Mid-Year Report: Gatto's Tires expects return to normal

MELBOURNE, Fla. — Gatto's Tires & Auto Service, which marks its 50th anniversary next year, survived the recent state shutdown by laying off several employees, shortening operating hours and applying for federal pandemic assistance.

The Melbourne-based dealership employs 63 at six retail locations along Florida's Atlantic Coast.

"Starting in March we saw an immediate drop in business. We have multiple locations but overall averaged about 40% down for the whole company," said Mike McHenry, Gatto's Tires marketing and inventory manager, as well as son of the dealership's president, Pam Gatto.

Despite the drop, he said he expects business to bounce back for the rest of the year.

"I'm kind of an optimist. I think things will get back to normal," he said, "and I think we're going to have a good year. These past six weeks where we were down, I don't know if we can make it up by the end of the year."

When he spoke to Tire Business in early June, sales were starting to come back as more customers resumed daily activities.

"Starting in the middle of March, it was like someone shut off a light switch. We stayed down at that number for the rest of March and all of April. Now in May we've definitely seen a significant uptick," he said.

"While we're not back to where we were, I'd say we're more than 50% back to the numbers we were doing before the whole coronavirus thing. … Each week in May it seemed to get a little busier overall.

"We have a total of six locations, so they are all up from what they were doing previously. My sense is, and my hope is, that by the end of June we'll be fully back to the number we should be doing this time of year. This is kind of our busiest time."

After laying off about 40% of its workforce in March at the start of the shutdown, Gatto's Tires has brought back almost all its employees, Mr. McHenry said.

He said he was concerned that some low-wage earners were making more with unemployment benefits during the pandemic and wouldn't want to return to work, but in the end all of the dealership's employees who were laid off wanted to return.

Part of the impetus could have been due to the time needed to apply for state and federal benefits and delays in receiving money, he surmised.

"Almost everyone that we laid off said they had problems. I guess the system was just overwhelmed with people all applying at the same time. It was weeks before they even started getting their first check," Mr. McHenry said.

"I was surprised. I thought some of the lower paid people, like the tire changers and so forth, would be like, 'No, we're going to stay laid off.' But they all came back."

Gatto's Tires also took advantage of federal pandemic assistance by applying for the Paycheck Protection Program, which provided payroll loans to small businesses.

Mr. McHenry said the funds "definitely helped."

"We were going to get through (the business slowdown) regardless, ... but it helped keep us going during the worst time. … It made us more comfortable about bringing people back that we had laid off before the business was all the way back. When we saw an uptick, we brought almost everyone back.

"We felt comfortable knowing we had that little bit of a buffer," he added, "whereas before, if we didn't have that (funding), if we were just relying on our own, we would have probably waited longer and been a lot more conservative about (bringing back employees)."

Like most businesses operating during the pandemic, Gatto's Tires configured its facilities to encourage social distancing and cleanliness.

"It's the cleanest tire stores ever. We got these burly, huge 50-year-old men that probably don't clean anything at their houses, but they're scrubbing floors and counters," Mr. McHenry said.

He said the stores also added distance between tables and chairs in the waiting areas.

"And we took some of chairs and blocked off sales counters so you couldn't stand right at the counter. We painted our Xs on the ground where you are supposed to stand, all that stuff. Everybody was good. I've never seen the shops cleaner. So one good thing about it was you don't have to worry about any germs being in here at all," he said.

The stores offer vehicle pick-up and drop-off for customers who wanted to stay home, "but fewer people than I thought took us up on it," he said.

"It sounds great that we offer it. It's one of those things we offer anyway. We would do that in a normal time," he said, adding, "A few people took us up on it, but I would have thought if would have been more. Most people, I think, like to be in their own car, want to drive their own vehicle up here. Even if they had to wait, there was plenty of distance in the showrooms where they could wait if they wanted to. A lot of them got rides home or to work."

The stores also shortened their hours under the stay-at-home orders because they didn't have enough business to run the full day, he said.

Weekday business started picking up in May but Saturday business remained light, he said. The company planned to resume normal business hours on weekdays in June but continue to cut operations by three hours on Saturdays until customer traffic increases.

He noted that the dealership's tire distributors cut back on their daily deliveries during the height of the pandemic to sometimes just once a day from three times.

"It was a little bit of an issue because you might not be able to get something as quickly as you used to be able to. It was the same kind of thing with parts," he said.

"... But everybody, from a customer standpoint, seemed very understanding about it. It is what it is. Everybody is in the same boat. Normally we would tell somebody: 'We'll have your tire in an hour.' But maybe it's later in the day or maybe even tomorrow. Everybody was fine. I don't think any (delays), that I can recall, cost us any sales. It was maybe a minor frustration at some points. But, overall, I think everybody was very understanding about it."

"This is the time of year people are normally thinking about traveling. I think this year people are concerned about flying. If they're going on vacation, they'll take the car instead — drive someplace instead of fly. So what they end up doing is a lot of maintenance work, fluids, getting the car ready, that kind of thing," Mr. McHenry said.

He said consumer confidence seems to be positive.

"Not fabulous or great, but I think it's good."

He noted that even under Florida's stay-at-home orders, people were coming out in May to get non-essential work done on their vehicles.

"Old people, who should probably be home, they'd come out wearing a mask to get free tire rotation. ...

"I think people were just stir crazy and they just needed to get out of their houses. We're definitely seeing a lot more people coming out more. The traffic you're seeing on the roads when you drive to work, you see an increase in traffic, which is good for our business. … I think we've come through the worst of it and starting to get back somewhat to normal," he said.

Mr. McHenry has a positive outlook for business for the rest of the year.

"I think that the lost production, you don't really get back, in my opinion. But I think the rest of the year, going forward from here, I think could be just fine. And if people are driving more instead of flying, that always helps us.

"If they decide to take more vacations by car, then that's a great thing for us. That's when people really tend to (do) deferred maintenance, things they've been putting off for awhile. If they're going out of town, typically they will get all that done. Whereas if you're just driving to work and back in town, a little 10-minute commute, you might live with your mostly worn-out set of tires or whatever else you need done. But if you're going to drive three states away somewhere, then you're probably going to get all that taken care of and that's a good thing for us."

During the height of the business slowdown, Mr. McHenry said he was pleasantly surprised by the positive attitude of the customers.

"People, customers, have been super nice. ... Some people come in with masks, some people come in without masks. But everybody has been super nice. Everybody seems to be understanding of the situation. … I think everybody is ready to get back to normal."

Another surprise was less pleasant.

"We thought during this (slowdown) there would be a ton of people looking for work. We had just as much trouble finding employees now as we did before. It seems like it really hasn't changed. I thought when other companies laid people off, we might find a good person that was laid off at a competitor down the road. But no, it's just the same. I had two interviews the other day, and one of them didn't even show up," he said.

"I think we're one of the best (employers) in our area certainly, as far as retention of employees. We have many employees that have doing this for decades. Being that we're a local family-owned business, we tend to just keep people. Once they're here, they get their foot in the door, they tend to stay. But finding them and getting them hired has been an issue."