Looming Demotion Brings Discount Resignation

By Michael Willins

AMB Senior Editor

EXCLUSIVE--An impending demotion for Discount Auto Parts President and Chief Operating Officer Bill Perkins was apparently more than he could take, as the company head resigned Jan. 18 to pursue “other opportunities.”

Perkins spoke during last December’s second quarter conference call with the media and financial analysts about an overall commitment within the company toward improving earnings. At the time, there was no indication he was anything but motivated in his current position.

“We know that we must improve our company’s performance and we are resolved to do so,” he said at the time. “With a committed and enthusiastic team serving our customer base, combined with our supply chain initiatives, our belief is we’ll achieve the result we’re looking for.”

The decision to resign apparently was spurred on by the corporate decision to seek out a new chief executive officer/president, which would reduce Perkins’ responsibilities. Discount Chief Financial Officer Mike Moore said the looming changes at the top were the result of significant pressures in the industry over the last two years.

“Basically a decision was made to take a fresh look at some things and see if there was a way to accelerate some areas,” said Moore. “Our desire certainly was for him to stay a part of the company.”

The primary internal struggles revolve around supply chain issues and a commercial program, Pro2Call, that has not met expectations. On the supply chain side, the company has reduced its inventory by $5 million, tried to improve overall distribution efficiencies and began the rollout last November of store-specific, tailored inventories. The supply chain initiatives are an attempt to improve turn rates, which average “barely two” per year, according to Advest Inc. Director of Consumer Products Research Bret Jordan.

“They have not had a tremendous improvement in inventory turns, which I guess you can always point back to Pro2Call. But even prior to Pro2Call they were having a hard time getting inventory turns up,” said Jordan. “If you’re turning inventory one and a half to two times a year, your return on investment for those inventories is pretty poor.”

As for Pro2Call, Moore would not share specific sales numbers. He said 175 of the chain’s 664 stores have implemented the program, and those stores are averaging just under $5,000 a week in sales. Leadership expects the program to reach profitability in the fourth quarter.

Jordan, however, is not so optimistic. As of Jan. 11, the commercial delivery program had incurred operating losses of about $10.8 million.

“Pro2Call is behind schedule. Things that are behind schedule have a tendency to stay behind schedule,” he said. “It’s conceivable it could be profitable in the fourth quarter, but I’m not going to bet the farm on that.”

Jordan does see Perkins’s departure as a positive move for the company by giving them a fresh start. He also likes some strategies the company has adopted, such as focusing on the supply chain and limiting its new store growth to focus on other issues.

“They have some issues to address, whether it be commercial, or inventory turns or rolling out a new distribution center, that are probably immediately more pressing than throwing up a substantial number of new stores in markets outside Florida,” he said.

The company’s new distribution center on Copiah County, Miss., should begin operation in March. The DC will initially service 150 stores in the four states of Louisiana, Georgia, Mississippi and Alabama, with a total capacity of 450 stores.

Discount has begun the search for a new chief executive officer and president. Search firms have been contacted and the goal is to have a new person named by March 1.