Long/short equity

Dorman Products: 70% Downside As Cyclical Headwinds Pick Up & Aggressive Accounting Unwinds

Business Overview

Dorman Products (NASDAQ:DORM) supplies automotive replacement parts to after-market retailers like AutoZone (NYSE:AZO), Advanced Auto Parts (NYSE:AAP), O'Reilly (NASDAQ:ORLY), and warehouse distributors such as Carquest (now part of AAP) and NAPA (a division of GPC).

DORM does not manufacture the goods it sells. Nor does DORM produce original designs. Instead, DORM claims to be the "dominant aftermarket supplier of original equipment 'dealer exclusive' items" (2013 10-K, page 3). This is an odd claim to make for a company that is not an original equipment manufacturer and does not hold a license to sell 'dealer exclusive' parts to unlicensed dealers.

While it is not uncommon for aftermarket suppliers to distribute...

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