Under the direction of its CEO, Tony Puckett, Sun Auto Tire & Service Inc. has added 60 locations to its network since last summer, bringing its store count to 400-plus outlets.
In this MTD exclusive, Puckett discusses the pace of Sun Auto Tire’s growth, the Tucson, Ariz.-based company’s brand strategy, the general state of tire demand and more.
MTD: How would you describe the pace of Sun's growth and do you see that accelerating in the future?
Puckett: It’s a key part of our strategy. We’re coming up on the two-year anniversary of Leonard Green & Partners purchasing Sun from Greenbriar. (Editor’s note: Private equity firm Leonard Green & Partners became a majority investor in Sun Auto Tire & Service in September 2021. Puckett joined the company at the same time.)
Just in the last two years, we’ve gone from 200 stores to 430 stores and we’ve more than doubled our revenue. We also have doubled our team members and have more than 4,000 (employees). That growth took a real team effort. But we're really pleased with where we are.
MTD: What do you look for when considering an acquisition?
Puckett: I get asked that frequently, as you might imagine. I think it really starts with looking for companies and owners who have developed businesses that we view as being high-quality, consistent and predictable – and ones that can benefit from scale.
In many cases, the owners stay with us. Plaza Tire is a great example of that. (Editor’s note: Sun Auto Tire & Service acquired Cape Girardeau, Mo.-based Plaza Tire Service Inc. at the end of 2021.) Mark and Scott Rhodes (Plaza Tire’s former owners) took a business their father started in the 1960s and grew it very aggressively and both have stayed with us. We love that. High-quality businesses have high-quality people.
We also look at real estate and use those analytics to help with our decisions. But the actual performance of stores is most reflective of what we expect. We're very much focused on the markets we’re in. We like the markets we’re in. And we certainly try to keep in contact with different owners in different markets. But it’s on their timelines.
There's a lot of passion among owners who have businesses in this industry. But everyone is going to exit at some point. We’re a potential exit strategy for them. We want to be in their thought process and consideration set.
MTD: Most stores that Sun has acquired still operate under their original names. What are the advantages of this approach?
Puckett: We have multiple brands across the country. Typically, we hope and desire to (leverage) the strength of local brands. For example, TGK Automotive Specialists was a more than 20-store chain that was well-established in Minneapolis, Minn. Their brand is stronger in that market than our brand would be. (Editor’s note: Sun Auto acquired TGK Automotive, which had 24 locations - most of them in Minnesota - last fall.) The owner had built a great business, so we’re not in any rush to change its name.
We’ve been able to acquire a lot of high-quality family businesses and we try to disrupt as few things as possible. Now, if we need to change some technology or processes, we’ll make that investment. That comes with the playbook we’ve built. Our resource teams have worked really hard to strengthen our integration process. We think we’re getting better and better at making seamless transitions.
MTD: Do you think managing so many different brands will become cumbersome? Are there plans to rebrand stores under the Sun name?
Puckett: It’s something my leadership team and I talk about. If we choose to have fewer brands, we could, but it hasn’t been a high priority for us. There are brands in certain spaces that are very powerful brands.
MTD: Sun has entered quite a few new geographies in recent years. What markets have provided good and fast returns?
Puckett: I give a lot of credit to the folks who started GB Auto Service Inc (Sun Auto Tire’s previous name). They started in the Southwest and the West Coast and I think that was a good decision. Those are high-growth markets, so it creates a natural tailwind for you. I think our foundation is strong, being in those markets.
Texas also has been a tremendous area for growth. It’s also highly competitive. In the Midwest, we’ve done really well and again, the credit goes to the Plaza Tire team. We’re just accelerating their growth.
It seems like everywhere we’ve landed, we’ve landed with a strong business and have been able to grow from there. So that strategy is working well.
MTD: Does Sun have distribution centers of its own? Who do you depend on for tire supply?
Puckett: With our Plaza Tire business in the Midwest, we have our own vertical, with our own trucks. It works really well, so we do have that capability. But that’s the only place we have it on that type of scale.
Today, American Tire Distributors is a major partner for us. They help get the tires we need, when we need them. Certainly, we’re looking for more opportunities to optimize and become as efficient as possible.
MTD: Can you envision a time when Sun would expand into wholesaling?
Puckett: No particular predictions there. Our highest priority today is making sure our stores are healthy. We've been really fortunate to have really strong same store sales year-over-year.
On the distribution side, it will ultimately be driven by financials. Does it make sense to expand the Plaza model into other regions of the country? We’d make that decision only if it would make us stronger in a new market by having our own vertical.
MTD: What are your thoughts on e-commerce? What effect has this had on Sun’s business?
Puckett: On the tire side, customers are savvy. The vast majority now shop online before making that buying decision. There are some big players in the (e-commerce) space that are very sophisticated.
We participate on the e-commerce side and are able to do fulfillment in some of our markets today. I think it’s going to be a key part of the business moving into the future. We have to make it as easy as possible to provide the shopper with a good buying experience. We’re in the study stage of it today.
MTD: What’s your take on the current state of the retail tire market? What feedback are you receiving from your stores?
Puckett: We gather data and try to understand how the broader market is doing. If you think about what we’ve been through since COVID-19, it’s been a tremendous challenge. First, it was difficult to get tires. The supply chain had experienced tremendous disruption. Then all the tires we ordered came in, but at the same time, inflation took off and interest rates went through the roof.
There have been a tremendous number of influences, but our business is positive and we’re gaining momentum.
Across our markets, we feel like we’ve been really fortunate to continue to grow our tire business. And we want to keep that momentum. Chris Ripani has been a phenomenal leader. (Editor’s note: A former Bridgestone executive, Ripani is Sun Auto Tire & Service’s chief operating officer.) He and I met when I was at Valvoline and he was president of Speedco. I was really impressed with his leadership. He’s incredibly knowledgeable. We’re lucky to have him.
MTD: What do you consider to be Sun’s biggest opportunities and challenges in the near term?
Puckett: We saw mergers and acquisitions slow down in the fourth quarter of 2022 through the third quarter of 2023. There was the big announcement of TBC and Mavis, but there’s been less activity and that's been true of us, as well. Debt service cost is creating more challenges for the models to work, in terms of paying the multiples people were receiving in 2021. I’m not 100% sure how it’s going to shake out.
We stand ready to move on opportunities. We are never overly aggressive. We’re looking for the right acquisition - rather than any acquisition - and are quite selective in the businesses we seek. We’ve invested aggressively in our infrastructure and are focused on growing our greenfields. I’m really pleased with the organic growth we’re experiencing and as M&A (opportunities present themselves), we’ll be ready. Leonard Green has been a tremendous partner and they’ve allowed us to invest. We’re on the right path.
