Jump to content

  • Welcome to Auto Parts Forum

    Whether you are a veteran automotive parts guru or just someone looking for some quick auto parts advice, register today and start a new topic in our forum. Registration is free and you can even sign up with social network platforms such as Facebook, X, and LinkedIn. 

     

Rhodes: Pricing Isn’t Only Driver Of AutoZone’s DIFM Growth

Counterman

By Counterman
in Auto Parts News

 Share

Recommended Posts

Counterman Contributor

Counterman

Posted
Posted

Earlier this month, AutoZone reported stellar results for its fiscal 2022 second quarter. DIFM sales set the pace.

For the quarter, which ended Feb. 12, AutoZone reported a 32.1% year-over-year increase in domestic commercial sales. The domestic DIFM sales total of $844 million was a second-quarter record for the company.

Weekly domestic commercial sales per store were $13,500 – another second-quarter record – up from $10,500 in the fiscal 2021 second quarter.

Overall, AutoZone’s fiscal 2022 second-quarter net sales were up nearly 16% to $3.4 billion. Domestic commercial sales accounted for 25% of that total – yet another company record – up from 21.9% of total net sales in the second quarter of FY 2021.

Perhaps the most impressive stat: On a two-year basis, domestic commercial sales are up a whopping 46%.

During the company’s March 1 conference call, AutoZone CEO Bill Rhodes noted that that the company doesn’t have good visibility into industry data that would quantify how much AutoZone has grown its DIFM market share in recent years. However, he acknowledged that “we are quite comfortable that we’re growing share exponentially” versus the overall aftermarket.

On several occasions, Rhodes made a point to emphasize that AutoZone’s recent price cuts have not been the primary catalyst for its accelerated growth in DIFM sales.

“They are an element, not the element of our growth,” Rhodes said. “About four years ago, we embarked on a new strategy in commercial, and we looked at all elements of our offerings. We changed the assortment methodology in every store in the United States. Every store has a different product assortment that leans further into the commercial business today than it did four years ago.

“We also said, ‘How are we going to get significant increase in local-market availability? And we came up with this concept called a megahub store.”

AutoZone’s megahub stores typically stock around 100,000 SKUs, “and drive tremendous sales lift inside the store box as well as serve as an expanded assortment source for other stores,” CFO Jamere Jackson explained during the call.

As of the end of its fiscal second quarter, AutoZone had 64 megahub stores, and Jackson said the company plans to open 14 more megahub locations throughout the rest of its fiscal 2022.

“The expansion of coverage and parts availability continues to deliver a meaningful sales lift to both our commercial and DIY business,” Jackson said. “And we are testing greater density of megahubs to drive even stronger sales results. What we’re learning is that not only are these assets performing well individually, but the fulfillment capability for the surrounding AutoZone stores gives our customers access to thousands of additional parts and lifts the entire network.”

AutoZone executives have stated publicly that the goal is to establish at least 110 meghahub locations, but Rhodes said that number could end up being closer to 200.

“One of the things about the mega hubs: Every time we measure them, they do better than our projections – period. Every single time,” Rhodes added.  

Regarding the DIFM sales growth, Rhodes also pointed to improvements in the effectiveness of AutoZone’s front-line sales personnel and delivery drivers, and technology upgrades that make AutoZone “easier to do business with.”

“We’ve taken our sales force – which was relatively immature and, frankly, brand new a decade ago – and as they mature and develop tenure, they’re getting more professional and better at their sales techniques.

“We’ve deployed the single-largest technology endeavor of the company’s history in the commercial business. We’ve enhanced how we interact with our customers digitally. We’ve also rolled out handheld devices to all stores and all drivers, so that when they’re picking the products, we make sure we have the right products, and when we deliver the products, we can understand delivery times. We’re driving our delivery times down about 15% so far, and that’s nowhere near our goal. So we’re improving our service on that front.”

He also pointed to the Duralast battery brand, “which continues to become stronger and stronger across the board.”

Regarding the pricing element of the company’s DIFM strategy, Rhodes noted that AutoZone traditionally has been “premium-priced” compared to its competitors, “because our service offering is “premium-priced.”

“I’d like to address the subject of pricing, and if AutoZone’s pricing disciplines or philosophies have changed from past practices,” Rhodes said during his prepared remarks. “The short answer is a resounding ‘no.’

“While we initiated a retail pricing adjustment last year in Q1, and further adjusted some commercial pricing in quarters 2 through 4, these moves were done to be price-competitive, but with other channels – not with our direct competitors. Specifically, in the retail business, we reduced our premiums to mass, particularly on highly visible commodity products.

“Regarding the more significant change in commercial. Our prices have always, always been meaningfully higher than our WD competitors, as our service level is superior. Our pricing changes over the last year or so have been to narrow – I emphasize narrow – but not eliminate that gap.”

Rhodes asserted that AutoZone’s pricing adjustments have “narrowed that premium by roughly half.”

“While this has created some consternation in the investment community, we think our results have shown that this was a prudent and productive decision,” Rhodes said. “We continue to see our industry as very rational when it comes to pricing strategies. And I want to be clear – crystal clear. I don’t want anyone to conclude that our growth in commercial is solely due to pricing.”

The post

link hidden, please login to view
appeared first on
link hidden, please login to view
.

link hidden, please login to view

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share
Go to topic listing

  • Similar Topics

    • shelitaauto
      Ford’s Electric Vehicle sales surged in the second quarter, followed only to Tesla in the United States
      By shelitaauto
      URL: 
      link hidden, please login to view Source: Gasgoo
      In the second quarter, 
      link hidden, please login to view’s electric vehicle sales in the United States again surpassed General Motors, ranking second in the U.S. electric vehicle market sales, and is on track to close the gap with Tesla.
      Ford Mustang Mach-E; Image source: Ford
       
      In the second quarter of this year, Ford sold 23,957 electric vehicles in the United States, a 61% increase from the same period last year, when total electric vehicle sales were 14,843. Meanwhile, Ford’s sales of hybrid vehicles rose 55 percent year over year. However, sales of internal combustion engine cars were down 5 per cent year on year.
      Ford saw double-digit sales growth for several of its electric vehicles. Sales of the Ford F-150 Lightning rose 76.9% to 7,902 units. While new competitors such as the Tesla Cybertruck and the Chevrolet Silverado EV RST have all hit the U.S. market, the Ford F-150 Lightning remained the best-selling electric truck in the U.S. in the first half of the year, with 15,654 units sold.
      Second-quarter sales of the Ford Mustang Mach-E were up 46.5% year-over-year to 12,645 units. In the first half of this year, 22,234 units of the Mustang Mach-E were delivered, the best performance ever. Sales of Ford’s E-Transit electric van continued to climb in the second quarter, rising 95.5 percent to 3,410 units from a year earlier.
      In the first half of 2024, Ford sold a total of 44,189 electric vehicles in the U.S. market, up 72% from 25,709 in the same period last year.
      Ford CEO Jim Farley said the automaker is shifting to smaller, more affordable electric vehicles to close the gap with Tesla and fend off competitors like BYD worldwide. Referring to Americans’ love affair with “larger vehicles,” Farley said smaller electric vehicles are “very important to driving the decarbonisation of American society and the development of electric vehicles.”
      Ford’s surge in electric vehicle sales in the US market is enough for it to continue to overtake General Motors. In the United States, GM delivered 21,930 electric vehicles in the second quarter, compared with 38,355 in the first half of 2024.
      GM is also ramping up production by introducing new models, with electric models such as the Chevrolet Blazer, Equinox and Silverado coming to the U.S. market. While Tesla did not give specific sales figures by region, its second-quarter electric vehicle sales worldwide exceeded expectations, delivering 443,956 electric vehicles and remaining №1 in the U.S. market.
      As competition in the U.S. electric vehicle market intensifies, other competitors, including Hyundai and Kia, also set new EV sales records in the second quarter. Hyundai Motor, for example, set a new sales record with its IONIQ 5 model, which sold 18,728 units in the first half of the year. Meanwhile, sales of Kia’s first three-row electric SUV, the EV9, are also climbing.
    • OReilly Auto Parts
      How To: Use a Bearing Race and Seal Driver by Evertough #67034 | Loaner Tools
      By OReilly Auto Parts
      How To: Use a Bearing Race and Seal Driver by Evertough #67034 | Loaner Tools
    • Auto News
      LKQ Corporation Announces Pricing of €750,000,000 Senior Notes
      By Auto News
      link hidden, please login to view
    • Dorman Products
      Technical Challenge: Wrong Answers Only #dashlightquiz #technicianchallenge
      By Dorman Products
      Technical Challenge: Wrong Answers Only #dashlightquiz #technicianchallenge
    • Counterman
      AutoZone Ramping Up International Growth
      By Counterman
      Executives on AutoZone’s most recent earnings call were upbeat about the growth prospects for the company’s international stores.
      AutoZone began publishing its international same-store sales numbers in September, along with its overall FY-2022 fourth-quarter results.
      In the fourth quarter, AutoZone’s stores in Mexico and Brazil posted year-over-year same-store sales growth of nearly 15% on a constant-currency basis – compared to 1.7% for the company’s domestic stores.
      In the first quarter of AutoZone’s fiscal-year 2023, which ended Nov. 18, same-store sales growth in Mexico and Brazil outpaced U.S. stores again. On a constant-currency basis, AutoZone’s international stores posted year-over-year same-store sales growth of nearly 11%, compared to 1.2% for its U.S. stores.
      On AutoZone’s Dec. 5 conference call, CEO Bill Rhodes noted that “international has become a more important part of our growth story and an area where we are increasingly deploying capital.”
      “We are very excited about the short- and long-term growth prospects of international,” Rhodes added. “Our expectations are we will continue to grow mature-store volumes both in DIY and DIFM and we plan to accelerate new-store openings over the next several years, ultimately getting to a minimum of 200 international new stores by 2028.”
      During the first quarter, AutoZone said it opened five new stores in Mexico and four in Brazil. As of Nov. 18, the company had 6,316 stores in the United States, 745 in Mexico and 104 in Brazil, for a total store count of 7,165.
      “These [international] businesses had impressive performance last quarter and should continue to grow at a robust pace for the remainder of fiscal 2024,” said Phil Daniele, who will succeed Rhodes as CEO in January. “We are leveraging many of the learnings we have in the U.S. to refine our offerings in Mexico and Brazil.”
      Although AutoZone isn’t breaking out bottom-line data for its international stores, CFO Jamere Jackson provided some insight on profit margins during the question-and-answer session with analysts.
      “From a margin standpoint, we’re very pleased with the progress that we’re making on margins – both gross margins and total operating margins,” Jackson said. “In our business in Mexico, which is much more mature than what we have in Brazil, we’ve been very pleased with the actions we’ve been able to take on the merchandising side of the business, and that’s given us a very healthy gross margin in that business.”
      Considering “the inherent advantages” of low-cost labor, Jackson added, “it’s a very attractive operating-margin structure in Mexico, and we believe as our business in Brazil matures and scales over time that we’ll see similar advantages in Brazil.”
      However, as AutoZone aggressively invests to open new stores in Brazil, Rhodes cautioned that “we’re still losing money there.” Those new stores “are causing a pretty good headwind,” Rhodes added, but such challenges are “not unanticipated.”
      While Rhodes and Daniele made a point to highlight the same-store sales growth in Mexico and Brazil during the call, Daniele emphasized that “the No. 1 focus for the remainder of the year will be on growing [market] share in our domestic commercial business.”
      The post
      link hidden, please login to view appeared first on link hidden, please login to view.
      link hidden, please login to view

×
×
  • Create New...