Dealers Anticipate Sales Trends to Improve Through the End of the Year
According to the results of our survey, demand for replacement tires increased in September. Indeed, from a volume standpoint the dealers reported they sold 0.6% more tires last month on a year-over-year basis, following a 0.5% increase in August and a 1.2% increase in July.
We are encouraged by the fact demand trends are holding strong toward the end of summer, although down slightly from what we saw at the peak of summer’s heat. In light of the recent strength in demand trends, we continue to believe the abundance of pent-up demand should lead to decent volume growth throughout the remainder of 2015, despite the fact 2014 provides tough comparisons.
In fact, demand has increased on a year-over-year basis for 18 of the past 19 months, according to the dealers surveyed. Furthermore, most dealers stated they anticipate trends to improve throughout the next three months of this year. Until next time, keep the tires rolling out the door.
A number of independent tire dealers were surveyed concerning current business trends. Except for tire prices and costs, the results of the September 2015 survey are compared with those of September 2014.
Dealers believe sales trends should continue to improve over the next six months
According to the survey results, 83% of passenger tire dealers believe business will improve over the next six months, while 17% of those surveyed believe business will stay about level. None felt that business would get worse in the near future.
The outlook for truck tire demand was slightly higher as 100% of the truck tire dealers we surveyed see business improving.
The table below highlights the outlook the respondents have conveyed in recent months.
Replacement passenger and truck tire sales volume trends remained strong
As stated, consumer demand for replacement tires increased in September. Indeed, the dealers in our survey reported they sold 0.6% more tires last month on a year-over-year basis, following a 0.5% increase in August and a 1.2% increase in July. Trends continued to be positive in the truck category as the dealers who responded to the survey reported volumes increased 0.6% after a 1.4% increase in August and a 1.0% decrease in July. Lastly, the survey respondents indicated volumes also were up 1.3% in the retreading business after increasing 3.8% in August.
Dealers reported a pricing split: an increase for value tires and a decrease for branded tires
The tire dealers who responded to the survey noted manufacturer pricing on value tires went up in September, while the prices of branded tires dropped. In fact, the respondents noted manufacturer pricing on value tires increased 1.2% during September, while the price of branded tires declined 2.7%.
The recent convergence in prices is not surprising as volatility in raw material costs are only partially offset by any pricing benefit from the implementation of tariffs of Chinese tires imported into the U.S. It is important, as always, to note that one month’s results, however, do not make a trend.
Inventories were seen as OK to high
Of the dealers that responded to the survey last month, 67% indicated they had the appropriate amount of inventory in stock for demand (the same as in August) and 33% indicated inventory levels were too high. Truck tire dealers were slightly more optimistic as 100% of those surveyed said they felt they had the appropriate amount of inventory for business levels.
Dealers’ repair sales rose in September
Dealers indicated automotive repair sales trends improved once again in September.
Specifically, the dealers who responded to the survey indicated service sales, which accounted for 29% of the study participants’ total revenues, were up 6.0% on a year-over-year basis in September (up from an increase of 4.0% in August) as a higher average ticket and strong traffic trends benefited repair departments. ■
How dealers view near-term business
Dealers MAY JUN JUL AUG(R) SEP(P) SEP(14)
Will improve 44% 29% 20% 50% 83% 50%
Will worsen 0% 0% 0% 0% 0% 0%
Will stay level 56% 71% 80% 50% 17% 50%
Will improve 56% 29% 60% 50% 100% 57%
Will worsen 0% 0% 0% 17% 0% 0%
Will stay level 44% 71% 40% 33% 0% 43%
Nick Mitchell is senior vice president, research, for Northcoast Research Holdings LLC based in Cleveland, Ohio. Mitchell covers a variety of subsectors of the automotive industry.
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