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Dealers Anticipate Sales Trends to Improve Over the Next Three Months

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Dealers Anticipate Sales Trends to Improve Over the Next Three Months

According to the results of our survey, demand for replacement tires increased in December. Indeed, from a volume standpoint the dealers reported they sold 0.8% more tires in December on a year-over-year basis, following a 0.6% increase in November and a 0.1% increase in October.

We are encouraged by the fact that demand trends are holding strong, although they are down slightly from what we saw at the peak of summer’s heat, which is likely due to a lack of harsh winter weather and a tough comparison from 2014. 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 2016, despite the fact 2015 provides tough comparisons.

In fact, demand has increased on a year-over-year basis for 21 of the past 22 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.

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 2015 survey are compared with those of December 2014.

Dealers believed sales trends may level off

According to the survey results, 83% of passenger tire dealers believed business would stay about level and 17% thought business would improve, which is a marked decline from what we have seen in the past. However, much of this decline in optimism may be related to the fact that business was very strong in 2015. The outlook for truck tire demand was slightly lower as 17% of the truck tire dealers we surveyed saw business staying about the same, 33% saw business improving, and 50% saw business worsening. The table above highlights the respondents’ outlook.

Replacement tire volume trends were strong

According to our dealer survey, consumer demand for replacement tires increased in December. As stated, the dealers in our survey reported they sold 0.8% more tires in December on a year-over-year basis, following a 0.6% increase in November and a 0.1% increase in October. Trends continued positive in the truck category as the dealers who responded to the survey reported volumes increased 0.7% after a 3.9% increase in November and a 0.8% decrease in October. Lastly, the survey respondents indicated volumes were up 3.5% in the retread business after decreasing 6.3% in November.

Dealer tire costs were mixed

The tire dealers who responded to the survey noted manufacturer pricing on branded and value tires decreased in December. In fact, the respondents noted manufacturer pricing on value tires decreased 1.3% during December, while the price of branded tires also decreased 1.3%. While we were initially surprised at hearing about any prices declining during our trip to the Specialty Equipment Market Association (SEMA) Show last November, this trend is consistent with commentary from around the country that pricing has remained flat or declined despite the implementation of tariffs on Chinese import tires. This phenomenon is being largely aided by lower raw material prices, as well (e.g., lower oil prices).

Dealers’ inventory levels were appropriate

Of the passenger tire dealers who responded to the survey in December, 83% indicated they had the appropriate amount of inventory in stock for demand (vs. 67% in November) and 17% indicated inventory levels were too high. As for inventory levels among truck tire dealers, 50% of those surveyed indicated they had the appropriate amount of inventory, 33% indicated their inventory was too high, and 17% indicated their inventory level was too low.

Vehicle repair sales rose in December

Dealers indicated automotive repair sales trends improved once again in December. Specifically, the dealers who responded to the survey indicated service sales, which accounted for 22% of the study participants’ total revenues, were up 4.3% on a year-over-year basis in December (nearly flat compared to an increase of 4.5% in November) 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.

How dealers view near-term business

Dealers             AUG     SEP    OCT      NOV(R)    DEC(P)  DEC(14)

Passenger tire

Will improve      50%       83%       0%        66%         17%      37%

Will worsen         0%         0%        0%         0%           0%        0%

Will stay level    50%       17%    100%       44%         83%      63%

Truck tire

Will improve      50%      100%      17%      57%         33%       43%

Will worsen       17%          0%        0%        0%          50%        0%

Will stay level    33%          0%       83%      43%         17%       57%

R-Revised   P-Preliminary

To read more Your Marketplace columns, see:

Tire Pricing Remained Flat or Declined Despite Tariffs on Chinese Imports

Demand Trends are Holding Strong Despite Lack of Harsh WInter Weather

Dealers Anticipate Sales Trends to Improve Through the End of the Year

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