Advance Auto Parts to Close 500 Stores by Mid-2025

(Reuters) – Advance Auto Parts (NYSE:AAP) announced on Thursday plans to close approximately 500 stores by mid-2025 and reduce jobs as part of a restructuring effort. This move comes as the demand for vehicle parts has declined due to fewer consumers choosing to repair their cars.

Shares of the auto parts retailer fell about 4.7% in premarket trading after reporting an unexpected third-quarter adjusted loss of 4 cents per share, while analysts were anticipating a profit of 49 cents, according to data from LSEG.

The automotive sector has faced significant challenges in the second half of the year, influenced by inflationary pressures and increased competition from Chinese automakers offering affordable and feature-rich vehicles.

Companies like Aptiv (NYSE:APTV) PLC and BorgWarner (NYSE:BWA) have recently lowered their annual sales forecasts due to expectations of reduced vehicle production amid decreasing consumer purchases.

In its turnaround strategy, Advance Auto Parts plans to close 523 corporate stores, exit 204 independent locations, and shut down four distribution centers by mid-2025. The company aims to enhance its adjusted operating income margin by over 500 basis points through fiscal 2027.

The restructuring is expected to incur costs ranging from $350 million to $750 million. Additionally, the North Carolina-based company anticipates 2024 earnings from continuing operations to range between a loss of 60 cents per share and breakeven, contrasting with estimates for an adjusted profit of $2.16 per share.