Pep Boys Announces First Quarter Results
15 May 2000
Pep Boys Announces First Quarter Results; Business Alliance with Safelite AutoGlass
PHILADELPHIA--May 11, 2000--The Pep Boys - Manny, Moe & Jack , the nation's leading full service automotive aftermarket chain, announced its results for the thirteen weeks ended April 29, 2000, as well as a business alliance with Safelite AutoGlass.Sales
Sales for the quarter ended April 29, 2000, were $614,809,000, 2.8% greater than the $598,316,000 recorded last year. Service labor revenue, exclusive of installed product, climbed to a record $117,089,000, 6.8% greater than the $109,618,000 recorded last year.
Comparable store sales, which includes a comparable service labor revenue increase of 4.6% and a comparable merchandise sales decrease of 0.3%, rose 0.6% during the quarter.
Service labor revenue, installed product, tires and commercial delivery accounted for approximately 55% of total sales.
Earnings
Net earnings for the period were $6,447,000 ($.13 per share - basic and diluted), which includes $2,040,000 ($.04 per share-basic and diluted) net gain on the early retirement of debt, as compared to the $10,093,000 ($.20 per share - basic and diluted) earned last year.
Store Expansion, Enhancement and Capital Spending Program
A 9 service bay Supercenter was opened in the Bronx, NY, on April 21. As of April 29, 2000, Pep Boys operated 663 stores, including 6,904 service bays, in 37 states and Puerto Rico.
During the quarter, the Company remodeled 7 stores and plans to remodel as many as 93 additional stores over the balance of the year. On average, these stores are 12 years old and generated sales of $4,934,000 in 1999. In addition to improving the general appearance and merchandise adjacencies of these stores, areas that will be significantly enhanced include the service registration area, 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 depreciation.
Safelite's CEO, John Barlow, made the following comment:
"By utilizing Pep Boys' network of Supercenter locations, Safelite will be able to service our customers in a fashion that's more convenient for them and more efficient for us. Safelite and Pep Boys share the same high standards for customer service, and the same desire to make auto glass repair and replacement as "hassle-free" as possible for the American driving public."
Pep Boys' CEO, Mitchell G. Leibovitz, made the following comment:
"In addition to generating incremental revenue without a cash investment, our relationship with Safelite will not only benefit our service customers but will provide us with an excellent resource and support capability as we inspect, certify and recondition used vehicles."
Additional Commentary
Pep Boys' Chief Financial Officer, George Babich, Jr., made the following comments:
"Comparable store sales in "do-it-yourself," service labor, commercial delivery and tires all improved from fourth quarter levels. However, unfavorable weather in April and a number of significant expenses that collectively reduced basic and diluted earnings per share by $.12, had a negative impact on our first quarter operating results as compared to last year.
"Most of these expenses relate to steps that we took to improve and reposition our company, the most significant of which were costs associated with enhancing our supply chain. To improve future supply chain efficiency and costs, we accelerated the implementation and roll-out of new inventory ("E3") and warehouse ("EXE") management systems. In addition, while the current year consolidation of our warehouse operations will enable us to lower year-end inventories, it will also result in reduced merchandise purchases and fewer volume rebates, most of which have been reflected in the first quarter. Our investment to enhance retail customer appeal included the start-up costs associated with our store remodel program, the accelerated completion of project "Clearview," the enhancement of the truck/van/sport utility vehicle merchandise offering and numerous store displays. We also modified economic order quantities and increased store inventory levels to prepare for the anticipated increase in seasonal demand and a multi-media sales event that begins in mid-May. Finally, retention and individual performance bonuses for a significant number of personnel were approved and paid during the quarter.
"Going forward, although we face a 35% increase in earnings per share in last year's second quarter, we are encouraged by the tone of business in May, and expect the initiatives that we are taking to continue to have a positive impact on sales throughout the current quarter as well as provide sales momentum during the less challenging third and fourth quarters.
"At the same time, we are enthused about our recently introduced used vehicle evaluation and certification program and are in active discussion with a number of potential commercial partners who are interested in utilizing our program. In addition to the alliance with Safelite AutoGlass, we are pursuing other new business opportunities to further leverage our existing assets and brand equity."
Pep Boys Financial Highlights
Thirteen Thirteen
Weeks Ended Weeks Ended
April 29, 2000 May 1, 1999
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Total Revenues $614,809,000 $598,316,000
Net Earnings $ 6,447,000 $ 10,093,000
Average Shares-Diluted 51,001,000 50,763,000
Basic Earnings Per Share $ .13 $ .20
Diluted Earnings Per Share $ .13 $ .20