Shane O'Kelly
President and Chief Executive Officer at Advance Auto Parts
Good morning, everyone, and thank you for joining us. I'm pleased to be here for my first earnings call as the CEO of Advance. We have several topics to discuss with you this morning.
But before I begin, I'd like to thank all of Advance's team members who I've come to know during my first 60 days with the company. During that time, I visited our stores across multiple markets, met with numerous customers, spent time in our distribution centers, got to know our Carquest Independence and attended our Annual Vendor Summit where I had the chance to meet with many of our major suppliers.
Through all of this, I came away impressed with the passion and dedication of our frontline team members and I remain optimistic about the future of the company. In addition to spending time in the field, I have partnered closely with the Board and Management team to make progress on our strategic and operational review.
As the new CEO, I place a premium on capabilities learned during my time in the military. This includes aligning the company around fewer measurable goals while ensuring discipline and accountability in the process to achieve those goals.
During my review of Advance, we identified the need to simplify our overall strategy while also improving execution, both of which will create value. Consistent with that, we are moving forward with a sense of urgency to help stabilize the company and return to profitable growth.
Today, we are announcing decisive actions that we have initiated to achieve these objectives. Those actions are, number one, the initiation of a sale process for Worldpac; number two, the initiation of a separate sales process for our Canadian business; number three, significant cost reductions; number four, reinvestment in the field and number five, the appointment of a new CFO as well as other organizational updates.
These decisive actions are further reinforced with a renewed and vigorous commitment of selling auto parts. That is our core business. This includes eliminating numerous initiatives that were distracting us from a clear focus on the most fundamental aspects of our business. We believe our success will come from disciplined execution across the blended box model, where we service both professional installers and DIY customers from our Advance and Carquest locations.
Let's take a moment and further describe our five decisive actions, beginning with the decision to initiate the sale process for Worldpac. Worldpac is a high-performing business and, as you know, is very different than our core blended box model.
As we get back to the fundamentals of servicing our professional and DIY customers, we view now as the right time to simplify our model. The Worldpac business still operates relatively independently from Advance, and we believe that the sale process will not create a distraction.
Next, let's talk about our business in Canada, which goes to market under the Carquest banner. Today, we are announcing a separate sale process for that business. Like Worldpac, our Canadian business also runs largely independently and predominantly serves professional customers. We do not believe this sales process will cause a distraction for our U.S. business.
Third, as part of our operational review, we have launched a new cost reduction program that we expect will generate a minimum of $150 million in savings on an annualized basis. These savings will be primarily driven by simplifying our organizational structure, minimizing duplicative efforts and eliminating investments that are not core to supporting our frontline team members and customers.
Four, while we expect to see the benefits of these cost reductions beginning next year, we recognize that we must take action to improve the retention of our frontline teams and ensure we have experienced team members to serve our customers. In line with this, we expect to reinvest approximately $50 million of our savings back into the business inclusive of wages and training enhancements. In fact, we began making changes to our frontline compensation structure in Q3 and are already seeing a reduction in turnover in targeted frontline roles.
And fifth, following a robust search, I am pleased to announce that we have appointed a new CFO. We're thrilled that Ryan Grimsland will be joining the Advance family from Lowe's to lead our finance organization. Ryan has more than 20 years' experience leading high-performing teams and omni-channel retail businesses serving both Pro and DIY customers. He has a strong track record of driving organizational improvements while implementing best practices to resolve complex issues.
I look forward to Ryan joining us later this month and partnering with him and the entire leadership team to drive the needed change for Advance. In addition to our CFO announcement, we've taken action to streamline our management structure.
We have reorganized parts of my leadership team and transition responsibilities for our marketing, merchandising and e-commerce functions to the appropriate leaders in our organization, who will drive enhanced collaboration and accountability. We have made additional organizational adjustments in several other areas to help us operate more effectively.
I would also note, as part of our strategic review, we are taking a disciplined approach to the evaluation of all assets including corporate stores, independently owned Carquest locations and our distribution network, all to enhance productivity. This may include the rationalization of unprofitable assets to better allocate resources focused on core fundamentals. We are early in this process and expect to share more as we progress in the thorough evaluation of our entire business.
As I emphasized earlier, we are sharpening our focus on the fundamentals. As an example, last month, we held our annual Partner Growth Summit and our team spent a few days with hundreds of representatives from key suppliers, who are critical to how we better serve our customers.
This annual event is a valuable opportunity for us to collaborate and share updates on our strategy. This year's summit was a great venue for us to articulate to our vendors how we are turning the page as an organization and we are excited to return to growth with their partnership. We recognize that having the right inventory availability is crucial for our team members' ability to serve customers, which would not be possible without the strong support of our vendor partners.
Finally, before I hand the call off to Tony, I'd like to thank him for his dedication and incredible work over the past few months, serving as our Interim CFO, in addition to his role as Treasurer. His servant leadership has been instrumental across our finance organization. I look forward to continue to partner with Tony as we build Advance and capture the immense opportunity ahead of us.
With that, I'd like to now turn the call over to Tony to discuss our Q3 results and provide an update on our outlook for the full year. Tony?
