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These Aftermarket Retailers Can Be Good For Your Portfolio

April 30, 2014 | About:
kcpl

kcpl

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The do-it-for-me market is hot in the U.S and it is growing faster than the do-it-yourself market as a result of increase in older vehicles in the U.S. This aging of vehicles is creating a pent up demand for aftermarket parts and services. This is giving business opportunities to various companies.

Monro Muffler Brake (MNRO) is a popular name in the DIFM & Services segment, while Pep Boys - Manny, Moe & Jack (PBY) is a hybrid of DIFM-DIY. The present perspective seems bright for such aftermarket service providers. However, these two are entirely different from aftermarket retailers such as Advance Auto Parts (AAP). Let us take a look at the present aftermarket scenario and its prospects.

A Look at Monro Muffler

Monro Muffler came out with impressive results. The company saw strong sales, amounting to an 18% increase in net income. But as per management’s estimates, the company’s revenue saw a decline as a result of a weak retail environment, which negatively influenced purchasing behavior.

On the other hand, Monro was aggressive on improving its position through acquisitions. The company is focusing on expansion throughout the country, as it has recently closed the deal to buy Curry's Auto Service’s ten stores and is also negotiating with seven other takeover prospects. With an aggressive expansion strategy, Monro is aiming at becoming an independent tire retailer in the U.S.

Moving deeper, Monro had acquired Ken Towery's Tire & Auto Service, Enger Auto Service & Tires, Tire King Complete Car Care, Tire Barn Warehouse of Anderson; and 17 Tuffy Muffler/Car-X locations in Wisconsin and South Carolina. With this, Monro saw geographical expansion, ultimately resulting in an increase in revenue.

As a result of acquisitions, Monro is expecting increase in sales, ranging in between $830 million to $845 million. Further, it expects EPS to come in the range of $1.58 to $1.65, which represents a 20% to 25% increase versus fiscal 2013.

Analyzing Pep Boys

Moving on to Pep Boys, its operations are based on DIFM-DIY hybrid model. Most of its revenue comes from DIFM and services. As the acquisition strategy is a growth driver to many companies, Pep Boys also acquired 17 Discount Tire Centers from AKH Company, which is expected to drive in more revenue for the company.

Moving forward, Pep Boys is working on various strategies to attract more customers. Under this, it is introducing a new store format design, intending to make it appealing to women and achieve the goal to be the best alternative to the dealer. Pep Boys is also engaged in non-automotive merchandise products such as generators, power tools and personal transportation products. This adds diversity as compared to Monro.

What about Advance Auto?

Moving on to Advance Auto, the company is seeing good business resulting from acquisitions and new store openings. The acquisition of BWP Distributors added 124 stores.

Advance Auto has become the largest aftermarket automotive provider in North America having announced acquisition of GPI. The news was so good that the company’s shares took off to an all time high. After the acquisition, Advance Auto parts will be the leader in automotive aftermarket parts with over 70,000 team members and with a balanced blend of DIY, commercial and e-commerce business-to-business operations.

Conclusion

The common point that can be seen in all the three companies is that they have used acquisitions as a growth driver. However, all of them operate in different segments of the auto parts industry, giving investors three options to invest in.


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Keyless Entry Remote Inc
Keyless Entry Remote Inc - 3 months ago

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