Each month, Northcoast Research publishes the Northcoast Research Mechanic Index, based on the results of a survey of approximately 50 independent repair shops operating in the top 10 states (based on the light vehicle fleet population), plus Advance Auto Parts’, AutoZone’s and O’Reilly’s aggregate store count.
Below are highlights from the results of Northcoast Research’s Independent Automotive Repair Garage Survey for June 2012.
According to the results of the most recent Northcoast Mechanic Index, sales trends in the DIFM channel continued to be pressured during June.
"As expected, the sales weakness appears to have been a function of soft traffic trends at the garages, which has been a recurring theme for several months now," Northcoast Research stated in the report. "This dynamic offset the benefit of a year-over-year gain in the average ticket.
"Additionally, respondents noted that the environment continued to be very promotional (at the wholesale level, as well as at the garages), which we continue to believe is symptomatic of the underlying weakness in demand across the industry.
"According to our contacts, deferred maintenance behavior continued to be a headwind to sales and traffic trends during June. That said, the severity of pressure appeared to have moderated for the second consecutive month.
"The Three Month Outlook Index rose 3.2 percent to close the month at 67.1. The improvement was driven by a decline in the percentage of respondents who anticipate soft sales trends over the next three months.
"While we continue to appreciate the opportunity that the publically traded players in the automotive aftermarket have to gain market share in the DIFM channel, current valuations are not attractive enough to pique our interest, especially given the recent deterioration in sales trends and signs that the industry remains under some pressure. Furthermore, we have growing concerns over what a changing mix of automobiles in the nation’s light vehicle fleet could mean for demand trends over the next four to five years. (See our note entitled ORLY: Change in Light Vehicle Mix Likely to be a Headwind in Coming Years and our recent initiation on Monro for more details.) As a result, we are maintaining our NEUTRAL ratings on Advance Auto Parts, AutoZone, Monro Muffler Brake and O’Reilly Automotive."
To read the full report on Northcoast Research’s June 2012 Independent Garage Survey, click here.
ABOUT NORTHCOAST RESEARCH
Northcoast Research is an independent, full-service institutional equity research and trading firm headquartered in Cleveland, Ohio. Founded in 2009, the company’s mission is to add value in each phase of the investment process by aligning the company’s goals with those of its clients. Northcoast aims to provide unbiased, proprietary and actionable fundamental research on select industry verticals and companies, underpinned by comprehensive channel checks across a broad array of industry contacts. The company’s core research verticals are Consumer, Health Care, Industrial and Business Services.
