Each month, we survey the owners of more than 300 automotive repair facilities to get a read on consumer demand for auto parts and service work. According to the results of our surveys, the positive sales trends that characterized business in the "do it for me" (DIFM) channel at the end of the third quarter continued throughout the fourth quarter of 2014, as technicians continued to report healthy traffic trends (car count). Specifically, the net number of respondents that noted year-over-year traffic increases improved to 14.8 percent in the fourth quarter from 13.7 percent in the third quarter of 2014. Likewise, the net number of respondents that noted year-over-year sales increases improved modestly to 23.7 percent in the fourth quarter from 23.6 percent in the third quarter of 2014. Indeed, it was particularly encouraging to see that the market continued to grow last quarter in spite of the fact that mild winter temperatures pressured front-end and other weather-sensitive repairs in several regions of the country during December.
Technicians reported that the increase in sales trends during the quarter relative to the prior year was largely driven by a higher average ticket as the aging car parc continued to manifest itself in the form of more medium and heavy duty repair work, which typically carries higher ticket sizes (combination of more expensive parts and more labor hours). Additionally, technicians in the Midwest, Northeast, and Great Plains regions indicated that consumers in these markets were more proactive in their maintenance behavior to ensure that their vehicles were well prepared for the winter driving season, which strengthened traffic patterns and boosted spending in maintenance categories.
A majority of the technicians noted that they were confident about business at the end of the fourth quarter as traffic trends remained strong, and consumers have been more willing to perform routine maintenance work. Additionally, miles driven trends have improved throughout the quarter, which has likely been aided by falling gasoline prices. Despite worrying about the difficult comparisons that are on the horizon, an increasing number of technicians in regions that typically experience harsh winters indicated that they have continued to have success recommending preventative winter maintenance to their customers, in large part due to the fact that last year’s winter weather is still frozen in their minds. That said, the respondents were definitely not shy about expressing concerns that the 2014/2015 winter has not been extreme enough to accelerate failure rates of hard parts like in the prior year (i.e. this is a caveat to their bullish outlook).
All in, we remain fairly positive on the underlying fundamentals within the DIFM service channel, including the re-emergence of the expansion in the nation’s light vehicle fleet, improving miles driven trends aided by low gasoline prices, and an increased willingness and ability for consumers to fund vehicle repairs.
Nick Mitchell is a Research Analyst with Northcoast Research Holdings LLC based in Cleveland, Ohio, where he covers a variety of subsectors of the automotive industry.
