May 26, 2012 Sharing the Wealth

Volume 15 | Issue 2

Success has seemed to come easy for Advance Auto Parts (just look at its history and recent financial statements). But this Virginia-based c

Based on sales and store number, Advance Auto Parts is the second-largest retailer of automotive replacement parts and accessories in the United States. Founded in 1932, the Roanoke, Va.-headquartered enterprise has come a long way in 80 years. It has established a presence in 39 states (in the northeastern, southeastern and Midwestern regions) as well as in Puerto Rico and the Virgin Islands.

Operating in two segments (Advance Auto Parts and Autopart International), the company provides fluids, alternators, batteries, belts, hoses, chassis parts, clutches, engine parts, ignition, lighting, radiators, starters, spark plugs, wires, transmission parts and a wide array of accessories, among many other items.

Advance boasts 3,662 stores that serve the DIY (do-it-yourself consumer) and commercial (professional installer) markets. “Currently, we are at 63-percent DIY and 37-percent commercial, but our goal is to transition to a 50/50 mix,” says Shelly Whitaker, the organization’s manager of public communications.

A distinguishing factor is its guiding principles, which the company terms as “Advance Values.” These include inspiring the success of every employee, optimal customer service, and achieving growth and profitability with integrity.

ENVIRONMENTALLY RESPONSIBLE ORGANIZATION
Integrity translates into environmentally friendly practices, and this is underscored by a partnership Advance formed in 2012 with the Lexington, Ky.-based Valvoline to create the “Close the Loop” program. “That phrase refers to the recycling and reuse of motor oil,” describes Todd Allard, Advance’s vice president of marketing. “It means that dirty oil won’t just be removed and dumped into the ground or into the garbage. It will be recycled into a closed loop that brings used motor oil back into the system. It’s Valvoline’s initiative – they own it and drive it – and we’ve partnered with them to take it to our customer, to encourage recycling.”

It’s more than that – the recycling creates a product called NextGen motor oil, created from 50-percent recycled oil. But consistency isn’t compromised, Allard assures. The recycled oil will deliver 100-percent quality and protection. It’s not only an ecologically sound initiative; it will help decrease dependence on foreign crude (as well as preserve existing resources).

How good is the NextGen oil? It has been embraced by professional drivers – NASCAR racers, that is. As Advance reveals, NextGen technology was put through extensive validation across NASCAR and NHRA, earning approval from some of motorsports’ top teams. For an automotive product, you can’t get a better endorsement.

The partners feel this initiative is critical – in America, cars and trucks consume more than three billion quarts of motor oil each year. Of that amount, Advance reveals, 200 million gallons are not properly disposed. Recycling means that oil won’t go into the water supply, and that’s a serious consideration: merely one gallon of improperly disposed motor oil can contaminate up to one million gallons of drinking water, Advance points out. Further, as Valvoline reveals, NextGen uses 48 percent less fossil fuels, emits 40 percent less harmful and acidic emissions and has 20 percent less impact on global warming.

While this initiative results in a new product, Whitaker reminds, “This is not something new for us that came with the Valvoline partnership. We’ve always had a robust recycling program. Beyond offering consumers the opportunity to recycle used motor oil, we’ve always helped them recycle old batteries, as well as other fluids that come from a vehicle.”

Adds Allard: “Responsibility is part of our DNA, so the partnership proved a good match.”

SUCCESSFUL ENTERPRISE
The partnership is a good match for another reason. Not only do both companies believe in the same thing, but Advance is a financially vibrant company. Consider recent financial figures. In 2011, Advance’s fourth-quarter sales grew 4.5 percent, to $1.33 billion, compared to the $1.27 billion in previous year’s fourth quarter. In physical terms, the increase translated into 99 new stores opened in a 12-month period, and a comparable store sales gain of 2.9 percent compared to an 8.9 percent store sales gain during 2010’s fourth quarter. Fiscal 2011 comparable store sales increased 2.2 percent on top of an 8.0-percent increase in fiscal 2010.

The company’s success represents an ongoing upward trajectory, which began in 1932 when Arthur Taubman purchased Advance Stores (located in Virginia) and began building a multistate chain of automotive and home supply stores. By 1969, the year that Nick Taubman became company president, the growing organization had 54 Advance stores in four states. Three years later, Nick Taubman transitioned the enterprise into a specialty auto parts chain. In 1974, the company changed its name to Advance Auto. Ten years later, it became Advance Auto Parts. In 1987, the renamed company opened its 100th store (in Vinton, Va.). Only two years later, the organization owned 156 stores and recorded nearly $119 million in sales.

During the 1990s, the company continued growing (by the end 1993 it had 352 stores and by 1996, it raised the total to 649) and acquisition became a major part of its development strategy. In 1997, it purchased 15 Nationwise stores and, in 1998, it acquired Western Auto Supply Company/Parts America, which doubled company size.

At the beginning of the new millennium (in 2000) it had 1,728 stores in 37 states, primarily in the eastern and Midwestern section of the nation – but it also posted locations in Puerto Rico and the Virgin Islands. In 2001, Advance acquired Carport Auto Parts, a regional retail chain with 29 stores in Alabama and Mississippi. Near the end of that year, Advance acquired 671 stores from Discount Auto Parts, a southern-based auto parts chain. After this development, Advance became a publicly traded company. By now, it had 2,484 stores in 38 states.

Ever relentless in acquisition, in 2002, Advance purchased 57 Trak Auto Parts Stores in northern Virginia, Washington, DC, and eastern Maryland. The year 2003 witnessed Advance bringing into its fold eight Karparts Auto Stores, Inc. That move solidified its position as the market leader in northern and central New Jersey, the company reports. That same year, Advance was listed in “Fortune 500” (it hasn’t fallen from that listing). That recognition was followed, two years later, with a Forbes Magazine ranking as the “Best Managed Retail Company in America.” This was soon followed by acquisition of 19 stores previously operated by Lappen Auto Supply – which enhanced the company’s presence in the US northeastern region – and the purchase of Autopart International, which operated 202 stores along the Atlantic Seaboard.

In 2006, Advance opened its 3000th store (in Salina, Kan.), which stretched its reach farther west. In the next year, the total reached 3,150. In 2008, Darren Jackson became Advance’s president and chief executive officer, and during his tenure, he developed transformative priorities: DIY transformation, commercial acceleration, availability excellence and superior experience. In 2010, Advance opened its 3,500th store in Westerly, R.I., marking another significant milestone in the company’s growth story.

SHARING GOOD FORTUNE
Obviously, Advance has enjoyed a great deal of prosperity, even in recent times of economic turmoil. But it shares its good fortune. “We have a long-standing commitment to charitable organizations,” says Whitaker. “In 2011, we raised more than $4 million for the Juvenile Diabetes Research Foundation, which makes us the number-one partner for that organization. Since 1994, our company has raised more than $32 million. We’re also actively involved with the United Way, Red Cross, American Cancer Society, Building Homes for Heroes and Habitat for Humanity, among many other humanitarian organizations.”

Adds Allard: “We don’t just add a storefront in a community to sell auto parts. This gets back to our DNA. It’s the inherent nature of this company to also give back to the communities where our team members live and work. And our 52,000 employees are equally as committed.”

WHERE NEXT?
Advance is a successful company – but how much better can it get, how much more shared good fortune can it realize? “Our strategy for 2012 includes opening a little over a 100 new stores as we have for the last several years,” says Whitaker. “Our company goals remain focused on reaching a 50/50 mix of DIY and commercial sales. We’ve achieved about $6.2 billion in sales and have a goal to get to $10 billion in the next few years.”

But success extends beyond a bottom-line figure, as both Whitaker and Allard agree. “More than just selling auto parts,” says Allard, “we’ll continue driving our strategies to provide service leadership and superior availability. We are constantly trying to figure out how we can overcome customer ‘pain points’ and offer them a better experience.”

Advance is also constantly trying to figure out how to be a better neighbor.

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