Uni-Select to close locations, eliminate 600 jobs in U.S. restructuring

MONTREAL – Uni-Select Inc. has announced a restructuring of its U.S. operations that will see more than 600 jobs eliminated as dozens of stores and distribution centres are closed or sold, saving the Quebec-based auto parts distributor US$30 million a year.

The company announced Thursday that it will cut 400 more positions on top of 214 already eliminated in the reorganization.

So far Uni-Select (TSX:UNS) has shut 11 of the 48 stores it plans to close overall along with one of 12 distribution centres slated for the chopping block. The stores provide parts to repair shops.

It 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.

“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,” CEO Richard Roy said.

The company says it remains committed to the U.S. and Canadian automotive aftermarkets and expects to grow its presence in both the mechanical and collision repair sectors.

Uni-Select said the initiatives will help to reduce its debt, increase market share and execute acquisitions.

“We are focused and convinced that we will be able to deliver on expectations and generate beneficial value to all stakeholders,” Roy said, noting that the company expects to shortly announce a new president of its U.S. automotive business.

The changes announced Thursday are in addition to a network optimization plan launched last August that realized US$20 million in annual cost savings. However, those benefits were offset by lower sales.

Uni-Select’s presence in the United States has grown over the past decade through more than 70 acquisitions.

The company will focus on select large distribution centres by opening two regional centres as it closes 12 smaller locations. It has already moved its national distribution centre from New Jersey to Tennessee.

It will also invest US$8 million to improve the efficiency of a dozen distribution centres.

About US$10 million of the annual cost savings will be realized this year, an additional US$15 million in 2014 and the remaining US$5 million in 2015.

The changes are expected to reduce annual sales by US$70 million and result in US$45 million in one-time costs.

Restructuring charges totalling about US$36 million will be recorded in the second quarter of its fiscal year, with the rest being booked as they are incurred. The charges will result in a cash outlay of US$13 million, offset by a US$40-million reduction in inventory.

Founded in 1968, Uni-Select is a major distributor of replacement parts, equipment, tools, accessories, paint and related products for motor vehicles in North America. With 5,800 employees, including 5,000 in the U.S., it is the largest distributor in Canadaand the sixth-largest in the United States.

On the Toronto Stock Exchange, Uni-Select’s shares were down 80 cents, or 3.74 per cent, at C$20.60 in midday trading Thursday.