It’s been a year marked by undercurrents of unease in the car industry. From layoffs at automakers to beloved aftermarket brands declaring bankruptcy, headlines have left enthusiasts wondering where doom and gloom will come from next, and as it turns out, it might be from where you buy your car parts. Hundreds of Advance Auto Parts locations are shutting down in the next few months, meaning there’s a good chance you could lose a local auto parts store soon.
Actually, it’s bigger than that. In addition to hundreds of Advance Auto Parts locations, the company is also getting out of franchise locations, and downsizing its distribution network. As Reuters reports:
As part of its turnaround efforts, Advance Auto Parts announced plans to close 523 corporate stores, exit 204 independent locations, and shutter four distribution centers by mid-2025. The company aims to improve its adjusted operating income margin by over 500 basis points through fiscal 2027.
Holy crap. If my math checks out, 727 retail locations will be affected by this restructuring, including a whopping 10.6 percent of all corporate-owned Advance Auto Parts stores. Those are some massive cuts that could result in hundreds of job losses, and it makes you wonder what exactly happened.
Well, the truth is that Advance Auto Parts has been struggling for a while. In November 2023, the company reported losses of $0.83 cents per share, and considering it had more than 59 million outstanding shares at the time, we’re talking total losses in excess of $48 million. Clearly, something had to change, and it had to change relatively quickly.
Flash forward roughly a year to now, and Advance has found a lifeline by selling business-to-business subsidiary WorldPac to private equity firm Carlyle Group for $1.5 billion. Depending on how WorldPac is managed going forward, this might be an even bigger deal than closing a huge number of retail locations, because pretty much every shop that works on European cars uses WorldPac to source OE parts using the company’s speedDIAL portal, shown above.
At the same time, things have turned around enough for Advance Auto Parts to be nigh-on breakeven. For the third quarter of 2024, the company reported losses of four cents per share, considerably better than the situation a year before but still not in the zone of profitability. While closing hundreds of locations ought to swing things in the right direction, what headwinds put Advance here in the first place?
Well, Reuters claims that fewer people are repairing cars at home, and while there’s likely some truth to that, it probably isn’t the only explanation. For starters, as commerce in general has shifted from brick-and-mortar to online for many industries, auto parts has followed suit. This means that companies with less overhead in their models, such as RockAuto’s plan of being entirely online, can be competitive on a nationwide scale. Even Amazon is cashing in on auto parts, with its Automotive Part Finder function. If it isn’t in stock at the local auto parts store but you can get it from Amazon the next day, how many people would go through Amazon?
The other side of things is a supply chain crunch. It’s no real secret that auto parts suppliers have been under some serious pressure over the past few years, from inflation affecting cost of materials to reduced automaker demand hurting the OEM side of the business to shipping issues affecting timeliness, these are all hurdles that end up being passed onto retailers, and if you’re a retailer that doesn’t use a lean model, you have less ability to absorb some of those fluctuations.
Of course, heading into a more tumultuous era like the past four years, it probably helps if a company doesn’t spend big. In 2019, CNBC reported that Advance Auto Parts purchased the DieHard battery brand from Sears for $200 million in cash. Oh, and then Advance paid Bruce Willis to start in a “Die Hard”-themed TV ad in 2020. At the same time, Advance continued expansion in 2021, inking agreements to lease 109 Pep Boys retail stores in California, converting them to Advance Auto Parts locations. Keep in mind, this was fully in the depths of a digital-first era, so it might not have been the most prudent capital decision.
It’s worth noting that the physical parts store of old still has a place. If you need a part right now and it’s in stock at a local auto parts store, chances are you’re taking the bus, going on a bike ride, or taking another car down to the store to get what you need. If your daily driver breaks at 3:00 p.m. on a Sunday and you need to clock in at 8:30 a.m. on Monday, you’re looking to get the job done if you can wrench, and the extra cost of going local is worth it compared to the alternative of calling into work.
Still, in a digital-first era, perhaps scaling back isn’t such a bad thing. Maybe it’s time to be more conscientious about the parts in stock, pay better wages for greater knowledge behind the counter, and find ways to be more price-competitive with online retailers. The losses that come with shuttering hundreds of Advance Auto Parts locations will have a serious impact, but for a situation to end up like this, it usually requires people in charge not seeing the forest for the trees.
(Photo credits: Advance Auto Parts, WorldPac)
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Advance Auto kinda built their reputation on the Hobby Lobby model of slightly higher prices with some killer coupons. The problem (for me anyway) was they’ve gradually reduced the effectiveness of the coupon so they’re basically unusable through all the restrictions. Pair that with higher prices and generally more poorly managed stores… Yeah I basically only go there if I’m desperate
The UPS store in my tiny town closed. The only reason I go to advance now is because I can drop my packages there for pickup when I have an Amazon return. No lie.
They never have anything I need in stock, and what is in stock is so much more money than ordering online I don’t bother.
There used to be two stores in my town. One was by itself, the other was in a row with every other parts retailer you could imagine. They closed the one that was by itself several years ago. The other one has been declining for years. It’s very dingy, and half of the lights don’t work. The only times I have ever gone in there was when the four other stores didn’t have what I was looking for. The only time I even go to any of them is when I haven’t planned ahead and gotten the parts from rockauto or amazon. I maybe go in there once a year and every time it just looks worse and worse.
I live in a fairly small city with several suburbs that makes up about 650,000 people.
Within a 20 minute drive, there are:
9 Advance Auto Parts
6 AutoZones
4 O’Reillys
5 Napa
Yeah, they are crazy oversaturated around me, too. Although, to be honest, I can never remember which ones are Advance Autos and which are AutoZones, even when I’m in the store, I often forget which one I went to and then get mad that they don’t have what the website showed as being in stock
When you’re worse than the likes of AutoZone and O’Reilly’s, it’s no wonder you’re going down in flames. Comparing parts, Advance is usually full of the cheap stuff but the brands you want are more costly than the other two, and a lot more than Rock Auto. In some cases, NAPA beat their price.
I’ve noticed a massive general decline in Advance Auto over the last few years. I used to be a die hard shopper there, but noticed that their stock was often not available in store even though the website said it was, the stores got dingier, and their not-behind the parts counter stock was super limited.
I now actively pass the Advance Auto by my house (that I can walk to) to go to a Napa or Autozone. It may be the worst store I’ve been in with employees that don’t help, have a different return policy than corporate, and is always in a state of disarray. If the Napa doesn’t have it, I can get it same day pretty much because the distrobution center is very very close and Autozone will call another store and hold something for me. Not something I’ve ever had Advance do.
This. I used to go to Advanced, but now I drive right past it to Autozone or O’Reilly’s. No point in even giving Advanced a shot, as they never have the part I need and the others almost always do.
My town has O’Reilly, Autozone, and Advance, all in a single row.
I mostly shop from RockAuto when I can plan 4-5 days out. (Or in many cases if I have to pay a ridiculously expensive price for 1 day shipping, and STILL be cheaper than the local store.)
O’Reilly carries Wix, and generally better quality stuff.
Autozone has lower prices, and a wider selection of I “need it today!”: odd sockets, tools, etc.
Advance… I’m actually not sure why I would go to advance. I can try them next time I guess, just to be fair.
I read this the other day, as you can imagine among us NAPA store owners it was of interest. I’m actually on a Teams call getting an update on it right now.
One thing to remember is that auto parts stores don’t subsist on DIY’ers doing work in their driveways. It’s nice, because there’s a bit more margin in that, but selling to the repair shops and fleets is where the bread and butter is. Advance acquired CarQuest a few years back to try to tap into that market a little better, I’m surprised this was not mentioned in the article (I do wonder how much that acquisition affected the balance sheet and led to the situation they’re in today). At our store probably 80% of our sales go out the back door. There’s a lot of volume there and it explains why O’Reilly’s in particular is after NAPA’s share of that market.
Auto parts is a fantastically competitive and complex business and there’s price pressure from all sides. Knowledgeable talent is at a premium. Margins are embarrassingly thin but everyone “can get it cheaper” somewhere else, and now the online retailers are strong as well. Sales are fairly soft in the industry right now, one theory I have is all the cars that weren’t sold in 2020 are not coming off-lease now nor out of OEM warranty (which is where the aftermarket comes in). Some folks disagree with my theory but we saw a bump a few years after Cash for Clunkers so there’s precedence. Between the Blue, Green, Orange and Red I’m not surprised one of the four is feeling the squeeze. Advance in particular has been so desperate for sales that they’ve been known to blitz areas at low margins, which has made things difficult at times.
Online retailers are a burden, to be sure, as evidenced by the number of folks here who say they’re willing to wait for parts. A shop that has to manage rack time doesn’t have this luxury, which is why it’s important to be successful in wholesale. You can combat the online guys buy having inventory, getting it to the shop faster, and providing good service. Personally I obviously feel an independently owned NAPA store is more likely to invest in these areas (in particular inventory), as they have their skin in the game. Your mileage may vary based on your local ownership though, and more NAPA’s are corporate owned now than ever before in my career, so it pays to know who runs yours.
TL;DR: From my perspective Advance was a retail-focused parts operation that tried to buy more wholesale market buy acquiring CarQuest and then didn’t know how to best use them, and amid a tough market is simply feeling the squeeze. I’m far from the smartest guy in the room though so take it for what it’s worth.
Interesting inside perspective, thank you.
Great stuff
I appreciate your perspective. It is interesting.
Parts prices for these “out the back door” sales are almost the sole reason that I really, really, resist taking any car to a local mechanic.
**Could you help to explain how local mechanics order parts, and how much competition there is on prices for these “out the back door” sales?
From my perspective as a consumer, when I go to a mechanic, he gives me parts prices which can sometimes be 2-3x more than what I could buy the exact same brand and part numbers on the competitive retail market.
I understand that there are costs for the local suppliers (NAPA, O’Reilly, etc.) of land, having parts in-stock, counter labor, driver labor, etc.
But it doesn’t seem like a competitive market. The mechanic gets a deal with a specific local supplier (I don’t know how, could be bribery and kick-backs for all I know.) and uses them for all parts orders. It doesn’t matter how much the parts cost, because they’ll just pass the cost to the customer, and most customers don’t look, don’t understand, and can’t negotiate repair bill line-items. The customer has no choice; they either get the work done or go elsewhere (to another place that also has a monopoly source for parts, likely with the same parts store!). Mechanics won’t allow the customer to use a competitive parts market and bring their own. I understand managing rack time in case the parts aren’t correct, but even if I verify the exact part number before hand, they won’t allow it. I really do understand that they are just reducing their risk to rack time.
So, where does the competition happen for the prices on “out the back door” sales to mechanics?
Thanks!
Another thing is that cars just break down a whole lot less and are much harder to DIY when they do. Back in the 1980s I did Starter, alternator, muffler, plugs, points and condenser, plug wires, hoses, and belts on my 60’s crap can car nearly every year or two. Now I can own cars for a dozen years with the same alternator/starter, hoses, and plugs.
I worked in a CarQuest as a driver and a counter guy when I was in high school, so I watch this industry with a mixture of nostalgia and sadness. Depending on the job I’ve rotated between the Autozone that’s been here a while or the O’Reilly that opened last year, with a NAPA and a once locally owned but now owned by Parts Authority. There is an Advance basically within shouting distance of all of these but I can’t remember the last time I went in there. Rock Auto has proven to be a mixed bag, with Centric brand parts once being okay, but now something I won’t touch.
I use Rock Auto, but I’ll go name-brand whenever possible. Their economy brands are a mixed bag.
But the prices are so much better than the brick and mortar stores, at least around here, that it’s still worth it to get a name-brand Bosch or whatever part, and still save money.
There’s so much junk on there. I stick with Delco or Denso or something I’ve at least heard of.
the issue with Advance and autozone to an extent, even O’Reilly’s lately is the selection and quality of parts available. little things like filters all the way to actual engine and vehicle specific parts like water pumps and even rotors are just not available as readily as they once were, and if they are downtown at some warehouse it seems like buying actual name brands from Rock auto or even Amazon is a faster and usually lower cost option.
I mean the other side is the people hired to work the counters. so few have a clue about anything automotive that it just baffles you how they got the job in the first place.
I’ve run into some good staff who really like the business and are very knowledgeable on cars – they’re able to answer questions right off the top of their head – but too many of them seem to have been hired b/c they could be taught how to enter things into the computer.
there are a few. There are also a few that try, but are definitely more the Bench racer types versus the actual racer type.
They’re not going to get good retail staffing at that rate of pay. Nobody does.
Hell, just doing a routine oil change usually takes Napa a couple of days to get everything together, or else I have to run around to a bunch of stores myself, 2 quarts from one, 1 quart from another, the filter from a third, etc. This is basic shit, I’m not buying anything weird or exotic here