NEW ORLEANS—Despite the devastation of Hurricane Katrina a year ago, Delta World Tire Co. President Kevin Cates said he believes Delta's a stronger company today than before the storm hit its Louisiana and Mississippi markets.
As New Orleans and the surrounding Gulf Coast areas continue to rebuild, Delta World has relocated its headquarters from a temporary site in Lafayette, La., back to the Central Business District of New Orleans and into a larger office.
Renovation and repairs to some of its 12 retail locations affected by the storm is about 80 percent complete, according to Mr. Cates. All the stores were open and operating within a week of the storm.
Ironically, the storm damage gave the company impetus to spruce up and paint its older buildings and overall helped increase its annual sales. “We're two years ahead of our business plans,” he said.
Delta's sales jumped about 11 percent to $16.1 million in 2005 vs. 2004, with retail accounting for 86 percent of sales.
The boon is attributed to two factors, Mr. Cates said. Due to the amount of debris on the roads, the dealership saw a surge in tire repairs and increased new tire sales. Secondly, some of the stores benefited from a population shift to their markets from other storm-ravaged areas.
He expects 2006 sales to reach $20.5 million. The company opened a store earlier this year in Waveland, Miss., and next year it plans to open three more outlets, through acquisition, in its existing markets.
“Business has been very strong,” he said. “We've had the ability to pass along (tire) price increases and increase our prices to offset our wage costs.” That's because New Orleans has become an expensive city to live in, according to Mr. Cates. Wage inflation due to a shortage of blue-collar labor has prompted price increases in New Orleans and along Mississippi's Gulf Coast. And people seem to be willing to pay the higher prices, he added.
The dealership had 90 employees before the storm and has since added 25 more to operate the new store and help the other stores handle the higher sales volume. Mr. Cates said the stores could use even more employees. “There's not enough tire technicians (in the job market), but we have enough to handle most of the work load,” he said.
Tire sales and service account for 75 percent of the dealership's revenues, but the company plans to bolster the automotive service side of the business in the coming year. “It's a reaction to the trend in the industry to more auto service than tires,” explained Mr. Cates. He expects preventive maintenance service to increase the gross profit margins.
“We're trying to do more for our existing customer base and generate more service sales,” he said. Two years ago the dealership became a Mighty Auto Parts franchise selling service parts and chemicals in its own stores and to other auto service shops. However, Mr. Cates admitted it is difficult for the store personnel to focus on being sales-oriented and make a concerted effort to sell preventive maintenance products after spending past years concentrating on basic tire service.
“It certainly is a transition process. We're just starting,” he said, noting that the company is in the process of creating a business model for the stores to develop skills and practices for selling the service products.
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