The Pulse: Northcoast Research Independent Automotive Repair Garage Survey

The Pulse: Northcoast Research Independent Automotive Repair Garage Survey

According to the results of Northcoast Research's February survey, the sluggish sales trends that characterized the end of 2011 and the beginning of 2012 continued into February.

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.
The study is designed to capture the following factors in the DIFM channel:
• Recent business trends and the corresponding drivers
• Major inflection points in sales trends
• Expectations for demand over the next three months
• Major changes in consumer behavior
• Insight into market share trends and the relative rate at which installers are switching wholesale parts suppliers
For this week’s “The Pulse” feature, we look at some of the findings of the Northcoast Independent Automotive Repair Garage Survey for February 2012.
According to the results of Northcoast Research’s February survey, the sluggish sales trends that characterized the end of 2011 and the beginning of 2012 continued into February. Despite the fact that technicians had an extra selling day this year (leap year), the Current Sales Index dropped 5.8 percent during February to close at 45.7.
"This performance was noteworthy, as February marked the first time since the inception of our survey that our current sales indicator experienced consecutive closes below 50.0," Northcoast Research stated in its report. "Consistent with the findings of our recent surveys, respondents noted that the deferral of routine maintenance continued to pressure sales and traffic trends in February as consumers tended to only spend money on work that was deemed necessary to keep their vehicles operating."

In addition to the decline in the Current Sales Index, the Three Month Outlook Index fell 8.2 percent to close the month at 65.7. While the respondents continue to anticipate year-over-year sales gains during the next 3 months, their optimism moderated relative to January.
"While we continue to appreciate the opportunity that the national automotive parts retailers have to gain market share in the DIFM channel, current valuations are not attractive enough for us to dip our toes back into the water, especially given the decelerating sales trends and signs that the consumer remains under pressure," Northcoast stated. "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 4 to 5 years. (See our note entitled ORLY: Change in Light Vehicle Mix Likely to be a Headwind in Coming Years for more details.) As a result, we are maintaining our NEUTRAL ratings on Advance Auto Parts, AutoZone, 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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