Counterman's ranking of the 20 largest store groups in the United States remained pretty much unchanged since last year, except for one caveat: The big are still getting bigger.
Comparatively, 2003 was a quiet one in the world of aftermarket distribution consolidation. Nevertheless, mergers and acquisitions continued over the last 12 months, albeit at a slowed pace.
Most store groups ranked in this year's Super Stores list, which is found on pages 26 and 27, expanded their numbers through the normal methods of acquisition or new store openings. In fact, 75 percent of the 20 store groups on the list grew their respective store counts, on average 6.5 percent over the previous year. A small minority (four) lost stores, and one reported no change.
The usual suspects, the largest of the large, added the most stores. But when store count growth is considered purely from a percentage of total stores standpoint, the greatest growth in the market is seen among those that are decidedly wholesalers. Companies such as MAWDI, Auto-Wares, Auto Parts Headquarters, Midwest and KOI all reported store count growth greater than 8 percent. These companies continue to expand, not as a result of mega mergers of large store groups, but rather through the methodical and pin-point acquisition of small one- and two-location mini chains. This fact feeds the perception that within the market, the one- and two-location store owner is being slowly melded into larger store groupings. O'Reilly was the only retailer that posted store count growth greater than 8 percent.
The big are getting bigger, a fact backed up by aggregate store totals owned by those on this year's list. Last year, the list represented 11,611 individual locations. The 2004 list represents 12,293 stores - an increase of almost 6 percent.
Here is a recap of some notable store groups that made news in 2003.
Last year, AutoZone said it planned to open 150 new stores in 2003. However, AutoZone eclipsed that number by replacing six and closing nine - opening a net 160 stores.
This news was overshadowed by the retailer's announcement of a controversial scan-based consignment-style inventory system, called Pay On Scan (POS). For more information on Pay On Scan, see the March issue, or visit www.counterman.com and click "Search Back Issues."
As the dust settles around the POS announcement, AutoZone has set its sights on its growth plans for 2004, which are even more robust: A company spokesman told Counterman that the Memphis-based retailer expects to open another 200 stores over the course of the 2004 fiscal year. That would put AutoZone at 3,459 stores, 785 stores larger than its nearest competitor, Advance Auto Parts (assuming Advance opens a projected 135 stores in '04). But the most notable change for AutoZone is within its wholesale/retail sales mix. In 2003, AutoZone noted that its store sales mix was decidedly retail-oriented, with 90 percent of stores sales going to that category. This year, AutoZone said that its wholesale mix has increased from 10 percent to 13 percent. While this is a small gain, it is a gain nevertheless in the notoriously difficult, but hugely important, professional market. Additionally, AutoZone's wholesale division, AZ Commercial, was recently bolstered with the addition of longtime NAPA President Steve Handschuh, who recently left NAPA to become AZ Commercial's executive vice president.
Look for AutoZone's wholesale numbers to rise over the foreseeable future as it seeks a more balanced, O'Reilly-style approach to both the wholesale and retail markets.
Advance Auto Parts
Advance Auto Parts also gained market share in 2003 through the opening of some 125 stores over the last 12 months, putting the retailer over the 2,500-store mark.
In addition, Advance is opening stores in the Charlotte, NC; Melborne, FL; and Daytona Beach, FL, markets. In Charlotte, the company has remodeled all of its 47 stores to what it calls the "2010" format, which highlights high-impact signage and displays. Currently, some 700 Advance stores have the "2010" look, and the company expects 1,000 locations to be converted by the end of the year.
General Parts Inc.
Leading the traditional side of the market in store counts is General Parts Inc. (GPI), which continues to quietly acquire store groups.
In early 2003, GPI and long-time CARQUEST member Auto Parts Wholesale (APW) jointly announced a merger. This was the market's largest acquisition of the year, adding some 60 stores to the GPI roster. APW, which was ranked 18th on last year's Super Stores list, served 254 CARQUEST stores in the California, Nevada and Mexico markets. APW DCs were located in Sacramento, San Diego and Bakersfield, where the company was headquartered.
In late 2003, GPI also announced the acquisition of Hutchins Automotive Supply, headquartered in the Town of Niagara. It operated 15 stores in western New York and Erie, PA.Although total CARQUEST group store numbers are less than that of the market's largest program group, NAPA, GPI continues to own a much higher percentage of stores, as compared to GPC. Currently, GPI owns 35 percent of all CARQUEST stores (up 2.5 percent versus 2003), while GPC owns 15 percent of all NAPA stores.
O'Reilly Auto Parts
O'Reilly Auto Parts made some acquisitions of note in 2003, putting it ahead of CSK in terms of store count. O'Reilly is now the fourth largest store owner in the U.S. market.
Last year, the company added 114 stores, either through new openings or acquisition, such as that of Dick Smith Enterprises in Fort Worth, TX, and Davie Automotive of Mocksville, NC. The Dick Smith Ent. deal added another 10 stores, while Davie Automotive brought 17 Raleigh, NC-area stores and one DC, putting O'Reilly in GPI's backyard for the first time.
O'Reilly has a history of large-scale acquisitions. The last big acquisition for O'Reilly was in 2001 when it acquired Mid-State Automotive Distributors, adding 82 stores and expanding O'Reilly's reach to 16 contiguous states.
Genuine Parts Co.
Amid the major staffing changes at both Genuine Parts Co. (GPC) and NAPA, the company has been growing, most notably through the 2003 acquisition of NAPA Hawaii.
NAPA Hawaii was a long-standing NAPA distributor with annual sales of approximately $35 million. It served 32 independent NAPA stores and four company-owned stores throughout the Hawaiian Islands and Samoa. With the acquisition of NAPA Hawaii, NAPA is left with two members: GPC and Quaker City.
Murray's Discount Auto
Perhaps the best-kept secret in the market is the privately owned, Belleville, MI-based Murray's Discount Auto, which operates 97 stores in the greater Detroit, Cleveland, Chicago and Toledo markets.
Murray's has grown through its simple but effective philosophy of "Super Parts, Super People and Super Prices," but one might add "Smart Store Openings" to that motto. Over the course of 2003, Murray's added an additional seven stores, growing its total store count by nearly 8 percent.
Midwest Auto Parts Dist.
From purely a percentage of stores standpoint, Midwest Auto Parts Distributors posted one of the largest growth numbers in 2003. The company grew its store count by an impressive 14 percent.
President Herb Lohse told Counterman that he expects Midwest growth to continue. "When the time is right, we are a ready and willing buyer," said Lohse.
"However," Lohse continued, "we are also adding significant volume to the independent side of our business. We have done three large competitive changeovers in the past year. This will also continue. Three step is alive and well at Midwest."
Midwest is also successfully mirroring the balance between retail and wholesale for which O'Reilly stores are so well known. Currently the company reports a sales mix of 43 percent retail and 57 percent wholesale.
"We offer a wholesale and retail product mix that is equal to or better than anyone would find at either a traditional wholesaler or national retailer," said Lohse. "We are very good at both; you must be if you want to continue to grow your market share."
Although Pep Boys closed some 30 underperforming stores and two DCs, the company is trying to expand in another important way: market share.
It is trying to accomplish this through a metamorphosis of sorts, first through a change in executive management and secondly through an effort to intensify Pep Boys merchandising and marketing strategies. The company also is trying to better capitalize on the potential synergies between merchandising and Pep's 6,000 service bays. Pep Boys is the largest store group that also has service bays.
All of this, says the company, will impact the future of Pep Boys as it provides a solid base for growth and expansion.
And finally, the APW acquisition brings a new face to the Super Stores list: Federated member KOI, which operates 67 stores in the Ohio, Kentucky and Indiana markets.
Over the next 12 months, the Counterman Super Stores list is sure to change, due in large part to a continuing consolidation trend toward more company-owned stores. Comparison of store ownership of AWDA-member WDs between 1995 and 2001 shows in that seven-year span, the number of store locations owned by these WD members grew by nearly 41 percent. According to the Automotive Aftermarket Industry Association, in 1995 there were 3,100 WD-owned stores in the market. By 1999, that number had jumped to 4,100. And in 2002, the number of these captive stores had leapt to 4,778.
As the number of independent jobbing store locations fell from 1980 through today, they have been replaced on nearly a one-to-one ratio with larger, higher-volume retail-type operations. The market today has about the same number of stores today as it did in 1990, and for a large percentage of them, the names and/or ownership has changed through acquisition.
However, what has significantly changed is the number of vehicles on the road and the ramifications that has on store sales volumes. Over the past two decades, the average store sales volume has increased an astonishing 147 percent. Specifically, in 1980, the average independent jobbing store sold $445,000 in sales per year. By 1996, average sales numbers had jumped to $717,000 and by 2000, the average store sold a little over $1 million in product.
The independent stores that remain are those with the resources to sustain higher costs and sales. The rest have either gone out of business or have been acquired and forced to embrace the higher-volume realities of today's aftermarket.
Editor's Note: Counterman's annual Super Stores list ranks companies based only on the number stores a company actually owns. This is why AutoZone, for example, is ranked number one with 3,259 stores, while NAPA member GPC is ranked sixth with 904 stores. While it is true that the total number of stores in the NAPA system is greater AutoZone's store count by nearly a 2:1 ratio, GPC only owns about 15 percent of the total number of stores that fly the NAPA flag.