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January 27, 2014

Analyst says tire demand remains robust

The results of Northcoast Research Partners LLC's monthly "Tire Demand Index" are in.  And demand was up in December.

"Our research indicates that consumer demand for replacement tires at retail remained very robust in December," says Nick Mitchell, senior vice president. "Specifically, the respondents in our survey reported a sharp year-over-year increase in the number of tires that were sold in the period, especially in the Northeast and Midwest."

(The index is a proprietary measure designed to gauge the strength of retail demand in the United States. It is constructed from the results of a monthly survey of approximately 100 tire dealers located across the country.)

"In a continuation of the themes that we have been hearing in the channel since late October, dealers indicated that inclement weather, and expectations that this year's winter will be characterized by more snow than we have seen in recent years, helped release some pent-up demand," says Mitchell. "While we think that the severe winter weather conditions in December likely enhanced the results of the index by pulling forward some replacement tire sales relative to last year, we are becoming more and more encouraged by the strength of end-market demand."

He says Tier One brands underperformed in the previous two surveys, but regained their spot atop the rankings in December.

"In our view, the strength in the Tier Two and Tier Three labels during October and November was driven by an influx of cash-constrained customers coming into the market, as the weather forced those dragging their feet to finally purchase new tires, rather than absolute weakness in the premium brands.

"In light of this phenomenon among low-income consumers, the fact that Tier One brands were the strongest category in December is a very bullish indicator for the strength of underlying demand trends in the industry."

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