Advance Auto Parts faces crisis with 727 store closures, what’s next?
The retailer plans significant cuts to its footprint and workforce as part of a new recovery strategy.
Advance Auto Parts is downsizing its operations in response to mounting financial challenges. The company announced plans to close 523 corporate stores, four distribution centers, and withdraw from 204 independent locations by mid-2025.
The restructuring comes after a disappointing third-quarter earnings report. The automotive parts retailer reported an 11% increase in gross profits, significantly lower than the 37% increase the company saw in the third quarter last year.
Alongside rising operating expenses and waning demand for vehicle repairs, the company said that hurricanes and the CrowdStrike outage impacted its recent financial performance.
Carving a path back to stability
Advance Auto Parts’s CEO and President, Shane O’Kelly, outlined a three-year plan to stabilize the company. “We are charting a clear path forward and introducing a new three-year financial plan, with a focus on executing core retail fundamentals to improve the productivity of all our assets and to create shareholder value,” O’Kelly said in a statement.
The plan includes consolidating the company’s supply chain into 13 large distribution centers by 2026 and opening 60 market-hub locations by mid-2027. The company also recently completed the nearly $1.5 billion sale of Worldpac, a wholesale supplier of auto parts, to free up resources for its turnaround efforts.
Related: This is your shot at buying a 1973 Dino 246 GTS once owned by Bob Seger
A shifting retail landscape
Founded in 1932 and headquartered in Raleigh, North Carolina, Advance Auto Parts operates 4,781 stores across the U.S., with additional locations in Canada, Puerto Rico, and the U.S. Virgin Islands.
The closures will reduce the company’s U.S. presence significantly, though Advance has not shared a comprehensive list of all the stores and distribution centers that will shut down.
According to the San Diego Union-Tribune, the company is planning to close all of its California locations, making up more than 150 stores.
The downsizing reflects broader challenges in the automotive aftermarket industry. Fewer consumers are opting for vehicle repairs, and of the ones who do, more people are turning to online retailers like RockAuto and Amazon.
Increased interest in new car ownership has also chipped away at the demand for repair parts offered by retailers like Advance Auto.
Related: Federal EV tax credit at risk — how much does it really drive sales?
Final thoughts
While the closures will make it harder for car owners and mechanics to access parts, Advance Auto Parts hopes the changes will streamline operations and improve long-term profitability. The company is betting on its reduced but more efficient retail network and an optimized supply chain to regain financial stability.
The big question is whether streamlining operations is enough as businesses and buyers increasingly forgo brick-and-mortar locations, instead choosing to buy parts online.
Advance Auto Parts currently faces an uphill battle to maintain its position as a leading player in the automotive aftermarket sector, with significant changes ahead for both employees and customers.
Related: GM doubles down on cutting Apple CarPlay and Android Auto