Pep Boys yields to Advance Auto Parts in major California expansion
Raleigh-based Advance Auto Parts has announced plans to grow its retail footprint expansion across California in 2021 by leasing the retail space of 109 Pep Boys stores from Icahn Auto Group. Over the next 9-12 months the stores will be converted to Advance Auto Parts stores. This will grow the number of stores operated by Advance Auto Parts to 4,915 in the United States, Canada, Puerto Rico, and the U.S. Virgin Islands. There are 24,111 Auto Parts stores in the U.S.
Pep Boys Service Centres are not included in the leasing opportunity and will remain under the management of Icahn Auto Group. The agreement was signed by both parties last month, leaving Advance in a strong position in a key strategic market expected to grow by more than $41 billion by 2024.
The acquisition increases Advance Auto Parts market share but still leaves them trailing behind Autozone (5,914), O’Reilly Auto Parts (5,592), Napa Auto Parts (5,270) in the national auto parts chain store count. It does increase the number of stores Advance Auto Parts owns in California from 634 to 743, making it the state with the largest number of Advance Auto Parts stores.
The expansion follows a three-year period of aggressive frugality and consolidation where underperforming stores were made leaner through restructuring, staffing changes, and aggressive inventory optimization. The plan was a success with Advance Auto Parts seeing store sales growth increase by 4.7 percent in the last quarter of 2020. Tom Greco, CEO of Advance Auto Parts is expected to make a major announcement concerning their long-term plans on April 20th, 2021.
For Pep Boys, it is a chance to their growing Service Center business, which includes the lucrative fleet market. Brian Kaner, CEO of Pep Boys issued the following statement:
“The agreement announced today only reinforces Pep Boys Service position as a leading repair and maintenance provider for consumers and fast-growing fleets on the West Coast. The agreement this year will provide us with an opportunity to refresh our Service Center locations and reinvest in the market to meet emerging customer needs, particularly as demand for electric vehicle service grows in the region. In addition, there’s a significant convenience advantage to having Pep Boys Service Centers located in proximity to a leading parts provider such as Advance — just another way Pep Boys in continuing to deliver on our promise to our customers: We go further to help you go farther.”
100 years
In the year of Pep Boys 100th Anniversary, the chain’s retail division has closed or leased around 120 of its 500-plus stores that were part of a $1 billion deal by Carl Icahn five years ago. Accelerated closings and the rebranding of stores have been in response to a significant drop in sales during one of the most disruptive years the automotive industry has ever seen.
California Pep Boys are also closing clusters of stores in Seattle, Detroit, Michigan, New Mexico, and Louisiana. The number of retail stores that Pep Boys operates is greatly outnumbered by their ‘Do-it-for-me’ service locations. In the last quarter of 2020, sales for Pep Boys totaled just $596 million compared with $703 million during the last quarter of 2019. Group chief financial officer Sung Cho told investors that the drop in sales was caused mostly by store closings during an October 2020 conference call.
Icahn Automotive says the downsizing of their aftermarket side of the business will allow resources and investment to be diverted to their tire and service division which is less vulnerable to competition. Several major auto parts retailers have been encroached upon by rivals such as Amazon Automotive making inroads into the industry.
