Are Autopart Retailers Amazon's (AMZN) Next Causality? (AAP) (AZO) (ORLY)

September 21, 2016 1:47 PM EDT
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Major autopart retailers, Advance Auto Parts (NYSE: AAP), AutoZone (NYSE: AZO) and O'Reilly Automotive (NASDAQ: ORLY), are holding their own Wednesday despite a cautious Jefferies report which highlighted Amazon (NASDAQ: AMZN) and other online competition.

The firm performed an online price study and found that discounts at Amazon and RockAuto could place limits on historically positive gross margin trajectory at traditional retailers. "Analyzing more than 1,000 price checks across 150 SKUs in nine product categories, we find that AMZN and RockAuto average a 23% & 24% discount to mean Big 3 (AAP, AZO & ORLY) pricing, respectively," analyst Bret Jordan said. "E-tailers posted below mean pricing in 8 of 9 product categories and averaged double digit discounts in 7 categories."

Further, a surprisingly robust branded hardparts offering also leads them to believe Amazon may become a longer term competitor in "traditional" auto parts. "We analyzed branded SKU availability to gauge inventory levels of major brands. AMZN posted the highest available SKU rate at 98.7% outpacing AAP, ORLY and AZO at 95%, 86% & 55%, respectively," he commented. "We see AMZN's high branded inventory mix as a sign of the e-tailer's likely traction in traditional parts distribution and believe the e-tailer could be ahead of a previously stated 2017 YE goal to expand beyond specialty product focus."

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