The retail sector has faced economic challenges since the COVID-19 pandemic impacted the sector beginning in 2020.
Retailers have already faced rising inflation, increased interest rates, and consumers who are cautious with discretionary spending that has prompted out-of-court restructurings, bankruptcy filings, and store closings.
A more severe economic downturn could send many businesses over the edge, and certain retailers are taking precautions to guard against disaster.
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While most retail operators dread economic downturns that can reduce sales and revenue and cause financial distress, the automotive aftermarket sector has faced less of an impact in recent downturns, according to a 2022 report from KPMG.
Automobile owners tend to purchase auto parts to repair and maintain their vehicles during downturns instead of adding a much larger expense by buying a new car. Such behavior bodes well for the auto parts aftermarket sector.
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Multiple auto parts aftermarket retailers will be ready if economic conditions worsen, as several launched various levels of corporate restructuring in 2024 to improve the health of their companies.
Wheel Pros, which operates as auto parts distributor and retailer Hoonigan, filed for a prepackaged Chapter 11 bankruptcy on Sept. 9, 2024, in a consensual restructuring to hand 85% of its new equity interests to holders of first-lien claims and the remaining 15% to new first-lien lenders who will backstop the debtor’s exit term loan.
The debtor’s restructuring plan would eliminate $1.2 billion in debt and provide about $570 million in new capital through an exit facility.
Accuride Corp., another leading manufacturer of wheels and wheel end products for commercial trucks and trailers filed for Chapter 11 bankruptcy protection on Oct. 9, 2024, seeking a consensual restructuring of its debt to continue operating as a going concern.
Advance Auto Parts will close over 700 stores by the end of March.
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Advance Auto Parts accelerates store closings
And in 2025, struggling auto parts retailer Advance Auto Parts (AAP) , with nearly 5,000 retail stores, has accelerated its strategic turnaround plan to close 727 corporate-owned and independent locations, as well as four West Coast distribution centers, by the end of March.
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Originally, the auto parts retailer revealed in November 2024 that it planned to close the stores and distribution centers by mid-2025 and lay off a significant number of its 65,000 employees.
More closings:
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- Bankrupt retail chain unloads store leases, key asset
- Popular discount retailer files bankruptcy, closes all stores
The company will consolidate its distribution centers into 13 large facilities around the nation by 2026.
The company-owned store closings amount to about 10% of its corporate stores, while the reduction of the independent locations equals 20% of Advance Auto Parts’ non-corporate locations.
The Raleigh, N.C.-based auto parts retailer operated 4,781 stores, mostly in the U.S., and 1,125 independently owned Carquest branded stores as of Oct. 5, 2024.
Advance Auto Parts said it would save about $60 million to $80 million in operating costs related to its store closures, but the elimination of the 727 stores would also reduce its annual net sales by about $700 million.
The reduction in personnel from the closed stores and facilities would yield about $50 million in annual savings, the company said.
Advance Auto expands its market hub store network
The auto parts dealer also plans to expand its network of market hub stores that operate as both retail stores and distribution facilities and are larger than its retail-only shops, the company said in its Feb. 26 earnings call.
Advance Auto Parts currently operates 19 market hub stores and plans to open 10 more in 2025. The company plans to accelerate market hub store openings in 2026 and target a total of 60 locations by mid-2027.
The auto parts retailer completed the sale of auto parts wholesaler and distributor Worldpac for $1.5 billion on Nov. 1, 2024.
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