GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

Which of These Aftermarket Retailers Is a Good Buy?

July 30, 2014 | About:
jaggom

jaggom

0 followers

The normal age of vehicles on U.S. roads is at a high of 11.4 years. This is expected to increase, which shows that 75% of the surveyed populace will still be running their vehicles instead of purchasing another one. Scarcely 14% are inclined to purchase another vehicle in 2014 as per the survey. This is because recession-hit consumers are holding their vehicles for more time than in the recent past.

Additionally, maturing vehicles and unfavorable climate lead to higher vehicle repairs. These are catalysts for auto aftermarket retailers like Advance Auto Parts (AAP), O'Reilly Automotive (ORLY) and Autozone (AZO). We should examine each of them.

Advance Auto on a roll

Amid fiscal 2013, Advance Auto confronted an unseasonably warm climate and a late start to the spring selling season. Advance Auto witnessed a quickening in consumer request from the second from last quarter onwards, which got a boost amid the final quarter as a result of the exceptionally frosty winter climate.

The organization performed well both in the do-it-without anyone else's help, or DIY, and the business segments. As a result, it timed better-than-anticipated sales growth of 6% year over year.

Advance Auto believes that 80% of the vehicles out and about are in excess of six years old, and conceded support arrived at record levels in 2013. These two factors will be great growth drivers going ahead. Moreover, the augmented profound stop in the eastern U.s. has profited the organization and will keep on doing so in fiscal 2014 also.

On the other hand, conceded support and macroeconomic headwinds like government health awareness reforms and an extremely uneven financial recuperation did take its toll on the full year similar store sales, which dropped 1.5%. Despite the decline in comps, all out sales increased because of the acquisition of BWP and expansion of new stores.

Advance Auto has been improving its business through strategic acquisitions and initiatives. The organization sees this as a significant growth driver going ahead. The acquisition of General Parts, advertised early this year , is one such strategic move. This brings to its overlap 38 Generals Parts distribution centers, 1,248 organization operated Carquest locations across the U.s. what's more Canada. Also, with the expansion of Worldpac, the organization has solidified its position as the business pioneer in the foreign made parts business space.

O'Reilly attempting to show signs of improvement

O'Reilly's first quarter of fiscal 2014 was highlighted by an impressive comps growth of 6.3% year over year, superior to Advance Auto's comps growth. A higher normal ticket and stronger activity filled the comps growth amid the first quarter.

The nasty climate amid the first quarter energized growth neglected climate related categories such as batteries, turning electrical, warming and cooling, and wiper blades. Furthermore, the terrible climate, coupled with awful roads, filled sales in auto repairs and categories like ride control, chassis parts, and driveline. The great climate conditions have also been responsible for the great performance of the DIY segment of the organization.

Going ahead, O'Reilly believes that this blending of awful climate and terrible roads will profit it in the approaching quarters as well, as parts disappointment drive up sales.

Autozone is trailing

A gander at the stock value performance amid last one year unmistakably positions Autozone as the slouch in its companion bunch. At the same time, each of the three have outperformed the more extensive market as seen in the outline underneath.

Stock value comparison

Autozone has been doing great as far as its fiscal performance is concerned. The organization reported its 30th consecutive quarter of twofold digit EPS growth in the second quarter of fiscal 2014. Its comps developed by a solid 4.3% year-over-year. Its top line growth amid the quarter, in the same way as its peers, was determined by the terrible climate.

The disappointment related critical issue categories experienced the highest growth in both retail and business. The organization expects that the force of this segment will sustain going ahead heading into the spring and summer seasons. Going ahead, Autozone expects to proceed with its streak of twofold digit EPS growth, which is a sign of better times ahead.

Conclusion

Every one of the three aftermarket retailers have conveyed solid gains to investors in the course of the last one year. Looking ahead, it won't be surprising if every one of the three keep outperforming the more extensive business since there are various factors to support them. So, investors should most likely investigate the aftermarket retail space.


Rating: 0.0/5 (0 votes)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK