Pep Boys Announces Second Quarter Earnings
13 August 1998
Pep Boys Announces Second Quarter Earnings
PHILADELPHIA--Aug. 13, 1998--The Pep Boys -- Manny, Moe & Jack , the nation's leading automotive aftermarket retail and service chain, announced record sales but a decline in earnings for the 13 weeks ended Aug. 1, 1998.Operating Results Second Quarter Sales
Sales for the quarter ended Aug. 1, 1998, rose to a record $635,301,000, 17.8% greater than the $539,298,000 recorded last year. Service labor revenue, exclusive of installed product, climbed to a record $104,357,000, 20.5% greater than the $86,601,000 recorded last year.
Comparable store sales increased 6.8% during the quarter while comparable service labor revenue and comparable tire sales increased 9.7% and 15.5%, respectively. Service labor revenue, exclusive of installed product, and tires accounted for 16.4% and 13.9%, respectively, of total sales.
Earnings
Earnings for the period, which were adversely impacted by the costs to complete the rapid rollout of the Company's commercial delivery program as well as lower gross margins associated with the program, a reduction in volume discounts, shifts in the sales mix and lower selling prices, were $17,704,000, $.29 per share-basic and diluted, 41.2% less than the $30,088,000, $.49 per share-basic, $.47 per share-diluted, earned last year.
Six Months Sales
Sales for the six months ended Aug. 1, 1998, rose to a record $1,219,525,000, 18.6% greater than the $1,028,576,000 recorded last year. Service labor revenue, exclusive of installed product, grew to a record $204,945,000, 23.8% more than the $165,558,000 recorded last year.
Comparable store sales increased 6.9% during the first half of the year while comparable service labor revenue and comparable tire sales increased 12.3% and 13.7%, respectively.
Service labor revenue, exclusive of installed product, and tires accounted for 16.8% and 13.8%, respectively, of total sales.
Earnings
Earnings for the six months ended Aug. 1, 1998, which were adversely impacted by the costs to rollout the Company's commercial delivery program as well as lower gross margins associated with the program, a reduction in volume discounts, shifts in the sales mix and lower selling prices, were $27,762,000, $.45 per share-basic and diluted, 47.8% less than the $53,234,000, $.87 per share-basic, $.84 per share-diluted, earned last year.
Store Expansion Program
Fourteen new stores, 13 Supercenters and one Express, were opened during the quarter. Highlighting the second quarter expansion were the Company's first stores, all of which are Supercenters, in the states of Washington, Oregon and Maine.
In addition, Supercenters, which typically feature 12 service bays, were opened in Detroit and Flint, Mich., Indianapolis, Bridgeport, Conn., Cleveland, Pittsburgh, Las Vegas, and Lodi, Calif. The Express store was opened in Boston.
As of Aug. 1, 1998, Pep Boys operated 723 stores, including 6,386 service bays, in 36 states, the District of Columbia and Puerto Rico. The Company anticipates opening approximately 20 units, 18 Supercenters and two Express stores, during the balance of the fiscal year.
Commentary Pep Boys' CEO, Mitchell G. Leibovitz, made the following comments:
"As we have previously stated, fiscal 1998 will be a transitional year for Pep Boys and our second quarter earnings reflect that circumstance. Despite our bottom line results, we are pleased with the progress that we are making and are convinced that the numerous initiatives we have taken will ultimately enhance our performance, our balance sheet and our returns.
"One of our goals was to complete the rollout of our commercial delivery program by the end of 1998; the rollout was completed by the end of the second quarter. Despite the immaturity of the program, average weekly delivery sales per store are already exceeding $6,000 and we continue to believe that we can achieve our previously stated objective of $10,000 per week, per store.
"In addition to reducing our capital spending by $100 million, another objective was to reduce inventory by $100 million by the end of the fiscal year. At the end of the second quarter, inventory was down $77 million. Although the reduction and balancing of inventory has a negative impact on gross margins since we are taking less advantage of volume discounts, we remain committed to maximizing our inventory efficiency before resuming a more normalized replenishment mode.
"Going into the second half of the year we expect to improve upon the 9% increase in comparable store sales that we achieved in July. We are hopeful that the recent completion of our commercial delivery rollout, key personnel changes in store operations and a new advertising campaign, coupled with our ongoing strength in service and tires, will enable us to achieve double-digit comparable store sales increases over the balance of the year as we build momentum for 1999."
Pep Boys Financial Highlights
Thirteen Thirteen
Weeks Ended Weeks Ended
Aug. 1, 1998 Aug. 2, 1997 % Change
------------ ------------ --------
Total Revenues $ 635,301,000 $ 539,298,000 + 18
Net Earnings $ 17,704,000 $ 30,088,000 - 41
Basic Earnings Per Share $ .29 $ .49 - 41
Diluted Earnings Per Share $ .29 $ .47 - 38
Twenty-Six Twenty-Six
Weeks Ended Weeks Ended
Aug. 1, 1998 Aug. 2, 1997 % Change
------------ ------------ --------
Total Revenues $1,219,525,000 $1,028,576,000 + 19
Net Earnings $ 27,762,000 $ 53,234,000 - 48
Basic Earnings Per Share $ .45 $ .87 - 48
Diluted Earnings Per Share $ .45 $ .84 - 46
Note: Certain statements made herein are forward-looking and as a
result involve risks and uncertainties. Actual results could differ
materially from expected results due to factors beyond the control of
the Company, including the strength of the national and regional
economies and consumers' ability to spend, the health of various
segments of the market that the Company serves--particularly the
do-it-yourself segment, the weather in geographical regions with a
high concentration of the Company's stores, competitive pricing,
location and number of competitors' stores, product costs, the ability
to attract and retain qualified personnel, the ability to acquire real
estate, facilities and equipment and the ability to reduce inventory
levels during 1998. Further risk factors are discussed in the
Company's filings with the Securities and Exchange Commission,
including its most recent Form 10-K, a copy of which may be obtained
from the Company without charge.