According to the results of our survey, demand for replacement tires remained encouraging in December. Indeed, from a volume standpoint the dealers reported they sold 0.7% more tires in December on a year-over-year basis, following a 0.9% increase in November and a 0.8% increase in October.
We were pleased to see volumes remained positive for the 11th consecutive month; however, volumes, specifically in snow tires, were pressured by unseasonably warm weather and a lack of snowfall in several regions during the month.
Notwithstanding the minor setback from mild weather in December, we continue to believe that the abundance of pent-up demand should lead to decent volumes throughout the remainder of the 2014-2015 winter selling season despite tougher comparisons from last year’s harsh winter.
Monthly survey
A number of independent tire dealers were surveyed concerning current business trends. Except for tire prices and costs, the results of the December 2014 survey are compared to those of December 2013.
Dealers were not quite as confident about sales trends
According to the MTD dealer survey, 38% of passenger tire dealers believe business will improve over the next six months, while 62% believe it will stay about level. Meanwhile, 43% of the truck tire dealers we surveyed saw business improving, and 28% believed it will stay about level. The table highlights the outlook the respondents have conveyed to us in recent months.
Replacement tire sales: Volume trends remain positive
According to dealer reports, consumer demand for replacement tires remained positive in December. As noted, the dealers in our survey reported they sold 0.7% more tires last month on a year-over-year basis, following the 0.9% increase reported in November and a 0.8% increase in October.
Trends were positive in the truck category. Dealers who responded to the MTD survey reported their volumes increased 4.2% after a flat performance in November. Meanwhile, respondents indicated volumes increased 6.0% in the retread business after decreasing 2.0% in November.
Dealer costs increased slightly
The tire dealers who responded to the MTD survey noted that manufacturer pricing on value tires increased in December, while pricing on branded tires was essentially flat. In fact, the respondents noted manufacturer pricing on value tires increased 3.3% during December. The increase in value tires is not entirely surprising given the recent duties put in place by the U.S. Department of Commerce on specific passenger and light truck tires imported from China.
Dealers’ thoughts on inventory
Of the dealers who responded to the MTD survey last month, 37.5% indicated that they had the appropriate amount of inventory in stock for demand (vs. nearly 100% in November), while the remaining 62.5% indicated inventory levels were too high for demand.
The inventory levels among truck tire dealers looked much more encouraging as approximately 86% of the truck tire dealers we surveyed indicated they had the appropriate amount of inventory (versus about 72% in November), while approximately 14% indicated inventory levels were too high.
Repair sales remain solid
We were encouraged to see service sales remained strong during December as the dealers indicated the spurt of winter weather that passed through the Midwest, Northeast, Great Plains and even parts of the Southeast in the second half of November rekindled fears that 2014/2015 could be another tough winter. This provided a huge boost to maintenance trends in December despite the fact the weather trends actually ended up being much warmer than the historical average.
The dealers who responded to the MTD survey indicated service sales, which accounted for 38% of the study participants’ total revenues, were up roughly 3% on a year-over-year basis in December (versus a 5% increase in November). ■
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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