Advance Auto Parts is slashing its store fleet by more than 700 locations and shuttering four distribution centers, adding to this year's pile of retail closings that are starting to inch toward the COVID-19 pandemic's peak in 2020.
The Raleigh, North Carolina-based auto parts retailer unveiled its dramatic restructuring and store optimization strategy Thursday when it reported its third-quarter earnings. The company's net sales from continuing operations totaled $2.1 billion, down from $2.2 billion in the prior-year period, while comparable store sales decreased 2.3%.
Advance Auto said it plans to close 523 corporate stores and 204 independent locations, a total of 727, starting this year and finishing in the middle of next year. With the move, the retailer — a major player in the more than $150 billion auto aftermarket industry — will exit the entire West Coast to increase its store concentration in its strongest markets. The store closings will result in a loss of sales revenue ranging from $500 million to $800 million for Advance Auto, according to Chief Financial Officer Ryan Grimsland. As of October, Advance Auto had 4,781 stores.
"Our four [distribution centers] on the West Coast serve a lower concentration of stores and we would need to allocate significant capital and resources to infill those markets," he said. "We do not believe this would be the best use of our capital and believe that investing in other core areas of the business will help deliver stronger profitability. As a result, we decided to close the four [distribution centers] and associated corporate stores and independent locations in these less dense markets resulting in a complete exit of certain markets on the West."
The objective is "to improve store concentration in our strongest markets to conserve resources and be better positioned to grow in those markets," according to O'Kelly.