Pep Boys Announces Fourth Quarter Results, Higher Fiscal Year Earnings & Current Quarter Sales Improvement
16 March 2000
Pep Boys Announces Fourth Quarter Results, Higher Fiscal Year Earnings & Current Quarter Sales Improvement
PHILADELPHIA--March 16, 2000--The Pep Boys - Manny, Moe & Jack , the nation's leading automotive aftermarket retail and service chain, announced its results for the fourth quarter and fiscal year ended January 29, 2000, as well as a significant improvement in comparable store sales for the first six weeks of the quarter ending April 29, 2000.Operating Results
Fourth Quarter
Sales
Sales for the quarter ended January 29, 2000, were $554,981,000, 1.5% less than the $563,216,000 recorded last year. Service labor revenue, exclusive of installed product, climbed to a record $104,193,000, 4.9% greater than the $99,368,000 recorded last year.
Continued weakness in "do-it-yourself" sales, challenging prior year comparisons which included comparable store sales increases of 13.0%, 17.0% and 9.8% in total, tires and labor, respectively, as well as a reduction in year-over-year advertising all contributed to the 3.8% decline in comparable store sales.
During the quarter, comparable service labor revenue increased 2.3% while comparable merchandise sales declined 5.1%. Service labor revenue, installed product, tires and commercial delivery accounted for approximately 54% of total sales.
Earnings
Weak "do-it-yourself" sales and approximately $4,300,000 of costs associated with the settlement of litigation had a negative impact on fourth quarter earnings. As a result, the Company sustained a loss of $10,785,000 ($.21 per share-basic and diluted), substantially better than the loss of $18,867,000 ($.31 per share-basic and diluted) recorded last year after charges.
Fiscal Year
Sales
Sales for the fiscal year ended January 29, 2000, were $2,394,533,000, slightly less than the $2,398,708,000 recorded last year when the Company operated 109 Express stores that were sold or closed in October 1998. Service labor revenue, exclusive of installed product, grew to a record $440,523,000, 8.1% more than the $407,368,000 recorded last year.
Comparable store sales, which includes comparable merchandise sales and comparable service labor revenue increases of .9% and 4.4%, respectively, rose 1.5% during the fiscal year. Service labor revenue, installed product, tires and commercial delivery accounted for approximately 54% of total sales.
Earnings Despite the fourth quarter loss, earnings for the fiscal year ended January 29, 2000, were $29,303,000 ($.58 per share-basic and diluted) significantly greater than the $4,974,000 ($.08 per share basic and diluted) earned last year after charges.
Current Quarter Sales Update
Comparable store sales for the six weeks ended March 11, 2000, rose 1.4%, which includes comparable service labor revenue and comparable merchandise sales increases of 6.1% and .3%, respectively.
By comparison, comparable store sales for the thirteen weeks ended January 29, 2000, declined 3.8%, which included a comparable service labor revenue increase of 2.3% and a 5.1% decline in comparable merchandise sales.
Store Expansion, Enhancement and Capital Spending Program
Fiscal 1999
Seven new Supercenters, which feature 12 service bays, were opened during the fourth quarter which brings the number of new units opened during the year up to 24. The new stores were opened in Boston, MA, Long Island, NY, Central New Jersey, Puerto Rico, Northern California, Portland, OR, and Los Angeles, CA.
As of January 29, 2000, Pep Boys operated 662 stores and 6,895 service bays in 37 states and Puerto Rico.
Fiscal 2000
Pep Boys anticipates opening five new Supercenters during the fiscal year ending February 3, 2001.
After reviewing the impressive sales increases that were achieved in a number of test stores, the Company plans to remodel approximately 100 stores during the current year. These stores, which are an average of twelve years old, generated $4,934,000 in average sales during fiscal 1999.
In addition to improving the general appearance and merchandise adjacencies of these stores, areas that will be significantly enhanced include the service registration counter, customer waiting room, tire display, truck accessory department and commercial delivery center.
Capital spending for the fiscal year ending February 3, 2001, is budgeted to be approximately $75 million, significantly less than the Company's internally generated cash flow and well below the Company's depreciation.
Commentary
Pep Boys CEO, Mitchell G. Leibovitz, made the following comments:
"Although earnings for the year increased significantly, we were disappointed with our fourth quarter performance. Below budget sales, especially in the 'do-it-yourself' category, were compounded by the cost to settle litigation. Included in the latter was the elimination of all sponsorship obligations for the remaining three years of a five-year contract.
"We have begun to implement a series of changes that we believe will have a positive impact on sales and earnings. Improvements in our merchandise offering, more focused advertising and a series of changes in both the structure and compensation of our store management team are but a few of these initiatives. As a result, we entered fiscal 2000 with optimism and after more than six weeks are pleased with the progress that we're making, especially in the 'do-it-yourself' category. On a quarter-to-date basis, comparable store sales in 'do-it-yourself,' service parts & labor and tires have all rebounded from their fourth quarter levels.
"At the same time that we are working to improve our existing business, we are testing a number of synergistic new business opportunities that we hope to implement on a wider scale. We are also confident that our unique, non-franchised, all-brands, service capability and essentially independent supply chain will provide Pep Boys with both traditional and Internet related growth opportunities in the near future."
Pep Boys Financial Highlights
Thirteen Thirteen
Weeks Ended Weeks Ended
January 29, 2000 January 30, 1999
---------------- ----------------
Total Revenues $ 554,981,000 $ 563,216,000
Net Earnings (Loss) $ (10,785,000) $ (18,867,000) (a)
Basic Earnings Per Share $ (.21) $ (.31) (a)
Diluted Earnings (Loss)
Per Share $ (.21) $ (.31) (a)
Fifty-Two Fifty-Two
Weeks Ended Weeks Ended
January 29, 2000 January 30, 1999
---------------- ----------------
Total Revenues $ 2,394,533,000 $ 2,398,708,000
Net Earnings $ 29,303,000 $ 4,974,000 (a)
Basic Earnings Per Share $ .58 $ .08 (a)
Diluted Earnings Per Share $ .58 $ .08 (a)
(a) Includes after tax charges of $3,949,000, $.06 per share-basic and
diluted for the thirteen weeks ended January 30, 1999, and
$20,109,000, $.33 per share-basic and diluted for the fifty-two
weeks ended January 30, 1999, to reflect the costs associated with
the sale and closure of 109 Express stores.
Comparable Store Sales
Thirteen Six
Weeks Ended Weeks Ended
January 29, 2000 March 11, 2000
---------------- ----------------
Merchandise (5.1)% .3%
Labor 2.3 6.1
Total (3.8) 1.4
Note: Certain statements made herein are forward-looking which involve risks and uncertainties.
The Company's actual results may differ materially from the results discussed in the forward-looking statements 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 the various sectors of the market that the Company serves, the weather in geographical regions with a high concentration of the Company's stores, competitive pricing, location and number of competitors' stores, product costs and the ability to enhance the profitability of the commercial delivery program.
Further factors that might cause such a difference include, but are not limited to, the factors described in the Company's filings with the Securities and Exchange Commission.