Advance Auto Parts is taking a play directly from the NASCAR greats by operating with one foot on the brake and one foot on the gas.
Advance Auto Parts is betting big on the idea that less is more. The automotive parts retailer is kicking off its downsizing strategy by shutting down over 200 locations, trimming its nationwide store footprint in a bid to streamline operations and refocus its resources.
In a bold move last November, Advance Auto Parts unveiled plans to shut down 523 corporate stores and 204 independent locations. This aggressive downsizing is part of a “strategic plan to improve business performance with a focus on core retail improvements,” with the company zeroing in on core retail improvements to steer its long-term turnaround strategy.
Hitting the Brakes
The national chain is slashing its footprint across the US with a ruthless move to shut down hundreds of stores. In the immediate crosshairs are 200 leased locations and 24 owned stores, all set to close within weeks. This no-nonsense maneuver is part of a hardline turnaround plan aimed at dragging the company back into profitability.
The full impact on workers remains a mystery, as the company hasn’t disclosed how many jobs will be lost in the wake of these closures. Advance Auto Parts currently operates roughly 4,780 stores across the U.S., Puerto Rico, Canada, and the U.S. Virgin Islands, but that number is about to take a serious hit.
“We made the decision to close certain non-performing, non-strategic stores in the U.S. to better position our asset base for long-term, sustainable growth”
Advance Auto Parts CEO Shane O’Kelly in November | Forbes
Advance Full Throttle
Advance Auto Parts has taken a beating, with shares plunging nearly 30% over the past year. However, the stock has clawed its way back from its fall 2024 low, as investors warm up to management’s no-nonsense turnaround plan. By targeting specific operational weak spots, the company has laid out a multi-year strategy to get back in the game.
The plan hinges on three core pillars: tightening up store operations (with these closures being just the beginning), driving supply chain efficiency, and revamping in-store merchandising. It’s a bold move to stop the bleeding and reignite growth.
- Store operations
- Reduction in U.S. asset footprint – closing 523 Advance corporate stores, exiting 204 independent locations, and closing four distribution centers.
- Standardization of store operating model and improving labor productivity.
- Acceleration in pace of new store openings.
- Merchandising excellence
- Strategic sourcing to improve first costs and bring parts to market faster.
- Assortment management to enhance availability of parts.
- Pricing and promotions management to improve gross margin.
- Supply chain
- Consolidation of distribution centers to operate 13 large facilities by 2026.
- Opening of 60 market hub locations by mid-2027.
- Optimization of transportation routes and freight to lower costs and improve productivity.
CEO Shane O’Kelly believes Advance Auto Parts has a solid shot at turning things around. According to S&P Global Mobility, out of the 286 million vehicles on U.S. roads, only 90 million are less than six years old. With electric vehicle sales crawling at a slower pace than anticipated, more consumers are pouring cash into keeping their aging vehicles running strong. This growing demand for repairs and parts gives Advance a critical opportunity to claw its way back into relevance.
In March 2024, New York hedge funds Third Point and Saddle Point seized an opportunity, snapping up a combined 8% stake in Advance Auto Parts, betting that the company’s beaten-down shares were undervalued. By March, they’d brokered a deal to shake things up at the top, adding three heavy-hitters to the board. CEO Shane O’Kelly highlighted their industry clout: Tom Seboldt, a former O’Reilly exec; Gregory Smith, who led Walmart’s supply chain operations; and Brent Windom, the ex-CEO of Uni-Select, a Canadian auto parts distributor swallowed up last year by Chicago-based giant LKQ. These moves signal a serious bid to rebuild from the inside out.
During a November 2024 earnings call, O’Kelly said: “We made the decision to close certain non-performing, non-strategic stores in the U.S. to better position our asset base for long-term, sustainable growth.” Advance Auto Parts has taken a pounding, with shares tumbling nearly 30% over the past year. However, the stock has staged a comeback since hitting rock bottom in fall 2024. Investors seem cautiously optimistic, supported by the management’s turnaround plan. By pinpointing critical operational pain points, the company has mapped out a multi-year strategy to claw its way back to profitability.
