- AutoZone reported solid comp-sales growth for the first two months of the fiscal quarter; however, starting in April, sales and observed traffic slowed due to adverse weather, being on the backside of tax refunds, and higher-for-longer gas prices. That slowdown is principally in the more economically sensitive DIY segment.
- Reported comp-sales of +4.1% compares to an avg. ticket increase of +5% and observed traffic of -0.1%. (As a reminder, credit-card data misses the commercial business because it’s a B2B billed business; by contrast, Advan’s mobility data captures the parts truck departing the AutoZone store on its way to the repair shop.)
- Advan+Claude observations show that Florida is a difficult market for the three major auto parts retailers with traffic in tight markets underperforming, and Florida itself underperforming the national averages (~230bps of underperformance per brand.) Moreover, competitive intensity in the commercial segment is more acute.
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AutoZone reported a +4.1% comp-sales increase for its domestic stores, with DIY increasing +2.2% and commercial increasing +10.4%. Average ticket increased +5.4%. Breaking the quarter into its three periods, comps were +5%, +5%, and +2.9%. The commercial business (34% of the business) did +12.7% / +9.1% / +9.6% and the DIY: +2.4% / +3.4% / 0.8%. The softer pace in the third period (ending May 9th) reflects adverse weather; however, as shown above, the trend (2-year) has been slowing since mid-April and that matches the broader macro slowdown that we’ve highlighted, which aligns with being on the backside of tax refunds and higher gas prices. As the chart shows, traffic to auto repair shops (there are 108K locations in our index) has not slowed; accordingly, we conclude that the slowdown in AutoZone’s traffic is primarily DIY-related. On the call, the question was asked about competition and AutoZone comping less spectacularly (ORLY +5% in DIY for Jan-Mar; Advance Auto +2% for Jan-Apr). To the question, CEO Phil Daniele answered, “I think the way we look at it is we have an opportunity to gain share both on the DIY side of our business and on the commercial side of the business. Our execution is improved, our assortments are improving… Our execution continues to improve and we have strategies that will help our execution improve even more. We look at things from an execution perspective, our turnover in stores is back down to historically low levels. Our supply chains are gaining efficiency. We're getting better service at service to our commercial customers, out of our Hubs and Megahubs, and our Satellite Stores. We continue to improve our delivery times. All of those things point to better execution and we think the opportunity to gain share specifically on the commercial side, where we're still, you know, roughly 5% of the market share opportunity that's out there. So we think we have pretty good opportunities on both sides of the business.”
In prior insights articles, we’ve highlighted Florida as a market of intensifying competition; over the past year, AutoZone has added 18 net new locations in the state, O’Reilly +15, and Advance +7. We turned to Advan+Claude analysis to give the visit trends relative to overlap; the Claude analysis is below – competition is difficult in Florida. However, contrary to our expectations, Florida is low in stores-per-capita as shown in the second panel. Moreover, turning Claude onto Advan Spendview data (CC) shows that Florida is a strong market for DIY-auto with spend-per-capita at $116, which is ranked #8 out of the lower-48 and above the $100 average. As such, we suspect that in Florida, the competitive intensity is more acute on the commercial side of the business (aligning with Daniele’s comment and the labor and parts availability investments that were evident in the FQ3 financials).
