DIY Auto Parts Retailers Performing Well

September 30, 2010

The DIY auto repair market continues to do well in the economic downturn. At Pep Boys a decrease in service revenue was overcome by an increase in in-store merchandise sales indicating that consumers may be choosing to turn their own wrenches. These trends were reported in an Investopedia article that compared second quarter earnings to that of the same quarter a year ago.

Advance Auto Parts, AutoZone and O’Reilly Automotive all outperformed Pep Boys in the “fundamental measure”, return on invested capital. These three auto parts retailers serve the DIY market to a greater degree than Pep Boys and do not offer in store installation of the parts they sell. Auto repair outlets have reported that the market for full service repairs remains soft.

Hedges & Company compiled an index of 20 automotive aftermarket stocks in which all the companies previously mentioned were included. It then compared the Hedges Aftermarket Index to the S&P 500 and tracked a $1000 investment from January 2008 to September 1, 2010. According to the automotive market research agency, the S&P 500 investment would have a -23 percent return leaving just $765.28 of the original $1000.

The Hedges group of stocks, however, would have returned 35 percent bringing the worth of the initial investment up to $1346.29.

What all this points out in the broad view is that the aftermarket auto parts business tends to be somewhat shielded from the ill effects of the current economic turmoil. However within the sector there are some retailers who are not as successful as others depending on the segment of the market they serve.

[Investopedia; Hedges & Company]

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