ATD: 6 trends that favor tire retailers

Nov. 21, 2011

In its latest SEC Form 10-Q filing, American Tire Distributors Inc. shared some of its analysis about the state of the tire industry, past, present and future. Here is what the company had to say about trends and economic events

Past: "The U.S. replacement tire market has historically experienced stable growth and favorable pricing dynamics. From 1955 through 2010, U.S. replacement tire unit shipments increased by an average of approximately 2.8% per year. However, during challenging economic periods, consumers may opt to defer replacement tire purchases or purchase less costly brand tires.

"Since the onset of the economic downturn in 2008, we have seen increased economic uncertainty, increased unemployment and rising fuel prices. These factors have impacted the availability of consumer credit and have changed consumer spending of disposable income, thus impacting our business and the industry as a whole."

Present: "The economic environment has been showing signs of stabilization. We experienced modest year-over-year unit volume growth in 2010 which has continued during the first nine months of 2011, reflecting, in part, an economy slowly re-emerging from the severe economic downturn.

"The return to established driving habits and longer vehicle life has led to moderate growth in the U.S. replacement tire market compared with prior years. However, we believe the modest pace of the recovery continues to negatively impact consumer spending of disposable income and miles driven."

Future: "Going forward, we believe growth in the U.S. replacement tire market will continue to be driven by favorable underlying dynamics, including:

* increases in the number and average age of passenger cars and light trucks;

* increases in the number of miles driven;

* increases in the number of licensed drivers as the U.S. population continues to grow;

* increase in the number of replacement tire SKUs;

* growth of the high performance tire segment; and

* shortening tire replacement cycles due to changes in product mix that increasingly favor high performance tires, which have shorter average lives.

"Despite the current market environment, we have a solid infrastructure, an extensive and efficient distribution network, and a broad product offering. Our growth strategy, coupled with our access to capital and our scalable platform, enables us to continue to expand in existing markets as well as in new geographic areas.

"In addition, we are investing in technology and new sales channels which will help fuel our future growth. As a result, we believe that we are well positioned to continue to achieve above market results in both contracting and expanding market demand cycles."

ATD is 100% owned by American Tire Distributors Holdings Inc. On May 28, 2010, the company was acquired by affiliates of TPG Capital L.P. for nearly $1.3 billion.

For ATD's third-quarter financial results, click on "ATD moves from red to black in 3Q."

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