With the integration of 225 National Tire & Battery (NTB) stores under its belt, TBC Corp. now is looking forward to expanding the chain's reach and its product lines.
Officials at Tire Kingdom Inc.-TBC's retail subsidiary that absorbed the NTB chain after its purchase from Sears, Roebuck and Co. last year-completed the integration in early April, more than two months ahead of schedule.
``Overall the transaction is going very, very well and will probably do better than we expected,'' said Larry Day, president and CEO of TBC, in a conference call with analysts as he discussed the private brand marketer's first quarter results, which included a 69.1-percent hike in net sales.
The new focus is expanding NTB's reach, he said, adding Tire Kingdom now can ``introduce (its) complete product line into the NTB chain.'' Mr. Day has previously told Tire Business that likely includes Tire Kingdom's Sigma brand, but likely not other private brands distributed by TBC. Also, TBC's retail store growth focus will be on the NTB chain.
``The chain is significantly underrepresented in Texas, Illinois and New England, and these remain our focus areas for expansion of that chain,'' Mr. Day told analysts.
He added the company is tinkering with the name, depending on the market. For example, in Columbus, Ohio, where the NTB name is more well known than Tire Kingdom, new stores there will bear the name ``NTB by Tire Kingdom.''
``So we take advantage of both names, and that's how we'll open more stores in that market,'' he said. The company has opened four NTB stores since the acquisition was finalized, and all are in Ohio: in Wadsworth, Columbus, Stow and Lancaster. Chicago stores also eventually will have the same name. In the Northeast, ``Tire Kingdom'' may be less prevalent since it has no recognition there, Mr. Day said.
In addition, TBC expects to concentrate this year on filling in existing Tire Kingdom markets instead of venturing into new territories, and its other chain, Big O Tires Inc., should add about 25 outlets. Tire Kingdom has nearly 600 stores, including the NTB stores, and Big O has 571 franchised stores.
Though the fast-paced integration has opened an early window to these possibilities, Mr. Day said it also bore high costs. In fact, in the company's earnings report, TBC said its selling, administrative and retail store expenses were $131.2 million, up almost 150 percent from last year's $53.1 million.
``Although we incurred greater costs during the first quarter as a result of this strategy, we believe those costs should be more than offset during the second quarter by improved operating results in the converted stores,'' Mr. Day said.
Also in the first quarter, sales rose to $433.8 million from $256.5 million last year. Net income rose to $5.98 million, up 9.3 percent from $5.47 million last year.
Same store retail sales grew 6.2 percent, and Mr. Day said comparable sales were positive across Tire Kingdom, Big O, Merchant's Tire & Auto and NTB, ranging from 4-7 percent. Total unit tire shipments in the company increased about 32 percent, TBC said, and about 8-9 percent of that is attributable to the wholesale business.
The company's wholesale division had a good quarter, recovering some of the anticipated decrease in the fourth quarter. ``Wholesale going forward will be lumpy,'' Mr. Day said. ``...It's not one of those businesses we can consistently forecast quarter to quarter.''
The wholesale business also has been sourcing tires from low-cost countries, both through its own efforts and through those of its tire production partners, such as Cooper Tire & Rubber Co. and Goodyear.
``If we can identify a product category that we can buy for less and improve our margins, we're certainly doing that,'' Mr. Day told analysts. He added the company has seen improved margins, especially in specialty, bias light truck and farm implement tires. Some of those tires are included in TBC's lines. For example, he said implement tires could be included in the Power King line.