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WIKI ANALYSIS
Genuine Parts Company (GPC) distributes automotive parts and industrial replacement parts (engine parts for heavy machinery) to auto repair businesses and manufacturers. The company also sells office products to large retailers. GPC operates in a mature market with many players, and the products it distributes are commodities with many substitutes available in the marketplace, resulting in ongoing pricing pressure from competitors. GPC's operating margin on automotive parts fell from 11% in 1995 to 8% in 2005 [1], and the company's office products segment faces growing pricing pressure from large retailers.
DEI auto sales have also been negatively affected by longer lasting manufacturers warranties. Over the last several years longer warranties have become the industry standard on new cars; when cars are under warranty, drivers are more likely to go to the car dealership for free repairs, than to visit DEI's clients.
Financials
Genuine Parts Co. divides its business into four segments: Automotive Parts ($5,311,873 or 50% of total revenue in 2007), Industrial Machinery Parts ($3,350,954 or 30%), Office Products ($1,765,055 or 17%), and Electrical/Electronic Materials (insulating and conducting materials) ($436,318 or 3%). [2] Its Automotive Parts group distributes over 300,000 products to retail customers through its 58 NAPA (National Automotive Parts Association) distribution centers across the US. The Industrial Parts Group, operating under the name Motion Industries, provides customized product and technical expertise to the manufacturing industry. The Office Products group distributes over 30,000 business products from 44 distribution centers across the U.S. and Canada under the name S.P. Richards Company. The Electrical/Electronic Materials Group was formed in 1998 through the acquisition of EIS, the nation's largest distributor of electronic and electrical apparatus. The group distributes over 100,000 items from 33 locations across the U.S. and Mexico. [3]
Percentage of total revenue from automotive parts has fallen from 51.2% in 2005 to 48.9% in 2007. This is attributed to a lessening demand for car parts because of extended manufacture warranties and the increasing overall quality of modern automobiles. This slack has been picked up the industrial sales division which accounted for 28.57% of total revenue in 2005 and increased to 30.9% in 2007. [4]
Trends and Forces
===Longer manufacturer warranties mean less business for DEI's clients=== Longer manufacturer warranties have become the industry standard in recent years. These warranties, which offer free repairs, motivate car owners to do repairs at the dealership rather then through NAPA stores for the first few years of ownership.
===Declining US job market puts pressure on office supply business=== : Its office suppy business is subject to the growth of the US job market. During the last economic downturn, in the months after 9/11, office supply companies suffered on average a 9% decrease in sales. [7] If the economy falls into a recession, job growth will stymie and businesses will have less of a need to purchase office supples.
===Outsourcing of manufacturing erodes client base=== : Increased outsourcing of North American manufacturing will hurt GPC's bottom line as its subsidiaries lie entirely in the US, Canada and Mexico. A study conducted by "PERI" of the Univ. of Massachusetts found that "foreign sourced goods in total manufacture inputs, a significant indicator of the extent of outsourcing activity, rose from 12.4% to 22.1% in the manufacturing sector as a whole between 1987 and 2002." [8].
Competitors
As a conglomerate, GPC encounters different competitive pressures in the respective industries in which its subsidiaries operate. GPC's business structure allows it to leverage its core competencies as a distributor across its business interests. This also leads to cost savings in the sharing of back office and HR facilities.
- Automotive Parts Distribution, these companies compete with Genuine Parts for individual car owners:
- Industrial Parts Distribution, these companies compete with Genuine Parts for heavy machinery part distribution:
- Applied Information Tech.
- General Motors (GM)
- Office Supplies, these companies compete with Genuine Parts for distrubition of office supplies to American businesses:
- Electronic Supplies, these companies compete with Genuine Parts for distribution of Electronic components:
Auto Parts Segment: Operating Metrics
Below is a comparison of major operating metrics for the company’s autoparts segment as compared to other companies' breakouts:
| Company | Sales 2006 ($M)* | Operating Margin | Number of Stores | Sales per Sq. Ft. |
| General Parts Co. (GPC) | $5,185 [9] | 8% [10] | 5800 [11] | $210 [12] |
| AutoZone (AZO) | $5,000 [13] | 17.1% [14] | 4,056 [15] | $239 [16] |
| Advance Auto Parts (AAP) | $3,300 [17] | 8.70% [18] | 2958 [19] | $209 [20] |
| O'Reilly Automotive (ORLY) | $2,000 [21] | 9.40% [22] | 1,640 [23] | $215 [24] |
| CSK Auto (CAO) | $1,600 [25] | 4% [26] | 1332 [27] | $190 [28] |
| Pep Boys-Manny, Moe & Jack (PBY)** | $1,680 [29] | 2% [30] | 593 [31] | $155 [32] |
^All sales and market share figures an estimate based on DIY business only
^^Note: PBY, ORLY, and AAP Sales figures excludes service and DIFM revenue, isolating DIY parts sales.
Footnotes
- ↑ 2008 Annual 10-K Report, Item 1. Business., p. 7
- ↑ 2008 Annual 10-K Report, Selection From Shareholder Report., p. 15
- ↑ 2008 Annual 10-K Report, Item 1. Business., p. 4
- ↑ 2008 Annual 10-K Report, Selection From Shareholder Report., p. 15
- ↑ 2008 Annual 10-K Report, Selection From Shareholder Report., p. 10
- ↑ 2008 Annual 10-K Report, Selection From Shareholder Report., p. 12
- ↑ Miller, Paul. "Recession slams office suppliers." Multichannel Merchant. 1/1/02
- ↑ Burke, James et al. PERI: Univ. of Mass. "Rising Foreign Outsourcing and Employment Losses in U.S. Manufacturing, 1987-2002", p.1
- ↑ 2008 Annual 10-K Report, Item 1. Business., p. 4
- ↑ 2008 Annual 10-K Report, Item 1. Business., p. 9
- ↑ 2008 Annual 10-K Report, Item 1. Business., p. 2
- ↑ 2008 Annual 10-K Report, Item 1. Business., p. 11
- ↑ 2008 Annual 10-K Report, Part 1. Item 1. Business., p. 11
- ↑ 2008 Annual 10-K Report, Part 1. Item 1. Business., p. 23
- ↑ 2008 Annual 10-K Report, Part 1. Item 1. Business., p. 29
- ↑ 2008 Annual 10-K Report, Part 1. Item 1. Business., p. 17
- ↑ 2008 Annual 10-K Report, Part II. Item 8. Financial Statements., p.1
- ↑ 2008 Annual 10-K Report, Part II. Item 8. Financial Statements., p.3
- ↑ 2008 Annual 10-K Report, Part II. Item 8. Financial Statements., p.4
- ↑ 2008 Annual 10-K Report, Part II. Item 8. Financial Statements., p.1
- ↑ 2008 Annual 10-K Report, Financial Statements., p.23
- ↑ 2008 Annual 10-K Report, Financial Statements., p.23
- ↑ 2008 Annual 10-K Report, Financial Statements., p.23
- ↑ 2008 Annual 10-K Report, Financial Statements., p.25
- ↑ 2008 Annual 10-K Report, Selected Financial Data., p.26
- ↑ 2008 Annual 10-K Report, Selected Financial Data., p.26
- ↑ 2008 Annual 10-K Report, Selected Financial Data., p.27
- ↑ 2008 Annual 10-K Report, Selected Financial Data., p.28
- ↑ 2008 Annual 10-K Report, Analysis of Statement of Operations., p.20
- ↑ 2008 Annual 10-K Report, Analysis of Statement of Operations., p.20
- ↑ 2008 Annual 10-K Report, Analysis of Statement of Operations., p.21
- ↑ 2008 Annual 10-K Report, Analysis of Statement of Operations., p.20
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