AZO - Autozone

[kab60]

Surprised there wasn't a thread.

 

I'm getting somewhat attracted to Autozone, which is trading at a multi year low. I've followed the Company on/off but always stayed away due to valuation (just noticed it had fallen quiet a bit when looking in the "What are you buying thread"). Company had 40 straight quarters of double digit EPS growth, but that stopped in its fiscal Q2 and Q3. AZO is a cannibal, having reduced outstanding shares from 70 to 29m in a bit less than ten years.

 

ROIC is around 31 pct., and it's trading at a low forward P/E (11,8 according to Morningstar) as well as P/S compared to where it has traded historically. It seems like the company isn't really sure what hit it in Q2 and Q3 other than a delayed tax refund and increased costs due to more frequently stocking the shops so customers don't leave empty handed.

 

Margins are sky high, and I suppose the bear case is related to Amazon (isn't every bear case at the moment) as well as electric vehicles. I also saw someone mention peak SAAR in the US, but I think that's bs, because Autozone actually did quiet well during the GFC since older cars need more maintenance (I think it was an Allan Mecham winner as well).

 

Not sure if they just talk the talk or walk the walk, but they seem to focus a lot on their employees being knowledgeable which I suppose might shield them a bit from competing on price alone, and then there's the whole thing about fixing a car where you usually can't wait a day or two for spares.

 

I don't have a position, but I might be getting a bit too attracted to auto (already have Auto Nation and like Sensata as well) late in the cycle. On the other hand, perhaps this might work somewhat as a hedge against falling car sales?

[atbed]

Surprised there wasn't a thread.

 

I'm getting somewhat attracted to Autozone, which is trading at a multi year low. I've followed the Company on/off but always stayed away due to valuation (just noticed it had fallen quiet a bit when looking in the "What are you buying thread"). Company had 40 straight quarters of double digit EPS growth, but that stopped in its fiscal Q2 and Q3. AZO is a cannibal, having reduced outstanding shares from 70 to 29m in a bit less than ten years.

 

ROIC is around 31 pct., and it's trading at a low forward P/E (11,8 according to Morningstar) as well as P/S compared to where it has traded historically. It seems like the company isn't really sure what hit it in Q2 and Q3 other than a delayed tax refund and increased costs due to more frequently stocking the shops so customers don't leave empty handed.

 

Margins are sky high, and I suppose the bear case is related to Amazon (isn't every bear case at the moment) as well as electric vehicles. I also saw someone mention peak SAAR in the US, but I think that's bs, because Autozone actually did quiet well during the GFC since older cars need more maintenance (I think it was an Allan Mecham winner as well).

 

Not sure if they just talk the talk or walk the walk, but they seem to focus a lot on their employees being knowledgeable which I suppose might shield them a bit from competing on price alone, and then there's the whole thing about fixing a car where you usually can't wait a day or two for spares.

 

I don't have a position, but I might be getting a bit too attracted to auto (already have Auto Nation and like Sensata as well) late in the cycle. On the other hand, perhaps this might work somewhat as a hedge against falling car sales?

 

I really admire many of the auto names: ORLY, LKQ, etc. Right now they look cheap, selling at below market multiples. It would be amazing if this Amazon threat was smoke and mirrors. If it were and they grow 10, 15, or 20% a year, I don't see why multiples can't re-rate higher making for a nice IRR.

 

But I think it's worth it to play devil's advocate. Why isn't Amazon a threat and why no downside to estimates? I'm going to focus on body shops.

 

Auto parts execs like to harp on the customer's immediate need for parts. That is certainly true for many cases. If you are in the shop to fix your brakes or a broken light, you don't want to wait around. So fast delivery times matter. But why can't Amazon provide quick delivery for auto parts? They are already testing 1-2 hour delivery for many items. They are also getting more aggressive with physical locations. Why won't Amazon stock physical locations with the most popular auto parts in the future?

 

For many types of repairs, I believe next day delivery works fine. I'm talking more serious repairs, where customers should have no expectations of picking up their cars on the same day. Doesn't the everything store have a huge advantage here? Why won't the auto parts retailers lose margin or lose a customer if they hold firm on price?

 

Then there is inventory. I have a hard time believing a good stock of "hard-to-find parts" will provide an advantage against a company known for carrying the long tail. The inventory Amazon will have to carry is not a barrier to entry IMO.

 

I've heard people say shops don't care about pricing, and that they will just pass it along to customers. But talk to a sales person and they'll tell you most phone calls they pick up are just shops calling in to check on prices. It wasn't like that in the old days, but they do it more and more each year. Why wouldn't body shops make a spread on parts if they could?

 

Who knows what will happen in 3-5-10 years and I think that's the reason you can buy in at these prices. I'm worried about the long-term. If you want to play it for a short-term bounce, then that is a different story.

[Spekulatius]

I was the one posting about buying AZO in the "What are you buying today?" thread. However, said it is not a high conviction idea at his point and I am aware of rhe "amazonification" risk.

 

I do think that AMZN right now has other fish to fry. Also there are a lot of SKU's and some technical knowledge is probably necessary as well as developing their own products and supply chain. it may not be that easy to break I to the AZO, GPC, ORKLY Oligopol.

Also, keep in mind that AZO owns about half their stores, which puts their leverage a bit into perspective. I do think that AZO is one of the better retail bets it there.

[JayGatsby]

To continue on the devil's advocate vein, I think the demographics of both cars and people are working against them. Cars have been and will continue to get more complicated, making self repair more difficult. The population that has grown up with these cars packed full of sensors knows very little about car maintenance. As a 30 year old male, I can count the number of friends that actually do their own car maintenance on one hand (all are engineers). I usually just wait for one of the sensors to turn on and then book an appointment at the shop. If I can't get an immediate appointment I'll just uber where I need to go. The shop I go to treats oil changes as a loss leader so there's little reason  to even do that on my own.  All I've bought at an auto store in the last few years is quarts of oil (cleaning products I'll get from Amazon, wiper fluid I'll get at a gas station).

[Jurgis]

To continue on the devil's advocate vein, I think the demographics of both cars and people are working against them. Cars have been and will continue to get more complicated, making self repair more difficult. The population that has grown up with these cars packed full of sensors knows very little about car maintenance. As a 30 year old male, I can count the number of friends that actually do their own car maintenance on one hand (all are engineers). I usually just wait for one of the sensors to turn on and then book an appointment at the shop. If I can't get an immediate appointment I'll just uber where I need to go. The shop I go to treats oil changes as a loss leader so there's little reason  to even do that on my own.  All I've bought at an auto store in the last few years is quarts of oil (cleaning products I'll get from Amazon, wiper fluid I'll get at a gas station).

 

Yeah, but presumably majority (?) of the business of part shops is selling parts to your repair shop. So presumably you not buying parts there does not hurt them if your repair shop buys the parts instead.

 

However, if there's a trend for more repairs at dealers, I don't know if dealers use part shops for parts as much as independents do.

[kab60]

Historically at least I think the main drivers have been miles driven and average age of vehicles, and the first is still increasing (lower gas prices a tailwind), while average age of vehicles is still quiet high (around 11 years) compared to where it has been historically. More advanced vehicles might pressure the DYI segment, but the professional segment has been growing nicely. I think the Amazon threat is real, considering the margins are this fat (Bezos: Your margin is my opportunity), but I also think professional advice plays a significant role when one purchases spare parts. I mean, I wouldn't know what to buy for my friggin' bicycle without help, and Amazon reviews definitely wouldn't cut it in most cases, but surely some items could easily be purchased online with fast delivery. I just don't any idea as to what numbers to track to sort of quantify it. Might just be too hard.

[vinod1]

I too looked at this sector but decided to pass up or at least looking for lower prices.

 

O'Reilly has gross margins of 52% which breaks down to operating margin of 20% and SG&A expenses at 32% of sales. All the profitability measures are also pretty high.

 

So why have they been able to be so profitable in such a mundane retail business?

 

1. The customer is modestly price insensitive and most of the time is not aware of the cost of the part.

 

2. Part availability is more important than price as the customer needs the part immediately and cannot wait.

 

So the larger chains are all very profitable as they have built up the distribution infrastructure to make parts available at low cost. 

 

Their distribution centers average 150,000 SKU's and even their big "Hub" stores have only about 45,000 SKU's.

 

I am not at all sure, but would think that this would be something right up Amazon's alley and get parts delivered in 2 hours similar to its Prime Now feature. This seems especially tailor made since the parts can be specified by model, year, etc. I always thought Amazon would go after this before they go after groceries. So what do I know.

 

If they can accept a 10% operating margin and cut down on SG&A by 15% (from 32% to 17%), given that they do not have physical stores, that would translate to about a 25% lower prices to the customers.

 

They do not even have to dominate the market, even if they take 5% of market share, it would cut down on prices for everyone.

 

This might take a while to play out unless Amazon buys up one of the chains :)

 

Vinod

[solobz]

I’ve opted to stay on the sidelines for now after spending some time on the industry. Short term I think sentiment is a bit too neg for a bounce, and have the same long term decline issues as others have mentioned. On that note, it’s not super hard to imagine the big 4 handling the decline relatively well. re: AMZN, the threat is probably slower moving in reality vs. perception, but I think they’re eventually going to be taking share in easy retail products like wipers.

 

Some of my notes - The industry is 1/3 DIY and 2/3 DIFM. IIRC, AZO has relatively higher retail DIY exposure vs. peers - you can choose  to see the DIFM opportunity as a neg or optionality for growth. AZO DIFM sales/store are something like $450k/store vs peers at $800k. AZO making moves to increase distribution centers/store, since inventory and story delivery frequency important for growing DIFM commercial share. AZO Mgmt lowering ramp in deliveries from 3x to 2x recently however to slow ramp which could help relieve any margin pressures. Industry does act somewhat countercyclical in a recession since folks more likely to opt for deferred maintenance vs. vehicle upgrade in a worse economy. Avg age should increase with peak SAAR as a  +'ve. Within total industry, big 4 have ~25% share so could continue to grab share from others. Big 4 have ~40% share in retail and ~20% share in commercial.

 

So at 574 it’s 14x ’16 EPS, ~12-13x 2018 EPS of 45. idk what multiple you want to slap on that but it is very tempting. Long term prospects are what give me some pause. If you imagine a world in X years where there's even more complexity, even more disinterested hobbyists/car owners, and fleets of autonomous cars buzzing around (probably further out), IDK what car care becomes.

[JayGatsby]

To continue on the devil's advocate vein, I think the demographics of both cars and people are working against them. Cars have been and will continue to get more complicated, making self repair more difficult. The population that has grown up with these cars packed full of sensors knows very little about car maintenance. As a 30 year old male, I can count the number of friends that actually do their own car maintenance on one hand (all are engineers). I usually just wait for one of the sensors to turn on and then book an appointment at the shop. If I can't get an immediate appointment I'll just uber where I need to go. The shop I go to treats oil changes as a loss leader so there's little reason  to even do that on my own.  All I've bought at an auto store in the last few years is quarts of oil (cleaning products I'll get from Amazon, wiper fluid I'll get at a gas station).

 

Yeah, but presumably majority (?) of the business of part shops is selling parts to your repair shop. So presumably you not buying parts there does not hurt them if your repair shop buys the parts instead.

Not sure if that's true (not sure if it isn't either). In their last set of earnings slides they said US commercial sales were ~$500M. The other chunk they call "DIY" which implies that it is individual do-it-yourselfers.

[abyli]

One question: what will happen to auto parts companies if e-car become main stream in the coming decade? A traditional car has about 2000 movable parts while Tesla has only 18 moving parts... This risk is much bigger than Amazon.

[clutch]

One question: what will happen to auto parts companies if e-car become main stream in the coming decade? A traditional car has about 2000 movable parts while Tesla has only 18 moving parts... This risk is much bigger than Amazon.

 

It seems to me there will be less parts suppliers, but more service-oriented companies. Fixing a car would be less of replacing parts, but more of maintaining electronics / software.

[abyli]

One question: what will happen to auto parts companies if e-car become main stream in the coming decade? A traditional car has about 2000 movable parts while Tesla has only 18 moving parts... This risk is much bigger than Amazon.

 

It seems to me there will be less parts suppliers, but more service-oriented companies. Fixing a car would be less of replacing parts, but more of maintaining electronics / software.

 

Replacing software is like an iPhone updates. Tesla can push the updates through the air automatically today. So today's parts suppliers business will shrink to almost nothing if that happens.

[Spekulatius]

Electric cars have electric components that will fail. Even nowadays, the electric and electronic components fail more often than the mechanical ones in many cases. I also don't think that the number of 18 moving parts is correct. I count 4 wheels, 2 axles, one engine, 4 motors to open windows, a couple of motors to adjust seats, 4 breaks, pedals, steering wheel, suspensions . Each of those has several moving parts if you think about it. Elon Musk has a different definition of a movable part than I do.

 

The trend to do repair at dealerships is a long term threat, I think. Dealers will generally not get from third party wholesalers, but from their own (manufacturers ) supply chain, I think.

[HJ]

This whole sector is getting pummeled today, this time led by ORLY, so maybe it should get posted there.  What to make of Icahn buying up the auto repair shops and Federal Mogul?

[kab60]

I've been pondering this topic since I wrote the first post and appreciate all the feedback. I'm thinking this might be a massive long.

 

Despite most of the knee-jerk reactions, my own included, it seems like industry research expects the auto DIY auto market to grow quite substantially. Even among younger folks that take advantage of 'How to' videos on Youtube etc. This is what a bit of Google search found (I don't have the reports, just the summaries linked below):

 

Jan 2015: The DIY industry is expected to continue to grow over the next five years, with total growth increasing by about 19% over today’s figures through 2019. Mintel also analyzes the growth in vehicle complexity and vehicle durability and its effects on the industry, as well as how the aging vehicle fleet is affecting the DIY industry.

http://store.mintel.com/diy-auto-maintenance-us-january-2015

 

May 2016: Do-it-yourself automotive repair has become one of the fastest-growing consumer trends in Canada and the United States. The latest reports say it is flourishing, based on the parallel growth in home DIY projects.

http://www.autoserviceworld.com/jobbernews/millennials-re-inventing-diy-market/

 

Feb 2017: DIY is another channel driving the automotive aftermarket share in the global automotive industry. Cost saving along with easy availability of aftermarket parts are the key factors driving the market growth. This channel is trending in young generation of developed countries. Increasing technological growth for solving queries through online portals resulting in rise in this segment. DIY is done for easy parts such as timely cleaning and replacement of small parts which require less tools.

https://www.gminsights.com/industry-analysis/automotive-aftermarket?utm%5fsource=prnewswire.com&utm%5fmedium=referral&utm%5fcampaign=Paid%5fprnewswire

 

---

 

What about Amazon? Well, I'm not gonna short the thing, but it seems to be the anti-thesis of pretty much everything at the moment and I think the market might be a bit silly. I'm not so sure it'll conquer all and everything, and I'm not sure auto parts is really suited for online sales. Online is a small part of Autozone sales and actually fell a bit in Q4 2016.

 

Their offering and tech might not be up to par, but it's not like I'm overwhelmed by Amazons presence either, so perhaps online just isn't that big a threat either way. 

 

Amazon has been around for ages, and even if Amazon increases sales in DIY auto, despite my first instincts, it seems to be a growing market.

 

What might affect Autozone etc. is the low level of cars aged 7-9 years. But this thing shall pass too. From a recent Oppenheimer report:

 

    "Per our analysis, since early 2014 the number of vehicles aged 7-9 years on the road in the US has declined about 26% to 37M from 50M. The size of this vehicle cohort should bottom at about 34M vehicles in mid-2018, before steadily rebounding over the next several years back toward prior peak levels. Vehicles aged 7-9 years have typically represented a "sweet spot" for the auto parts retail sector.

 

In our view, the aftermarket auto parts channel is simply not displaying signals of a rapid shift online. Consider: 1) ebbs and flows in top-line trends lately tie closely with shifts in other predominantly cyclical factors; 2) sales weakness appears broad-based and not skewed toward items or categories more suited to online commerce; and 3) the well built-out and heavily advertised online operations of companies such as AZO are not experiencing surges in volume".

 

I think I can live with the uncertainty given this thing trades at 11,5xTTM P/E and the Company's excellent capital allocation and recession resistant traits. Like few companies it increased the buybacks during the GFC when the stock was cheap and actually took on debt to fund a part those buybacks, while debt has been steady for the last couple of years despite increased earnings (thus decreasing leverage ratios) because stock wasn't cheap.

 

It might have a target on its back due to the high margins and ROIC (but it must have had that for ages?), and I don't like the lack of insider ownership, but the CEO has been with the Company for more than two decades, so I'm not too worried. A negative might be wage inflation in an economic upturn, but on the other hand that might increase sales, so probably a minor negative.

[WneverLOSE]

What do you think about their high leverage/negative equity and the future of those earnings under different economic scenarios (maybe a low p/e is artificially low ?)

 

about the fact that some of the capital returned to shareholders in the last few years was funded from debt and how it affects future owners returns ?

 

[kab60]

I don't think leverage is high. Ebitda to net debt is pretty much unchanged since 2009 at around 2x which doesn't seem particularly high for a Company that handled the GFC like it did and throws off so much cash. Azo could keep opening 200 new units each year and still pay off debts in five years at the current run rate. Hardly seems excessive.

 

The negative equity is a function of all the buybacks. Since 2007 the Company repurchased 85 pct. of the outstanding shares - while growing.

 

That was possible by having leverage towards its suppliers. They have a low working capital requirement because they have extended payment terms. They had an accounts payable to inventory ratio of 112.8% at August 27, 2016. Basically, the suppliers pay for Autozones' inventory, thus reducing the working capital and need for equity.

 

Clearly, if earnings and margins come crashing down, this will be a dud. But before this started its crash they had increased EPS double digit for some 40 quarters.

 

They do own half of their stores, so if they wanted to, they could probably do a bit of financial engineering with sale/leaseback transactions, but hopefully this won't turn into a Sears-like real estate play. :) This is all about cash flows, capital allocation and resilient business dynamics.

 

(I still don't have a position, but that'll probably change)

[flesh]

 

Fair to say you believe the amzn's of the world will take some sales from the azo's? There is a decent amount of operating leverage that works both ways here...... would you still like it if sales flat lined and operating margins contracted very slowly? Or alternatively, do you perhaps believe there would still be some rev growth due to store openings while sss would flat line as opposed to slow growth?

 

I've followed this segment for years and it seems to me that it's perfectly reasonable that online could take 25% of this business over the next 5 years or so.

[HJ]

Amazon taking 25% share over 5 years maybe too high of an assumption.  Take BBY, a much more "amazon-able" category, revenue peaked 2012 at $50 billion, revenue in 2016 was $39.5 billion.  So a 20% drop off over 4 yrs or so.  Gross margin down a couple of points. 

 

For this category, revenue drop off may not be quite this much, but I do think there is more sector specific issues than broadly just Amazon, that has greater impact, specifically, off lease vehicles ramp causing a drop in used car price, which reduces the incentive to spend an extra $1k to keep a 10 year old car running. 

 

But it's already trading at 8x ev/ebitda.  GWW, another category at risk to Amazon, trading at 9.2x ev/ebitda, gross margin declined from 44% down to 40% over the past 4 years, all the while growing revenue.   

 

It seems to me that the used car price cycle is a bigger problem in the short term.  The question is, of course,  how does one handicap the revenue / margin impact of that.

[kab60]

 

Fair to say you believe the amzn's of the world will take some sales from the azo's? There is a decent amount of operating leverage that works both ways here...... would you still like it if sales flat lined and operating margins contracted very slowly? Or alternatively, do you perhaps believe there would still be some rev growth due to store openings while sss would flat line as opposed to slow growth?

 

I've followed this segment for years and it seems to me that it's perfectly reasonable that online could take 25% of this business over the next 5 years or so.

Sure. I expect online to take share, but it's a growing market, and I suspect the smaller players will be hit the hardest since they might not have the means to establish a meaningful online presence. Amazon has been around for a long time, but margins haven't compressed - actually it has expanded for the last ten years. It's an attractive space, but it might not be easy to capture for Amazon. Besides, didn't they just buy an upscale grocery store? They might have other things on their list. Why do you think Amazon can take 25 pct. of the business, when it seems like they don't have much today?

 

This is from the latest O'Reilly call. It might be hubris, or it might be right?

 

"I've spent some time talking to some of our supplier principals who might sell online retailers, which we obviously don't care for that that much. But still some of them that make sense for them to sell online retailers and work to protect the price at which the products are sold and so forth. But, and I think – I've known a lot of these guys for a long time and I have every reason to believe that they would shoot me straight relative to the amount of volume they do with some of these online retailers. I think that most of you would be really disappointed to hear what some of the suppliers that you might think would be major suppliers to online retailers, the amount of volume they're actually doing. And that volume is not on a ramp up that I think some of the commentary would lead people to believe".

 

SSS growth has been quiet impressive in the past, but they've probably had a nice tailwind from the amount of 7-9 year old cars. Opening 200 new stores each year, and O'Reilly during the same, should make it harder to increase SSS going forward, but I think they're already priced like margins will compress, and I think the verdict is still out though I do expect wage increases will hit them in the upswing.

 

Off lease vehicles will probably be a headwind, but a temporary one. At a P/E at half the market, recession resistance, kickass management and solid capital allocation I'm willing to take a bet.

[Guest Schwab711]

Autozone also has a website to take online orders. They are currently offering a 20% deal on orders > $100, which is basically the difference between AMZN and AZO. Not to say AMZN won't pressure margins, but AZO's volume should be relatively stable. I think AMZN takes share from mom n' pop's.

 

I'd also argue that claims that EV cars will hurt sales should look into Robert Bosch/Norway. I do not have actual sales for Robert Bosch AS, but there are sales estimates available online. It doesn't seem like sales ever took a hit and 19% of all cars in Norway are EVs.

 

I'm not a huge fan of AZO right now, but not because of EV cars and/or AMZN. In general, AZO's at an intersection of major margin pressure. There's a thread started by LongHaul somewhere that hints at this issue for this industry.

[KCLarkin]

I'd also argue that claims that EV cars will hurt sales should look into Robert Bosch/Norway. I do not have actual sales for Robert Bosch AS, but there are sales estimates available online. It doesn't seem like sales ever took a hit and 19% of all cars in Norway are EVs.

 

It doesn't look like it is quite that high:

https://www.ssb.no/en/bilreg

 

Maybe the 19% was percentage of new car sales, not total cars?

[DooDiligence]

This is from the latest O'Reilly call. It might be hubris, or it might be right?

 

"I've spent some time talking to some of our supplier principals who might sell online retailers, which we obviously don't care for that that much. But still some of them that make sense for them to sell online retailers and work to protect the price at which the products are sold and so forth. But, and I think – I've known a lot of these guys for a long time and I have every reason to believe that they would shoot me straight relative to the amount of volume they do with some of these online retailers. I think that most of you would be really disappointed to hear what some of the suppliers that you might think would be major suppliers to online retailers, the amount of volume they're actually doing. And that volume is not on a ramp up that I think some of the commentary would lead people to believe".

 

SSS growth has been quiet impressive in the past, but they've probably had a nice tailwind from the amount of 7-9 year old cars. Opening 200 new stores each year, and O'Reilly during the same, should make it harder to increase SSS going forward, but I think they're already priced like margins will compress, and I think the verdict is still out though I do expect wage increases will hit them in the upswing.

 

Off lease vehicles will probably be a headwind, but a temporary one. At a P/E at half the market, recession resistance, kickass management and solid capital allocation I'm willing to take a bet.

 

Seems like everyone in this space has power over OE suppliers & I'm sure these guys would happily pump out more volume to Amazon if asked.

 

I believe AZO has an edge with DIY & DIFM local service, tool loans & good parts availability (stepping up from once a week to 3 to 5 times a week for store deliveries in order to stay ahead of Amazon & existing B & M competitors.)

 

Building 3 mega distribution facilities at around $60m a piece between now & 2018.

 

Seems like a nice corollary to an energy bet.

 

Headwins, tailwins, I'm in...

[Guest Schwab711]

I'd also argue that claims that EV cars will hurt sales should look into Robert Bosch/Norway. I do not have actual sales for Robert Bosch AS, but there are sales estimates available online. It doesn't seem like sales ever took a hit and 19% of all cars in Norway are EVs.

 

It doesn't look like it is quite that high:

https://www.ssb.no/en/bilreg

 

Maybe the 19% was percentage of new car sales, not total cars?

 

I went off this article. It agrees with the above.

https://electrek.co/2017/02/15/norway-electric-vehicle-market-share-record/

 

You are right, good catch. I read too quickly. It's probably too early to say Robert Bosch is unaffected.

[flesh]

Here's the quote from LongHaul from the other auto parts collapse thread:

 

"Amazon and Rock Auto and the internet will only get more competitive vs the stores.  Amazons faster shipping and probable lower prices will only threaten the AZO's of the world more and more.  RockAuto is great also.

 

1.  The auto parts stores are some of the highest ROIC retailers I can think of.  I question the sustainabilty.

EBIT margins are super high and A/P are very high.

2.  It has turned into an oligopolistic business where a few remaining players are hosing consumers on parts they need often right away.

3.  There are really 2 sections of their business - competitive stuff and other.    Competitive stuff are cleaners, oil, etc that Walmart, etc sells.  These have lower margins.  Then the hard parts is probably lower turn and super high gross margins.  60%+ would be be unusual.  That is ripe to come way down.

 

Frankly - I think the CEOs of these stores are idiots who have jacked up prices and are just opening up the door to get killed long term.  Hard to predict when though.  "

 

Does anyone know of any analysis regarding amazon and auto parts? In terms of total sku's over time and/or whether or not amzn's prices have gone up or down over time?

 

AFAIK any auto part I can find on amazon is cheaper than at azo or orly.

 

Anecdotally, my 73 year old father has been buying parts from amzn recently, according to him he called the local auto parts store and found some sort of axel for 300 less on amzn. Since then he has made two more auto parts purchases in the 100's from amzn.