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CarParts.com (NASDAQ:PRTS) was one of the stars of the lockdown era, surging from around a $1 share price to over $20 at its pandemic peak. Since that point, however, the stock has rapidly tumbled back to earth.
Nonetheless, CEO David Meniane sees a path for future growth back to those lofty levels.
“The auto parts industry is one of the last to be disrupted by the internet,” he said. “Whether its pet foods, apparel, electronics or what have you, the percentage of transactions made online is around 20 to 30%. For auto parts, it is less than 5%.”
As such, Meniane sees a long runway for penetration for online sales to grow and come to compete with many of the brick and mortar players that currently dominate the space. He cited the company’s “Do-It-For-Me capability” whereby customers can select a part and book an appointment with a certified repair shop in their area as a key to expanding the addressable market and providing service to customers less eager to buy parts for their own DIY efforts.
Aging Autos
The soaring price of autos and specifically used autos have encouraged many consumers to extend the life of their autos. According to S&P Mobility, the average age of autos on the roads in the US has risen to 12.2 years as of 2022, a record. In 2002, the average age according to IHS Markit was 9.6 years.
As the average age of autos has crept upward, the purchase of auto parts to keep older vehicles on the road has likewise risen. While the move to extend the life of autos does have some correlation with spiking used auto prices, Meniane indicated the trend has more to do with manufacturing improvements and increased longevity for authors generally speaking.
“Cars are going to continue to get older, regardless of the economic environment,” he concluded. “Kia and Hyundai, for example, have made significant improvements in manufacturing. These cars are lasting longer which gives us an opportunity to capture more revenue over a longer period of time.”
Meniane added that the his company’s website has specifically curated auto parts for EV owners and their specific needs, which he expects will allow the company to increase market share moving forward.
Profit Focus for Now
In the near-term, Meniane made clear that the company will focus on profitability rather than the rapid growth that he still sees ahead.
“The macro environment is changing, so we are taking a more conservative approach and we want to be ready for whatever is thrown at us,” he said. “We are focusing on free cash flow, focusing on staying debt-free, just the fundamentals of a strong and stable business. That’s the pivot we are making.”
Meniane concluded that the company does not subscribe to the “growth at all costs” mantra that became popular among e-commerce companies in recent years. In the present environment, he anticipates the “laser-focus on positive unit economics” to be rewarded by the market.
Shares of CarParts.com (PRTS) have rocketed 31.9% higher since Wednesday’s close. However, the stock has still marked a nearly 55% decline year to date.
Read the company’s latest earnings call transcript.
