Progress and Impact of Final Mile Delivery Expansion
Colin Yankee highlighted the transformation of the supply chain into a digitally-enabled, customer-facing network supporting growth and competitive advantage.
The rollout of Final Mile is in 145 hub stores with 220 spokes, covering about 15% of stores, aiming for 25% by year-end.
Early results show average order size of nearly $400, with high customer satisfaction, lower return rates, and engagement from high-value customers.
The initiative extends legendary service to rural properties, delivering high-weight, high-volume goods directly to customers' land, including entering properties with gate codes.
The Final Mile network leverages existing distribution centers, mixing centers, and local store hubs, providing cost-effective fulfillment and a competitive edge in rural delivery.
Accelerated Rollout of Green Apron Service and Technology Integration
Green Apron Service to be fully scaled across all U.S. company-operated stores by mid-August, ahead of initial schedule.
Early pilot results show significant improvements in transaction times, customer service, and full-day sales performance.
Implementation includes new staffing models, SmartQ order sequencing technology, and a new performance report ('grow report') to enhance operational focus and store performance.
The rapid deployment aims to build a stronger operational foundation to support future innovation and customer experience enhancements.
Adjusted operating margin expanded by 70 basis points to 16.3%, supported by margin improvements in the light-duty business.
Consolidated net sales for Q2 2025 grew 8% year-over-year to $541 million, driven primarily by strong volume growth in the light-duty segment.
Heavy Duty segment grew 1% with a slight positive operating margin of 80 basis points, down year-over-year due to lower volume and investments for growth.
Light Duty segment net sales increased 10% with a 140 basis point margin improvement to 18.5%.
Operating cash flow was $9 million in Q2 2025, down from $63 million in Q2 2024, impacted by higher tariff costs and increased inventory investments.
Specialty Vehicle segment net sales declined 3% due to weak consumer sentiment but maintained margin focus and engagement in enthusiast markets.
Return to Profitability and Store Footprint Optimization
Advance Auto Parts achieved a significant milestone by returning to profitability in Q2 2025, supported by store footprint optimization and strategic initiatives.
The company has completed the closure or conversion of 9 distribution centers in the U.S. year-to-date, with a target of 12 closures by year-end.
Management emphasized that store infrastructure upgrades, including HVAC, roofing, and signage, are part of a multiyear plan to improve customer and employee experience.
The store refresh CapEx has increased threefold compared to 2024, with over 1,000 stores upgraded so far, aiming for a better in-store experience.
These operational improvements are designed to reinforce the company's turnaround and long-term growth strategy.
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