Advance Auto Parts has decided to walk away from a previously announced partnership with Interstate Batteries, Advance CEO Tom Greco said.
“The value envisioned by both parties was compelling, but circumstances changed,” Greco said during Advance’s May 22 quarterly earnings call.
Announced in December, the partnership would have made Interstate Batteries the exclusive automotive and specialty battery brand for Advance Auto Parts, extending its retail presence to Advance’s nearly 5,000 stores.
“We’ve talked in the past about the importance of suppliers and external partnerships to help us better serve customers, drive sales growth, increase margins and improve cash flow,” Greco said during the conference call. “In line with these long-term financial priorities, and after several months of discussions with Interstate Batteries, we’ve decided not to proceed with the partnership announced in December.”
Greco said the decision “was made through the lens of our financial priorities and is in the best interest of our shareholders.”
“We still believe that Interstate Batteries provides a leading brand, quality products and an exceptional service model, and we wish them continued success,” he added.
Despite the deal falling through, Advance’s battery sales have been strong this year, Greco noted. He said Advance will strengthen its partnership with “a pre-existing battery supplier,” although he didn’t name the supplier.
“We’ll continue to look for impactful partnerships with suppliers and external partners that create value for all parties,” Greco said.
When an analyst asked Greco to provide more details about the decision, he said the company uses a number of “pretty straightforward” criteria to evaluate its relationships with suppliers and external partners: “We want to know where the consumer is headed, we want to know what’s best for our customers and, of course, we put it through a financial lens that looks at sales, margin expansion and cash flow.”
“In line with those financial priorities, we decided not to proceed with the I-B partnership because circumstances fundamentally changed since it was announced last December,” Greco added.
Greco also noted that the company doesn’t anticipate any supply disruptions from the deal falling through. “In fact, we feel very good about this decision and there’s no doubt it was in the best interest of AAP and our shareholders.”