The road ahead for American Tire Distributors
The Interview, which focused on ATD, revealed why the company has always struggled with pricing and where its gross margin could be over the next two to three years. “There was a time in the industry when 17-18% was achievable, and I think those days are long gone,” the expert said.
Another area of focus was ATD’s emergence from bankruptcy in 2018, which it handled “pretty well”. However, further challenges are expected because of the company’s high fixed costs which, despite significant cuts, are “likely to persist”. Meanwhile, whether ATD’s continued investment in technology pays off “will be key for them”.
The growth trajectory of ATD’s Hercules product line was described as “a little bit of a double-edged sword”. As ATD increasingly promotes and sells Hercules products, more units move from other lines, damaging relationships with the associated manufacturers.
Also on the agenda was whether there is any risk that Continental, “their most strategic and strong partner”, could end its relationship with ATD. If ATD continues to struggle, “Continental is the one that could step up and acquire an ATD so that they would have their own distribution,” the expert said.
Other topics covered included expectations for ATD if new car sales declined by 20% in 2020, how customers’ tyre preferences might shift in the future, and general volume expectations for ATD in H2 2020-early 2021 across tyre types.
To access all the human insights in Third Bridge Forum’s American Tire Distributors Inc – Q3 2020 Business Update transcript, click here to view the full transcript.
The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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