Amazon and Zoom aren’t the only winners in the work-from-home environment. Advance Auto Parts and O’Reilly Auto Parts recently reported strong second-quarter results, and both companies noted that stimulus checks and extended unemployment benefits gave their business a boost.
Advance CEO Tom Greco, during an appearance on CNBC’s “Power Lunch,” asserted that there are other tailwinds that can keep driving the auto parts sector – such as the pandemic-driven decline in new-vehicle sales.
“When that happens, you have an aging fleet, and that means more repairs, more maintenance on [existing] vehicles,” Greco said.
Also, the COVID-19 pandemic has made travelers skittish about using “mass transportation.”
“People don’t want to get on a subway or a bus or an airplane. Obviously that makes the personal vehicle so critical, and people have been very focused on that in the last couple of months,” Greco said. “In addition, they have time on their hands. You can’t sit in your house and look at a computer screen and watch Netflix all day. So eventually you get outside and you do some work in your yard or potentially on your car.”
On Aug. 18, Advance reported second-quarter net sales of $2.5 billion, a 7.3% year-over-year increase. The company’s results exceeded analysts’ projections for most metrics, which prompted “Power Lunch” host Tyler Mathesin to ask: How did analysts get it so wrong?
“I think it’s a really tough time to model,” Greco responded. “There are so many factors going on out there. It’s actually probably the most fascinating time I’ve ever been in business over a long career, because there are just a lot of variables out there that are causing major shifts in consumer behavior. It’s important to be out in front of those shifts.”
Greco noted that Advance “launched a suite of services” in April – same-day curbside pick-up, same-day home delivery and a mobile app – to serve customers during the COVID-19 pandemic. He also touched on the steps Advance has taken to protect its retail workers and customers during the pandemic, adding that the company has been focusing on workplace safety and health for several years. That focus has helped Advance reduce its incident-frequency and collision-frequency rates, according to Greco.
Asked about the current quarter, Greco noted that Advance is launching the DieHard battery brand. Advance acquired DieHard from Transform Holdco in December 2019.
To view the entire interview, click here.