The Pulse: Northcoast Research Independent Automotive Repair Garage Survey For August 2012

The Pulse: Northcoast Research Independent Automotive Repair Garage Survey For August 2012

According to the survey responses from nearly 250 independent garage owners, demand trends in the DIFM channel increased during August relative to the prior year.

CLEVELAND — 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 August 2012.

According to the survey responses from nearly 250 independent garage owners, demand trends in the DIFM channel increased during August relative to the prior year. Northcoast’s Current Sales Index finished the month at 53.8.
"While the performance in August marked the first time in eight months that the index finished in expansion territory in successive months, demand during the period was clearly not as strong as it was in July," the the research firm wrote in its August report. "In sum, while sales trends appear to have improved from the cadence witnessed earlier in the year, our research suggests that underlying demand trends across the industry remain relatively weak. In other words, we believe that the breadth of mechanics experiencing a sales increase was wide, but the magnitude was weak in both July and August.
"In what is starting to sound like a broken record, our contacts noted that the behavior toward routine maintenance remained a headwind to sales and traffic trends during August. Despite the fact that our survey respondents noted that sales trends increased year-over-year for the second consecutive month (the first occurrence in eight months), the Three Month Outlook Index dropped 6.1 percent to close at 58.4.

"While we continue to appreciate the opportunity that the publicly 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 recent initiation on Monro Muffler Brake for more details.) As a result, we are maintaining our NEUTRAL ratings on Advance Auto Parts, AutoZone, Monro Muffler Brake and O’Reilly Automotive."
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.

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