NACE, CARS Moving To Detroit In 2014
The International Autobody Congress & Exposition (NACE) — along with the Congress of Automotive Repair & Service (CARS) — are moving to Detroit in 2014. They are joining with the Inter-Industry Conference on Auto Collision Repair (I-CAR) and the Collision Industry Conference (CIC) to form an event billed as Industry Week 2014. Detroit’s Cobo Center will be the initial home for these events, which are scheduled to take place July 28 to Aug. 2, 2014.
This year, CARS and NACE will be held Oct 16-18 in Las Vegas — a co-located event called Automotive Service & Repair Week (ASRW).
Monro Buying 10 Curry’s Shops In Metro D.C.
Rochester, NY-based Monro Muffler Brake has signed a definitive agreement to acquire 10 Curry’s Auto Service shops in the Washington DC metropolitan area, enabling Monro to fill in an existing market. Financial terms of the transaction have not been disclosed.
Annual sales for these stores are roughly $18 million, according to Monro, comprised of approximately 80 percent auto service and 20 percent tires. This high mix of service sales would help Monro offset the pressure the company has been seeing from a sales mix shift to lower-margin tires.
The shops are to be co-branded as Curry’s/Mr. Tire. Monro plans to retain all store-level employees.
Closing is expected to occur in mid-August. The deal would give Monro a total of 37 stores in the Washington, DC market.
More acquisitions are likely. John Van Heel, president and CEO of Monro, disclosed on a July 25 conference call that his company has seven signed non-disclosure agreements (NDAs). Five are within Monro’s footprint and two are in contiguous markets, with store chains ranging in size from five to 40 locations.
“Based on the current transaction, the current macro environment and our existing NDAs, we think the acquisition environment can heat up further in the second half of the year,” Van Heel told analysts on the call. “We have plenty of liquidity, combined with strong cash flow to complete these deals and remain very disciplined on the prices we pay with 7 X to 7.5X EBITDA — or about 80 percent of sales — being our key metric. Importantly, we continue to compete only with the sellers’ expectations in these deals.”
Van Heel has said that he sees attractive acquisition opportunities in the marketplace, created by the challenging operating environment, and that Monro will continue to pursue these candidates in a disciplined manner.
BB&T Capital Markets pointed out in a recent report that acquisitions remain key to Monro’s growth. “While weak consumer demand has impacted comp-sales growth, top-line expansion continues to be driven by weaker market participants capitulating in the face of industry-wide softness,” wrote BB&T analysts Bret Jordan and David Kelley.
They added later in the note: “Given Monro’s low borrowing costs and significant purchasing and distribution scale, we expect continued consolidation-driven top-line growth in the second half of 2014, while the majority of current-year earnings expansion comes from last year’s deal flow (assuming comps remain stagnant).” — Marc Vincent
Acquisitions Drove Most Of Monro’s Quarterly Sales Increase; Comp-Store Sales Disappoint
Monro Muffer Brake’s fiscal first-quarter results were weaker than management and analysts had hoped. Softer sales in May and June drove the Rochester, NY-based company to a comparable-stores sales increase of only 1.2 percent — lower than analysts’ consensus of 3.2-percent growth and below management’s guidance calling for comp-store sales to rise between 3 percent and 4 percent.
“We believe this is primarily the result of the macro environment, as reflected by softer retail sales generally in June,” explained President and CEO John Van Heel on a July 25 conference call.
Nonetheless, management pointed out on the call that Monro’s business model and execution against its long-term strategy allowed the company to increase its market share and deliver sales and net income growth for the three months ended June 29, 2013.
Net income increased 16.6 percent to $13.57 million. However, gross margin fell from 40.3 percent to 38.3 percent year-over-year, attributable to a sales mix shift to the lower-margin tire category related primarily to recently acquired stores. These declines were offset, in part, by lower labor, distribution and occupancy costs as a percentage of sales.
Net sales rose 21.9 percent to $206.17 million. The bulk of the increase — $36 million of the $37 million year-over-year uptick — was attributable to sales from new stores, including recently acquired locations. That leaves the aforementioned 1.2-percent comparable-store sales gain.
“Consumers increasingly turned to us during the quarter to perform the necessary work to maintain and expand the life of their vehicles, as evidenced by a 2-percent increase in our comparable-store oil change traffic on top of the 2.5-percent increase last year and a 4-percent increase in comparable-store tire units in the quarter,” Van Heel told analysts on the call. “However, customers continued to defer more-costly purchases and trade down, resulting in flat or slightly positive comparable-store sales in key categories.”
Comparable-store sales increased 3 percent for alignments and 1 percent for maintenance services and tires. Comps were flat for exhaust, front end/shocks and brakes.
BB&T Capital Markets, in a July 25 report, pointed out how this trade down in tires limited Monro’s sales gains.
“Although tire units showed signs of life in Q1 with a 4-percent comp unit gain, widespread consumer trade down to low-priced import product and tire price deflation limited comparable-store sales growth to 1 percent,” explained analysts Bret Jordan and David Kelley.
While they expect trade down to continue, the BB&T analysts contend that sustained weakness in tire volumes industry-wide is unlikely to continue as accumulated tire wear ultimately creates safety and drivability issues. “Given industry forecasts for less than 2-percent unit growth in 2013, we believe Monro’s Q1 result indicates the company is likely holding or growing share in this otherwise challenged category and are optimistic that Monro may be positioned to accelerate growth as general demand eventually improves,” Jordan and Kelley wrote.
BB&T remains optimistic that regional demand trends will improve as deferred maintenance drives repair volumes and expects recent acquisitions to bolster second-half margins.
While management expects the macro environment to remain choppy in the near-term, it is optimistic about Monro’s ability to deliver comparable-store sales increases for the full year fiscal 2014 based on easy comparisons to date in the second quarter. Oil change traffic remains positive and comparable-store sales are trending flat to last year, Van Heel told analysts on the call. “We expect this trend to continue through our second quarter.”
“That said, we are optimistic that with the increase in comparable-store tire and oil change units and with more-normalized weather throughout the high tire-selling season two years of increases in customer deferrals will reverse and present a tailwind for sales in the second half of fiscal 2014,” Van Heel added. “In addition, our fiscal 2013 acquisitions have positioned Monro for profitable growth over the next several years, including fiscal 2014.”
For the current quarter, management expects comp-store sales to come in flat to up 2 percent. Diluted earnings per share are forecast at $0.41 to $0.45, which is comparable to $0.36 in the prior-year quarter.
Full year fiscal 2014 guidance calls for comp-store sales gains of 1 percent to 3 percent and earnings per share somewhere between $1.58 and $1.70. This is down from previous guidance calling for earnings per share to come in between $1.65 and $1.80, yet this is up from the $1.32 recorded for fiscal 2013. — Marc Vincent
Point of View: Value Proposition Not Clearly Communicated
Almost all of us in this industry can identify with the circumstance where we are explaining to neighbors, friends, acquaintances, relatives and even strangers the industry in which we work. It can be a daunting task, with answers ranging from using the term “aftermarket” to a detailed explanation that notes that we are the ones who provide service and parts outside of the auto dealership. Even when they get a reasonable understanding of who we are, the usual follow up involves some type of conversation complaining about a recent experience in getting their vehicle serviced, or a cynical comment or two concerning the cost of diagnosing and repairing today’s vehicles.
My friends are just like yours, and even if they are financially secure, we have all been exposed to the ever-present questions about why it costs so much to repair today’s vehicles, why the parts are so expensive, and why there is seemingly no repair that doesn’t hit the wallet with a major impact.
The answer, though, is not a simple one – and it goes back to some of the fundamental challenges this industry has faced seemingly forever.
We all know that today’s vehicles are complex beyond comprehension. For example, last year, Lexus announced that it is creating two new positions at each of its 230 dealers around the country: a “vehicle delivery specialist” to show buyers how the cars work during purchase and a “vehicle technology specialist” to troubleshoot snafus after the sale. Cars today might have as many as 50 microprocessors on them with modules controlling airbags, doors, the cruise control, the climate control system, the anti-lock braking system, ad infinitum. Without a special piece of computerized system analysis equipment you aren’t able to know exactly what is wrong with that car, beyond “it won’t start.” And we all know that emission controls alone have a myriad number of sensors feeding electronic control modules and electronic control units – a high-tech array of computerized components mastering our mechanical systems.
Add hybrids and alternate fuel vehicles to the mix, along with government-mandated fuel efficiency standards, and these complexities will continue to drive the so-called problem even deeper into the perception of most vehicle owners.
Yet, all along the way, this industry has done little or nothing to educate consumers regarding what they get for what they pay. And that lack of consumer education, coupled with the constantly reinforced perception that shops are purposefully ripping off consumers, leaves us falling further and further downward in a spiral of negativism about what we do.
Even with the complexity of today’s vehicles aside, this industry has done very little over the years in informing consumers regarding what we provide in the independent aftermarket – the ability for Americans to move freely, safely and conveniently for a reasonable price. We have always missed the boat on explaining our value proposition to consumers, and with today’s complex vehicles with high-end and expensive electronic components involved, we have done nothing to counter a perception that we are just looking for a bigger invoice with each transaction.
Too many consumers believe we have them over a barrel and really believe we don’t care what it costs because the consumer has to get to work and transport the family. But the fact of the matter is that today’s vehicles last longer than ever before, are more reliable than they have ever been, and are environmental friendly in a world that needs that benefit.
As with such complex issues, there are no simple solutions – and I certainly don’t want to seem like I am accusing the industry of any purposeful negligence or indifference regarding these negative perceptions. But, as we continue to move forward, we need to be actively cognizant of this negative perception and begin to look at ways individually and collectively to reinforce the value proposition of this industry.
Though the perception is otherwise, we keep America on the road, effectively, efficiently and at a reasonable overall price. We need to make sure that is understood, clearly and concisely.
Gary A. Molinaro
Snap-on Organic Sales Up 3.1% In Q2
Snap-on Inc. turned in sold results for the second quarter of 2013, with net income up 15.5 percent to $90.70 million and net sales up 3.6 percent to $764.10 million. Excluding $4.70 million in unfavorable foreign currency translation and $8.50 million in sales from the May 2013 acquisition of Challenger Lifts, total organic sales were up 3.1 percent
The Tools Group saw its operating earnings rise 22.5 percent to $54.50 million in the second quarter and its net sales increase 6.5 percent to $346.20 million. Excluding $1.50 million of unfavorable foreign currency translation, group organic sales were up 7.0 percent, reflecting sales gains across both the United States and international franchise operations
For the Tools Group, big-ticket sales were significant growth drivers in the period. In particular, diagnostic products and tool storage units were strong. “It’s important for us, because we believe that big-ticket activity provides meaningful evidence of the financial well-being of our customers,” Chairman and CEO Nick Pinchuk explained on a July 18 conference call. “And, it’s a good barometer on the overall health of the auto repair sector.”
“Those big-ticket sales are being supported by Snap-on Credit. It’s an important advantage for us,” Pinchuk added. “Not only is Credit helping to drive big-ticket activity in North America, but we are now extending some of that advantage to the international van operation. The well-established programs and expertise we’ve developed here are being applied in places like the U.K. and Australia … improving service, increasing customer satisfaction and driving more growth.”
Meanwhile, the company’s Repair Systems & Information Group saw its operating earnings increase 8.6 percent to $56.70 million and its net sales rise 8.3 percent to $246.20 million in the second quarter of 2013. Excluding the $8.50 million in sales from Challenger and $800,000 of unfavorable foreign currency translation, group organic sales were up 4.9 percent
Primary drivers were a high single-digit gain in sales to OEM dealerships, as well as a mid single-digit gain in sales of diagnostics and repair information products to independent repair shops. Undercar equipment sales were flat due, in part, to declines in Europe, where Snap-on has a relatively large position. — Marc Vincent
Federated Launches Training Program On Targeting Female, Younger Customers
Federated Auto Parts has developed a new training program designed to help repair shops target younger and female customers. The program, called Connecting With the New Generation of Auto Repair Customers, focuses on the effective use of social media.
The seminar covers everything from texting, email blasts, Yelp and Facebook and suggests ways to produce not just happy customers, but customers who become grass roots promoters, Mike Allen, vice president of Federated, said. “The most effective form of advertising we still have today is word of mouth, and it is magnified with social media,” Allen said. “The progressive shops totally get it.”
“Sites such as Yelp and Facebook have a tremendous force multiplying effect that can have either a positive or negative impact on business, and we need for those who attend to fully comprehend and prepare to react to this concept,” Allen said.
The program is not software driven. Instructors encourage interaction and share examples of ways to communicate most effectively with different demographics and “wow” customers through examples from various companies, Allen said.
Federated developed the program in collaboration with the Essential Action Design Group. The two companies also worked together on a round of classes meant to generate more profits through small changes in everything from average repair orders, productivity and vehicle count. Those classes, offered over the past two years, generated better audience engagement than expected and requests for follow up classes, Allen said.
The new program focuses on customer complaint avoidance, customer appreciation and customer experience enhancements.
Cliff Hovis, president of Hovis Auto & Truck Supply, scheduled a 90-minute seminar this spring at the company’s technical training center. The training complemented other training programs the company already uses, Hovis said in an email. “Attendees were very interested in how social media can help them enhance customer service and attract and retain customers.” — Sarah Hollander
Myers’ Distribution Unit Sales Up 4% In Q2
Akron, OH-based Myers Industries came through with strong results for the second quarter of 2013. Net sales increased 12.7 percent to $204.02 million due, in large part, to a 39-percent rise in material handling segment sales. Net income increased 47 percent to $8.31 million.
The distribution segment (a.k.a. Myers Tire Supply) saw sales increase 4 percent to $45.89 million in the quarter. Management attributed the rise to new product sales and market share gains in equipment sales. Segment income before taxes fell 10.1 percent to $3.86 million, partially attributable to costs associated with an information technology system upgrade.
Looking ahead, Myers expects its distribution segment to continue producing market share gains that will more than offset the ongoing slow replacement tire market, resulting in increased profitability in the second half of 2013.
Innova Expands Tech Support Operations
Innova Electronics Corp. has expanded its Innova Pro technical support operating hours to seven days a week. Automotive service professionals can call a dedicated number from 6:00 am to 6:00 pm (Pacific) to speak in English or Spanish with an ASE-certified technician at the company’s headquarters.
Irvine, CA-based Innova is a supplier of test equipment and diagnostic reporting for the automotive aftermarket.
Snap-on Makes Honor Flight Network Donation
Kenosha, WI-based Snap-on Inc. has made a $50,000 to the Honor Flight Network and become the first company to sponsor solo Honor Flights for its associates and franchisees on a national level. Working with the organization, Snap-on will transport veterans of World War II, the Korean War and Vietnam War to visit their memorials in Washington, DC this fall.
Online A/C And Engine Cooling System Spec Database Introduced
MACS and Motor Information Systems have introduced a new online A/C and engine cooling system specification database. The database contains mobile A/C system specifications for refrigerant capacities, refrigerant types, compressor oil type and viscosity and compressor clutch air gap from 1980 to current models. It also contains oil capacity by component specs from 1994 to the present; component locations from 1990 to today; serpentine drive belt routing and replacement information for models from 1991 forward; as well as data for coolant capacity and type for vehicles from 1980 to today.
MACS members can subscribe to the database for an annual fee of $30. Non-members can sign up for an annual fee of $50.
Jiffy Lube President Leaves For Bridgestone
Stu Crum is set to take over as president of Bridgestone Retail Operations (BSRO) on Aug. 5. BSRO operates 2,200 Firestone Complete Auto Care, Tires Plus, Expert Tire and Wheel Works service centers across the United States. Crum has been the president of Jiffy Lube for the last two years. Prior to that, he was vice president of national accounts – North American automotive consumer products at Shell.
Myers Names VP Of Investor Relations/Treasurer
Akron, OH-based Myers Industries, parent company to Myers Tire Supply, has named Monica Vinay as its vice president of investor relations and treasurer. Vinay is the primary day-to-day interface between the company and the investment community, overseeing treasury operations including cash management and directing corporate communications.
News Briefs 7/31/13
• Brakes Plus, in partnership with Universal Lubricants, now collects used oil and filters from its 51 locations in Colorado, Texas, Nevada, Wyoming and Iowa.
• Jiffy Lube International has named Atlantic Coast Enterprises as its franchisee of the year. Atlantic Coast owns and operates 50 Jiffy Lube shops in Tampa, Miami and West Palm Beach, FL, as well as Myrtle Beach, SC.
• The Tire Industry Association (TIA) is reporting that the total number of registered exhibitors for the 2013 Global Tire Expo has already exceeded the 2012 total. The expo will be held during the SEMA Show, taking place Nov. 5-8 in Las Vegas.
• AccessorizeYourVehicle.com now offers product installations in the Orange County, California area. Installations can be scheduled at a customer’s home, work or elsewhere.
• Dan Risley, ASA executive director, has joined the Automotive Management Institute (AMI) board of trustees, assuming the association’s permanent board position.
• Universal Technical Institute (UTI) has formalized an agreement with General Motors to develop a 12-week elective training program for UTI students. Curriculum will be developed in partnership between UTI, GM and Raytheon Professional Services, GM’s training partner.
• K.W. Mechanical of Whitecourt, Alberta has been named the Truck Service Expert (TSE) of the Year by HDA Truck Pride.