Parts player downshifts to cope with growing pains - CSK Auto - Company Profile - Statistical Data Included

DSN Retailing Today, Oct 22, 2001 by Katherine Hutchison

"The diminished DIY business has been offset this year by growth in the professional and corporate side, which generally improves the productivity of CSK's stores," said Moody's Investor Service analyst Marie Menendez. CSK has been so effective at marketing to professional installers that it has been able to maintain its position against AutoZone's entry into its key markets, she added. AutoZone has about 400 stores in California.

CSK credits expansion of its parts depots, an on-line local warehouse network and increased sku mix for growing sales to commercial accounts. "We have significantly increased our marketing efforts to the commercial customer," the company said in its most recent quarterly filing. CSK operates commercial sales centers in about 554 of its stores.

According to several store managers, CSK is beginning to format some of its Midwestern stores in what presumably will be the prototype for new stores going forward. At a Checker Auto Parts outside Milwaukee that opened in March, the format is a marked contrast to a former Big Wheel site in a nearby strip mall that has operated as a Checker for about two years.

The newer store, a freestanding site, is smaller. It has lower ceilings, narrower aisles and merchandise more easily within reach. Most notably, the parts counter, located in the rear of the older store, is now positioned adjacent to the checkout registers near the entrance.

Motor oil, one of the most in-demand items in any auto parts store, is more prominently displayed high up on the wall facing the entrance near the batteries, clearly visible to anyone entering the store. In the older store, motor oil is hidden away in an aisle far from the entrance. And on the wall above the display of FRAM air filters, banners carry all the brand names found in the store. An electronic parts catalog in the same section, where customers can key in their vehicle type and find the proper product, is also a new feature, the manager said.

The overall effect is a more shopper-friendly store where any item a customer is looking for can be easily spotted, with more accessible sales staff to answer questions. One manager said that new stores will also trend toward free-standing sites.

"The company has invested heavily in systems and in-store improvements in recent years to reduce future needs," Moody's Menendez wrote in a report, noting that CSK's broad geographic coverage, strong branding in its markets and seasoned management team are the retailer's primary strengths. "There is potential for sales to increase over the next few years as the increase in auto production in 1994 and beyond translates into a larger number of cars entering the sweet spot for repairs.

"But greater longevity of parts, changes in lease and warranty terms and [new] technology could change the timing and venue of repairs, [which] have migrated toward professional channels."

Jenkins allowed during the recent call that the company's comps have been spotty. "We can't draw any conclusion on the way comps are running. In areas where there's no competition our business has been tough, and in other areas with more competition, it's been better."