In this segment of the Motley Fool Money radio show, host Chris Hill, Supernova and Rule Breakers‘ David Kretzmann, and Motley Fool Pro and Options‘ Jeff Fischer talk about the reasons auto parts weren’t selling last quarter — the reasons the specialty retailers blame — like the tax refund delay and the vagaries of the weather. But do they have a longer-term problem?
A full transcript follows the video.
This video was recorded on May 26, 2017.
Chris Hill: Tough week if you are in the auto parts business. Third-quarter same-store sales were down for AutoZone (NYSE:AZO), same story for Advance Auto Parts‘ (NYSE:AAP) first-quarter report, and both stocks down, Jeff, more than 10% this week. This is kind of a rough patch for two businesses that have really rewarded shareholders over the long term.
Jeff Fischer: For a long time. And add O’Reilly Automotive (NASDAQ:ORLY) to that, and you have three, a trifecta, a disappointing quarter for these three companies. A few things have happened, Chris. One, as we talked about in the earlier segment, that tax refund was delayed. It’s funny how these companies all really rely on consumers to get that refund.
Hill: I was going to say, AutoZone called that out, whereas Best Buy went out of their way to give credit to the delayed tax return, like, “Hey, people took their tax refund and spent it here!” AutoZone went the other way and said, “Yeah, tax returns were delayed, and they weren’t spending money with us.”
Fischer: Exactly, Chris. And they went further and said this last week that it never materialized. Once people got that refund, they didn’t come in and spend it at AutoZone the way they expected. So, it was a one-two punch where it was delayed and then it didn’t show up. Meanwhile, Best Buy is like, “Hey, everybody just came in and spent their refund on tech!”
Hill: Clearly AutoZone needs to start selling video games.