Uni-Select closing 48 stores and 12 distribution centres in the U.S.
Uni-Select Inc, a major distributor of replacement parts, equipment, tools, accessories, paint and related products has announced a restructuring of its operations in the U.S. The several changes are part of what the company calls The Action Plan, initiated in April 2013.
Uni-Select Inc, a major distributor of replacement parts, equipment, tools, accessories, paint and related products has announced a restructuring of its operations in the U.S. The several changes are part of what the company calls “The Action Plan,” initiated in April 2013.
The Plan, which has completed its formal review by the Board of Directors is designed to significantly improve profitability and maximize shareholder value. The Corporation says it remains committed to the US and Canadian automotive aftermarkets and expects to grow its presence in both the mechanical and collision repair sectors.
Over the past ten years, Uni-Select has markedly expanded completing over 70 acquisitions. It allowed the Corporation to increase its activities, improve its product offering, enhance its geographical presence and strengthen its operations. In this regard, Uni-Select’s network needs to be optimized to eliminate some redundancy.
The Action Plan is the result of a comprehensive review of Uni-Select’s distribution operations. The adopted strategy will allow Uni-Select to improve efficiency and profitability by increasing its focus on markets with growth opportunities and exit areas with less potential. The Action Plan encompasses a major optimization of the U.S. distribution network and includes a number of operational improvements, which together are expected to improve profitability.
Highlights of the Action Plan
Closures, divestitures or consolidations involving 48 stores to exit areas with less potential
Optimization of distribution network with focus on select large distribution centres
Closure of 12 distribution centres
Opening of two regional distribution centres
Investment of $8 million in a dozen distribution centres to improve efficiency
Process improvements focused on increasing fill rates and enhancing pricing strategy
The company has projected an estimated cost savings of approximately $10 million in 2013, an additional $15 million in 2014 and $30 million in 2015. Restructuring charges, write-off of assets and other actions related to the Action Plan will result in an approximate one-time cost of $45 million.
The company has also estimated a reduction in sales of approximately $70 million, on an annual basis, resulting from store closures and warehouse relocations
The restructuring charges of approximately $36 million will be recorded in the second quarter of 2013. The balance will be recorded as incurred. These charges will result in a cash outlay of $13 million that will be fully offset by a $40 million reduction in inventory.
Implementation of the Action Plan is in progress and completion is expected in late 2014.
Progress of the Action Plan to Date
1. Closure of 11 stores and one distribution centre resulting in an headcount reduction of 58 people
2. Completion of the relocation of US national distribution centre
3. Restructuring of operations leading to the elimination of 156 positions
During the last few weeks the Corporation reduced its expenses through these initiatives by approximately $10 million, on an annual basis, of which $5 million will positively affect 2013 results.
Uni-Select is also committed to close 30 stores, another distribution centre and open a new regional distribution centre in the third quarter of 2013.
The Action Plan is in addition to the Network Optimization Plan launched in August 2012 (rationalization and consolidation of distribution network). The annual savings of $20 million expected from the Network Optimization Plan have been realized; unfortunately, the cost reduction stemming from the Network Optimization Plan were largely offset by lower sales in the past three quarters as well as the unfavourable change in the distribution channel mix. These offsetting elements led Uni-Select to implement additional initiatives to improve results.
“With the support of our strong and dedicated team and the help of our advisors, we were able to assess our operations and assets, as well as our potential for growth. We have concluded that the Action Plan is the best alternative to create additional value for our shareholders and offer continued excellent service to our customers.” said Richard G. Roy, president and CEO, Uni-Select.
“As we implement these initiatives, we still intend to achieve previously stated goals such as the reduction of indebtedness and carry-out our sales strategy to diversify our market, increase market share and execute accretive acquisitions. FinishMaster and Beck/Arnley are delivering good results on which we plan to capitalize. We are focused and convinced that we will be able to deliver on expectations and generate beneficial value to all stakeholders. Our search for a new President and COO for our U.S. automotive business is progressing according to our plan and we shortly should be able to make an announcement” added Roy.