Texas Border Business
Texas Border Business
RALEIGH, N.C. — February 28, 2024 – Advance Auto Parts, Inc. (NYSE: AAP), a leading provider of automotive aftermarket parts in North America, released its financial results for the fourth quarter and full year ending December 30, 2023. The report highlighted declining profitability, prompting the company to announce a significant restructuring plan, including the closure of 700 stores nationwide, four distribution hubs, and 200 independently operated locations as part of its Asset Optimization Program.
Shane O’Kelly, President and CEO, acknowledged the company’s below-expectation performance, emphasizing the need for greater discipline and accountability.
“As we closed out 2023, we continued to act with a sense of urgency to stabilize the business and position the company for a return to profitable growth,” O’Kelly stated.
The company has undertaken major cost-cutting measures and leadership changes to address these challenges, appointing Ryan Grimsland as Chief Financial Officer and Elizabeth Dreyer as Chief Accounting Officer to strengthen financial oversight.
Advance Auto Parts experienced declines in key financial metrics compared to the previous year, highlighting the challenges facing the company:
- Q4 2023 net sales: $2.5 billion (down 0.4% year-over-year)
- Full-year net sales: $11.3 billion (up 1.2% from 2022)
- Comparable store sales: Q4 down 1.4%, full year down 0.3%
- Q4 operating loss: $48.6 million, a steep drop from the prior year’s $119.3 million operating income
- Full-year operating income: $114.4 million (down from $670.3 million in 2022)
- Diluted earnings per share (EPS): $0.50 for 2023, a significant decline from $7.65 in the previous year
The company attributed its declining gross profit margin (down 414 basis points) to inventory-related adjustments and increased supply chain costs. Additionally, higher labor and occupancy costs contributed to an increase in SG&A expenses, further straining profitability.
700 Store Closures: Impact on Texas
Advance Auto Parts will close 700 underperforming stores nationwide by mid-2025 as part of its cost-cutting strategy. This includes:
- 500 corporate-owned stores
- 200 independently operated stores
- 4 distribution hubs
The closures will reduce the company’s total store count from 4,788 locations to approximately 4,065 stores across North America.
In Texas, the company currently operates 251 stores, with at least four locations confirmed for closure:
- Corpus Christi, TX – 10765 Leopard St.
- McAllen, TX – 1010 North 10th St.
- Weslaco, TX – 154 North Texas Blvd.
- Grand Prairie, TX – 425 S Belt Line Rd.
Following these closures, an estimated 247 Advance Auto Parts stores will remain operational in Texas.
Strategic Cost-Cutting & Restructuring Initiatives
To improve financial stability, the company has launched a cost-reduction initiative, including:
- $150 million in annualized SG&A reductions executed in Q4
- An additional $50 million in cost eliminations targeting indirect spending
- A supply chain consolidation plan to create efficiencies and improve customer service
Additionally, the company is in the process of selling Worldpac and its Canadian business, which are undergoing separate sale processes.
Despite financial struggles, Advance Auto Parts declared a $0.25 per share dividend, payable on April 26, 2024, to stockholders of record as of April 12, 2024.
2024 Outlook: A Reset Year
Looking ahead, CFO Ryan Grimsland emphasized 2024 as a pivotal year for operational reset:
“We are committed to improving overall productivity and taking a disciplined approach to reducing expenses. This will support our focus on investing in our team members and solidifying our foundation for long-term success.”
Advance Auto Parts is focused on returning to profitability by refining its cost structure, enhancing store efficiency, and strengthening competitive positioning in the rapidly evolving auto parts market.
