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Point Of View: Standard Look At Industry Metrics May Need Some Modification

As dry as the subject may be to some, we take great pride in being the only industry publisher to do our own reporting on quarterly reports of publicly-traded aftermarket entities, not just repurposing the press releases supplied by the company itself. It requires a lot of effort on our part, reviewing the comments of various Wall Street analysts, reading the reports of a variety of financial publications, and spending the time to listen to the analysts’ conference calls where management discusses the numbers and talks about the factors facing the company in both the recent past and the coming quarters.

We know that is the value aspect we provide to our subscribers, a report on company results and industry trends that are not the “spin” that a good public relations professional would like you to hear.

In that process, too, we find that we gather a lot of information, many times finding out “inside” information about the company’s plans or execution, much of which is never part of the public relations campaign or other public statements. It’s always amazing what you hear when you listen.

For example, we found the following comments from O’Reilly Automotive CEO Greg Henslee on the company’s recent conference call insightful:

“The macroeconomic factors that affect our industry remain basically unchanged since our last conference call. Fuel prices remain relatively high at $3.44 per gallon — up 11 percent from a year ago. Unemployment rates are still over 8 percent and miles driven in the U.S. through November were down 1.4 percent, representing 38.3 billion fewer miles driven. These conditions, in and of themselves, would typically create an overall headwind for our industry. However, with the average age of vehicles having increased substantially over the past few years due to depressed new car sales, we speculate that miles driven on vehicles out of warranty has incrementally grown, resulting in a better auto-parts sales yield per mile driven.

“We also speculate that many consumers are relatively pleased with the way their vehicles are performing at higher mileages due to the significant engineering and manufacturing improvements in vehicles manufactured over the past 10 years. For this reason, we suspect there will be a lasting result from this recession when it comes to the frequency in which many consumers feel compelled to replace their vehicles and the length of time vehicles stay on the road.”

And, for those involved in the service sector, that is certainly a rosy view of the coming year and beyond

As in any business, there are always standard metrics that can be tracked that give those involved in the industry a relatively clear view of how business will be in the foreseeable future. Fuel prices, miles driven and the age of the fleet are fundamental metrics of the aftermarket, yet some of the usual effects those factors have on the marketplace have transitioned in the last several years.

Right now, we are in the midst of a slow and steady climb in fuel prices, and the factors that affect those price increases are projected to be in a position to push the per-gallon rate well over $4 this summer. And that is a general negative against the entire economy — especially relating to consumer spending — and could have particular impact on aftermarket spending. But, unlike in the past, there are factors, like the ones Mr. Henslee has noted, that mitigate the fuel price pressure as well as the miles-driven factor.

It is worth noting that the higher quality of today’s cars is dramatically pushing the age of the fleet significantly, and the lengthy period of low new-car sales has multiplied that affect as well.

To many, it may be a overly-simplified way of looking at a complex marketplace, but, sometimes, simple is the solution.

Gary A. Molinaro, Editor/Publisher