Advance Auto Parts, Inc., an automotive aftermarket parts provider in North America, announced that it has decided to focus on its “blended box business model” and initiate a separate sale process for Worldpac as well as its Canadian business. In its third-quarter financial report, Advance also said it is launching a new cost reduction program that is expected to generate at least $150 million in savings on an annualized basis.
New Advance Auto Parts CEO Shane O’Kelly served as a U.S. Army captain in the 1990s after graduating from the U.S. Military Academy at West Point.
Early in Advance’s third-quarter conference call on Nov. 15 – during which the company reported an operating loss of $43.7 million – O’Kelly said his time in the military taught him the importance of aligning an organization “around fewer measurable goals while ensuring while ensuring discipline and accountability in the process to achieve those goals.”
O’Kelly, who replaced Tom Greco as CEO on Sept. 11, then outlined five “decisive actions” that Advance is taking “to help stabilize the company and return to profitable growth.”
The headliner was the company’s decision to divest its most prized asset: Worldpac.
Advance acquired Worldpac and Carquest in 2014 through its acquisition of General Parts International Inc. At the time, Advance boasted that the transaction created the largest provider of aftermarket parts in North America.
Centerview Partners, an investment-banking and advisory firm, will assist with the sale process, according to the company.
“Worldpac is a high-performing business and as you know, is very different than our core blended-box model,” O’Kelly said during the conference call. “As we get back to the fundamentals of servicing our professional and DIY customers, we view now as the right time to simplify our model. The Worldpac business still operates relatively independently from Advance, and we believe that the sale process will not create a distraction.”
In a separate sales process, Advance plans to divest its business in Canada. Advance’s Canadian business – which goes to market under the Carquest banner – predominantly serves DIFM customers.
As part of its operational review launched in August, Advance also announced a cost-cutting program that the company expects to generate at least $150 million in annualized savings. While Advance’s Q3 net sales were up 3% to $2.7 billion, the company reported negative cash flow through the first three quarters of 2023 – an outflow of $156.8 million.
The cost-reduction program “will be primarily driven by simplifying our organizational structure, minimizing duplicative efforts and eliminating investments that are not core to supporting our frontline team members and customers,” O’Kelly said.
O’Kelly noted that Advance plans to reinvest approximately $50 million from the cost-cutting program “to improve the retention of our frontline teams and ensure we have experienced team members to serve our customers.”
“In fact, we began making changes to our frontline compensation structure in Q3 and are already seeing a reduction in turnover in targeted frontline roles,” he added.
Advance Appoints New CFO
Coinciding with its third-quarter earnings announcement, Advance announced the appointment of Ryan Grimsland as executive vice president and chief financial officer, effective Nov. 27.
Tony Iskander, who has served as interim chief financial officer since August, will continue in his role as senior vice president, finance and treasurer.
Grimsland, 46, brings more than 20 years of experience in corporate finance, treasury, financial planning and retail strategy and transformation.
Most recently, Grimsland served as senior vice president, strategy and transformation at Lowe’s Companies. During his 17-year tenure at Lowe’s, he held leadership roles across all aspects of the finance organization, including senior vice president, corporate finance and treasurer; vice president, corporate financial planning and analysis; and vice president, stores finance.
During Advance’s Nov. 15 conference call, O’Kelly said Grimsland “has a strong track record of driving organizational improvements while implementing best practices to resolve complex issues.”
“In addition to our CFO announcement, we’ve taken action to streamline our management structure,” O’Kelly added. “We have reorganized parts of my leadership team and transitioned responsibilities for our marketing, merchandising and e-commerce functions to the appropriate leaders in our organization who will drive enhanced collaboration and accountability.”
As part of that reorganization, Advance announced that it is eliminating the position of executive vice president, merchandising, marketing and e-commerce, currently held by Jason McDonell. McDonell will depart from the company effective Dec. 1.