Our recent discussions with dealers leave us with a view that sell-out trends improved in May versus the prior year’s period, re-accelerating from year-over-year contractions early in the year. While always somewhat subjective, we note commentary from installers was at the highest level since October 2017. From a volume standpoint, surveyed dealers reported they saw unit sales volumes up nearly 2% relative to the previous year’s period.
According to the results of our survey, demand for passenger and light truck replacement tires at retail was essentially the same in February versus the prior year’s period, which mitigates some of the positive momentum the industry had built since October 2017.
While most of the tire industry is getting ready for the Specialty Equipment Market Association (SEMA) Show, our survey indicates that dealers haven’t taken their eye off of the prize as the respondents in our study noted that demand improved in September.
Dealers reported that new passenger tire sales in August improved modestly from July as sales of passenger units rose 0.1% year-over-year following a 0.3% decline.
Dealers reported that July sales trends were much improved relative to June. The respondents of our survey noted that unit volumes were essentially flat, which marks a significant improvement from June when dealers indicated that passenger replacement tire sales fell 1.1% year-over-year.
"Some consumers have delayed tire replacements to the point that we will see some pent-up demand released in the coming months as consumers adjust to the incremental headwind created by the expiration of the payroll tax earlier in the year," reports John Healy and Nick Mitchell, analysts for Northcoast Research Holdings LLC based in Cleveland, Ohio.
Dealers noted that unit volumes fell 1.1% compared to June of 2012, which marks a slowdown from May when dealers said that year-over-year tire sales were essentially flat.
Tire dealers reported that lackluster sales continued during April as passenger tire unit volume at retail was essentially flat. While the 0.2% decline that dealers reported is certainly an improvement over the 1.1% decline that was reported in March, it’s important to remember that Easter was in March this year, compared to 2012, when the holiday occurred in April. This calendar shift effectively gave dealers an additional selling day this year, which obviously benefited the reported numbers.
After reporting a modest sales lift in February, the dealers we surveyed indicated that soft sales trends reemerged during March. Indeed, we were disappointed with the responses from our survey as we thought that there was a good chance that momentum would build from February’s improvement — especially as the disbursement of tax refunds normalized and the price of gasoline fell throughout the month.
Last month we said the consumer could very well prove to be the story of 2013, which is a belief that was reinforced by many of the dealers we speak with. Our hope is that January’s results are not indicative of how this story plays out throughout the rest of the year.
Well, we made it through 2012, which almost everyone can agree was not the tire industry’s banner year. As we were winding down the year, dealers got their Christmas wish answered as winter finally made its presence felt.
We think that weak consumer demand and the lower prices of Chinese tires in the post-Tariff 421 world continue to be the big stories in the tire industry right now.
For 40 years industry analyst Saul Ludwig graced the pages of this publication with his astute comments on the tire industry. This year marks a changing of the guard. Ludwig’s protégés, Nick Mitchell and John Healy, are offering their insights, presenting fresh perspectives on market angles that affect your business.