Can Advance Auto Parts Unlock Real Growth? The Turnaround Strategy Explained

The Restructuring Plan: A Fresh Approach

Since Shane O’Kelly took over as CEO in September 2023, Advance Auto Parts has implemented an aggressive restructuring. The company shuttered over 700 underperforming locations to concentrate operations in markets where it holds a commanding “No. 1 or No. 2 position in terms of store density.” This selective approach differs markedly from previous turnaround attempts that lacked strategic focus.

Looking ahead, the company plans to expand with 100 new locations through 2027, complementing the 30 stores already launched in 2025. These aren’t standard retail outlets—they’re designed as “market hub” stores carrying three to four times the inventory depth of traditional Advance Auto locations. The emphasis on same-day parts delivery also positions the company to better serve professional mechanics, a crucial market segment where speed matters.

The Valuation Case: Why the Stock Looks Attractive

On a price-to-sales basis, Advance Auto Parts trades at levels that would ordinarily signal distress. Yet the real issue isn’t the valuation metric itself—it’s what drives it. The stock remains consistently undervalued because the company has historically failed to generate profit margins comparable to competitors like AutoZone and O’Reilly Automotive.

Current EBITDA margins lag peer benchmarks significantly, creating a value gap that offers either opportunity or a cautionary tale depending on execution. If management can narrow this margin differential through operational efficiency and scale benefits from the restructured store network, shareholders could see substantial upside potential.

Early Signs of Improvement (And Remaining Concerns)

The latest margin trends show a modest uptick compared to recent years, suggesting the restructuring may finally be gaining traction. Unlike previous false starts, this plan includes concrete operational changes—store rationalization, inventory optimization, and delivery infrastructure—rather than cosmetic adjustments.

However, turnaround risks persist. Retail automotive remains fiercely competitive, and execution stumbles could derail momentum. The company must prove it can sustain margin expansion while opening new locations and maintaining customer retention through the store closure transition.

Who Should Consider This Investment?

Advance Auto Parts is a stock for investors with a high tolerance for uncertainty who believe in the new leadership’s execution capability. Deep-value players who see the competitive dynamics shifting in management’s favor might view this as a compelling opportunity. For conservative portfolios seeking lower-risk exposure, established competitors with more predictable profitability may be more suitable alternatives.

The company’s ability to deliver on its strategic blueprint over the next 18-24 months will determine whether early margin improvements represent a genuine turnaround or another missed opportunity.