Specialist
Former VP at XPO Logistics Inc
Agenda
- ATD's (American Tire Distributors') business, highlighting coronavirus impact on sales and margins
- Volume and pricing trends
- Competitive dynamics – ATD vs direct peers vs OEMs' distribution networks
- Online channel shifts and outlook
- Outlook for H2 2020 and beyond
Questions
1.
Could you give an overview of the US tyre industry, highlighting the key trends and themes the investment community should monitor regarding the coronavirus pandemic?
2.
What are your thoughts on ATD’s [American Tire Distributors’] performance since the company emerged from bankruptcy a few years ago?
3.
You repeatedly mentioned the high fixed costs associated with ATD’s business. Could those fixed costs decline? Are they likely to persist?
4.
How price sensitive do you expect ATD’s customers to be in H2 2020-early 2021, and why?
5.
What might be a realistically achievable gross margin level for ATD over the next 2-3 years?
6.
Could you elaborate on the Hercules line? What could be its growth trajectory over the next few years?
7.
It seems as though you’re saying we could see a trade down to the Hercules line given the broader economic climate. Can you elaborate on this point?
8.
What do you think would be the ideal split between Hercules and the other brands ATD carries? You described Hercules as a double-edged sword.
9.
Could you comment on the independent distributor channel? Could it gain share in the next few months?
10.
How do you think ATD can combat the growth in the independent channel?
11.
Could you discuss the manufacturers’ relationships with the independent distributor challenge? How might the market share dynamics between Goodyear and Bridgestone have evolved in that channel, given that Goodyear dropped ATD?
12.
You mentioned miles driven as a key statistic to monitor. How could a 10-15% YoY decline in miles driven in H2 2020 affect ATD’s performance?
13.
How would you say ATD has performed in filling the gap left by Goodyear with other customers? How confident are you in the company’s ability to continue filling it?
14.
What would be your expectations for ATD if new car sales declined by 20% in 2020?
15.
How might ATD’s customers’ tyre preferences shift over the next 2-3 years, and also longer-term?
16.
What would be the margin implications for ATD if the mix shifted towards more tier 3-4 products?
17.
Is there anything ATD can do to boost the tier 3-4 portion of its product mix to grow its margins over the next year? Is this impossible in today’s environment?
18.
Could you compare the profitability of the tyres ATD is selling to the tier 2-3 manufacturers to what the company was experiencing with Goodyear before the latter exited the relationship?
19.
Could you discuss the geographical footprint of the regional independent distributors? What JV combinations might be required to form an entity able to compete with ATD nationally?
20.
What are your general volume expectations for ATD in H2 2020-early 2021 across tyre types?
21.
How do you expect ATD to perform if there’s a second wave of coronavirus in the autumn or early winter, especially if there is another decline in miles driven?
22.
Could you comment on NTW’s [National Tire Wholesale’s] 2-3-year trajectory? Might success from NTW caused Michelin to drop ATD?
23.
Do you think there’s any risk of Continental dropping ATD?
24.
Why do you think Continental could acquire ATD if the latter struggles?
25.
Would you say there’s any more room for cost cutting to improve ATD’s cash or liquidity position, beyond what the company has implemented over the past few years?
26.
How could pricing trend across ATD’s segments in H2 2020-early 2021?
27.
How do you think ATD could combat pricing pressure? Is there nothing to be done?
