Last year, diversified distributor Genuine Parts Co. set new records for sales and earnings, president and CEO Paul Donahue said Tuesday. “We are well-positioned to further strengthen our global platform in 2019.”
The company said sales for the year increased 15% to nearly $19 billion from $16.3 billion in 2017. Most of the increase came in sales to commercial customers in GPC’s Automotive Parts Group, including its flagship Napa Auto Parts Stores and ecommerce site NapaOnline.com, Donahue said. “Sales to the commercial segment, which represents 75% to 80% of our total U.S. automotive sales, outpaced our retail sales for the second consecutive quarter,” he said Tuesday on a conference call with investment analysts, according to a transcript from Seeking Alpha.
GPC executives said digital technology and strategies will continue to play an important role in helping the company to grow sales and operate more efficiently. “Our global automotive group posted solid results in the fourth quarter and we move forward into 2019 with plans for digital sales growth and operating improvement,” Donahue said on the conference call.
Going digital helps profit margins
When asked how digital and pricing initiatives in the automotive group had contributed to GPC’s increase profit margins, Carol Yancey, executive vice president and chief financial officer, said data analytics, pricing and related strategies have helped GPC improve operations from its supply chain to serving customers. “The automotive and industrial businesses have benefited from effective margin initiatives, including ongoing negotiations with our global suppliers, more flexible and sophisticated pricing and digital strategies, as well as more favorable product mix,” she said.
At the same time, Yancey noted, GPC has maintained its margins by passing on to customers price increases in 2018 from suppliers, driven mainly by tariffs, of 3.8% in automotive and 18% in both industrial and business products. GPC also took on increased costs related to cyber security, freight and information technology, she added. GPC’s Business Products Group is comprised mainly of office products distributor S.P. Richards Co., which GPC had planned to merge with rival distributor Essendant Inc. last year before Essendant accepted an offer to be acquired by Staples Inc.
GPC is taking several steps to improve and expand its operations outside the United States. In Mexico, it is phasing out its Autoto aftermarket auto parts brand in favor of focusing on its main Napa Mexico brand. In Europe, its Alliance Automotive Group auto parts business is expanding with the acquisition last year of TMS Motor Spares, a major distributor based in Carlisle, England. In Germany, GPC’s Automotive Alliance Group last month acquired Hennig Fahrzeugteile Group, a supplier of vehicle parts with annual revenue of about $190 million.
GPC has also has invested in ecommerce operations in its automotive and industrial parts groups in the U.S. and Australia.
For the fourth quarter ended Dec. 31, 2018, GPC reported:
- Net sales increased 9.4% from the year-earlier quarter to $4.60 billion;
- Automotive products sales increased 11.4% to $2.58 billion;
- Industrial products sales increased 8.7% to $1.57 billion;
- Office and other business products sales inched up 1.6% to $456.8 million;
- Gross profit increased 20.0% to $1.54 billion, resulting in a gross profit margin of 33.5%, up from 30.5% a year earlier;
- Net income increased 72.6% to $186.70.
For the year ended Dec. 31, 2018, GPC reported:
- Net sales increased 14.9% year over year to $18.74 billion;
- Automotive products sales increased 22.6% to $10.53 billion;
- Industrial products sales increased 8.5% to $6.30 billion;
- Office and other business products sales dipped 0.5% to $1.91 billion.
- Gross profit increased 22.0% to $5.98 billion, resulting in a gross profit margin of 31.9%, up from 20.1%;
- Net income increased 31.4% to $810.47 million.
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