In an effort to better identify and understand demand trends across the automotive aftermarket, Northcoast Research has partnered with VehicleServicePros.com. The research company will be sending a monthly survey out to email subscribers and asking for their input on revenue trends. The first report for April 2013 has been completed. Here are the results:
Conversations with more than 300 repair shop owners imply that sales trends in the aftermarket channel continued to heat up during April 2013. The "do it for me" channel delivered the best month since June 2011. The Current Sales Index increased 2.7 percent.
The Current Sales Index finished in expansionary territory in April, largely on the back of an increase in the average ticket; however, traffic trends across the channel also improved for the second straight month.
For the third consecutive month, consumers bucked the recent trend of deferring maintenance as the shop owners in our survey noted that preventive work helped drive sales during April 2013.
The sales improvement was driven by a higher average ticket. In our view, the higher average repair order reflects: 1) a reduction of the trend to defer routine maintenance; and 2) more expensive repair jobs (i.e., more failure work and catch-up repairs) that were likely brought on by the deferral of preventative maintenance in 2012.
More importantly, the car count (i.e., traffic) appears to have positively contributed to sales for the second straight month. Traffic trends across the channel improved for the second straight month, as a net 5.6 percent of the respondents cited a year-over-year increase in traffic during the period (up from 2.3 percent in March). While analysts would not characterize traffic trends as robust, it is worth noting that this is the first time since the company formally began tracking this metric that increases have been reported in consecutive months.
The collective outlook of the shop owners in the sample remained upbeat at the end of April.
Analysts have concerns that the recent improvement in demand trends in the market witnessed in recent months could largely be a reflection of a channel shift on account of the colder weather this year. Additionally, concerns continue over what a changing mix of automobiles in the nation’s light vehicle fleet could mean for demand trends over the next three to four years. Specifically, the unseasonably cool spring weather this year was not conducive for consumers in the DIY channel to work on their vehicles relative to what was reported last year. Consequently, analysts believe that some business shifted to the "do it for me" channel, especially in the Midwest and Northeast.
Additionally, commentary in the channel that suggests that the professinoal market captured a greater share of consumers’ tax refunds this year (i.e., more consumers allocated their refunds to repairs and maintenance after neglecting their vehicles for the past three quarters).
Although maintenance trends have been favorable for the past three months, analysts continue to have concerns over the health of traffic trends in the automotive aftermarket in the intermediate term as a result of macro headwinds and changing demographics, both of which are factors that could continue to weigh on demand in 2013.
These macro headwinds were offset by lower gas prices and shift in spend between channels over the two months, which likely aided deferred maintenance behavior. Fuel prices were 8.1 percent lower year-over-year in April and 3.3 percent lower year-over-year in March, including a 3.7 percent sequential drop.
Overall, the "do it for me" market remains upbeat about revenue in 2013.