Auto Parts Retailers Outperform

While the auto industry propels itself into the abyss, the parts retailers like AutoZone (AZO) and O’Reilly Automotive (ORLY) are seeing their value proposition become more relevant in the marketplace. As credit remains tight and new car sales plummet, more and more people are putting off major purchases in favor of repair and/or band-aid projects for their cars.

I wrote about this trend earlier in the month, highlighting O’Reilly as my favorite in the group because there’s a lot of improvement they can bring to recent acquisition CSK Auto. While O’Reilly has been a top operator, registering comps growth of 2% - 3% in 2008 (both AZO and Advance Auto (AAP) are flat to down), CSK has been running (1%) to (3%) this year despite being favorably positioned geographically in its markets. O’Reilly should be able to drive marginal improvement at the CSK stores, while the potential customer base is rising as new car sales fall.

Valuations are below market averages, and the industry could be one of the few that actually benefits from a recession. O’Reilly and AutoZone have both outperformed the S&P 500 by 10 percentage points since October 15.

Disclosure: None

Comments

[fatcat:]

As more car dealers fail,more "shade tree mechanics" will go in business to service an aging fleet of vehicles...this should be bullish for the above mentioned stocks.

AZO has been good to me over the last 7 or 8 yrs...

2008 Nov 02 10:24 AM

[Roger Knights:]

Here's a link to a late-October Seeking Alpha article on another beaten-down auto-parts retailer, titled "Pep Boys: Insanity dominates share price":

seekingalpha.com/artic...

2008 Nov 02 02:15 PM

[Urbane Gori...:]

I was watching GT (Goodyear Tire) move up and thinking how gurus were saying that without auto sales, their market would dry up. In the back of my mind was the niggling little thought "If people aren't buying new cars they'll need to replace the tires on their old clunkers.."

jegan ;-)

2008 Nov 03 05:41 PM

[chiefenterp...:]

AutoZone fell $5.44, or 5 percent, to $103.06. Advance Auto dropped $2.13, or 7.7 percent, to $25.70 and Pep Boys fell 59 cents, or 13.1 percent, to $3.91.

www.chiefenterprises.c...

Jan 14 01:27 AM

[User 417430:]

CSK is big name in auto industry. Good to know they are growing.

May 21 04:33 PM