Sears Weighs Separating Auto Centers Business
Sears Holdings Corp. is evaluating separating the Sears Auto Centers (SAC) business. Management contends that this would allow SAC to pursue its own strategic opportunities, optimize its capital structure, attract talent and allocate capital in a more focused manner.
Sears, which is led by hedge fund billionaire Eddie Lampert, believes that SAC has a unique national footprint that can be leveraged to create significant value. “We have begun the repositioning of the business around non-tire related services as tire margins have been compressed industry-wide over the past several years, leveraging the store footprint, the number of service bays and our auto technicians,” Sears wrote in a prepared statement.
Lampert runs ESL Investments, which has owned a sizable stake of AutoZone and AutoNation.
Monro’s September-Quarter Comps Fell 2.1%
Monro Muffler Brake (Rochester, NY) was able to deliver top- and bottom-line growth in the fiscal second quarter ended Sept. 28, 2013, despite a choppy sales environment. Net income rose 18.2 percent to $13.65 million, buoyed by improved margins and the outperformance of recent acquisitions. Gross margin increased from 39.6 percent to 39.8 percent year-over-year.
Net sales increased $28.85 million, or 16.3 percent, to $205.32 million in the quarter. The growth came from recently acquired stores ($33.90 million), partially offset by a 2.1-percent decrease in comparable-store sales. On a month-by-month basis, comps were down 4.1 percent in July, down 2.8 percent in August and down 3.2 percent in September.
Comparable-store sales increased 5 percent for exhaust, 4 percent for brakes and 2 percent for oil changes. Front-end and shocks comps were flat. Comps decreased 6 percent for tires, 4 percent for alignments and 2 percent for maintenance.
President and CEO John Van Heel told analysts on an Oct. 24 conference call that it was Monro’s strong business model that enabled it to deliver sales and net income growth of 16 percent and 18 percent respectively in the fiscal second quarter. “We’re disappointed in our top-line results, which remained weaker in the second quarter than we had hoped. However, we were able to deliver bottom-line results within our guidance range with improvement in operating margin and the continued outperformance of our recent acquisitions despite what remains a choppy sales environment,” Van Heel said.
He went on to say that this performance was the result of consistent execution of the company’s proven strategy and initiatives. “During our second quarter, we delivered on our key objectives of benefiting from lower material cost, controlling operating expenses, generating strong sales and earnings contributions from our recent acquisitions, and capitalizing on opportunities to complete additional acquisitions at attractive prices,” he explained.
On Aug. 18, Monro completed the acquisition of 10 Curry’s Auto Service centers in the Washington, DC area, enabling the company to fill in an existing market. Annual sales for these stores are approximately $18 million, comprised of roughly 80 percent auto service and 20 percent tires.
In addition, Monro has signed definitive agreements to acquire 10 stores in Delaware, Maryland and Lexington, KY. Annual sales for these 10 stores are roughly $15 million and are approximately 55 percent tires and 45 percent service. These locations will allow Monro to fill in existing markets and leverage some of the company’s existing brands, Mr. Tire (for the Delaware and Maryland shops) and Towery’s Tire (in Kentucky).
Van Heel said Monro continues to see meaningful opportunity for attractive deals in the marketplace given the current macro-environment.
“The owners of target independent tire dealers are individuals who are at or nearing retirement age without an internal succession option. We presently have six [non-disclosure agreements] signed, compared to seven at the end of the first quarter, even after completing or signing three of those deals,” he told analysts on the call. “Four of these NDAs are within our footprint and two are in a contiguous market, with chains ranging in size from five to 40 locations. Based upon our recent transactions and our existing NDAs, we remain optimistic about our opportunities for additional acquisitions during the second half of our fiscal year.
“If a winter doesn’t come again and comps remain weak, we would expect smaller competitors to be impacted more significantly than Monro, which should help us to get even more deals done and grow the top line further.”
As of Sept. 28, 2013, Monro had 940 company-operated stores, compared to 853 stores a year ago. During the quarter, Monro added 12 stores and closed six.
Current-quarter sales trends have remained challenged (down 2.8 percent through Oct. 22). Van Heel said sales have been particularly soft in tires, while oil-change traffic and key service categories have remained positive.
Therefore, management now anticipates comps to decline 1 percent to 3 percent in the fiscal third quarter with earnings per share coming in between $0.41 and $0.46, compared to $0.35 a year ago. For the full fiscal year, comps are expected to come in flat to down 1 percent with earnings per share between $1.58 and $1.65, compared to prior guidance calling for $1.58 and $1.70 and last year’s $1.32.
Nonetheless, management is optimistic about improved sales performance in the second half of the fiscal year with a return to more normalized weather, particularly as Monro’s markets will be cycling against two consecutive warm winters and a two-year deferral cycle. “We haven’t included that potential upside in our sales and earnings estimates for the remainder of the year,” Van Heel said. “At the end of the day, people can only defer purchases of our products and services for so long, and we are confident that they will continue to turn to us as their trusted service provider.”
BB&T Capital Markets also sees reason for some optimism.
“Despite continued soft tire comps (-6 percent in Q2), solid expansion in Monro’s service categories points to a continued rebound in industry demand in 2013 after a notably weak 2012,” analysts Bret Jordan and David Kelley wrote in an Oct. 24 report. “Given our belief that recent deferral of tire purchases (three years of soft industry volumes) will drive a volume rebound as increasing miles driven and inclement weather should spur purchase, we believe current fiscal year 2014 comp guidance of -1 percent to 0 percent could prove conservative.”
BB&T’s report elaborates on how service gains have reversed early calendar-year 2013 trends. “As Monro posted +5 percent and +4 percent comps in exhaust and brake categories, respectively, improving service demand appears to be reversing an early calendar-year 2013 trend of declining volumes. Notably, both categories have posted significant sequential improvements year-to-date (-11 percent, 0 percent and 4 percent for brakes and -6 percent, 0 percent and 5 percent for exhaust), reinforcing our belief that recent maintenance deferral trends, an aging vehicle fleet and modestly improving miles driven should drive higher failure rates,” Jordan and Kelley point out. “As we anticipate inclement weather could drive continued accelerating demand in weather-dependent categories such as brakes, we believe Monro will continue to post solid service comps in the second half of fiscal year 2014.”
The analysts also believe that early inclement weather in November and December could be the catalyst to a reversal of tire purchasing trends. “Currently 42 percent of Monro’s sales mix, improving tire volumes could drive significant earnings expansion given Monro’s significant improvement in operating leverage (leverage -1 to 0 percent comps), with management noting each point of comp growth currently generates roughly $0.07 in incremental EPS,” Jordan and Kelley’s report states. — Marc Vincent
D.C.-Area Monro Shops Sign On With The Hybrid Shop
Monro Muffler Brake is incorporating services from The Hybrid Shop (Gainesville, VA) in four of its Washington, DC-area locations. This allows the Monro shops to offer a range of hybrid vehicle services, including battery pack conditioning/rebuilding, as well as electronic transmission, power inverter, control system and converter maintenance.
New Show Management For CARS, NACE
A new time and format for the CARS and NACE shows won’t be the only major changes coming in 2014. ASA has announced a new strategic partner, the Stone Fort Group, that will provide conference management, sales, and marketing for NACE and CARS in 2004, and will work closely with the association in a similar capacity to ASA’s longstanding relationship with Hanley Wood Exhibitions — a relationship that is coming to an end.
Stone Fort will be working with Hanley Wood over the next few months as ASA launches CARS and NACE 2004, which will take place July 29 to Aug. 2 at the Cobo Center in Detroit. As you may recall, the shows will be co-located with I-CAR, CIC and the Collision Repair Education Foundation.
Alliance Launches MyPlaceForParts VIN-Scanning App
The Aftermarket Auto Parts Alliance now offers a free VIN barcode scanning application to help technicians find and acquire repair parts. The app integrates with MyPlaceForParts, an e-commerce site available exclusively through Auto Value and Bumper to Bumper affiliates. The app also includes features to help shops find and purchase supplies, accessories and tools in addition to application-specific hard parts.
Advance Auto Parts Rebrands eServices Unit
Advance Auto Parts has rebranded its eServices product portfolio as MOTOSHOP Technology Tools. This includes MotoLOGIC Repair & Diagnostics; MotoREV Shop Marketing (formerly DriverSide), which develops professional websites for shops and includes customer retention and reputation management services; MotoSKILL Shop Tech Training, where all content is provided through an industry-exclusive partnership with AVI OnDemand; and the soon-to-launch MotoSHOP Shop Management System, which includes real-time parts buying, invoicing and quoting.
Goodyear To Host National Car Care Clinics
To help better educate consumers on the importance of vehicle maintenance, The Goodyear Tire & Rubber Co. (Akron, OH) will host regularly scheduled car care clinics across its national network of more than 600 Goodyear Auto Service Center locations. The plan calls for at least one free clinic in each of its 36 districts across the country. Goodyear has teamed up with the Car Care Council to help promote this effort. To find a clinic, visit the car care events page at www.carcare.org or contact a local Goodyear Auto Service Center (a store locator is available at www.goodyearautoservice.com).
Snap-on Auto-Repair Related Businesses Solid In Q3
Kenosha, WI-based Snap-on Inc. had a sold third quarter, especially among its automotive-repair related businesses. Net sales increased 5.8 percent to $753.20 million. Organic sales were up 4.7 percent. Net income rose 14.2 percent to $84.60 million.
Snap-on Tools Group sales rose 8.1 percent to $333.80 million in the quarter. Organic sales were up 9.5 percent, with gains coming from all geographies. Segment operating earnings increased 4.2 percent to $41.90 million.
The Repair Systems & Information Group came through with $252.70 million in sales — up 13.8 percent over the prior year. Organic sales were up 6.7 percent, primarily attributable to gains in sales of diagnostics and repair information products to independent repair shops owners/managers, as well as higher sales to OEM dealerships. Segment operating earnings rose 17 percent to $57.90 million.
Snap-on Backs Associate/Franchisee Veterans’ Honor Flights To Washington D.C.
Early this month, Snap-on Inc. hosted its first “solo” Honor Flight for the company’s associates and franchisees who served in World War II, the Korean War and the Vietnam War. It afforded 25 veterans from 13 states the opportunity to visit the Washington, DC memorials erected in their honor.
Snap-on formally announced its sponsorship of the Honor Flight Network with a $50,000 donation to the organization earlier this year. As a result, more than 50 associates and franchisees will participate in Honor Flights to view their memorials.
Citing an “overwhelming” number of veterans who have applied to be part of solo Honor Flights, Snap-on plans to make a second $50,000 donation to fund two additional flights this spring.
Myers Tire Supply’s Sales Essentially Flat In Q3
Myers Industries’ distribution business (a.ka. Myers Tire Supply) saw sales decrease 0.1 percent to $45.01 million in the third quarter of 2013, as sales of new products and services mostly offset lower international sales volume during the quarter. Segment income before taxes rose 28.3 percent to $4.29 million, attributable to a favorable product mix and lower expenses.
In related news, Myers has entered into a purchase agreement for the private placement of notes totaling $100 million with a group of institutional investors. The proceeds will be used to grow key businesses and to repay existing debt.
Myers To Carry JDI Dynamic TPMS Products
Barberton, OH-based JohnDow Industries (JDI) has announced a distribution partnership that makes JDI Dynamic a featured supplier of pre-programmed tire pressure monitoring system (TPMS) sensors, service kits and tools through Myers Tire Supply’s nationwide distribution network.
Line-X Debuts New Franchising Website
Line-X Protective Coatings has launched a new web platform to support its franchise sales network. OwnALINE-X.com features resources for learning about Line-X franchise opportunities, business ownership infomration such as corporate support, business model plans, and initial investment details.
New Store Growth At The Tire Factory
The Tire Factory member-owned organization of independent tire dealers has added 17 new member stores so far this year. Many of these new dealers have come from the Denver area and surrounding states. Because of this growth, the Tire Factory is boosting the footprint of its Denver regional distribution center to more than 40,000 square feet.
Service-Oriented Program Returns To HDAW
The SOLD14 program, which stands for Service Opportunities & Learning Day, will return in 2014. The session — which will be held Jan. 27, the day before Heavy Duty Aftermarket Week (HDAW) — will concentrate on the changing nature of heavy-duty service and parts distribution and the business decisions involved. The agenda features the following presentations …
• “Service: The Independent Aftermarket’s Final Frontier” with Bill Wade of Wade & Partners
• “Navigating New Service Channels” with Molly MacKay of MacKay & Co.
• “Making Change ‘Stick’ in Shops” with Dave Kwinn, MSOE
• A panel discussion on “The Future of Affiliate Marketing Service Shop Programs” with leaders from HDA Truck Pride, Vipar and Power HD
• “Expanding Parts & Service Opportunities Using Analytics” with Bruce Merrifield of Merrifield Consulting
Held at the Mirage in Las Vegas the day before HDAW, a separate registration is required. The cost is $149 for one person and $99 for each additional attendee from the same company or for any member of one of the sponsoring groups or associations. Click here for more information or to register.
OEConnection Introduces Consumer-Facing OE Parts Site
OEConnection LLC (Richfield, OH) now offers a consumer-facing OE parts website designed to leverage search engines to help franchise dealers compete for online parts sales. The EasyParts.com OE parts locating technology uses search engine optimization (SEO) to help a dealership’s parts inventory rank higher in part number search results from search engines like Google, Yahoo and Bing. OEConnection explains that, because a dealership’s parts inventory is updated daily on EasyParts.com, this provides content and update frequency to help deliver improved page rankings in search results.
EasyParts.com also helps consumers locate the closest dealerships that stock their searched-for parts. And ordering parts through EasyParts.com links a buyer to a dealership’s website where the buyer can begin the transaction or request additional information.
This new technology integrates with ConsumerLink, a B2C parts e-commerce platform dealerships customize and merge into existing websites or use as a stand-alone OEM e-parts store. This also allows dealerships to employ ConsumerLink’s discounting, parts promotion and shipping option capabilities.
EasyParts.com is currently available to any OEM brand franchise dealership located in the United States.
TBC Adds Senior VP To Grow Its Franchise Business
TBC Corp. (Palm Beach Gardens, FL) has added Brant Wilson as senior vice president of its franchise group — a newly developed role. He is charged with increasing the franchisee base of TBC brands Big O, Midas and SpeeDee. Wilson joins the company with more than 15 years of experience in retail and franchise development. He has spent the last eight years with H&R Block in various management roles, including vice president of acquisitions and franchise development.
New Sales & Marketing VP For Arrowhead Aftermarket Insurance Program
The Arrowhead General Insurance Agency has hired Gerry Cecil as vice president of sales and marketing for its automotive aftermarket program. Cecil brings more than 20 years of insurance experience to the program, including time with Zurich in North America, including account executive and business development director for the global automotive industry practice.
Arrowhead General, headquartered in San Diego, is a national insurance program manager for commercial, personal and specialty products.
People Watching 10/30/13
• AskPatty.com Inc. — an online resource for automotive advice and a link between women and “Certified Female Friendly” automotive business — has hired Cherie Watters as its president of sales and marketing. Watters most recently was general manager of three California car dealerships.
• Mercedes-Benz USA has promoted Bernie Glaser to vice president and managing director of Mercedes-Benz Vans USA. He is responsible for all aspects of business operations, including sales, marketing, service and parts.
News Briefs 10/30/13
• Stanley Black & Decker reports that Mac Tools revenue grew in the high-single digits in the third quarter of 2013.
• Danaher Corp. is reporting third-quarter sales growth from its mobile tool (Matco) and wheel service (Hennessy Industries) businesses. No specifics were given regarding how much growth.
• Alldata and MAM Software have entered into a strategic agreement to launch a cloud-based shop management system called Alldata Manage Online. The program includes a vehicle owner database and integrated labor and parts costs, as well as online ordering.
• Identifix has added a vehicle search by VIN feature to its Direct Hit system.
• The Aurora Capital Group has completed its previously announced sale of Mitchell International to KKR, a New York-based investment group.
• Repair Jungle, an auto repair quotes service, now has a website designed for smartphone users. Washington, DC-area vehicle owners can now receiving competing quotes from top mechanics and auto body shops on their mobile phones at repairjungle.com.
• Greg Brannon, AAA’s director of automotive engineering and industry relations, will speak at the Fall 2013 General Meeting of NASTF on Wednesday, Nov. 6 in Las Vegas. Brannon will address the connected vehicle and AAA’s Approved Auto Repair network.
• The Ford Customer Service Division and BASF are ASA’s newest corporate members.
• Heavy-duty vehicle lift specialist Stertil-Koni has launched a website specifically to serve the U.S. military.
• The first Tint World franchise location in Kansas is set to open Nov. 9 in Lenexa. Two additional Kansas locations are to follow a year-and-a-half apart.
• Atlanta-based Speedemissions Inc. has acquired seven emission-testing centers in the Atlanta area from Auto Emissions Express and JK Express Emissions. The transaction gives Speedemissions a total of 43 emission-testing facilities nationwide.
• mLight Tech Inc., a fully reporting Florida-based corporation, has signed a definitive agreement to purchase 100 percent of the outstanding stock of The Ding King Training Institute. Ding King teaches paintless dent repair and other automotive appearance programs.
• Yokohama Tire Corp. has released Exceed 2.0, an updated version of the company’s online dealer training program. It includes advanced software to track employee training progress.
• Bridgestone Americas has launched a campaign and promotion, titled “Conquer the Cold,” to tout the benefits of changing to winter tires.