Higher average ticket and strong traffic trends benefited repair shops
According to the results of our survey, demand for replacement tires increased in June. Indeed, from a volume standpoint the dealers reported that they sold 1.2% more tires in June on a year-over-year basis, following a 0.3% increase in May and a 0.2% increase in April.
We are encouraged by the fact that demand trends seem to be accelerating throughout the summer after some slight weakness seen earlier this year. In light of the recent strength in demand trends, we continue to believe that the abundance of pent-up demand should lead to decent volume growth throughout the remainder of 2015, despite the fact that 2014 provides tough comparisons.
In fact, demand has increased on a year-over-year basis for 15 of the past 16 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 June 2015 survey are compared with those of June 2014.
Dealers believe sales trends should improve
According to the survey results, 29% of passenger tire dealers believe business will improve over the next six months, while 71% believe it will stay about level. The outlook for truck tire demand was identical as 29% of the truck tire dealers we surveyed see business improving, while 71% believe it will stay about level.
Replacement tire sales volume trends improve
According to our survey, consumer demand for replacement tires increased in June. As stated, the dealers in our survey reported they sold 1.2% more tires in June on a year-over-year basis, following a 0.3% increase in May and a 0.2% increase in April.
Trends turned slightly negative in the truck category as the dealers who responded to the survey reported that volumes decreased 0.3% after a 2.2% increase in May and a 0.4% increase in April.
Lastly, the survey respondents indicated that volumes were flat in the retread business after increasing 2.3% in May.
Dealer reported costs are mixed
The tire dealers who responded to the survey noted manufacturer pricing on value and branded tires increased and declined, respectively, on average in June. In fact, the respondents noted manufacturer pricing on value tires increased 0.4% during June, while the price of branded tires declined 0.4%.
The divergence in prices is somewhat surprising; however, most price declines were due to an increase in aggressive pricing and promotions on branded tires, and as the effects of the tariff on imported tires from China flow through to installers, prices have increased on value tires. It is important, as always, to note one month’s results do not make a trend.
Dealers’ inventory deemed appropriate
Of the dealers who responded to the June survey, 67% indicated they had the appropriate amount of inventory in stock for demand (vs. 67% in May), 33% indicated inventory levels were too high, and no dealers indicated inventories were too low.
The inventory levels among truck tire dealers were similar to passenger tire levels as 60% of those surveyed indicated they had the appropriate amount of inventory, while 40% of respondents noted inventory levels were too high, and no respondents indicated inventories were too low.
Repair sales rose in June
Dealers who responded to our survey indicated automotive repair sales trends improved once again in June. Specifically, the dealers who responded to the survey indicated that service sales, which accounted for 19% of the study participants’ total revenues, were up 7.0% on a year-over-year basis in June (down from an increase of 9.6% in May) as a higher average ticket and strong traffic trends benefited repair departments. ■
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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