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CarParts.com CEO: We’re looking to ‘pass on savings’ amid inflation

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CarParts.com CEO David Meniane joins Yahoo Finance Live to discuss inflation, the demand for car parts, the age of the average American vehicle, inventories, and the market for electric vehicle car parts.

Video Transcript

BRIAN CHEUNG: Welcome back. Sticking with the recent earnings reports that have hit the tapes lately, and we're focusing now on the auto world, where shares of carparts.com on the move this morning, up over 3%. That's after the company posted record quarterly sales of $176.2 million. That's up 12% on the year.

For more on this, we're joined by CEO of the company, David Meniane. Appreciate you stopping by this morning, David. One read on this because you live kind of in the auto repair maintenance part of this industry is that people are, maybe having bought cars during the pandemic, taking the time now to service them as maybe they get back on the road. What do you see as the demand for your business and kind of the car repair industry in 2022?

DAVID MENIANE: Thanks for having me, Brian. You know, what I think is happening right now is that the consumer is under a lot of pressure. If you're looking at interest rates, gas prices, inflation across the board for first necessities, there is a need for the customer to find savings wherever they can.

At carparts.com, we sell mostly replacement parts, collision, replacement, mechanical. It's factory direct. It's the same quality as you can find in the brick and mortar, but it's lower price. So I think we're well positioned to capture some of that demand and help the consumer get back on the road in an affordable way.

AKIKO FUJITA: Yeah, David, let's build on that point because you talk about consumers trying to save money. At the same time, for those who are looking to go out and get a new car, may not necessarily be able to get their hands on one. There is a supply issue. There's also a cost issue with rates going up as well. How big of a tailwind has it been on your end?

DAVID MENIANE: Yeah, we're actually seeing it. And what's been happening is that the cars are staying on the road longer. There's 300 million vehicles on the road today. The average age of a car on the road, believe it or not, is 12.2 years. So the average American drives an older car, usually, the third or fourth owner. So there's an opportunity for us to capture some of that demand because you want to keep that car running longer because a new car is just too expensive, or interest rates on a consumer loan are just too high, and you just can't afford it.

BRIAN CHEUNG: David, I'm thinking about the inflation side of this story because I imagine that you're feeling both sides, right? There's a higher demand, as you outline, for car parts, given where we are in the cycle, but then secondly, you might also be experiencing the supply chain issues with COVID related things, maybe Ukraine related things choking up the availability of those parts. Are you still raising prices now? Or are you starting to see some pushback from consumers if you do try to do that?

DAVID MENIANE: Yeah I mean, you guys cover this all the time. There is inflationary pressure across the board. There's freight. There's transportation. There's labor. There's cost of goods. Ultimately, for us, what we see is an opportunity to just double down on efficiencies and figure out ways to get the best product at the cheapest price so that we can pass on those savings to the customer. Again, like I've said-- I've said it. The customer is getting squeezed, so we have an opportunity to figure out a way to provide more value to the customer at more reasonable prices.

AKIKO FUJITA: What does that pipeline look like for you going into year end? I mean, I'd imagine now you're not experiencing the kind of supply disruptions that you did early on in the pandemic. But certainly, a lot of concerns going into the second half-- we're already in the second half of the year-- toward the end of the year. When you talk about try to improve efficiencies, I mean, what are the biggest concerns you have?

DAVID MENIANE: I mean, we're feeling good about the second half of the year. We came out yesterday and said that investors can expect double digit year over year growth. Some of it is due to the environment, but a lot of it is due to the investments that we've made over the last three years. What we've done is we've really loaded up on inventory for the last two years. We've made it a point to carry as much inventory as possible so that when there is a demand increase, we have it.

Again, our business is very technical in that it's fit specific parts. And we sell parts that fit a specific vehicle. And in our business, either you have it or you don't. So we made it a point to carry as much inventory as we could.

BRIAN CHEUNG: So I guess, if we can talk about another kind of trend here, electric vehicles, right? Rising gas prices have incentivized a lot of people to get into EV vehicles. That's going to be a bigger part of the market going forward. What's the parts industry like for EV cars?

I mean, obviously, they all have wheels. I'm sure there are things that can be crossed over. But I imagine there are also kind of proprietary parts that are going to be unique to EV-- the EVs themselves that you need to source as well. What do you see in terms of the growing need on that side?

DAVID MENIANE: Yeah, listen, for us, EVs and hybrids are a huge opportunity in terms of expanding that assortment. I think there is a misconception that there are unit parts, but 90% of the parts that we sell are agnostic to the powertrain. So if you look at everything outside of the car, anything in the wheel base, all of that carries over.

So I think for us, our supply chain, our data and catalog, our technology, and our customer experience really carries over. What we need to do as a company is really invest. We need to invest in growing that assortment. We need to invest in building a destination for EV drivers to find their parts. So for me, it's a trend, but it's also a huge opportunity.