The last three years were a very strong period for auto part retail sales due to parts inflation, increased miles driven, dynamic weather (resulting in more break/fix), and the rising number of older vehicles on the road. Per the Census figures, auto parts retail will have closed out 2023 at $135B in sales, up +39% since 2019 and up +7.3% over 2022. However, for the retail brands, not all are “tuned to perfection”; O’Reilly Automotive gained meaningful market share (+130 basis points to 11.8%), AutoZone had a few dings, and Advance Auto Parts struggled.
Over the last two weeks, we got a look at the auto parts retail category again with results for O’Reilly and Genuine Parts Company (Napa). O’Reilly reported a +3.4% comp sales increase for Q4 and guided to a 3-5% increase in 2024. O'Reilly CEO Brad Bechham said, “From a broader macroeconomic standpoint, we view current conditions as favorable for our customers and in turn, our industry. We believe the economic health of the consumer is solid, supported by strong employment trends, improved wages, stable fuel prices, and moderating inflation.” By contrast, GPC reported a -6.1% comparable-store sales decline at NAPA for Q4 2023, resulting in a material erosion in two- and three-year CAGR trends. This implies a very poor result for Advance Auto when they report results at the end of the month. The -6.1% decline reflects losses in both commercial (80% of the revenue mix) and DIY. Moreover, it is the second significant miss in a row versus the company's own expectations and it also likely implies much slower industry growth in 2024.
For this year, given that parts inflation has passed (the consumer price index for auto parts was down -0.6% for January), growing comparable-store sales is dependent upon winning market share. O’Reilly and AutoZone are wired for capturing market share in commercial. Given that commercial is a big business for NAPA and Advance (65% of revenue), that’s a problem. Expect a brutal Le Mans race, but one that lasts far longer than 24 hours, like an entire year.
