As for Advance, we think the poor performance seen in the Southeast (mainly Florida), where the company has 15 to 20 percent of its mix continuing to place downward pressure on comps, likely won't improve until the Southeast recovers in other areas such as housing and the sub prime market. But even Advance has seen a rebound as of late, as it noted on an earnings call that SSS in May were accelerating once again (we estimate this to be in the plus 2 to 3 percent range) in spite of higher gas prices.
AutoZone reported sluggish SSS growth of 0.4 percent on its third quarter 2007 earnings call and noted that April was a tough month for the company. We estimate the comparable commercial revenue declined just more than 2 percent year over year, while the comparable DIY business increased about 0.7 percent. Though AutoZone does not provide any type of guidance, we suspect that May has proven to be a much better month for the company as well.
In our opinion, the real outlier in the group has been Monro Muffler, which reported comparable SSS increased 7.3 percent during its calendar first quarter 2007. Monro management also noted that comps were up 3.2 percent in April and that they accelerated significantly into May and were tracking at plus 8.5 percent through the first three weeks.
We remain optimistic as 2007 continues to progress, particularly against the backdrop of easier year over year sales comparisons and our expectation of less "shock factor" at the gas pump than drivers had experienced in 2006.
Disclosures:
BB&T Capital Markets makes a market in the securities of Monro Muffler Brake, Inc. and O'Reilly Automotive Inc.
BB&T Capital Markets expects to receive or intends to seek compensation for investment banking services from Advance Auto Parts, Inc.; AutoZone Inc.; Genuine Parts Company; Monro Muffler Brake, Inc.; and O'Reilly Automotive Inc. in the next three months.
An affiliate of BB&T Capital Markets received compensation from Advance Auto Parts, Inc.; AutoZone, Inc.; Monro Muffler Brake, Inc.; and O'Reilly Automotive Inc. for products or services other than investment banking services during the past 12 months. The analyst or employees of BB&T Capital Markets with the ability to influence the substance of this report know or have reason to know the foregoing facts.