Advance Auto Parts plans to close 523 stores, sever relations with 204 independent locations and shutter four distribution centers after reporting quarterly earnings that missed analysts’ estimates. It also lowered its full-year profit forecast.
The Raleigh-based auto parts retailer is shrinking its U.S. footprint and aims to improve merchandising and supply chain and store operations as CEO Shane O’Kelly launched a three-year effort to boost profits. He told an analysts’ call today that “macro headwinds and economic uncertainty’’ hurt sales in the quarter ended Oct. 5.
Sales slipped 3.2% to $2.15 billion in the quarter from a year earlier while comparable-store sales dropped 2.3%. The adjusted per-share loss of 4 cents trailed analysts’ projection of 49 cents a share.
The stock climbed more than 1% to $41.69 in late afternoon trading. Shares have traded between $35 and $88 over the past year.
The closings will reduce the number of company-owned by about 10% and end Advance Auto’s supply relationships with about 20% of independent stores, according to O’Kelly. As of the end of 2023, the company operated 4,786 stores and 50 distribution centers, and it supplied 1,245 independently owned Carquest stores, according to a securities filing.
The closing of the Advance and Carquest stores are slated by mid-2025, the CEO said. Advance bought Carquest parent General Parts of Raleigh for $2 billion in 2014.
Earlier this month, the company completed the sale of Worldpac for about $1.5 billion in cash. Disposing of the automotive parts wholesale distribution business increases the company’s focus on stores.
As it closes what O’Kelly described as “non-performing, non-strategic’’ locations primarily in the western U.S., Advance Auto intends to improve pricing and promotion of merchandise and reduce freight costs. Job cuts will result in savings of about $50 million, he said.
Looking ahead, Advance Auto said it expects to report a per-share loss of 60 cents to break even in 2024, compared with its August projection of profit in the $2 to $2.50 per share range.
The company projected sales of $8.4 billion to $8.6 billion in 2025, and nearly $9 billion by 2027. it anticipates an adjusted operating income margin of 2% to 3% next year, versus a 2027 goal of about 7%.
“We have no doubt we can compete,’’ O’Kelly told analysts. After store closings, the company will be the largest or second-biggest auto parts retailer in 75% of its markets, based on the number of stores. Key rivals include AutoZone and O’Reilly Auto Parts.
“The idea is to get back to winning’’ and accelerating store openings,’’ he said. The company plans to open about 30 stores next year and ramp up annual openings to 50 stores to 70 stores by 2027.