizing the need to close underperforming and non-strategic stores in the U.S. to better position its asset base for sustainable growth. Shares in Advance Auto Parts have seen a dip of nearly 30% over the past 12 months, but investors appear hopeful about the company's clear turnaround strategy.
The strategy has three main pillars: optimizing store operations (including store closures), enhancing supply chain efficiency, and improving merchandizing in-store. Hilco Real Estate's leased and owned location sale offers deadlines are set for March this year.
Following Advance Auto Parts' strategic initiative, the company announced that it will close over 200 of its Advance Auto Parts stores, contributing to the total of 523 corporate and 204 independent locations set to close. (Advance Auto Parts closing 200 locations)
The closing of these stores, part of Advance Auto's larger strategic overhaul, is being managed by corporate recovery specialist Hilco Real Estate, responsible for selling both owned and leased outlets. (Advance Auto Parts store closures managed by Hilco Real Estate)
