U.S. consumer spending, a cornerstone of economic growth, is showing signs of strain. Although economists had forecast an increase in personal spending would rise 0.1% in May, it instead fell 0.1%, marking only the third monthly decline in four years, with a broad-based retreat across sectors:
Inflation-adjusted spending dropped 0.3%, the steepest decline since early 2025, while personal income fell 0.4%, the first drop since September 2021, largely due to reduced Social Security payments.
The six-month annualized spending rate slowed to 0.7% growth, a three-year low, signaling growing pressure on household finances.
Consumer sentiment, according to the Conference Board’s June 2025 index (93.0), is down 18% from its December 2024 peak, with weaker vacation intentions and increased savings (4.5% rate).
Tariffs are reportedly raising prices, even as they bring in record revenue, prompting consumers to cut discretionary purchases like apparel (-0.4%) and electronics (-0.6%).
This contraction, coupled with a 0.5% GDP decline in Q1 2025, suggests economic caution.
The weakening consumer spending environment, particularly with new car sales expected to decline 6% in June, creates opportunities in the aftermarket auto parts sector.
As consumers delay new vehicle purchases due to financial strain and tariff-driven price hikes, the average U.S. vehicle age – 12.8 years, a record – drives demand for ongoing maintenance and repairs, either do-it-yoursself (DIY) or do-it-for-me (DIFM) through repair shops.
The three stocks that control 45% of the U.S. aftermarket auto parts industry should shine by leveraging their scale, distribution networks, and resilience to capitalize on this trend.
Genuine Parts (GPC) is well-positioned to benefit from this increased repair demand. Its network of over 6,000 NAPA stores, generating 54% of revenue from auto parts, serves a growing "do-it-for-me" (DIFM) market as repair shops see higher volumes from aging vehicles.
GPC’s diversified portfolio, including industrial parts, helps offset sector-specific risks, while its 3.2% dividend yield appeals to income investors.
Recent acquisitions, like the Lausan Group, expand its European presence, enhancing growth its potential. Despite a recent price dip of 1% in June, GPC trades at 14 times next year's earnings and just a fraction of its sales. That makes it a value play in a downturn, as consumers prioritize affordable repairs over new car purchases.
O'Reilly Automotive (ORLY) thrives on its balanced model, with 58% of sales from DIY customers and 42% from DIFM. Its 6,400 stores and Canadian expansion via its 2023 acquisition of Groupe Del Vasto, position it to capture rising repair demand as consumers, facing a 0.4% income drop, opt for cost-effective fixes.
ORLY’s 4% revenue growth in Q1 on a 3.6% rise in comps reflect strong fundamentals. However, its higher forward P/E (27) and P/S (4.6) reflect the growth it has enjoyed over the past three- and five-year time frames.
The aftermarket parts retailer's aggressive share buybacks and store growth make it a good growth pick, though investors should monitor for spending-related revenue softness.
The third in the triumvirate of retailers is AutoZone (AZO). Some 75% of its business is from DIYers. Adjusted fiscal Q3 revenue jumped 5.4% on a similar rise in comps. Wall Street’s bullish outlook forecasts a $4,080 price target, implying 10% growth, and reflecting confidence in AZO’s commercial sales strength.
However, its P/E of 23 and P/S of 3.2 make it less attractive for value seekers. AZO’s extensive distribution and loyalty programs counter online competition, ensuring steady demand as financial strain pushes consumers toward DIY repairs.
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