US: new car sales hit auto parts retailers image

The continued strength of the US auto sales has negatively impacted retailers of auto parts, as the rising consumer confidence prompts customers into purchasing new cars instead of repairing their old ones.

The sales figures have proven spectacularly strong in each of the past three months, with August – traditionally a very weak sales month – reaching a 1.58 million vehicles figure, the highest for the period since the record 1.63 million units accounted in August 2003.

Companies such as AutoZone, Advance Auto Parts and O’Reilly Automotive – traditional auto parts retailers – are now refocusing their business on providing parts for the higher-margin commercial repairs business, as opposed to direct client sales.

“AutoZone’s higher exposure to the slower-growing do-it-yourself (retail) segment and lower exposure to the higher-growth commercial delivery business was a bit of a competitive headwind,” comments RBC Capital Markets analyst Scot Ciccarelli.

AutoZone reported its same-store sales rose 2.1% in the fourth quarter ended Aug. 30. But the Memphis, Tennessee-based retailer still has some catching up to do in the commercial parts market, with the segment only accounting for 17.5% of this year’s sales, although on the rise from 2013’s figure of 16%. On the other hand, Advance and O’Reilly have up to 40% of their business dedicated to the commercial repair market.

Via Reuters