Uni-Select Inc. has announced a restructuring of its U.S. operations that will see closures, divestitures or consolidations involving 48 stores to exit areas with less potential. The restructuring includes closure of 12 distribution centres and the opening of two regional distribution centres as well as an investment of $8 million in a dozen distribution centres to improve efficiency. The company also said that it will cut 400 more positions on top of 214 already eliminated in the reorganization.
Uni-Select has shut 11 of the 48 stores it plans to close overall, along with one of 12 distribution centres. The company plans to close an additional 30 stores and a second distribution centre in the third quarter, with the rest of the reorganization to be completed by late 2014.
The moves are a result of a slowdown in the aftermarket business that prompted a review of strategic alternatives designed to significantly improve the U.S. segment’s profitability by eliminating redundancies.
During the last few weeks the corporation reduced its expenses by approximately $10 million, on an annual basis, of which $5 million will positively affect 2013 results.
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 Chief Executive Officer, 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 Mr. Roy.
Highlights of the Action Plan:
Closures, divestitures or consolidations involving 48 stores to exit areas with less potential
Rightsizing of the distribution network
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
Estimated cost savings of approximately $30 million on an annual run-rate basis
Approximately $10 million in 2013, an additional $15 million in 2014 and full impact in 2015
Reduction in sales of approximately $70 million, on an annual basis, resulting from store closures and warehouse relocations
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
Restructuring charges of approximately $36 million to 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
Closure of 11 stores and one distribution centre resulting in an headcount reduction of 58 people
Completion of the relocation of US national distribution centre
Restructuring of operations leading to the elimination of 156 positions