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What changed in ADVANCE AUTO PARTS INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of ADVANCE AUTO PARTS INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+346 added−303 removedSource: 10-K (2025-02-26) vs 10-K (2024-03-12)

Top changes in ADVANCE AUTO PARTS INC's 2025 10-K

346 paragraphs added · 303 removed · 103 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

48 edited+100 added−9 removed4 unchanged
Biggest changeOur Corporate Sustainability and Social Report is not, and will not be deemed to be, a part of this Annual Report on Form 10-K or incorporated by reference into any of our other filings with the Securities and Exchange Commission (“SEC”).
Biggest changeThe Corporate Sustainability and Social Report is not, and will not be deemed to be, a part of this Annual Report on Form 10-K or incorporated by reference into any of the Company’s other filings with the Securities and Exchange Commission (“SEC”). 4 Table of Contents Intellectual Property The Company owns a number of trade names, service marks and trademarks, including “Advance Auto Parts ® ,” “Advance Same Day ® ,” “Carquest ® ,” “CARQUEST Technical Institute ® ,” “DieHard ® ,” “DriverSide ® ,” “MotoLogic ® ,” “MotoShop ® and “TECH-NET Professional Auto Service ® ”, for use in connection with the automotive parts business.
In 2014, we acquired General Parts International, Inc. (“GPI”), a privately-held company that was a leading distributor and supplier of original equipment and aftermarket automotive replacement products for professional markets operating under the Carquest and Worldpac trade names.
In 2014, the Company acquired General Parts International, Inc. (“GPI”), a privately-held company that was a leading distributor and supplier of original equipment and aftermarket automotive replacement products for professional markets operating under the Carquest and Worldpac trade names.
Our primary competitors are (i) both national and regional chains of automotive parts stores, including AutoZone, Inc., NAPA, O’Reilly Automotive, Inc., The Pep Boys-Manny, Moe & Jack and Auto Plus (formerly Uni-Select USA, Inc.), (ii) internet-based retailers, (iii) discount stores and mass merchandisers that carry automotive products, (iv) wholesalers or jobbers stores, including those associated with national parts distributors or associations, (v) independently-owned stores and (vi) automobile dealers that supply parts.
The Company’s primary competitors are (i) both national and regional chains of automotive parts stores, including AutoZone, Inc., NAPA, O’Reilly Automotive, Inc., The Pep Boys-Manny, Moe & Jack and Auto Plus (formerly Uni-Select USA, Inc.), (ii) internet-based retailers, (iii) discount stores and mass merchandisers that carry automotive products, (iv) wholesalers or jobbers stores, including those associated with national parts distributors or associations, (v) independently-owned stores and (vi) automobile dealers that supply parts.
The principal methods of competition in our business include brand recognition, customer service, product offerings, availability, quality, service with speed, price and store location.
The principal methods of competition in the business include brand recognition, customer service, product offerings, availability, quality, service with speed, price and store location.
Our Products The following table shows some of the types of products that we sell by major category: Parts & Batteries Accessories & Chemicals Engine Maintenance Batteries and battery accessories Air conditioning chemicals and accessories Air filters Belts and hoses Air fresheners Fuel and oil additives Brakes and brake pads Antifreeze and washer fluid Fuel filters Chassis parts Electrical wire and fuses Grease and lubricants Climate control parts Electronics Motor oil Clutches and drive shafts Floor mats, seat covers and interior accessories Oil filters Engines and engine parts Hand and specialty tools Part cleaners and treatments Exhaust systems and parts Lighting Transmission fluid Hub assemblies Performance parts Ignition components and wire Sealants, adhesives and compounds Radiators and cooling parts Tire repair accessories Starters and alternators Vent shades, mirrors and exterior accessories Steering and alignment parts Washes, waxes and cleaning supplies Wiper blades We provide our customers with quality products that are often offered at a good, better or best recommendation differentiated by price and quality.
Company Products The following table shows some of the types of products that the Company sells by major category: Parts & Batteries Accessories & Chemicals Engine Maintenance Batteries and battery accessories Air conditioning chemicals and accessories Air filters Belts and hoses Air fresheners Fuel and oil additives Brakes and brake pads Antifreeze and washer fluid Fuel filters Chassis parts Electrical wire and fuses Grease and lubricants Climate control parts Electronics Motor oil Clutches and drive shafts Floor mats, seat covers and interior accessories Oil filters Engines and engine parts Hand and specialty tools Part cleaners and treatments Exhaust systems and parts Lighting Transmission fluid Hub assemblies Performance parts Ignition components and wire Sealants, adhesives and compounds Radiators and cooling parts Tire repair accessories Starters and alternators Vent shades, mirrors and exterior accessories Steering and alignment parts Washes, waxes and cleaning supplies Wiper blades The Company provides customers with quality products that are often offered at a good, better or best recommendation differentiated by price and quality.
These categories of merchandise include batteries, brakes, chassis, ride control, engine management, filtration, chemicals and other parts under various owned brand names such as Autopart International ® , Carquest ® , DieHard ® , Driveworks ® and Wearever ® .
These categories of merchandise include batteries, brakes, chassis, ride control, engine management, filtration, chemicals and other parts under various owned brand names such as Carquest ® , DieHard ® , Driveworks ® and Wearever ® .
Pursuant to agreements with third-party vendors, lead-acid batteries, used motor oil and other recyclable items are collected by our team members, deposited onto pallets or into vendor supplied containers and stored by us until collected by the third-party vendors for recycling or proper disposal.
Pursuant to agreements with third-party vendors, lead-acid batteries, used motor oil and other recyclable items are collected by team members, deposited onto pallets or into vendor supplied containers and stored by the Company until collected by the third-party vendors for recycling or proper disposal.
Seasonality Our business is somewhat seasonal in nature, with the highest sales usually occurring in the spring and summer months. In addition, our business can be affected by weather conditions.
Seasonality The Company’s business is somewhat seasonal in nature, with the highest sales usually occurring in the spring and summer months. In addition, the Company’s business can be affected by weather conditions.
Our stores and branches offer a broad selection of brand names, original equipment manufacturer (“OEM”) and owned brand automotive replacement parts, accessories, batteries and maintenance items for domestic and imported cars, vans, sport utility vehicles and light and heavy duty trucks.
The Company’s stores offer a broad selection of brand names, original equipment manufacturer (“OEM”) and owned brand automotive replacement parts, accessories, batteries and maintenance items for domestic and imported cars, vans, sport utility vehicles and light and heavy duty trucks.
We initiated our professional delivery program in 1996 and have served professional customers since 2000. We have grown significantly as a result of strategic acquisitions, new store openings and comparable store sales growth. Advance Auto Parts, Inc., a Delaware corporation, was incorporated in 2001 in conjunction with the acquisition of Discount Auto Parts, Inc.
The Company initiated the professional delivery program in 1996 and has served professional customers since 2000. The Company has grown significantly as a result of strategic acquisitions, new store openings and comparable store sales growth. Advance Auto Parts, Inc., a Delaware corporation, was incorporated in 2001 in conjunction with the acquisition of Discount Auto Parts, Inc.
For the DieHard ® brand, we own the right to sell batteries and to extend the DieHard ® brand into other automotive and vehicular categories. We granted the seller an exclusive royalty-free, perpetual license to develop, market and sell DieHard ® branded products in certain non-automotive categories.
For the DieHard ® brand, the Company owns the right to sell batteries and to extend the DieHard ® brand into other automotive and vehicular categories. The Company granted the seller an exclusive royalty-free, perpetual license to develop, market and sell DieHard ® branded products in certain non-automotive categories.
Environmental and Other Regulatory Matters We are subject to various federal, state and local laws and governmental regulations relating to the operation of our business, including those governing collection, transportation and recycling of automotive lead-acid batteries, used motor oil and other recyclable items and ownership and operation of real property.
Environmental and Other Regulatory Matters The Company is subject to various federal, state and local laws and governmental regulations relating to the operation of the business, including those governing collection, transportation and recycling of automotive lead-acid batteries, used motor oil and other recyclable items and ownership and operation of real property.
Some of our brands include Bosch ® , Castrol ® , Dayco ® , Denso ® , Fram ® , Gates ® , Meguiar’s TM , Mobil 1 TM , Moog ® , Monroe ® , NGK ® , Prestone ® , Purolator ® , Trico ® and Wagner ® .
Some of the Company’s brands include Bosch ® , Castrol ® , Dayco ® , Denso ® , Fram ® , Gates ® , Meguiar’s TM , Mobil 1 TM , Moog ® , Monroe ® , NGK ® , Prestone ® , Purolator ® , Trico ® and Wagner ® .
Item 1. Business. Unless the context otherwise requires, “Advance,” “we,” “us,” “our,” and similar terms refer to Advance Auto Parts, Inc., its subsidiaries and their respective operations on a consolidated basis. Our fiscal year consists of 52 or 53 weeks ending on the Saturday closest to December 31 st each year.
Item 1. Business. Unless the context otherwise requires, the “Company,” “Advance,” and similar terms refer to Advance Auto Parts, Inc., its subsidiaries and their respective operations on a consolidated basis. The Company’s fiscal year consists of 52 or 53 weeks ending on the Saturday closest to December 31 st each year.
We believe that chains of automotive parts stores that, like us, have multiple locations in one or more markets, have competitive advantages in customer service, marketing, inventory selection, purchasing and distribution compared with independent retailers and jobbers that are not part of a chain or associated with other retailers or jobbers.
The Company believes that chains of automotive parts stores that, like the Company, have multiple locations in one or more markets, have competitive advantages in customer service, marketing, inventory selection, purchasing and distribution compared with independent retailers and jobbers that are not part of a chain or associated with other retailers or jobbers.
Compliance with any such laws and regulations has not had a material adverse effect on our operations to date. For more information, see the following disclosures in “ Part I. Item 1A. Risk Factors ” elsewhere in this report. Available Information Our internet address is www.AdvanceAutoParts.com.
Compliance with any such laws and regulations has not had a material adverse effect on the operations to date. For more information, see the following disclosures in “ Part I. Item 1A. Risk Factors ” in this report. 5 Table of Contents Available Information The Company’s internet address is www.AdvanceAutoParts.com.
Our website and the information contained therein or linked thereto are not part of this Annual Report on Form 10-K for 2023.
The Company’s website and the information contained therein or linked thereto are not part of this Annual Report on Form 10-K for 2024.
We make available free of charge through our Investor Relations website, located at ir.advanceautoparts.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, registration statements and amendments to those reports filed or furnished pursuant to the Securities Exchange Act of 1934 (“Exchange Act”) as soon as reasonably practicable after we electronically file such materials with, or furnish them to the SEC.
The Company makes available free of charge through the Investor Relations website located at ir.advanceautoparts.com, the Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, registration statements and amendments to those reports filed or furnished pursuant to the Securities Exchange Act of 1934 (“Exchange Act”) as soon as reasonably practicable after the Company electronically files such materials with, or furnishes them to the SEC.
Except where prohibited, we also provide a variety of services at our stores free of charge to our customers, including: • Battery and wiper installation; • Check engine light scanning; • Electrical system testing, including batteries, starters and alternators; • Oil and battery recycling; and • Loaner tool programs. 3 Table of Contents We also serve our customers online at www.AdvanceAutoParts.com or on our Advance Mobile App.
Except where prohibited, the Company also provides a variety of services at its stores free of charge to customers, including: • Battery and wiper installation; • Check engine light scanning; • Electrical system testing, including batteries, starters and alternators; • Oil and battery recycling; and • Loaner tool programs. 3 Table of Contents The Company also serves customers online at www.AdvanceAutoParts.com or on the Advance Mobile App.
We strive to exceed our customers’ expectations end-to-end through a comprehensive online and in-store pick up experience, extensive parts assortment, quality brands, experienced parts professionals, professional programs that are designed to build loyalty with our customers and our DIY customer loyalty program.
The Company strives to exceed its customers’ expectations end-to-end through a comprehensive online and in-store pick up experience, extensive parts assortment, quality brands, experienced parts professionals, professional programs that are designed to build loyalty with customers and the DIY customer loyalty program.
We sell products containing hazardous materials as part of our business. In addition, our customers may bring automotive lead-acid batteries, used motor oil or other recyclable items onto our properties. We currently provide collection and recycling programs for used lead-acid batteries, used oil and other recyclable items at a majority of our stores as a service to our customers.
The Company sells products containing hazardous materials as part of the business. In addition, customers may bring automotive lead-acid batteries, used motor oil or other recyclable items onto the properties. The Company currently provides collection and recycling programs for used lead-acid batteries, used oil and other recyclable items at a majority of the stores as a service to its customers.
While unusually heavy precipitation tends to soften sales as elective maintenance is deferred during such periods, extremely hot or cold weather tends to enhance sales by causing automotive parts to fail at an accelerated rate. Our fourth quarter is generally our most volatile as weather and spending trade-offs typically influence our professional and DIY sales.
While unusually heavy precipitation tends to soften sales as elective maintenance is deferred during such periods, extremely hot or cold weather tends to cause automotive parts to fail at an accelerated rate which can lead to enhanced sales. The fourth quarter is generally the most volatile as weather and spending trade-offs typically influence the professional and DIY sales.
Compliance with these laws and regulations and clean-up of released hazardous substances have not had a material impact on our operations to date. 5 Table of Contents We are also subject to numerous regulations including those related to labor and employment, discrimination, anti-bribery/anti-corruption, product quality and safety standards, data privacy, taxes, workplace safety, consumer protection and trade compliance.
Compliance with these laws and regulations and clean-up of released hazardous substances have not had a material impact on operations to date. The Company is also subject to numerous regulations including those related to labor and employment, discrimination, anti-bribery/anti-corruption, false claims, product quality and safety standards, data privacy, taxes, workplace safety, consumer protection and trade compliance.
In addition to these branded products, we stock a wide selection of high-quality owned brand products with a goal of appealing to value-conscious customers.
In addition to these branded products, the Company stocks a wide selection of high-quality owned brand products with a goal of appealing to value-conscious customers.
Based on our experience, we do not believe that there are any material environmental costs associated with the current business practice of accepting lead-acid batteries, used oil and other recyclable items as these costs are borne by the respective third-party vendors. We own and lease real property.
Based on the Company’s experience, the Company does not believe that there are any material environmental costs associated with the current business practice of accepting lead-acid batteries, used oil and other recyclable items as these costs are borne by the respective third-party vendors. The Company owns and leases real property.
Our marketing and advertising program is designed to drive brand awareness, consideration by consumers and omnichannel traffic by position in the aftermarket auto parts category.
The Company’s marketing and advertising programs are designed to drive brand awareness, consideration by consumers and omnichannel traffic by position in the aftermarket auto parts category.
Our professional customers can conveniently place their orders electronically, including through MyAdvance.com, by phone or in-store, and we deliver products from our stores or branch locations to their places of business. Supply Chain Our supply chain consists of a network of distribution centers, hubs, stores and branches that enable us to provide same-day or next-day availability to our customers.
Professional customers can conveniently place their orders electronically, including through MyAdvance.com, by phone or in-store, and the Company delivers products to their places of business. Supply Chain The Company’s supply chain consists of a network of distribution centers, hubs and stores that enable the Company to provide same-day or next-day availability to customers.
From time to time, we receive notices from the U.S. Environmental Protection Agency and state environmental authorities indicating that there may be contamination on properties we own, lease or operate or may have owned, leased or operated in the past or on adjacent properties for which we may be responsible.
From time to time, the Company receives notices from the U.S. Environmental Protection Agency and state environmental authorities indicating that there may be contamination on properties that the Company owns, leases or operates or may have owned, leased or operated in the past or on adjacent properties for which the Company may be responsible.
Our previous three fiscal years ended on December 30, 2023 (“2023”), December 31, 2022 (“2022”) and January 1, 2022 (“2021”) and included fifty-two weeks of operations. Overview We are a leading automotive aftermarket parts provider in North America, serving both professional installers (“professional”) and “do-it-yourself” (“DIY”) customers, as well as independently owned operators.
The Company’s previous three fiscal years ended on December 28, 2024 (“2024”), December 30, 2023 (“2023”) and December 31, 2022 (“2022”) and each included fifty-two weeks of operations. Overview Advance Auto Parts, Inc. and its subsidiaries is a leading automotive aftermarket parts provider in North America, serving both professional installers (“professional”) and “do-it-yourself” (“DIY”) customers, as well as independently-owned operators.
Our merchandising strategy is to carry a broad selection of high quality and reputable brand name automotive parts and accessories that we believe will appeal to our professional customers and also generate DIY customer traffic.
The Company aims to carry a broad selection of high quality and reputable brand name automotive parts and accessories that the Company believes will appeal to professional customers and also generate DIY customer traffic.
As of December 30, 2023, we operated 4,786 stores and 321 branches primarily under the trade names “Advance Auto Parts,” “Carquest” and “Worldpac.” We were founded in 1929 as Advance Stores Company, Incorporated, and operated as a retailer of general merchandise until the 1980s. During the 1980s, we began targeting the sale of automotive parts and accessories to DIY customers.
As of December 28, 2024, the Company operated 4,788 stores primarily under the trade names “Advance Auto Parts” and “Carquest.” The Company was founded in 1929 as Advance Stores Company, Incorporated, and operated as a retailer of general merchandise until the 1980s. During the 1980s, the Company began targeting the sale of automotive parts and accessories to DIY customers.
Our purchasing strategy involves negotiating agreements with vendors to purchase merchandise over a specified period of time along with other provisions, including pricing, rebates, volume and payment terms.
Merchandise, Marketing and Advertising In 2024, the Company purchased merchandise from over 634 vendors. The Company’s purchasing strategy involves negotiating agreements with vendors to purchase merchandise over a specified period of time along with other provisions, including pricing, rebates, volume and payment terms.
We believe we are better able to meet our customers’ needs by operating under several trade names, which are as follows: Advance Auto Parts — Our 4,484 stores, inclusive of 394 hubs, as of December 30, 2023, are generally located in freestanding buildings with a focus on both professional and DIY customers.
The Company believes it is better able to meet its customers’ needs by operating under two trade names, which are as follows: Advance Auto Parts — The Company’s 4,507 stores, inclusive of 316 hubs, as of December 28, 2024, are generally located in freestanding buildings with a focus on both professional and DIY customers.
For additional information related to risks related to divestitures, see Item 1A. Risk Factors . Store Development The key factors used in selecting sites and market locations in which we operate include population, demographics, traffic count, vehicle profile, number and strength of competitors’ stores and the cost of real estate.
Store Development The key factors used in selecting sites and market locations in which the Company operates include population, demographics, traffic count, vehicle profile, number and strength of competitors’ stores and the cost of real estate.
You should consider carefully the risks and uncertainties described below together with the other information included in this Annual Report on Form 10-K, including without limitation our consolidated financial statements and related notes thereto and “
One should consider carefully the risks and uncertainties described below together with the other information included in this Annual Report on Form 10-K, including without limitation, the Company’s consolidated financial statements and related notes thereto and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies .
The terms of our contracts with third-party vendors require that they are in compliance with all applicable laws and regulations. Our third-party vendors who arrange for the removal, disposal, treatment or other handling of hazardous or toxic substances may be liable for the costs of removal or remediation at any affected disposal, treatment or other site affected by such substances.
The Company’s third-party vendors who arrange for the removal, disposal, treatment or other handling of hazardous or toxic substances may be liable for the costs of removal or remediation at any affected disposal, treatment or other site affected by such substances.
These stores carry a wide variety of products serving the aftermarket auto part needs for both domestic and import vehicles with a product offering of approximately 19,000 SKUs. As of December 30, 2023, 1,245 independently-owned stores operated under the Carquest name.
The average size of a Carquest store is approximately 7,500 square feet. These stores carry a wide variety of products serving the aftermarket auto part needs for both domestic and import vehicles with a product offering of approximately 16,400 SKUs. As of December 28, 2024, 934 independently-owned stores operated under the Carquest name.
Our professional sales represented nearly 60% of our sales in 2023, 2022 and 2021. We also serve 1,245 independently owned Carquest stores with shipments directly from our distribution centers. Our DIY customers are primarily served through our stores, but can also order online to pick up merchandise at a conveniently located store or have their purchases shipped directly to them.
The Company also serves 934 independently-owned Carquest stores with shipments directly from distribution centers. DIY customers are primarily served through the Company’s stores, but can also order online to pick up merchandise at a nearby store or have their purchases shipped directly to them.
We accept customer returns for many new, core and warranty products. Customer returns have historically been immaterial. Our Customers Our professional customers consist primarily of customers for whom we deliver products from our store or branch locations to their places of business, including garages, service stations and auto dealerships.
The Company accepts customer returns for many new, core and warranty products. Customer returns have historically been immaterial. Customers The Company’s professional customers primarily consist of customers for whom the Company delivers products to their places of business, including garages, service stations and auto dealerships. The Company’s professional sales represented approximately 50% of sales in 2024, 2023 and 2022.
During 2023 , 61 stores and branches were opened and 40 were closed or consolidated, resulting in a total of 5,107 stores and branches as of December 30, 2023 compared with a total of 5,086 stores and branches as of December 31, 2022.
Stores During 2024, 42 stores were opened and 40 were closed, resulting in a total of 4,788 stores as of December 28, 2024 compared with a total of 4,786 stores as of December 30, 2023.
In addition, we own and have registered a number of trademarks for our owned brands. We believe that these trade names, service marks and trademarks are important to our merchandising strategy. We do not know of any infringing uses that would materially affect the use of these trade names and trademarks and we actively defend and enforce them.
In addition, the Company owns and has registered a number of trademarks for the owned brands. The Company believes that these trade names, service marks and trademarks are important to the merchandising strategy.
As of December 30, 2023, approximately 1.3% of our team members were represented by labor unions. 4 Table of Contents Additional information about our human capital resources can be found in our Corporate Sustainability and Social Report, which is available on our website.
Additional information about the Company’s human capital resources can be found in the Corporate Sustainability and Social Report, which is available on the Company’s website.
As of December 30, 2023, we operated 50 distribution centers, ranging in size from approximately 60,000 to 943,000 square feet with total square footage of approximately 12.7 million, including one distribution center dedicated to reclamations. In 2023, we closed a distribution center in Asheville, North Carolina. Merchandise, Marketing and Advertising In 2023, we purchased merchandise from over 750 vendors.
As of December 28, 2024, the Company operated 28 distribution centers, ranging in size from approximately 70,000 to 943,000 square feet with total square footage of approximately 8.5 million, including one distribution center dedicated to reclamations.
As of December 30, 2023, 4,935 stores and branches were located in 48 U.S. states and two U.S. territories, and 172 stores and branches were located in nine Canadian provinces. We serve our stores and branches primarily from our executive office in Raleigh NC. We also maintain customer support centers in Newark CA and Norton MA.
As of December 28, 2024, 4,639 stores were located across 48 U.S. states and two U.S. territories, and 149 stores were located across six Canadian provinces. The Company serves the stores primarily from its executive office in Raleigh, NC.
We serve our professional and DIY customers through a variety of channels ranging from traditional “brick and mortar” store locations to self-service e-commerce sites.
On November 14, 2024, the Company announced the 2024 Restructuring Plan, which includes the reduction of approximately 500 stores, approximately 200 independent locations and four distribution centers by mid-2025. The Company serves its professional and DIY customers through a variety of channels ranging from traditional “brick and mortar” store locations to self-service e-commerce sites.
As of December 30, 2023, we employed approximately 40,000 full-time team members and 29,000 part-time team members. Our workforce consisted of 82.5% of our team members employed in store-level operations, 11.3% in distribution and 6.2% in our corporate offices.
Human Capital As of December 28, 2024, the Company employed approximately 33,200 full-time team members and 29,600 part-time team members. The Company’s workforce consisted of 87.4% of team members employed in store-level operations, 8.9% in distribution and 3.7% in corporate offices. As of December 28, 2024, approximately 1.5% of team members were represented by labor unions.
The average size of an Advance Auto Parts store is approximately 7,800 square feet. These stores carry a wide variety of products serving aftermarket auto part needs for both domestic and import vehicles.
These stores carry a wide variety of products serving aftermarket auto part needs for both domestic and import vehicles with product offerings of approximately 23,600 stock keeping units (“SKUs”), consisting of a custom mix of products based on each store’s market.
Carquest — Our 302 stores as of December 30, 2023, including 149 stores in Canada, are generally located in freestanding buildings with a primary focus on professional customers, but also serve DIY customers. The average size of a Carquest store is approximately 7,000 square feet.
Supplementing the Company’s stores’ inventory on-hand, less common SKUs are also available on a same-day or next-day basis from any of the larger hub stores or market hub locations. 2 Table of Contents Carquest — The Company’s 281 stores as of December 28, 2024, including 149 stores in Canada, are generally located in freestanding buildings with a primary focus on professional customers, but also serve DIY customers.
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Stores and Branches Key factors in selecting sites and market locations in which we operate include population, demographics, traffic count, vehicle profile, competitive landscape and the cost of real estate.
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On November 1, 2024, the Company completed the sale of the Worldpac business for net proceeds of approximately $1.47 billion after transaction costs and excluding the impact of taxes. The transaction reflects a strategic shift in the Company’s business with increased focus on the Advance blended-box model. Refer to Note 20.
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Our Advance Auto Parts stores carry a product offering of approximately 23,000 stock keeping units (“SKUs”), consisting of a custom mix of products based on each store’s unique market. Supplementing our stores’ inventory on-hand, less common SKUs are also available on a same-day or next-day basis from any of our larger hub stores.
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Discontinued Operations of the notes to the Consolidated Financial Statements included herein for further details. On November 13, 2024, the Company’s Board of Directors approved a restructuring and asset optimization plan (“2024 Restructuring Plan”) designed to improve the Company’s profitability and growth potential and streamline its operations.
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Worldpac — Our 321 branches, of which 135 are branded Autopart International (“AI”), as of December 30, 2023 principally serve professional customers utilizing an efficient and sophisticated online ordering and fulfillment system. Worldpac’s branches are generally larger than our other store locations, averaging approximately 26,000 square feet.
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This plan is supplemental to other ongoing initiatives to simplify the Company's business and improve profitable growth and entails, among other items, certain store and independent location closures as well as headcount reductions and organizational design changes to align the Company’s workforce to the expected needs of the Company's business.
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Worldpac’s complete product offering includes over 293,000 SKUs for domestic and import vehicles and specializes in imported OEM parts. 2 Table of Contents As previously disclosed in our quarterly report on Form 10-Q for the period ended October 07, 2023, we announced our intention to explore divestitures of our Worldpac and Carquest Canada businesses in separate sales processes as part of our strategic review.
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The Company is also pursuing efficiencies in procurement, pricing and professional and outside services, in addition to operational efficiencies. Refer to Note 3. Restructuring of the notes to the Consolidated Financial Statements included herein for further details.
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Human Capital Management We believe our People are Our Best Part, and we have adopted six Cultural Beliefs to help foster a culture that fully engages our team members with our business: Speak Up, Be Accountable, Take Action, Move Forward, Grow Talent and Champion Inclusion.
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The average size of an Advance Auto Parts location (including stores, hubs and market hubs) is approximately 8,000 square feet.
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Our Cultural Belief of Grow Talent highlights the importance to us of developing our team members in their careers, and we seek to not only recruit the best talent, but also retain and promote the best talent.
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In 2024, the Company converted eight distribution centers to market hubs, closed four distribution centers as a result of the 2024 Restructuring Plan and closed one distribution center as part of the normal course of business. Additionally, nine distribution centers were sold as part of the Worldpac transaction.
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Through another Cultural Belief, Champion Inclusion, we seek to fully leverage the ideas and talents of all team members in caring for our customers and each other. We encourage our team members to Speak Up and promote their engagement through a variety of programs and networks within our organization.
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The Company does not know of any infringing uses that would materially affect the use of these trade names and trademarks and will actively defend and enforce them. Competition The Company operates in both the professional and DIY markets of the automotive aftermarket industry.
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Intellectual Property We own a number of trade names, service marks and trademarks, including “Advance Auto Parts ® ,” “Advance Same Day ® ,” “Autopart International ® ,” “Carquest ® ,” “CARQUEST Technical Institute ® ,” “DieHard ® ,” “DriverSide ® ,” “MotoLogic ® ,” “MotoShop ® ,” “speedDIAL ® ,” “TECH-NET Professional Auto Service ® ” and “Worldpac ® ” for use in connection with the automotive parts business.
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The terms of the contracts with third-party vendors require that they are in compliance with all applicable laws and regulations.
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Competition We operate in both the professional and DIY markets of the automotive aftermarket industry.
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The occurrence of any of the following risks could materially adversely affect the Company’s business, financial condition, results of operations, cash flows and future prospects, which could in turn materially affect the price of the Company’s common stock.
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Risks Related to the Company’s Operations and Strategy If we are unable to successfully implement our business strategy, our business, financial condition, results of operations and cash flows could be adversely affected. The Company undertook a comprehensive strategic and operational review to improve its performance of its business and create long-term value.
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This review resulted in, among other things, narrowed business priorities and initiatives aimed at improving core performance in key areas. The Company is currently making and expects to continue to make significant investments to improve its business.
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If the Company is unable to implement initiatives efficiently and effectively, the Company’s business, financial condition, results of operations and cash flows could be adversely affected. The Company could also be adversely affected if it has not appropriately prioritized and balanced its initiatives or if the Company is unable to effectively manage change throughout the organization.
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Implementing strategic initiatives could disrupt or reduce the efficiency of the Company’s operations and may not provide the anticipated benefits, or may provide them on a delayed schedule or at a higher cost. These risks increase when significant changes are undertaken and when multiple projects with interdependencies and shared human resources are pursued simultaneously.
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Restructuring our operations is a significant undertaking and introduces risk to the continuity and results of the Company's operations. In November 2024, the Company announced a plan to restructure its operations to improve profitability and growth potential and streamline the Company's operations.
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This plan is supplemental to other ongoing initiatives to simplify the Company's business and improve profitable growth and entails, among other items, certain store and independent location closures as well as headcount reductions and organizational design changes to align the Company’s workforce to the expected needs of the Company's business.
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The Company is also pursuing efficiencies in procurement, pricing and professional and outside services, in addition to operational efficiencies.
Added
These measures are subject to known and unknown risks and uncertainties, including whether the Company has targeted the appropriate areas for its cost-saving efforts and at the appropriate scale, the Company's ability to successfully execute the restructuring plan and achieve the cost-savings anticipated while minimally disrupting our operations and whether, if required in the future, the Company will be able to appropriately target any additional areas for its cost-saving efforts.
Added
The Company expects to incur restructuring charges and undertake other exit-related activities as a result of such initiatives.
Added
For example, execution of the Company’s plan is expected to result in the termination of certain leases, leading to exits of certain properties over time and the incurrence of expenses, including but not limited to impairment charges and contingent obligations, which could be material.
Added
The terms, scope and timing of any additional changes to our lease obligations, as well as any other effects on our landlord relationships or reputation with other real estate owners, are uncertain.
Added
As a result of the restructuring plan, the Company currently expects to incur approximately $875 million to $960 million in total charges, which is estimated to include $275 million to $310 million of cash charges and $600 million to $650 million of non-cash charges, primarily as a result of closure sites and the reduction in workforce.
Added
The Company’s expectations for charges to be incurred and cash to be expended in connection with the restructuring activities are based on a number of assumptions, and the Company may experience unanticipated consequences, such as higher than anticipated lease termination and facility closure costs, asset impairment or other unforeseen expenses related to the restructuring.
Added
Implementing any restructuring plan, including the one the Company has outlined, presents potential risks that may impair our ability to achieve or sustain anticipated cost reductions or operational improvements.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAt least every three years, we use an external party to evaluate the maturity of our program against the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework. The Audit Committee of our Board of Directors is charged with reviewing, discussing with management and overseeing the Company’s information technology and cybersecurity risk.
Biggest changeThe Internal Audit function assesses cyber security risks and audits components of cyber security on an annual basis. At least every three years, the Company uses an external party to evaluate the maturity of the program against the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework.
Our CISO leads the Cyber Steering Committee, which also includes individuals with experience identifying and managing enterprise risks, including our President and Chief Executive Officer, Executive Vice President, Chief Financial Officer, Executive Vice President, General Counsel and Corporate Secretary and Senior Vice President, Internal Audit, as well as individuals with technical expertise in information technology, data and cyber matters and/or experience in managing cyber incident responses, including our Executive Vice President, Chief Technology Officer, Senior Vice President, Information Technology Operations and Senior Vice President, Deputy General Counsel and Chief Compliance Officer.
The Company’s CISO leads the Cyber Steering Committee, which also includes individuals with experience identifying and managing enterprise risks, including the Company’s President and Chief Executive Officer, Executive Vice President, Chief Financial Officer, Executive Vice President, General Counsel and Corporate Secretary and Vice President, Chief Audit Executive, as well as individuals with technical expertise in information technology, data governance and cyber matters and/or experience in managing cyber incident responses, including the Company’s Executive Vice President, Chief Technology Officer, Vice President, Information Technology Operations and Senior Vice President, Deputy General Counsel and Chief Compliance Officer.
We evaluate risks associated with use of third-party providers through a lifecycle-based approach, conducting risk-based due diligence before engagement, using contractual provisions to apportion risk, and for certain third-party providers, engaging in architectural review and validation at the beginning of engagement.
The Company evaluates risks associated with use of third-party providers through a lifecycle-based approach, conducting risk-based due diligence before engagement, using contractual provisions to apportion risk, and for certain third-party providers, engaging in architectural review and validation at the beginning of engagement.
Our cyber risk treatment plan is reviewed in a bimonthly cadence with a cross-functional Cyber Steering Committee, the managerial governing body that regularly reviews our top cyber risks and receives reports on progress on key cyber initiatives.
The Company’s cyber risk mitigation plan is reviewed on a bimonthly cadence with a cross-functional Cyber Steering Committee, the managerial governing body that regularly reviews the top cyber risks and receives reports on progress on key cyber initiatives.
We use third parties to assist with penetration testing, simulated attacks and survey and other threat intelligence reporting on third parties, as well as review and enhancement of associated response processes.
The Company uses third parties to assist with penetration testing, simulated attacks and survey and other threat intelligence reporting on third parties, as well as review and enhancement of associated response processes.
We evaluate risks on an ongoing basis across several categories in terms of probability of the likelihood and magnitude of potential impact, using evaluation results to inform our areas of focus and prioritization.
The Company evaluates cyber security risks on an ongoing basis across several categories in terms of probability of the likelihood and magnitude of potential impact, using evaluation results to inform areas of focus and prioritization.
Item 1C. Cybersecurity. We have processes in place for assessing, identifying and managing significant risks from potential cyber threats and vulnerabilities.
Item 1C. Cybersecurity. The Company has processes in place for assessing, identifying and managing risks from potential cyber threats and vulnerabilities.
We utilize a wide range of capabilities to help us identify and assess potential cyber threats and vulnerabilities, which feed into our development and regular updating of a risk treatment plan to help us manage our cybersecurity risk posture.
Cybersecurity is a component of the Company’s ERM framework and processes. The Company utilizes a range of capabilities to help identify and assess potential cyber threats and vulnerabilities, which feed into the development and regular updating of a risk mitigation plan to help manage the Company’s cybersecurity risk posture.
To protect our information systems from cyber threats, we use a wide variety of tools, controls, technologies, methods, systems and other processes that are designed to prevent, detect, escalate, investigate, mitigate and/or remediate data loss, theft, misuse, unauthorized access or other security incidents or vulnerabilities affecting information systems and data.
To protect the Company’s information systems from cyber threats, the Company uses a variety of tools, controls, technologies, methods, systems and other processes that are designed to prevent, detect, escalate, investigate, mitigate and/or remediate data loss, theft, misuse, unauthorized access or other security incidents or vulnerabilities affecting information systems and data. 16 Table of Contents The Company’s Chief Information Security Officer (“CISO”) and Vice President, Chief Audit Executive, who oversees the Company’s enterprise risk management (“ERM”) framework, partner on definition and treatment of cyber risks.
Our CISO and Senior Vice President, Internal Audit and Risk report regularly to the Audit Committee, and at least annually, to the full Board of Directors on cybersecurity risks and management thereof.
The Audit Committee of the Company’s Board of Directors is charged with reviewing, discussing with management and overseeing the Company’s information technology and cybersecurity risk. The Audit Committee receives reports on cybersecurity risk and management thereof at least semi-annually, and the full Board of Directors receives such reports at least annually.
Removed
Our Senior Vice President, Chief Information Security Officer (“CISO”) and Senior Vice President, Internal Audit and Risk, who oversees our enterprise risk management (“ERM”) framework, partner on definition and treatment of cyber risks. Cybersecurity is a component of our ERM framework and processes.
Added
As of December 28, 2024, we are not aware of any instances of material cybersecurity incidents that impacted the Company in the last three years.
Removed
Our CISO has over 15 years of Chief Information Security Officer experience leading security strategy and execution for large companies.
Removed
He holds a Certificate in Secure Software and Information Engineering from Pace University and is a Certified Information Systems Security Professional. 15 Table of Contents The Internal Audit function assesses cyber security risks and audits components of cyber security on an annual basis.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table summarizes the location, ownership status and total square footage of space utilized for distribution centers, principal corporate office and retail stores and branches as of December 30, 2023: Square Footage (in thousands) Location Leased Owned Distribution centers 50 locations in 31 U.S. states and four Canadian provinces 8,106 4,591 Executive office Raleigh NC 245 — Stores and branches 4,935 stores and branches in 48 U.S. states and two U.S. territories and 172 stores and branches in nine Canadian provinces 36,644 6,289
Biggest changeThe following table summarizes the location, ownership status and total square footage of space utilized for distribution centers, principal corporate office and retail stores as of December 28, 2024: Square Footage (in thousands) Location Leased Owned Distribution centers 28 locations in 22 U.S. states and three Canadian provinces 3,929 4,591 Executive office Raleigh NC 245 — Stores 4,639 stores in 48 U.S. states and two U.S. territories and 149 stores in six Canadian provinces 31,637 6,276 Item 3.
Added
Legal Proceedings. Refer to discussion in Note 1 4 . Contingencies , of the Notes to the Consolidated Financial Statements included herein for information relating to legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. 17 Table of Contents PART II Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Added
The Company’s common stock is listed on the New York Stock Exchange under the symbol “AAP.” As of February 21, 2025, there were 1,112 holders of record of common stock, which does not include the number of beneficial owners whose shares were repres ented by security position listings.
Added
The following table sets forth information with respect to repurchases of the Company’s common stock for the fourth quarter ended December 28, 2024: Period Total Number of Shares Purchased (1) Average Price Paid per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Programs Maximum Dollar Value that May Yet Be Purchased Under the Programs ( in thousands ) (2) October 6, 2024 to November 2, 2024 — $ — — $ 947,339 November 3, 2024 to November 30, 2024 18,062 $ 38.13 — $ 947,339 December 1, 2024 to December 28, 2024 4,615 $ 43.66 — $ 947,339 Total 22,677 $ 39.26 — (1) All repurchases reported in this table relate to the withholding of shares upon the vesting of restricted stock units to settle income tax liabilities (“net settlement”).
Added
The aggregate cost of repurchasing shares in connection with the net settlement of shares issued as a result of the vesting of restricted stock units was $0.9 million, or an average price of $39.26 per share, during the twelve weeks ended December 28, 2024.
Added
(2) On February 8, 2022, the Board of Directors authorized an additional $1 billion to the existing share repurchase program. This authorization is incremental to the $1.7 billion that was previously authorized by the Board of Directors.
Added
Amendment No. 5 to the Company’s 2021 Credit Agreement currently generally prohibits open market share repurchases. 18 Table of Contents Stock Price Performance The following graph shows a comparison of the cumulative total return on the Company’s common stock, the Standard & Poor’s (“S&P”) 500 Index and the S&P’s Retail Index.
Added
The graph assumes that the value of an investment in the Company’s common stock was $100.00 on December 28, 2019, and that any dividends have been reinvested. The comparison in the graph below is based solely on historical data and is not intended to forecast the possible future performance of the Company’s common stock.
Added
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG ADVANCE AUTO PARTS, INC., S&P 500 INDEX AND S&P RETAIL INDEX Company/Index December 28, 2019 January 2, 2021 January 1, 2022 December 31, 2022 December 30, 2023 December 28, 2024 Advance Auto Parts $ 100.00 $ 100.24 $ 155.04 $ 98.45 $ 40.70 $ 29.34 S&P 500 Index $ 100.00 $ 118.08 $ 151.98 $ 124.46 $ 157.17 $ 199.46 S&P Retail Index $ 100.00 $ 145.42 $ 173.50 $ 114.02 $ 162.36 $ 219.96 19 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

0 edited+60 added−42 removed0 unchanged
Removed
Item 3. Legal Proceedings. Refer to discussion in Note 13. Contingencies , of the Notes to the Consolidated Financial Statements included herein for information relating to legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. 16 Table of Contents PART II Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Added
Item 3. Legal Proceeding s of this Annual Report on Form 10-K) and to numerous lawsuits alleging injury as a result of exposure to asbestos-containing products (see Note 1 4 . Contingencies , of the Notes to the Consolidated Financial Statements included herein).
Removed
Our common stock is listed on the New York Stock Exchange under the symbol “AAP.” As of March 5, 2024, there were 1,067 holders of record of our common stock, which does not include the number of beneficial owners whose shares were repres ented by security position listings.
Added
The Company is subject to numerous federal, state and local laws and governmental regulations relating to, among other things, environmental protection, product quality and safety standards, weights and measures, building and zoning requirements, labor and employment, discrimination, anti-bribery/anti-corruption, false claims, data privacy, income taxes and trade sanctions and compliance.
Removed
The following table sets forth information with respect to repurchases of our common stock for the fourth quarter ended December 30, 2023: Period Total Number of Shares Purchased (1) Average Price Paid per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Programs Maximum Dollar Value that May Yet Be Purchased Under the Programs ( in thousands ) (2) October 8, 2023 to November 4, 2023 20 $ 51.20 — $ 947,339 November 5, 2023 to December 2, 2023 5,340 $ 52.49 — $ 947,339 December 3, 2023 to December 30, 2023 1 $ 56.25 — $ 947,339 Total 5,361 $ 52.49 — (1) The aggregate cost of repurchasing shares in connection with the net settlement of shares issued as a result of the vesting of restricted stock units was $0.3 million, or an average price of $52.49 per share, during the twelve weeks ended December 30, 2023.
Added
Compliance with existing and future laws and regulations could increase the cost of doing business and adversely affect the Company’s results of operations. If the company fails to comply with existing or future laws or regulations, the Company may be subject to governmental or judicial fines or sanctions while incurring substantial legal fees and costs as well as reputational risk.
Removed
(2) On February 8, 2022, our Board of Directors authorized an additional $1 billion to the existing share repurchase program.
Added
In addition, the Company’s capital and operating expenses could increase due to remediation measures that may be required if the Company is found to be noncompliant with any existing or future laws or regulations.
Removed
This authorization is incremental to the $1.7 billion that was previously authorized by our Board of Directors. 17 Table of Contents Stock Price Performance The following graph shows a comparison of the cumulative total return on our common stock, the Standard & Poor’s (“S&P”) 500 Index and the S&P’s Retail Index.
Added
Business interruptions may negatively impact the Company’s store hours, operability of our computer systems and the availability and cost of merchandise, which may adversely impact our sales and profitability.
Removed
The graph assumes that the value of an investment in our common stock was $100.00 on December 29, 2018, and that any dividends have been reinvested. The comparison in the graph below is based solely on historical data and is not intended to forecast the possible future performance of our common stock.
Added
Hurricanes, tornadoes, earthquakes, wildfires or other natural disasters, war or acts of terrorism, civil or geopolitical unrest, public health issues, epidemics or pandemics or the threat of any of these incidents or others, may have a negative impact on the Company’s ability to obtain merchandise to sell in the Company’s stores, result in certain of stores being closed for an extended period of time, negatively affect the lives of the Company’s customers or team members, or otherwise negatively impact the Company’s operations.
Removed
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG ADVANCE AUTO PARTS, INC., S&P 500 INDEX AND S&P RETAIL INDEX Company/Index December 29, 2018 December 28, 2019 January 2, 2021 January 1, 2022 December 31, 2022 December 30, 2023 Advance Auto Parts $ 100.00 $ 102.01 $ 102.25 $ 158.16 $ 100.43 $ 41.52 S&P 500 Index $ 100.00 $ 132.97 $ 157.02 $ 202.09 $ 165.49 $ 209.00 S&P Retail Index $ 100.00 $ 129.15 $ 187.82 $ 224.09 $ 147.26 $ 209.70 18 Table of Contents Item 6. [Reserved] Item 7.
Added
Some of the Company’s merchandise is imported from other countries.
Removed
Management ’ s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated historical financial statements and the notes to those statements that appear elsewhere in this report.
Added
If imported goods become difficult or impossible to import into the United States due to business interruption (including regulation of exporting or importing), and if the company cannot obtain such merchandise from other sources at similar costs and without an adverse delay, sales and profit margins may be negatively affected. 12 Table of Contents In the event that commercial transportation, including the global shipping industry, is curtailed or substantially delayed, the business may be adversely impacted due to difficulty receiving merchandise from the Company’s suppliers and/or transporting it to the Company’s stores.
Removed
Our discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the section titled “ Part 1. Item 1A.
Added
Terrorist attacks, warfare, geopolitical instability, or uncertainty or insurrection involving any oil producing country could result in an abrupt increase in the price of crude oil, gasoline and diesel fuel.
Removed
Risk Factors ” elsewhere in this report. The discussion of our financial condition and changes in our results of operations, liquidity and capital resources for the fiscal year ended December 31, 2022 (“2022”) compared with the fiscal year ended January 1, 2022 (“2021”) has been omitted from this Form 10-K, but are included in “ Item 7.
Added
Such price increases would increase the cost of doing business for the Company and the Company’s suppliers, and also negatively impact customers’ disposable income, causing an adverse impact on the Company’s business, sales, profit margins and results of operations.
Removed
Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of our Form 10-K for 2022, filed with the Securities and Exchange Commission (“SEC”) on February 28, 2023. Amounts are presented in thousands, except per share data, unless otherwise stated.
Added
The Company has extensive reliance on computer systems and the systems of business partners to manage data or inventory, process transactions and report results.
Removed
Management Overview A high-level summary of our financial results and other highlights from 2023 includes: • Net sales during 2023 were $11.3 billion, an increase of 1.2% compared with 2022, driven by new store openings and favorable product mix, partially offset by a 0.3% decline in comparable store sales. • Gro ss profit margin for 2023 was 40.1% of Net sales, a decrease of 414 basis points compared with 2022.
Added
These systems are subject to damage or interruption due to various reasons such as power outages, telecommunication failures, computer viruses, security breaches, malicious cyber attacks and catastrophic events or occasional system breakdowns related to ordinary use or wear and tear.
Removed
This decrease was primarily due to higher product costs, inventory-related charges and elevated supply chain costs. • Operating income for 2023 was $114.4 million, a decrease of $555.9 million from 2022. As a percentage of Net sales, operating income was 1.0%, a decrease of 500 basis points compared with 2022.
Added
If computer systems of the Company or its business partners fail, the company may experience loss of critical data and interruptions or delays in the Company’s ability to process transactions and manage inventory.
Removed
The increase in Selling, general and administrative (“SG&A”) costs was primarily driven by increased labor-related costs and occupancy expenses . • Cash flow from operations was $287.4 million during 2023, a decrease of 61.0% c ompared with 2022, primarily due to l ower Net income. • Diluted earnings per share (“Diluted EPS”) was $0.50 du ring 2023 compared with $7.65 in 2022.
Added
Any significant business interruptions may make it difficult or impossible to continue operations, and any disaster recovery or crisis management plans the Company may employ may not suffice in any particular situation to avoid a significant adverse impact to the business, financial condition and results of operations.
Removed
Refer to “ Results of Operations ” and “ Liquidity and Capital Resources ” for further details on our results.
Added
Risks Related to the Company’s Industry and the Business Environment If overall demand for the products that the Company sells declines, the Company’s business, financial condition, results of operations and cash flows will suffer. Decreased demand could also negatively impact the Company’s stock price.
Removed
Business and Risk Update We have been executing various initiatives to improve the customer experience, expand margins and drive consistent execution for both professional and do-it-yourself (“DIY”) customers, including: • Continued refinement of a demand-based assortment, leveraging purchase and search history from our common catalog • Advancement towards optimizing our footprint by market to drive share, repurpose our in-market store and asset base and streamline our distribution network • Progress in the implementation of a more efficient end-to-end supply chain to deliver our broad assortment of inventory • Continued negotiations with vendors on strategic sourcing and pricing to help mitigate inflationary pressures • Rationalization of product assortment • Investment in our frontline workforce • Incremental investments in store and distribution center distribution As announced in the third quarter of 2023, we initiated a comprehensive operational and strategic review of our business to help improve execution and position Advance for long-term success and increased shareholder value.
Added
Overall demand for products the Company sells depends on many factors and may decrease due to any number of reasons, including: • a decrease in the total number of vehicles on the road or in the number of annual miles driven or significant increase in the use of ride sharing services , because fewer vehicles means less maintenance and repairs, and lower vehicle mileage, which decreases the need for maintenance and repair; • the economy , because as consumers reduce their discretionary spending by deferring vehicle maintenance or repair, sales may decline and as new car purchases increase, the number of cars requiring maintenance and repair may decrease; • the weather, because milder weather conditions may lower the failure rates of automobile parts while extended periods of rain and winter precipitation may cause the Company’s customers to defer elective maintenance and repair of their vehicles; additionally, overall climate changes could create greater variability in weather events, which may result in greater volatility for the Company’s business, or lead to other significant weather conditions that could impact the Company’s business; • the average duration of vehicle manufacturer warranties and average age of vehicles driven, because newer cars typically require fewer repairs and will be repaired by the manufacturers’ dealer networks using dealer parts pursuant to warranties (which have gradually increased in duration and/or mileage expiration over the recent past), while vehicles that are seven years old and older are generally no longer covered under manufacturers’ warranties and tend to need more maintenance and repair; • an increase in internet-based retailers , because potentially favorable prices and ease of use of purchasing parts via other websites on the internet may decrease the need for customers to visit and purchase their aftermarket parts from the Company’s physical stores and may cause fewer customers to order aftermarket parts on the Company’s website; • technological advances, including the rate of adoption of electric vehicles, hybrid vehicles, ride sharing services, alternative modes of transportation, autonomously driven vehicles and future legislation related thereto, and the increase in the quality of vehicles manufactured , because vehicles that need less frequent maintenance or have lower part failure rates will require less frequent repairs using aftermarket parts and, in the case of electric and hybrid vehicles, do not require or require less frequent oil changes; and • the refusal of vehicle manufacturers to make available diagnostic, repair and maintenance information to the automotive aftermarket industry that the Company’s professional and DIY customers require to diagnose, repair and maintain their vehicles , because this may force consumers to have a majority of diagnostic work, repairs and maintenance performed by the vehicle manufacturers’ dealer networks. 13 Table of Contents The Company may be adversely affected by legal, regulatory or market responses regarding technological adaptation in the automotive industry.
Removed
We have identified and are pursuing cost reductions that we expect will generate at least $150 million in savings on an annualized basis, of which, we intend to invest approximately $50 million in employee compensation and training with a clear focus on improving the retention of our frontline team members.
Added
Policy makers in the U.S. may enact legislative or regulatory proposals that would impose mandatory requirements on greenhouse gas emissions and encourage more rapid adoption of vehicles that minimize emissions. Such laws, if enacted, are likely to impact the Company’s business in a number of ways.
Removed
In addition, we recently launched an initiative to eliminate costs related to our indirect spend by an additional $50 million on an annualized basis We also announced the potential sales of our Worldpac business and the Canadian portion of our Carquest business.
Added
For example, significant increases in fuel economy requirements, new federal or state restrictions on emissions of carbon dioxide or new federal or state incentive programs that may be imposed on vehicles and automobile fuels could adversely affect annual miles driven, purchases of used vehicles that are likely to have a higher need for maintenance and repair, or the relevancy of the products the Company sells to new vehicles coming into production.
Removed
Our operational and strategic review progress is ongoing. 19 Table of Contents Industry Update Operating within the automotive aftermarket industry, we are influenced by a number of general macroeconomic factors, many of which are similar to those affecting the overall retail industry.
Added
The Company may not be able to accurately predict, prepare for and respond to new kinds of technological innovations with respect to electric vehicles and other technologies that minimize emissions. Additionally, compliance with any new or more stringent laws or regulations, or stricter interpretations of existing laws, could require additional expenditures by the Company or its suppliers.
Removed
In addition to the “ Business and Risk Update ” section included within Management’s Discussion and Analysis of Financial Condition and Results of Operations, these factors include, but are not limited to: • Inflationary pressures, including logistics and labor • Global supply chain disruptions • Rising fuel costs • Miles driven • Unemployment rates • Consumer confidence and purchasing power • Competition • Changes in new car sales • Vehicle manufacturer warranties • Average age of vehicles in operation • Economic and geopolitical uncertainty • Deferral of elective automotive maintenance and improvements in new car quality • Increased foreign currency exchange volatility While these factors tend to fluctuate, we remain confident in the long-term growth prospects for the automotive parts industry.
Added
The Company’s inability to appropriately respond to such changes, adapt the Company’s business to meet evolving demands or innovate to remain competitive could adversely impact the Company’s business, financial condition, results of operations or cash flows.
Removed
Results of Operations The following table sets forth certain of our operating data expressed as a percentage of net sales for the periods indicated.
Added
If the Company is unable to compete successfully against other companies in the automotive aftermarket industry, the Company may lose customers and market share and the Company’s revenues may decline. The sale of automotive parts, accessories and maintenance items is highly competitive and influenced by a number of factors, including name recognition, location, price, quality, product availability and customer service.
Removed
Year Ended 2023 vs. 2022 $ Change Basis Points 2022 vs. 2021 $ Change Basis Points (in millions) December 30, 2023 December 31, 2022 January 1, 2022 Net sales $ 11,287.6 100.0 % $ 11,154.7 100.0 % $ 10,998.0 100.0 % $ 132.9 — $ 156.7 — Cost of sales 6,764.1 59.9 6,222.5 55.8 6,074.0 55.2 541.6 414 148.5 55 Gross profit 4,523.5 40.1 4,932.2 44.2 4,924.0 44.8 (408.7) (414) 8.2 (55) SG&A 4,409.1 39.1 4,262.0 38.2 4,101.6 37.3 147.1 85 160.4 91 Operating income 114.4 1.0 670.2 6.0 822.4 7.5 (555.8) (500) (152.2) (147) Interest expense (88.1) (0.8) (51.1) (0.5) (37.8) (0.3) (37.0) (32) (13.3) (11) Loss on debt extinguishment — — (7.4) (0.1) — — 7.4 7 (7.4) (7) Other income (expense), net 5.5 0.0 (7.4) (0.1) (2.1) 0.0 12.9 12 (5.3) (5) Provision for income taxes 2.1 — 140.0 1.3 185.9 1.7 (137.9) (124) (45.9) (44) Net income $ 29.7 0.3 % $ 464.3 4.16 % $ 596.6 5.42 % $ (434.6) (390) $ (132.3) (126) Note 1: Table amounts may not foot due to rounding.
Added
The Company competes in both the professional and DIY categories of the automotive aftermarket industry, primarily with: (i) national and regional chains of automotive parts stores, (ii) internet-based retailers, (iii) discount stores and mass merchandisers that carry automotive products, (iv) wholesalers or jobbers stores, including those associated with national parts distributors or associations, (v) independently owned stores and (vi) automobile dealers that supply parts.
Removed
Net Sales Net sales for 2023 were $11.3 billion, an increase of $132.9 million, or 1.2%, compared with 2022, and was primarily driven by new store openings and favorable product mix, partially offset by a decline in units sold. Category growth was led by brakes and batteries.
Added
These competitors and the level of competition vary by market.
Removed
Comparable store sales decreased 0.3% due to a decline in the DIY business. 20 Table of Contents We calculate comparable store sales based on the change in store or branch sales starting once a location has been open for 13 complete four-week periods (approximately one year) and by including e-commerce sales.
Added
Some of the Company’s competitors may possess advantages over the Company in certain markets the Company shares, including with respect to the level of marketing activities, number of stores, store locations, store layouts, operating histories, name recognition, established customer bases, vendor relationships, distribution network, product availability, employee staffing, prices and product warranties.
Removed
Sales to independently-owned Carquest stores are excluded from our comparable store sales. Acquired stores are included in our comparable store sales once the stores have completed 13 complete accounting periods following the acquisition date. We include sales from relocated stores in comparable store sales from the original date of opening.
Added
Internet-based retailers may possess cost advantages over the Company due to lower overhead costs, time and travel savings and ability to price competitively. In order to compete favorably, the Company may need to increase availability, change inventory assortment, increase delivery speeds, incur higher shipping costs or lower prices, any of which could adversely impact the Company’s financial results.
Removed
Comparable sales is intended only as supplemental information and is not a substitute for Net sales presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Added
Consolidation among the Company’s competitors could enhance their market share and financial position, provide them with the ability to achieve better purchasing terms and allow them to provide more competitive prices to customers for whom the Company competes. In addition, the Company’s reputation is critical to the Company’s continued success.
Removed
Gross Profit Gross pro fit in 2023 was $4.52 billion, or 40.1% of Net sales, compared with $4.93 billion, or 44.2% of Net sales in 2022, a decrease of 414 basis points.
Added
Customers are increasingly shopping, reading reviews and comparing products and prices online. If the Company fails to maintain high standards for, or receive negative publicity (whether through social media or traditional media channels) relating to, product safety and quality, as well as the Company’s integrity and reputation, the Company could lose customers due to competition.
Removed
Gross profit as a percentage of Net sales was negatively impacted by higher product costs not fully covered by pricing actions of $180.9 million, a change in estimate associated with inventory reserves and other inventory-related charges of $143.5 million as well as elevated supply chain expenses. Gross margin decline was partially offset by favorable product mix.
Added
The products the Company sells are both third-party vendor brands and the Company’s owned brands. If the perceived quality or value of the brands the Company sells declines in the perception of its customers, the Company’s results of operations could be negatively affected.
Removed
Selling, General and Administrative Expenses SG&A for 2023 wa s $4.41 billion, or 39.1% of Net sales, compared with $4.26 billion, or 38.2% of Net sales for 2022, an increase of 85 basis points. T his increase as a percentage of Net sales was primarily driven by increased labor-related costs and occupancy expenses.
Added
Competition may require the Company to reduce its prices below the Company’s normal selling prices or increase the Company’s promotional spending, which could lower the Company’s revenue and profitability. Competitive disadvantages may also prevent the Company from introducing new product lines, require the Company to discontinue current product offerings, or change some of the Company’s current operating strategies.
Removed
Interest Expense Interest expense for 2023 wa s $88.1 million, an increase of $37.0 million compared with 2022. Thi s increase was primarily due to interest incurred on higher borrowings against our revolver as well as issuances of senior unsecured notes in 2023. Refer to Note 6.
Added
If the Company does not have the resources, expertise and consistent execution, or otherwise fail to develop successful strategies, to address these potential competitive disadvantages, the Company may lose customers and market share, the Company’s revenues and profit margins may decline and the Company may be less profitable or potentially unprofitable.
Removed
Long-term Debt and Fair Value of Financial Instruments of the Notes to the Consolidated Financial Statements included herein for further details. Provision for Income Taxes Our Provision for income taxes for 2023 was $2.1 million compared with $140.0 million for 2022, a favorable change of $137.9 million p rimarily due to a decrease in taxable income.
Added
The Company’s inventory and ability to meet customer expectations may be adversely impacted by factors out of the Company’s control.
Removed
Our effective tax rate was 6.6% for 2023 and 23.2% for 2022.
Added
For the portion of the Company’s inventory manufactured and/or sourced outside the United States, geopolitical changes, changes in trade regulations or tariff rates, currency fluctuations, work stoppages, labor strikes, unionizing activity, port delays, shipping disruptions, civil unrest, natural disasters, pandemics and other factors beyond the Company’s control may increase the cost of items the Company purchases, lead to lengthy delays in acquiring products or create shortages that could have a material adverse effect on the Company’s sales and profitability.
Removed
In 2023, the rate decreased compared with prior year primarily due to a tax benefit resulting from the expiration of statute of limitations for certain tax years in multiple states as well as enhanced utilization of tax credits in the current year and a discrete charge related to share-based compensation.
Added
In addition, unanticipated changes in consumer preferences or any unforeseen hurdles in meeting the Company’s customers’ needs for automotive products (particularly parts availability) in a timely manner could undermine the Company’s business strategy. 14 Table of Contents Deterioration of general macroeconomic conditions, including unemployment, inflation or deflation, rising consumer debt levels, and/or high fuel and energy costs, could have a negative impact on the Company’s business, financial condition, results of operations and cash flows due to impacts on the Company’s suppliers, customers and operating results.
Removed
Liquidity and Capital Resources Overview Our primary cash requirements necessary to maintain our current operations include payroll and benefits, inventory purchases, contractual obligations, capital expenditures, payment of income taxes, funding of initiatives under our strategic business plan and other operational priorities, including payment of interest on our long-term debt.
Added
The Company’s business depends on developing and maintaining close relationships with the Company’s suppliers and on the Company’s suppliers’ ability and willingness to sell quality products to the Company at favorable prices and terms. Many factors outside the Company’s control may harm these relationships and the ability or willingness of these suppliers to sell the Company products on favorable terms.
Removed
Historically, we have also used available funds to repay borrowings under our credit facility, to periodically repurchase shares of our common stock under our share repurchase program, to pay our quarterly cash dividend and for acquisitions; however, depending on the priorities of our business and in consideration of ongoing uncertainties related to general global macroeconomic conditions, our future uses of cash may differ, including with respect to the weight we place on the preservation of cash and liquidity, degree of investment in our business and other capital allo cation factors.
Added
Such factors include a general decline in the economy and economic conditions and prolonged recessionary conditions. These events could negatively affect the Company’s suppliers’ operations and make it difficult for them to obtain the credit lines or loans necessary to finance their operations in the short-term or long-term and meet the Company’s product requirements.
Removed
Typically, we have funded our cash requirements primarily through cash generated from operations, supplemented by borrowings under our credit facilities and notes offerings as needed. We believe funds generated from our expected results of operations, available cash and cash equivalents and available borrowings under our credit facility will be sufficient to fund our obligations for the next year.
Added
Financial or operational difficulties that some of the Company’s suppliers may face could also increase the cost of the products the Company purchases from them or the Company’s ability to source products from them. The Company might not be able to pass its increased costs on to its customers.
Removed
We also believe such funds, cash and available borrowings, together with our ability to generate cash through credit facilities and notes offerings as needed, will be sufficient to fund our obligations long-term.
Added
If the Company’s suppliers fail to develop new products, the Company may not be able to meet the demands of the Company’s customers and results of operations could be negatively affected.
Removed
Cash requirements for obligations next year and beyond are discussed in the “ Contractual and Off Balance Sheet Obligations ” section below. 21 Table of Contents Share Repurchases In August 2019, our Board of Directors approved a share repurchase program.
Added
In addition, the trend towards consolidation among automotive parts suppliers as well as the off-shoring of manufacturing capacity to foreign countries may disrupt or end the Company’s relationship with certain suppliers, and could lead to less competition and result in higher prices.
Removed
Under the program, we may periodically repurchase shares of our common stock at market prices through open market purchases effected through a broker dealer and in privately negotiated transactions. The Board of Directors may increase or otherwise modify, renew, suspend or terminate the share repurchase program without prior notice.
Added
The Company could also be negatively impacted by suppliers who might experience bankruptcies, work stoppages, labor strikes, changes in foreign or domestic trade policies, changes in tariff rates or other interruptions to or difficulties in the manufacture or supply of the products we purchase from them.
Removed
On February 8, 2022, our Board of Directors authorized an additional $1.0 billion toward our share repurchase program. Previously, in April 2021 and November 2019, our Board of Directors authorized $1.0 billion and $700.0 million for our share repurchase program. During 2023, we did not repurchase any shares of our common stock in connection with our share repurchase program.
Added
Deterioration in macroeconomic conditions or an increase in fuel costs or proposed or additional tariffs may have a negative impact on the Company’s customers’ net worth, financial resources, disposable income or willingness or ability to pay for accessories, maintenance or repairs for their vehicles, resulting in lower sales.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

40 edited+16 added−9 removed5 unchanged
Biggest changeAnalysis of Cash Flows The following table summarizes our cash flows from operating, investing and financing activities: Year Ended December 30, 2023 December 31, 2022 January 1, 2022 Cash flows provided by operating activities $ 287,375 $ 736,571 $ 1,107,022 Cash flows used in investing activities (235,489) (424,448) (287,314) Cash flows provided by (used in) financing activities 189,267 (620,704) (1,064,112) Effect of exchange rate changes on cash (8,487) (8,664) 5,474 Net increase (decrease) in cash and cash equivalents $ 232,666 $ (317,245) $ (238,930) 22 Table of Contents Operating Activities In 2023, Net cas h provided by operating activities decreased $449.2 million to $287.4 million.
Biggest changeIn 2025, the Company anticipates that the Company’s capital expenditures related to such investments will be approximately $300 million but may vary with business conditions. 27 Table of Contents Analysis of Cash Flows The following table summarizes the Company’s cash flows from operating, investing and financing activities: Year Ended (in thousands) December 28, 2024 December 30, 2023 December 31, 2022 Cash flows provided by operating activities from continuing operations $ 140,504 $ 141,788 $ 622,638 Cash flows (used in) provided by operating activities from discontinued operations (55,871) 145,587 113,933 Cash flows used in investing activities from continuing operations (167,406) (218,750) (399,520) Cash flows provided by (used in) investing activities from discontinued operations 1,522,160 (16,739) (24,928) Cash flows (used in) provided by financing activities (75,010) 189,267 (620,704) Effect of exchange rate changes on cash 1,569 (8,487) (8,664) Net increase (decrease) in cash and cash equivalents $ 1,365,946 $ 232,666 $ (317,245) Operating Activities In 2024, cash flows provided by operating activities decreased $1.3 million to $140.5 million.
On February 27, 2023, we entered into Amendment No. 1 (“Amendment No. 1”) to the Credit Agreement, dated November 9, 2021, with Advance Auto Parts, Inc., as Borrower, Advance Stores Company, Incorporated, as a Guarantor, the lenders party thereto, and Bank of America, N.A., as administrative agent (“2021 Credit Agreement”).
On February 27, 2023, the Company entered into Amendment No. 1 (“Amendment No. 1”) to the Credit Agreement, dated November 9, 2021, with Advance Auto Parts, Inc., as Borrower, Advance Stores Company, Incorporated, as a Guarantor, the lenders party thereto, and Bank of America, N.A., as administrative agent (“2021 Credit Agreement”).
The 2026 Notes and 2028 Notes bear interest at a rate of 5.90% and 5.95%, respectively, and are payable semi-annually in arrears in March and September. Proceeds from our 2026 and 2028 Notes were utilized to make repayments on our revolving facility and supplement operational and capital expenditures.
The 2026 Notes and 2028 Notes bear interest at a rate of 5.90% and 5.95%, respectively, and are payable semi-annually in arrears in March and September. Proceeds from the Company’s 2026 and 2028 Notes were utilized to make repayments on the Company’s revolving facility and supplement operational and capital expenditures.
On August 21, 2023, we entered into Amendment No. 2 (“Amendment No. 2”) to the 2021 Credit Agreement in order to amend certain financial covenants related to the Consolidated Coverage Ratio (as defined therein), and on November 20, 2023, we entered into Amendment No. 3 (“Amendment No. 3”) to the 2021 Credit Agreement in order to further amend financial covenants related to the Consolidated Coverage Ratio.
On August 21, 2023, the Company entered into Amendment No. 2 (“Amendment No. 2”) to the 2021 Credit Agreement in order to amend certain financial covenants related to the Consolidated Coverage Ratio (as defined therein), and on November 20, 2023, the Company entered into Amendment No. 3 (“Amendment No. 3”) to the 2021 Credit Agreement in order to further amend financial covenants related to the Consolidated Coverage Ratio.
Critical Accounting Policies Our financial statements have been prepared in accordance with GAAP. Our discussion and analysis of the financial condition and results of operations are based on these financial statements. The preparation of these financial statements requires the application of accounting policies in addition to certain estimates and judgments by our management.
Critical Accounting Policies The Company’s financial statements have been prepared in accordance with GAAP. The Company’s discussion and analysis of the financial condition and results of operations are based on these financial statements. The preparation of these financial statements requires the application of accounting policies in addition to certain estimates and judgments by the Company’s management.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ” for further details on our share repurchase program. Capital Expenditures Our primary capital re quirements have been the funding of our investments in information technology and supply chain, e-commerce and maintenance of existing stores and branches.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ” for further details on the Company’s share repurchase program. Capital Expenditures The Company’s primary capital re quirements have been the funding of the Company’s investments in information technology and supply chain, e-commerce and maintenance of existing stores.
Pursuant to Amendment No. 2 and Amendment No. 3, we will not permit the Consolidated Coverage Ratio to be less than (a) 1.75 to 1.00 for each period of four fiscal quarters ending on October 7, 2023 through and including the period of four fiscal quarters ending on October 5, 2024, (b) 2.00 to 1.00 for each period of four fiscal quarters ending on December 28, 2024 through and including the period of four fiscal quarters ending on October 4, 2025 and (c) 2.25 to 1.00 for each period of four fiscal quarters ending after October 4, 2025.
Pursuant to Amendment No. 2 and Amendment No. 3, the Company may not permit the Consolidated Coverage Ratio to be less than (a) 1.75 to 1.00 for each period of four fiscal quarters ending on October 7, 2023 through and including the period of four fiscal quarters ending on October 5, 2024, (b) 2.00 to 1.00 for each period of four fiscal quarters ending on December 28, 2024 through and including the period of four fiscal quarters ending on October 4, 2025 and (c) 2.25 to 1.00 for each period of four fiscal quarters ending after October 4, 2025.
Long-Term Debt On March 9, 2023, we issued our 5.90% senior unsecured notes due 2026 (the “2026 Notes”) at 99.94% of the principal amount of $300.0 million and our 5.95% senior unsecured notes due 2028 (the “2028 Notes”) at 99.92% of the principal amount of $300.0 million.
Long-Term Debt On March 9, 2023, the Company issued the 5.90% senior unsecured notes due 2026 (the “2026 Notes”) at 99.94% of the principal amount of $300.0 million and the 5.95% senior unsecured notes due 2028 (the “2028 Notes”) at 99.92% of the principal amount of $300.0 million.
Amendment No. 1 extends the maturity date of the 2021 Credit Agreement by one year from November 9, 2026, to November 9, 2027. Amendment No. 1 also replaces an adjusted LIBOR benchmark rate with a Term Secured Overnight Financing Rate benchmark rate, as adjusted by an increase of ten basis points, plus the applicable margin under the 2021 Credit Agreement.
Amendment No. 1 extended the maturity date of the 2021 Credit Agreement by one year from November 9, 2026, to November 9, 2027. Amendment No. 1 also replaced an adjusted LIBOR benchmark rate with a Term Secured Overnight Financing Rate benchmark rate, as adjusted by an increase of ten basis points, plus the applicable margin under the 2021 Credit Agreement.
If we are not in compliance with the financial covenants required by our 2021 Credit Agreement, and cannot timely secure an amendment or waiver thereof, we would be in default of our 2021 Credit Agreement and our outstanding senior unsecured notes, which would have a material adverse impact on our financial condition.
If the Company is not in compliance with the financial covenants required by the 2021 Credit Agreement, and cannot timely secure an amendment or waiver thereof, the Company would be in default of the 2021 Credit Agreement and the Company’s outstanding senior unsecured notes, which would have a material adverse impact on the Company’s financial condition.
As part of our normal operations, we enter into purchase commitments primarily for the purchase of goods or services that are enforceable, legally binding and specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction.
As part of the Company’s normal operations, the Company enters into purchase commitments primarily for the purchase of goods or services that are enforceable, legally binding and specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction.
Our future capital requirements will depend in large part on the timing or number of the investments we make in information technology and supply chain network initiatives and existing stores and new store development (leased and owned locations) within a given year.
The Company’s future capital requirements will depend in large part on the timing or number of the investments the Company makes in information technology and supply chain network initiatives and existing stores and new store development (leased and owned locations) within a given year.
While we do not expect the amounts ultimately paid to differ significantly from our estimates, our self-insurance reserves and corresponding Cost of sales and SG&A could be affected if future claim experience differs significantly from historical trends and actuarial assumptions.
While the Company does not expect the amounts ultimately paid to differ significantly from the Company’s estimates, the Company’s self-insurance reserves and corresponding Cost of sales and SG&A could be affected if future claim experience differs significantly from historical trends and actuarial assumptions.
We classify the portion of our self-insurance reserves that is not expected to be settled within one year in Other long-term liabilities.
The Company classifies the portion of the Company’s self-insurance reserves that is not expected to be settled within one year in Other long-term liabilities.
These provisions are considered in our calculation of our minimum lease payments that are recognized as expense on a straight-line basis over the applicable lease term. Any lease payments that are based upon an existing index or rate are included in our minimum lease payment calculations. As of December 30, 2023, our operating lease obligations were $2.66 billion .
These provisions are considered in the Company’s calculation of the Company’s minimum lease payments that are recognized as expense on a straight-line basis over the applicable lease term. Any lease payments that are based upon an existing index or rate are included in the Company’s minimum lease payment calculations.
Our excess and obsolete inventory reserve assessment includes analyzing our inventory at the SKU level by assessing each SKU quantity based on years on hand, the stage within the product lifecycle the SKU is assigned and sales history. From this data analysis, our excess and obsolete inventory is identified, analyzed and compared against our reserve.
Excess and Obsolete Inventory Reserves The Company’s excess and obsolete inventory reserve assessment includes analyzing the Company’s inventory at the SKU level by assessing each SKU quantity based on years on hand, the stage within the product lifecycle the SKU is assigned and sales history.
Certain of our vendor agreements contain purchase volume incentives that provide for increased funding when graduated purchase volumes are met. Amounts accrued throughout the year could be impacted if actual purchase volumes differ from projected annual purchase volumes. Periodic assessments of the accruals are performed to determine the appropriateness of the estimate and are adjusted accordingly.
Certain of the Company’s vendor agreements contain purchase volume incentives that provide for increased funding when graduated purchase volumes are met. Amounts accrued throughout the year could be impacted if actual purchase volumes differ from projected annual purchase volumes.
Historically, the change in our reserve for receivables related to vendor funding has not been significant. Self-Insurance Reserves Our self-insurance reserves consist of the estimated exposure for claims filed, claims incurred but not yet reported and projected future claims, and are established using actuarial methods followed in the insurance industry and our historical claims experience.
Self-Insurance Reserves The Company’s self-insurance reserves consist of the estimated exposure for claims filed, claims incurred but not yet reported and projected future claims, and are established using actuarial methods followed in the insurance industry and the Company’s historical claims experience.
This assessment is routinely performed and includes, but is not limited to, the analysis of anticipated, historical and actual demand; and changes in customer preferences. SKU-level classifications are updated as warranted.
This assessment is routinely performed and includes, but is not limited to, the analysis of anticipated, historical and actual demand; and changes in customer preferences. SKU-level classifications are updated as warranted. Restructuring and Related Expenses The Company records restructuring and transformation activities when management commits to and approves a restructuring plan.
Additionally, from time to time, specific SKUs may be identified as excess and/or obsolete for which a reserve will be recognized. We classify each product into a product lifecycle category: introduction, expansion, saturation, reduction and disposition.
From this data analysis, the Company’s excess and obsolete inventory is identified, analyzed and compared against the Company’s reserve. Additionally, from time to time, specific SKUs may be identified as excess and/or obsolete for which a reserve will be recognized. The Company classifies each product into a product lifecycle category: introduction, expansion, saturation, reduction and disposition.
As of December 30, 2023, our long-term debt, consisting of senior unsecured notes with varying maturities through 2032, was $1.8 billion. Future interest payable related to long-term debt was $380.0 million as of December 30, 2023.
As of December 28, 2024, the Company’s operating lease obligations were $2.4 billion. As of December 28, 2024, the Company’s long-term debt, consisting of senior unsecured notes with varying maturities through 2032, was $1.8 billion. Future interest payable related to long-term debt was $380.0 million as of December 28, 2024.
Any payments of dividends in the future will be at the discretion of our Board of Directors and will depend upon our results of operations, cash flows, capital requirements and other factors deemed relevant by our Board of Directors.
Any payments of dividends in the future will be at the discretion of the Company’s Board of Directors and will depend upon the Company’s results of operations, cash flows, capital requirements and other factors deemed relevant by the Company’s Board of Directors. In addition, Amendment No. 5 to the 2021 Credit Agreement prevents the Company from increasing its cash dividends.
(“Issuer”) is an issuer or provides a full and unconditional guarantee, Advance Stores, a wholly-owned subsidiary of the Issuer, serves as the guarantor (“Guarantor Subsidiary”). The subsidiary guarantees related to our senior unsecured notes are full and unconditional and joint and several, and there are no restrictions on the ability of the Issuer to obtain funds from its Guarantor Subsidiary.
The subsidiary guarantees related to the Company’s senior unsecured notes are full and unconditional and joint and several, and there are no restrictions on the ability of the Issuer to obtain funds from its Guarantor Subsidiary. The Company’s captive insurance subsidiary, an insignificant wholly-owned subsidiary of the Issuer, does not serve as guarantor of the Company’s senior unsecured notes.
New Accounting Pronouncements For a description of recently adopted and issued accounting standards, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see “ Recently Issued Accounting Pronouncements” in Note 2. Significant Accounting Policies , of the Notes to the Consolidated Financial Statements included herein. 25 Table of Contents
The Company periodically evaluates and, if necessary, adjusts its estimates based on currently available information. New Accounting Pronouncements For a description of recently adopted and issued accounting standards, including the expected dates of adoption and estimated effects, if any, on the consolidated financial statements, see “ Recently Issued Accounting Pronouncements” in Note 2.
Amounts received or receivable from vendors that are not yet earned are reflected initially as a reduction to inventory, which subsequently is recorded to Cost of sales. Our estimate of the portion of deferred revenue that will be realized within one year of the balance sheet date is included in Other current liabilities.
The Company’s estimate of the portion of deferred revenue that will be realized within one year of the balance sheet date is included in Other current liabilities. Earned amounts that are receivable from vendors are included in Receivables, net, except for that portion expected to be received after one year, which is included in Other assets, net.
Many of these incentives are under agreements with terms in excess of one year, while others are negotiated on an annual basis or less. Advertising allowances received as a reimbursement of specific, incremental and identifiable costs incurred to promote a vendor’s products are included as an offset to SG&A when the cost is incurred.
Advertising allowances received as a reimbursement of specific, incremental and identifiable costs incurred to promote a vendor’s products are included as an offset to SG&A when the cost is incurred.
Our estimates and judgments are based on currently available information, historical results and other assumptions we believe are reasonable. Actual results could differ materially from these estimates.
The Company’s estimates and judgments are based on currently available information, historical results and other assumptions the Company believes are reasonable. Actual results could differ materially from these estimates. The preparation of the Company’s financial statements included the following significant estimates and exercise of judgment.
For additional information on transactions entered into relating to long-term debt during the fifty-two weeks ended December 30, 2023, refer to Note 6. Long-term Debt and Fair Value of Financial Instruments of the Notes to the Consolidated Financial Statements included herein.
For additional information on transactions entered into relating to long-term debt during the fifty-two weeks ended December 28, 2024, refer to Note 7 .
The net decrease in c ash flows provided by operating activities compared with the prior year was primarily driven by lower Net income and higher accounts receivable. Re fer to “ Results of Operations ” for further details on our results.
The net decrease in cash flows provided by operating activities was primarily attributable to lower net income and provision for deferred income taxes offset by an increase in net working capital compared with 2023 prior year. Refer to “ Results of Operations ” for further details on the Company’s results.
On February 26, 2024, we entered into Amendment No. 4 (“Amendment No. 4”) to the Credit Agreement dated November 9, 2021, with Advance Auto Parts, Inc., as Borrower, Advance Stores Company, Incorporated, as a Guarantor, the lenders party thereto, and Bank of America, N.A., as administrative agent to enable certain addbacks to the definition of Consolidated EBITDA contained therein for specific write-downs of inventory and vendor receivables .
Amendment No. 2. and Amendment No. 3 made no other material changes to the terms of the 2021 Credit Agreement. On February 26, 2024, the Company entered into Amendment No. 4 (“Amendment No. 4”) to the 2021 Credit Agreement to enable certain addbacks to the definition of Consolidated EBITDA contained therein for specific write-downs of inventory and vendor receivables.
The net increase in cash provided by financing activities was attributable to a reduction in share repurchases of our common stock of $604.0 million and the incremental net proceeds of $251 million from the issuances of senior unsecured notes in 2023 compared with 2022. Our Board of Directors has declared a quarterly cash dividend since 2006.
The net increase in cash used in financing activities was attributable to the issuances of senior unsecured notes in the prior year partially offset by a decrease in dividends paid in the current year compared with 2023. The Company’s Board of Directors has declared a quarterly cash dividend since 2006.
Our captive insurance subsidiary, an insignificant wholly-owned subsidiary of the Issuer, does not serve as guarantor of our senior unsecured notes. 23 Table of Contents Contractual and Off Balance Sheet Obligations We enter into operating leases for certain store locations, distribution centers, office spaces, equipment and vehicles. Our property leases generally contain renewal and escalation clauses and other concessions.
Contractual and Off Balance Sheet Obligations The Company entered into operating leases for certain store locations, distribution centers, office spaces, equipment and vehicles. The Company’s property leases generally contain renewal and escalation clauses and other concessions.
Lower participation in our supplier payment programs would shorten our payable terms, resulting in an increase in our working capital requirements, and may have a material negative impact on our liquidity or capital resources. With respect to all senior unsecured notes for which Advance Auto Parts, Inc.
As previously disclosed, a decline in credit ratings or perceived creditworthiness, among other factors, may impact participation in supplier finance programs, which in turn could shorten payable terms, result in an increase in working capital requirements or otherwise negatively impact capital resources. With respect to all senior unsecured notes for which Advance Auto Parts, Inc.
However, risk of noncompliance increases if our financial performance worsens or we are required to increase borrowings to fund operations.
The Company currently expects to be in compliance with these financial covenants for the next 12 months. However, risk of noncompliance increases if the Company’s financial performance worsens or the Company is required to increase borrowings to fund operations.
If our credit ratings further decline, it would negatively impact our interest rate, and our access to additional financing on favorable terms may be limited. In addition, further decline in our credit ratings would likely reduce the attractiveness of our supplier finance programs, whereby our suppliers are provided financing arrangements based on our credit rating.
The current pricing grid used to determine the Company’s borrowing rate under the Company’s revolving credit facility is based on the Company’s credit ratings. If the Company’s credit ratings decline, it would negatively impact the Company’s interest rate, and the Company’s access to additional financing on favorable terms may be limited.
We lease approximately 84% o f our stores and branches. Our capital expenditur es were $242.4 million in 2023, a decrease of $181.7 million fro m 2022, related to the decrease of spend in information technology and supply chain as well as fewer store openings from 2022 to 2023.
The Company leases approximately 83% o f the Company’s stores. The Company’s capital expenditures were $180.8 million in 2024, a decrease of $44.9 million from 2023, related to the decrease of spend in information technology, fewer store openings and fewer marketing-related projects from 2023 to 2024.
As of December 30, 2023, giving consideration to the amendments to our 2021 Credit Agreement, we were in compliance with the financial covenants required thereby. We currently expect to be in compliance with these financial covenants for the next 12 months.
The Company’s compliance with these covenants will depend upon achieving the Company’s financial targets including improvements in operating income. As of December 28, 2024, giving consideration to the amendments to the Company’s 2021 Credit Agreement through that date, the Company was in compliance with the financial covenants required thereby.
As of December 30, 2023, our purchase commitments were $133.0 million.
As of December 28, 2024, the Company’s purchase commitments were $147.5 million.
The preparation of our financial statements included the following significant estimates and exercise of judgment. 24 Table of Contents Vendor Incentives We receive incentives in the form of reductions to amounts owed and/or payments from vendors related to volume rebates and other promotional considerations.
Vendor Incentives The Company receives incentives in the form of reductions to amounts owed and/or payments from vendors related to volume rebates and other promotional considerations. Many of these incentives are under agreements with terms in excess of one year, while others are negotiated on an annual basis or less.
As of March 12, 2024, we had a credit rating from S&P of BB+ and from Moody’s Investor Service of Baa3. The current outlooks by S&P and Moody’s were stable and negative, respectively. The current pricing grid used to determine our borrowing rate under our revolving credit facility is based on our credit ratings.
Long-term Debt and Fair Value of Financial Instruments of the Notes to the Consolidated Financial Statements included herein. 28 Table of Contents As of February 26, 2025, the Company had a credit rating from S&P of BB+ and from Moody’s Investor Service of Ba1. The current outlooks by S&P and Moody’s were negative and stable, respectively.
Removed
In 2024, we anticipate that our capital expenditures related to such investments will range from $200 million to $250 million but may vary with business conditions.
Added
Investing Activities In 2024, cash flows used in investing activities decreased $51.3 million to $167.4 million compared with 2023. This decrease was attributable to fewer store openings, lower capital spend in information technology and marketing-related development projects. Financing Activities In 2024, cash flows used in financing activities increased by $264.3 million to $75.0 million compared with 2023.
Removed
Investing Activities In 2023, Net cas h used in investing activities decreased $189.0 million to $235.5 million compared with 2022 . This decrease was attributable to reduced purchases of property and equipment due to the completion of back office integration in the prior year, partially offset by investments in new store openings.
Added
In addition, the Company’s current revolving credit facility would require securitization in the event of further decline in the Company’s credit rating from S&P.
Removed
Financing Activities In 2023, Net cash provided by financing activities increased by $810.0 million to $189.3 million compared with 2022.
Added
(“Issuer”) is an issuer or provides a full and unconditional guarantee, Advance Stores, a wholly-owned subsidiary of the Issuer, serves as the guarantor (“Guarantor Subsidiary”).
Removed
This could result in significantly lower supplier or bank participation in those programs. Following the downgrade in our credit rating from S&P, certain banks reduced participation in our programs. This capacity has been substantially replaced with new participating banks as well as existing participating banks providing increased capacity.
Added
In addition to the Company’s Consolidated Coverage Ratio requirement, the Company was required to maintain a maximum leverage ratio of 3.75 to 1.00. On November 13, 2024, the Company entered into Amendment No. 5 to the 2021 Credit Agreement.
Removed
Amendment No. 2. and Amendment No. 3 made no other material changes to the terms of the 2021 Credit Agreement.
Added
Amendment No. 5 (i) permits up to $575 million of certain restructuring charges to be added back to Consolidated EBITDAR (as defined therein), (ii) permits up to $800 million of unrestricted cash to be netted out of debt in the calculation of the Leverage Ratio (as defined therein), and (iii) reduced the minimum Consolidated Coverage Ratio (as defined therein) to 1.50 to 1.00 through July 12, 2025 and 1.75 to 1.00 thereafter.
Removed
In addition to our Consolidated Coverage Ratio requirement, we are required to maintain a maximum leverage ratio of 3.75 to 1.00. Our compliance with these covenants will depend upon achieving our financial targets including improvements in operating income.
Added
Amendment No. 5 also reduced the unsecured revolving credit facility under the 2021 Credit Agreement from $1.2 billion to $1.0 billion and amended the pricing on the loans thereunder in connection with changes in the Company’s credit ratings. 29 Table of Contents Amendment No. 5 also updated certain covenants and other limitations on the Company, including (i) expanding the scope of the covenant restricting the ability to create, incur or assume additional debt to cover Advance Auto Parts, Inc., (ii) restricting the Company’s rights to complete share repurchases and increase cash dividend amounts, (iii) requiring the Company to grant liens on deposit accounts, inventory and accounts receivables if credit ratings are downgraded below a minimum threshold, (iv) imposing an additional monthly minimum daily liquidity financial covenant of $750 million, (v) providing for the maturity date under the 2021 Credit Agreement to automatically spring forward to the extent necessary for the 2021 Credit Agreement to mature at least 91 days prior to any scheduled maturity date under any of the Company’s senior unsecured notes, (vi) prohibiting further extensions of the maturity date under the 2021 Credit Agreement beyond the existing maturity date, and (vii) eliminating certain baskets for additional indebtedness, liens, and asset sales.
Removed
Earned amounts that are receivable from vendors are included in Receivables, net, except for that portion expected to be received after one year, which is included in Other assets, net. We regularly review the receivables from vendors to ensure they are able to meet their obligations.
Added
On February 25, 2025, the Company entered into Amendment No. 6 (“Amendment No. 6”) to the 2021 Credit Agreement to, among other things, (i) expand the scope of domestic subsidiaries that would be required to grant security interests and guarantee the Company’s obligations under the 2021 Credit Agreement upon the occurrence of a Springing Lien Trigger Event (as defined therein) to include all of the Company’s subsidiaries other than the Company’s Insignificant Subsidiaries (as defined in Amendment No. 6), (ii) revise the definition of Consolidated Coverage Ratio to exclude up to $175 million of accelerated rent charges related to lease buyouts and to permit the minimum Consolidated Coverage Ratio to remain at 1.50 to 1.00 for one additional quarter before increasing to 1.75 to 1.00 on and after the fiscal quarter ending on January 3, 2026, (iii) revise the definition of Consolidated EBITDA to increase the threshold for Identified Restructuring Charges (as defined therein) from $575 million to $625 million, and (iv) expand the scope of the guaranteed obligations to include bank product obligations and cash management obligations.
Removed
A 10% change i n our self-insurance liabilities at December 30, 2023 would result in a change in expense of approximate ly $15.0 million for 2023. Excess and Obsolete Inventory Reserves In connection with a strategic and operational review of the business, we reviewed the rationalization of product assortment and planned decisive actions related to inventory.
Added
Periodic assessments of the accruals are performed to determine the appropriateness of the estimate and are adjusted accordingly. 30 Table of Contents Amounts received or receivable from vendors that are not yet earned are reflected initially as a reduction to inventory, which subsequently is recorded to Cost of sales.
Removed
As a result, we made a change in our estimate of excess inventory reserves resulting in an increase to Cost of sales of approximately $116 million.
Added
The Company regularly reviews the receivables from vendors to ensure they are able to meet their obligations. Historically, the change in the Company’s reserve for receivables related to vendor funding has not been significant.
Added
A 10% change in the Company’s self-insurance liabilities at December 28, 2024 would result in a change in expense of approximately $14.1 million for 2024.
Added
The components of a restructuring plan require significant management judgments and estimates that would materially impact reported performance if different assumptions were used and have a significant uncertainty in measurements. Impairment of inventory is recognized when the cost of inventory exceeds its net realizable value.
Added
There are significant assumptions required by management to estimate the net realizable value associated with inventory located at the stores and distribution centers to be closed, including the anticipated sell through rate and estimated sales proceeds less costs to sell.
Added
Asset impairment charges associated with operating lease right-of-use (“ROU”) assets are recognized when the ROU carrying value exceeds its fair value. There are significant assumptions required by management to estimate the fair value of ROU assets, including the market rental rates and discount rates utilized in the discounted cash flow model.
Added
Severance and retention costs associated with workforce reductions are recognized at the time of communication to employees, unless future service is required, in which case the costs are recognized ratably over the future service period. Employee termination benefits are recognized as a liability when it is probable that a liability exists, and the amount is reasonably estimable.
Added
Other exit-related costs, including nonrecurring professional fees, are recognized as incurred. Restructuring expenses are recognized as an operating expense in cost of sales or selling, general and administrative expenses within the consolidated statements of operations and related liabilities are recorded within accounts payable and accrued expenses on the consolidated balance sheets.
Added
Significant Accounting Policies , of the Notes to the Consolidated Financial Statements included herein. 31 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

0 edited+58 added−137 removed0 unchanged
Removed
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies ”. The occurrence of any of the following risks could materially adversely affect our business, financial condition, results of operations, cash flows and future prospects, which could in turn materially affect the price of our common stock.
Added
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of the Company’s Annual Report on Form 10-K for 2023, filed with the Securities and Exchange Commission (“SEC”) on March 12, 2024, and the amended Annual Report on Form 10-K/A filed with the SEC on May 30, 2024 (collectively the “ 2023 Form 10-K”).
Removed
Risks Related to Our Operations and Strategy If we are unable to successfully implement our business strategy, our business, financial condition, results of operations and cash flows could be adversely affected. We have undertaken a strategic and operational review to improve the performance of our business and create long-term value.
Added
Amounts are presented in thousands, except per share data, unless otherwise stated. Management Overview On August 22, 2024, the Company entered into a definitive purchase agreement to sell Worldpac, and on November 1, 2024, the Company completed the sale. As a result, Worldpac was presented as discontinued operations beginning in the third quarter of 2024.
Removed
We are currently making and expect to continue to make significant investments to improve our business. If we are unable to implement our initiatives efficiently and effectively, our business, financial condition, results of operations and cash flows could be adversely affected.
Added
Unless otherwise noted, the discussion below relates to the Company’s continuing operations.
Removed
We could also be adversely affected if we have not appropriately prioritized and balanced our initiatives or if we are unable to effectively manage change throughout our organization. Implementing strategic initiatives could disrupt or reduce the efficiency of our operations and may not provide the anticipated benefits, or may provide them on a delayed schedule or at a higher cost.
Added
A high-level summary of the Company’s financial results and other highlights from 2024 includes: • Net sales from continuing operations during 2024 we re $9.1 billion, a decrease of 1.2% compared wit h 2023, driven by a decrease in price and volume partially offset by a favorable product mix.
Removed
These risks increase when significant changes are undertaken and when multiple projects with interdependencies and shared human resources are pursued simultaneously. We are exposed to risks associated with our potential divestitures, which may impact our ability to fully realize the anticipated benefits of those transactions.
Added
Comparable store sales declined 0.7%. • Gro ss profit margin from continuing operations for 2024 was 37.5% of net sales, a decrease of 444 basis points co mpared with 2023 , primarily due to inventory-related charges attributable to the location closures and streamlining product assortment resulting from the Board-approved restructuring and asset optimization plan (“2024 Restructuring Plan”). • Operating loss from continuing operations for 2024 was $713.3 million, a decrease of $752.2 million from 2023.
Removed
We recently announced our intention to explore divestitures of our Worldpac business and Carquest Canada business in separate sales processes as part of our strategic review. There can be no assurance that we will complete these transactions.
Added
As a percentage of net sales, operating loss wa s 7.8%, a decrease of 827 basis points co mpared with 2023.
Removed
Divestitures are complex transactions involving inherent risks, including the potential for distractions of management from the core remaining business of the Company and the occurrence of events that may impact our ability to fully realize the anticipated benefits of the divestitures.
Added
This decrease was primarily attributable to gross margin decline and the impairment of long-lived assets due to the 2024 Restructuring Plan. • Cash flows provided by operating activities from continuing operations was $140.5 million during 2024, a decrease of 0.9% c ompared with 2023, primarily attributable to an increase in net working capital offset by lower net income and provision for deferred income taxes compared with 2023 prior year. • Diluted earnings per share (“Diluted EPS”) from continuing operations was a loss of $9.80 during 2024 compared with a loss of $0.50 in 2023. 21 Table of Contents Refer to “ Results of Operations ” and “ Liquidity and Capital Resources ” for further details on the Company’s results.
Removed
We have not yet set a timetable for the sale processes, but transactions of this nature carry risks associated to variation from expectations with respect to timing, expense and post-closing claims for liability. If any of these risks materialize, the benefits of such divestitures may not be fully realized, if at all.
Added
Business and Risk Update The Company continues to make progress on the various elements of its business plan, which is focused on improving the customer experience, margin expansion, and driving consistent execution for both professional and DIY customers.
Removed
If we are unable to design, implement and properly operate and maintain various information systems, our ability to conduct our business could be negatively impacted . We are dependent on information systems to facilitate the day-to-day operations of the business and to produce timely, accurate and reliable information on financial and operational results.
Added
To achieve these improvements, the Company has undertaken planned strategic actions to help build a foundation for long-term success across the organization, which include: • The completion of the sale of Worldpac with net proceeds of approximately $1.47 billion after transaction costs and excluding the impacts of taxes; • Completing an assessment of the productivity of all assets, including company-owned stores and Carquest Independents, to achieve merchandising excellence; • The 2024 Restructuring Plan designed to improve the Company’s profitability and growth potential and streamline its operations; • Reducing costs to remain competitive while reinvesting in the frontline; • Making organizational changes to position the Company for success; and • Consolidating the Company’s supply chain.
Removed
We are in the process of designing, implementing and updating various information systems. These initiatives will require significant investment of human and financial resources, and we may experience significant delays, increased costs and other difficulties with these projects.
Added
On November 13, 2024, the Company’s Board of Directors approved the 2024 Restructuring Plan which is designed to improve the Company’s profitability and growth potential and streamline its operations.
Removed
We are currently focusing on projects to improve our merchandising, assortment and inventory systems to enable us to efficiently move product through our supply chain network.
Added
This plan is supplemental to other ongoing initiatives to simplify the Company's business and improve profitable growth and entails, among other items, certain store and independent location closures, streamlining product assortment and headcount reductions and organizational design changes to align the Company’s workforce to the expected needs of the Company's business.
Removed
Any deficiency in the design or implementation or maintenance of these systems could lead to inaccuracy of data and disruption to our business operations, such as demand and fulfillment data, which would lower the accuracy and efficacy of our demand and inventory forecasting.
Added
The Company is also pursuing efficiencies in procurement, pricing and professional and outside services, in addition to operational efficiencies. Refer to Liquidity and Capital Resources and Note 3. Restructuring for further details.
Removed
Such deficiencies may also result in lost sales from failure to buy product demanded by our customers, excess inventory from buying product not demanded by our customers, higher costs from buying products in an inefficient manner, disruption in sending invoices and tracking payments, and otherwise negative impacts to our business operations.
Added
Industry Update Operating within the automotive aftermarket industry, the Company is influenced by a number of general macroeconomic factors, many of which are similar to those affecting the overall retail industry.
Removed
The effectiveness of our supply chain is important to our business operations and ability to grow our business, and if we are unable to maintain adequate supply chain capacity or improve supply chain efficiency, it could adversely affect our business, financial condition, results of operations and cash flows.
Added
In addition to the “ Business and Risk Update ” section included within this Management’s Discussion and Analysis of Financial Condition and Results of Operations, these factors include, but are not limited to: • Inflationary pressures, including logistics and labor • Global supply chain disruptions • Cost of fuel • Miles driven • Unemployment rates • Interest rates • Consumer confidence and purchasing power • Competition • Changes in new car sales • Economic and geopolitical uncertainty • Increased foreign currency exchange volatility While these factors tend to fluctuate, the Company remains confident in the long-term growth prospects for the automotive parts industry. 22 Table of Contents Results of Operations The following table sets forth certain of the Company’s operating data from continuing operations expressed as a percentage of net sales for the periods indicated.
Removed
Our store inventories are primarily replenished by shipments from our network of distribution centers. We are working to optimize our distribution network to support sales growth.
Added
Year Ended 2024 vs. 2023 $ Change Basis Points 2023 vs. 2022 $ Change Basis Points (in millions) December 28, 2024 December 30, 2023 December 31, 2022 Net sales $ 9,094.3 100.0 % $ 9,209.1 100.0 % $ 9,148.9 100.0 % $ (114.8) — $ 60.2 — Cost of sales (1) 5,685.8 62.5 5,349.0 58.1 4,916.0 53.7 336.8 443.7 433.0 435.0 Gross profit 3,408.5 37.5 3,860.1 41.9 4,232.9 46.3 (451.6) (443.7) (372.8) (435.0) SG&A exclusive of restructuring and related expenses 3,812.9 41.9 3,805.2 41.3 3,708.3 40.5 7.7 60.6 96.9 78.8 Restructuring and related expenses 308.9 3.4 16.0 0.2 — — 292.9 322.3 16.0 17.4 SG&A 4,121.8 45.3 3,821.2 41.5 3,708.3 40.5 300.6 382.9 113.0 96.2 Operating (loss) income (713.3) (7.8) 38.9 0.4 524.6 5.7 (752.2) (826.6) (485.8) (531.2) Interest expense (81.0) (0.9) (88.0) (1.0) (50.8) (0.6) 7.0 6.4 (37.1) (40.0) Loss on debt extinguishment — — — — (7.4) (0.1) — — 7.4 8.1 Other income (expense), net 26.2 0.3 1.9 0.0 (6.2) (0.1) 24.3 26.8 8.1 8.8 Provision for income taxes (181.1) (2.0) (17.2) (0.2) 99.7 1.1 (163.9) (180.6) (116.8) (127.6) Net (loss) income from continuing operations $ (587.0) (6.5) % $ (30.0) (0.3) % $ 360.5 3.9 % $ (557.0) (612.8) $ (390.6) (426.7) Note: Table amounts may not foot due to rounding.
Removed
If we are unable to maintain adequate capacity in our supply chain network, either as we expand our business or work to optimize our existing network, or if we are unable to improve the efficiency of our supply chain, we may experience higher inventory costs, lower availability, slower delivery speed and ultimately a lower ability to meet consumer product needs and channel preferences.
Added
(1) Cost of sales includes $431.5 million of inventory-related charges attributable to the location closures and streamlining product assortment resulting from the 2024 Restructuring Plan. Net Sales Net sales for 2024 were $9.1 billion , a decline o f $114.7 million, or 1.2%, co mpared with 2023.
Removed
We plan to further invest in distribution center infrastructure to help ensure safety, reliability and efficiency across our operations, which will require capital investments. We are also working to improve product lifecycle management and address slower-moving inventory in our 7 Table of Contents network.
Added
Net sales was negatively impacted by strategic pricing investments coupled with volume decline, partially offset by favorable product mix. Comparable store sales declined 0.7%. Category growth was led by batteries, filters and engine management.
Removed
Our investments in our supply chain may not provide the anticipated benefits, and experiencing sub-optimal inventory levels, inventory availability or increases in our costs could adversely affect our business, financial condition, results of operations and cash flows.
Added
The Company calculates comparable store sales based on the change in store sales starting once a location has been open for approximately one year and by including e-commerce sales and excluding sales fulfilled by distribution centers to independently owned Carquest locations. Acquired stores are included in the Company’s comparable store sales one year after acquisition.
Removed
Our reliance on suppliers, including freight carriers and other third parties in our global supply chain, subjects us to various risks and uncertainties which could adversely affect our financial results.
Added
The Company includes sales from relocated stores in comparable store sales from the original date of opening. Closed stores and stores in process of closing under the 2024 Restructuring Plan are not included in the comparable store sales calculation.
Removed
We source the products we sell from a wide variety of domestic and international suppliers, and place significant reliance upon various third parties to transport, store and distribute those products to our distribution centers, stores and customers.
Added
Comparable store sales is intended only as supplemental information and is not a substitute for Net sales presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Removed
Our financial results depend on us securing acceptable terms with our suppliers for, among other things, the price of merchandise we purchase from them, funding for various forms of promotional programs, payment terms and provisions covering returns and factory warranties.
Added
Gross Profit Gross profit in 2024 was $3.41 billion, or 37.5% of net sales, compared with $3.86 billion, or 41.9% of net sales in 2023, a decrease of 444 basis points .
Removed
To varying degrees, our suppliers may be able to leverage their competitive advantages - for example, their financial strength, the strength of their brand with customers, their own stores or online channels or their relationships with other retailers - to our commercial disadvantage.
Added
Gross profit as a percentage of net sales declined primarily due to $431.5 million of inventory-related charges attributable to the location closures and streamlining product assortment associated with the 2024 Restructuring Plan and liquidation sales at closing stores and distribution center locations. 23 Table of Contents Selling, General and Administrative Expenses, Exclusive of Restructuring and Related Expenses Selling, general and administrative (“SG&A”) expenses, exclusive of restructuring expenses for 2024 was $3.81 billion, or 41.9% of net sales, compared with $3.81 billion, or 41.3% of Net sales for 2023, an increase of 61 basis points.
Removed
Generally, our ability to negotiate favorable terms with our suppliers is more difficult with suppliers for whom our purchases represent a smaller proportion of their total revenues, consequently impacting our profitability from such vendor relationships. If we encounter any of these issues with our suppliers, our business, financial condition, results of operations and cash flows could be adversely impacted.
Added
T he increase in SG&A expense as a percentage of net sales was primarily driven by higher labor-related costs attributable to wage-investments in frontline team members and occupancy costs partially offset by a decline in marketing expenses. Restructuring and Related Expenses Restructuring and related expenses for 2024 was $308.9 million, or 3.4% of net sales.
Removed
In addition, our suppliers, including those within our global supply chain, are impacted by global conditions that in turn may impact our ability to source merchandise at competitive prices or timely supply product at levels adequate to meet consumer demand.
Added
These expenses represent costs primarily attributable to the 2024 Restructuring Plan and included $204.2 million of long-lived asset impairment and accelerated amortization and depreciation charges, $19.7 million of distribution network optimization, $24.7 million of incremental reserves of the collectibility of receivables resulting from contract terminations with independents, $15.2 million severance and other labor related expenses and third party professional fees.
Removed
For example, disruptions to the global supply chain resulting from lack of carrier capacity, labor shortages, geopolitical unrest, port congestion and/or closures, amongst other factors, may negatively impact costs, inventory availability and operating results.
Added
Refer to Note 3. Restructuring of the Notes to the Consolidated Financial Statements included for additional detail. Interest Expense Interest expense for 2024 was $81.0 million, a decrease of $7.0 million co mpared with 2023. This decrease was attributable to an increase in interest income due to higher investment balances compared with the prior year .
Removed
If suppliers increase prices charged to us for products, including transportation and distribution, as a result of these or other factors such as inflation or the cost of participating in vendor financing programs, it may negatively impact our results.
Added
Refer to Note 7 . Long-term Debt and Fair Value of Financial Instruments of the Notes to the Consolidated Financial Statements included herein for further details.
Removed
If we experience transitions or changeover with any of our significant vendors, or if they experience financial difficulties or otherwise are unable to deliver merchandise to us on a timely basis, or at all, we could have product shortages in our stores that could adversely affect customers’ perceptions of us and cause us to lose customers and sales.
Added
Provision for Income Taxes The Company’s Provision for income taxes for 2024 was a benefit of $181.1 million compared with a benefit of $17.2 million for 2023, an increase of $164.0 million primarily due to a decrease in taxable income. The Company’s effective tax rate was 23.6% for 2024 and 36.4% for 2023. In 2024.
Removed
If we are unable to keep existing store locations or open new locations in desirable places on favorable terms, it could adversely affect our business, financial condition, results of operations and cash flows.
Added
The tax rate decreased compared with prior year primarily due to a tax benefit resulting from a discrete charge related to share-based compensation, the expiration of statute of limitations for certain tax years in multiple states as well as enhanced utilization of tax credits in the current year.
Removed
We intend to continue to expand the markets we serve as part of our strategy, which may include opening new stores or branches, as well as expansion of our online business. We may also grow our business through strategic acquisitions.
Added
Reconciliation of Non-GAAP Financial Measures “ M anagement’s Discussion and Analysis of Financial Condition and Results of Operations ” includes certain financial measures not derived in accordance with GAAP.
Removed
As we expand our market presence, it becomes more critical that we have consistent and effective execution across all of our locations and brands. There is uncertainty about the profitability of newly opened locations, including whether newly opened stores will harm the profitability or comparable store sales of existing locations.
Added
Non-GAAP financial measures, including Adjusted Net income, Adjusted EPS, Adjusted SG&A Margin, and Adjusted Operating Income, should not be used as a substitute for GAAP financial measures, or considered in isolation, for the purpose of analyzing operating performance, financial position or cash flows.
Removed
The newly opened and existing locations’ profitability will depend on the competition we face as well as our ability to properly stock, market and price the products desired by customers in these markets.
Added
The Company has presented these non-GAAP financial measures as the Company believes that the presentation of the financial results that exclude (1) transformation expenses under the Company’s turnaround plans, inclusive of the Worldpac divestiture (2) other significant expenses and (3) nonrecurring tax expense are useful and indicative of the Company's base operations because the expenses vary from period to period in terms of size, nature and significance.
Removed
The actual number and format of any new locations to be opened and the success of our strategy will depend on a number of factors, including, among other things: • the availability of desirable locations; • the negotiation of acceptable lease or purchase terms for new locations; • the availability of financial resources, including access to capital at cost-effective interest rates; • our ability to expand our online offerings and sales; and • our ability to manage the expansion and to hire, train and retain qualified team members.
Added
These measures assist in comparing the Company’s current operating results with past periods and with the operational performance of other companies in the industry. The disclosure of these measures allows investors to evaluate the Company’s performance using the same measures management uses in developing internal budgets and forecasts and in evaluating management’s compensation.
Removed
We compete with other retailers and businesses for suitable locations for our stores. Local land use and zoning regulations, environmental regulations and other regulatory requirements may impact our ability to find suitable locations and influence the cost of constructing, renovating and operating our stores.
Added
Included below is a description of the expenses the Company has determined are not normal, recurring cash operating expenses necessary to operate the Company’s business and the rationale for why providing these measures is useful to investors as a supplement to the GAAP measures.
Removed
In addition, real estate, zoning, construction and other delays may adversely affect store openings and renovations and increase our costs. For example, during 2021 through 2022 we experienced significant delays associated with our planned opening of new locations in California, primarily as a result of permitting challenges, and such delays increased our costs and resulted in significant lost sales opportunities.
Added
Transformation Expenses — Expenses incurred in connection with the Company's turnaround plans and specific transformative activities related to asset optimization that the Company does not view to be normal cash operating expenses.
Removed
Further, changing local demographics at existing store locations may adversely affect revenue and profitability levels at those stores. The early termination or expiration of leases at existing store locations may adversely affect us if the renewal terms of those leases are unacceptable to us and we are forced to close or relocate stores.
Added
These expenses primarily include: • Restructuring and other related expenses — Expenses relating to strategic initiatives, including severance expense, retention bonuses offered to store-level employees to help facilitate the closing of stores, incremental reserves related to the collectibility of receivables resulting from contract terminations with certain independents associated with the 2024 Restructuring Plan and third-party professionals assisting in the development and execution of the strategic initiatives. 24 Table of Contents • Inventory write-down — Expenses relating to the incremental write-down of inventory to net realizable value due to liquidation sales and streamlining inventory assortment due to store and distribution center closures associated with the 2024 Restructuring Plan. • Impairment and write-down of long-lived assets - Expenses relating to the impairment of operating lease ROU assets and property and equipment, incremental depreciation as a result of accelerating long-lived assets over a shorter useful life, and incremental lease abandonment expenses as a result of accelerating ROU asset amortization for leases the Company expects to exit before the end of the contractual term, net of gains on lease terminations, in connection with the 2024 Restructuring Plan and Other Restructuring Plan. • Distribution network optimization — Expenses primarily relating to the conversion of the stores and distribution centers to market hubs, including temporary labor, incremental depreciation as a result of accelerating long-lived assets over a shorter useful life, nonrecurring professional service fees and team member severance.
Removed
If we determine to close or relocate a store subject to a lease, we may remain obligated under the applicable lease for the balance of the lease term.
Added
Other Expenses — Expenses incurred by the Company that are not viewed as normal cash operating expenses and vary from period to period in terms of size, nature, and significance.
Removed
In addition to potentially incurring costs related to lease obligations, we may also incur employee-related severance or other facility closure costs for stores that are closed or relocated. 8 Table of Contents Omnichannel growth in our business is complex and if we are unable to successfully maintain a relevant omnichannel experience for our customers, our sales and results of operations could be adversely impacted.
Added
These expenses primarily include: • Other professional service fees — Expenses relating to nonrecurring services rendered by third-party vendors engaged to perform a strategic business review, including the Company’s transformation initiatives. • Worldpac post transaction-related expenses — Expenses primarily relating to non-recurring separation activities provided by third-party professionals subsequent to the sale of Worldpac. • Executive turnover — Expenses associated with the hiring search for leadership positions and compensation. • Material weakness remediation — Incremental expenses associated with the remediation of the Company’s previously-disclosed material weaknesses in internal control over financial reporting. • Cybersecurity incident— Expenses related to the response and remediation of a cybersecurity incident.
Removed
Omnichannel and e-commerce retail are competitive and evolving environments.
Added
Nonrecurring Tax Expense — Income tax incurred by the Company from the book to tax basis difference in the Worldpac Canada stock directly resulting from the sale of Worldpac.
Removed
Operating an e-commerce platform is a complex undertaking and exposes us to risks and difficulties frequently experienced by internet-based businesses, including risks related to our ability to attract and retain customers on a cost-effective basis and our ability to operate, support, expand and develop our internet operations, website, mobile applications and software and other related operational systems.
Added
The following table includes a reconciliation of this information to the most comparable GAAP measures: 25 Table of Contents Year Ended Classification December 28, 2024 December 30, 2023 Net loss from continuing operations (GAAP) $ (586,955) $ (30,024) Cost of sales adjustments: Transformation expenses: Inventory write-down Restructuring 431,529 — Selling, general and administrative adjustments: Transformation expenses: Restructuring and other related expenses (1) Restructuring 60,682 7,835 Impairment and write-down of long-lived assets (2) Restructuring 204,156 — Distribution network optimization (3) Restructuring 19,713 — Other expenses: Other professional service fees Restructuring 15,533 — Worldpac post transaction-related expenses Restructuring 7,258 — Executive turnover Restructuring 1,561 8,152 Material weakness remediation Non-restructuring 4,579 1,438 Cybersecurity incident Non-restructuring 3,491 — Other income adjustments: TSA services (2,537) — Provision for income taxes on adjustments (4) (186,491) (4,356) Nonrecurring tax expense (5) 10,000 — Adjusted net loss (Non-GAAP) $ (17,481) $ (16,955) Diluted loss per share from continuing operations (GAAP) $ (9.80) $ (0.50) Adjustments, net of tax 9.51 0.22 Adjusted EPS (Non-GAAP) $ (0.29) $ (0.28) (1) Restructuring and other related expenses included transactional expenses due to incremental receivable reserves resulting from contract terminations with certain independents as part of the 2024 Restructuring Plan of $24.7 million, severance and other labor related costs of $15.2 million as part of the 2024 Restructuring Plan, and nonrecurring services rendered by third-party vendors assisting with the 2024 Restructuring Plan of $20.8 million.
Removed
Enhancing the customer experience through omnichannel programs such as buy-online-pickup-in-store, new or expanded delivery options, the ability to shop through a mobile application or other similar programs depends in part on the effectiveness of our inventory management processes and systems, the effectiveness of our merchandising strategy and mix, our supply chain and distribution capabilities, and the timing and effectiveness of our marketing activities, particularly our promotions.
Added
(2) During the fifty-two weeks ended December 28, 2024, the Company recorded impairment charges for ROU assets and property and equipment of $171.4 million and incremental accelerated depreciation and amortization for property and equipment and ROU assets of $32.7 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed1 unchanged
Biggest changeAs of December 30, 2023, we had no borrowings outstanding under our revolving credit facility. As of December 31, 2022, we had $185.0 million of borrowings outstanding under our revolving credit facility. Our financial assets that are exposed to credit risk consist primarily of trade accounts receivable and vendor receivables. We are exposed to normal credit risk from customers.
Biggest changeAs of December 28, 2024 and December 30, 2023, the Company had no borrowings outstanding under its revolving credit facility. The Company’s financial assets that are exposed to credit risk consist primarily of trade accounts receivable and vendor receivables. The Company is exposed to normal credit risk from customers.
Our concentration of credit risk is limited because our customer base consists of a large number of customers with relatively small balances, which allows the credit risk to be spread across a broad base. We have not historically had significant credit losses.
The Company’s concentration of credit risk is limited because the Company’s customer base consists of a large number of customers with relatively small balances, which allows the credit risk to be spread across a broad base. The Company has not historically had significant credit losses.
Item 7A. Quantitative and Qualitative Disclosures about Market Risks. We are subject to interest rate risk to the extent we borrow against our revolving credit facility as it is based, at our option, on adjusted Term Secured Overnight Financing Rate (“SOFR”) plus a margin, or an alternate base rate plus a margin.
Item 7A. Quantitative and Qualitative Disclosures about Market Risks. The Company is subject to interest rate risk to the extent the Company borrows against its revolving credit facility as it is based, at the Company’s option, on adjusted Term Secured Overnight Financing Rate (“SOFR”) plus a margin, or an alternate base rate plus a margin.
We are exposed to foreign currency exchange rate fluctuations for the portion of our inventory purchases denominated in foreign currencies. We believe that the price volatility relating to foreign currency exchange rates is partially mitigated by our ability to adjust selling prices. During 2023 and 2022, foreign currency transactions did not materially impact Net income. Item 8.
The Company is exposed to foreign currency exchange rate fluctuations for the portion of its inventory purchases denominated in foreign currencies. The Company believes that the price volatility relating to foreign currency exchange rates is partially mitigated by the Company’s ability to adjust selling prices. During 2024 and 2023, foreign currency transactions did not materially impact net income. Item 8.

Other AAP 10-K year-over-year comparisons