Advance Auto Parts (AAP), a leading auto parts retailer announced this week that they would be closing hundreds of stores across the country and performing job cuts. The decision was made in an effort to restrategize and restructure to avoid a bankruptcy filing.
The auto parts industry has faced financial struggle for the past few years as retailers are battling lower consumer demand for vehicle parts. Stellantis, a Big Three Automaker in Detroit, recently laid off hundreds of employees while other giants in the industry like Wheel Pros have been forced to file for Chapter 11 bankruptcy to pay off debts. AAP announced that their store closures and layoffs are part of a three-year restructuring initiative. Here’s what we know.
Advance Auto Parts Faces Financial Distress
As of December 2023, Advance Auto Parts had nearly 5,000 stores across the U.S. and Canada. Nearly one year later, in November of 2024 they announced they would be closing a whopping 700 stores in order to restructure and focus on the high-performing stores which will remain open.
AAP revealed in a press release their third quarter 2024 financial report, demonstrating the financial strain the business had faced in 2024 as compared to the previous year. Compared to the third quarter of 2023, sales decreased by 2.3%. The company also stated in the press release that they had “incurred high labor-related expenses due to wage investments in frontline team members.
According to Reuters, the company also revealed to analysis that their distribution was heavily impacted by hurricanes and the CrowdStrike outage, putting further financial strain on the company.
President and CEO Shane O’Kelly explained the strategic plan to avoid filing for Chapter 11 bankruptcy: “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.”
Advance Auto Parts Store Closures
The 700 stores and 4 distribution centers closing include every California location. These stores will be officially closed by the end of 2025 as per the strategic plan to concentrate efforts on strong markets.
In addition to all California locations being closed and mass layoffs across the state, Texas will be hit with layoffs as well. There are currently 251 AAP locations in the state of Texas. A recent WARN Notice revealed that 67 workers in Texas will be laid off in February 2025.
While the auto parts giant did not state exactly how many layoffs they planned, they did reveal that the personnel reduction would result in about $50 million in annual savings which is one step of their strategic initiative to improve business performance.
Advance Auto Parts Strategic Plan
In addition to closing stores and reducing staff, the press release revealed the other strategic initiatives that AAP will undergo over the next three years. They plan to improve labor productivity in their high-performing stores and bring products to market faster.
In terms of their supply chain, they will also consolidate their distribution centers with plans “to operate 13 large facilities by 2026” and open 60 market hub locations by 2027.
