CarParts.com COO on upbeat inventory outlook despite supply chain disruptions
David Meniane, Chief Operating Officer and Chief Financial Officer of CarParts.com, joins Yahoo Finance Live to discuss the outlook on the car parts industry and the company’s inventory amid supply chain disruptions.
Video Transcript
[MUSIC PLAYING]
- Welcome back. CarParts.com has seen significant growth over the last five consecutive quarters. But can that growth be sustained? We're joined now by David Meniane, chief operating officer and chief financial officer for CarParts.com. David, great to have you here with us. So let's just start with that question that I asked about that sustainability around growth. What kind of growth are you anticipating not only for the second half of 2021 but also into 2022?
DAVID MENIANE: Yeah, thanks for having me. I think, yeah, that's a great question. We're definitely anticipating some more growth. We spent the last two and a half years making some investments in the company on the talent side, the supply chain side, technology, marketing. And we definitely feel like we can continue to grow. Right now we're taking share from the online marketplaces, we're taking share from the brick and mortar, and we're the fastest growing retailer in the space.
- David, tell us how things are looking in the supply chain world. Because we keep talking about car prices, used cars, new cars. Prices are just going through the roof. There is all this demand and not enough cars to fill the demand. And a big part of that is because you've got this computer chip shortage and these supply chain constraints. You are always dealing with these auto parts. What has it been like for your business?
DAVID MENIANE: Yeah, absolutely. I think every retailer is feeling the impact of the supply chain disruption, not just auto parts. I think we've been lucky because we've been loading up on inventory since last year. I think all retailers have to find creative solutions to push through. So whether it's going to different ports, or domestic supplies, or different countries. But everyone's feeling the pain. But I think we're in a really good position. We have over a hundred million dollars of inventory on the books, we're still building inventory, we're expanding our supply chain. So I feel really good about where we are.
- That's pretty incredible that you had the foresight to stock up the way you did. Why did you buy so much inventory ahead of these issues? Did you do that during the pandemic? And what drove you to do that?
DAVID MENIANE: Yeah, we absolutely did that during the pandemic. To us, inventory is our oxygen. So we look at building a business as a marathon and the more oxygen you can take in, the more success you can have in the future. So we're a supply chain company as much as we are a technology company. And inventory is where it's at. And the people with the parts are the ones that are going to win in the future. So we're going to keep building inventory, we're going to keep expanding our footprint, and that's how we're going to win.
- David, we just got some key inflation indicators just yesterday from the consumer price index. How do you see inflation continuing to weigh on your business? Right now the used car market is really essentially a huge driver of some of these inflationary rises that we've been seeing.
DAVID MENIANE: Yeah, you have inflation on raw materials, you have the increase in transportation costs, which ultimately ends up impacting the cost of goods. So it's definitely impacting all retailers. I think we're in a good position because historically, auto retailers they have a better way of passing on the increase to the customers. But it's a balance between increasing prices and managing margin. So I think it's a challenge but we're in pretty good position to take on that challenge.
- What are you hearing, David, from your customers right now? Are there particular parts that they are really looking for that are in demand that may be difficult for them to get?
DAVID MENIANE: I think it's across the board. We see it in all categories. We see it in replacement parts and we see it in mechanical parts. We have our own brands but we also sell other premium brands. And there is a shortage of parts, that's for sure. I can see some of my competitors running out of inventory. I can see some of the competitors kind of holding off on paying the extra transportation charges. What I can tell you is that for us, we are going to keep buying. We're going to keep bringing the inventory because ultimately, the one with the parts is the one who is going to win.
- And David, I want to ask now about auto parts being sold online and what you're anticipating moving forward, especially as we come out of the pandemic. I know that there has been a huge boom of these auto parts being sold online. But what are you anticipating moving forward with some of these online sales?
DAVID MENIANE: Yeah, you're absolutely right. There's definitely been kind of an accelerated shift of offline to online. It's very similar to what we've seen in other industries, furniture, Wayfair, or mattresses, or pet foods. I think there hasn't been a player like us to make the commitment to kind of build an entire supply chain. I've seen a lot of marketplaces with a very wide assortment of parts. And what we're trying to do is trying to replicate the experience that you have in a brick and mortar and sell the entire job, sell the solution. And until someone like us actually does it, online penetration is going to remain in low single digits. But I think it's going to take someone like us to lead and actually push that online penetration even further.
- You're in that enviable position with all that inventory. But I guess my question is, where are you storing all of these parts? I don't know if as soon as you get them, you're selling them because of the parts shortage. But are you looking to expand your physical footprint as you look for more warehouse space?
DAVID MENIANE: So both, you're absolutely right. Our turns have increased. As soon as the inventory comes in, it goes out. And it's been a challenge to build up inventory. We are definitely investing in expanding our footprint. Two and a half years ago when our new team joined, we had two distribution centers. Today we have five. We just signed a lease to expand in one of the buildings next door, that's going to be six. We're going to be expanding in Florida, that's going to be seven. And ultimately, you can expect us to get closer and closer to the customers. And more footprint, more inventory, more outbound capacity means more sales.
- All right. David Meniane, chief operating officer and chief financial officer of CarParts.com, thanks so much for joining.
