Pep Boys Announces Third Quarter Results
10 November 2000
Pep Boys Announces Third Quarter Results, Profit Enhancement Plan Detail, Completion of Store Closures
Business Editors
PHILADELPHIA--Nov. 9, 2000--The Pep Boys --
Manny, Moe & Jack , the nation's leading full service
automotive aftermarket chain, announced its operating results for the
thirteen weeks ended October 28, 2000, the completion of the closure
of 38 underperforming stores as well as additional details relating to
its recently announced profit enhancement plan.
Operating Results
Third Quarter
Sales
Sales for the quarter, which were negatively impacted by the
closure of 38 stores on the morning of October 28, 2000, were
$622,382,000, 2.7% more than the $605,833,000 recorded last year.
Service labor revenue, exclusive of installed product, rose to a
record $117,849,000, 5.2% greater than the $111,995,000 recorded last
year.
Comparable store sales, which include 1% and 4% increases in
comparable merchandise sales and comparable service labor revenue,
respectively, increased 1% during the quarter.
Service labor revenue, installed product, tires and commercial
delivery accounted for approximately 57% of total sales.
Earnings
Third quarter results were negatively impacted by a total of
$96,493,000 in pre-tax expenses associated with the previously
announced Profit Enhancement Plan, increased reserves, lower vendor
enhancement funds, higher shrinkage estimates, equipment write-downs,
inventory write-offs, abandoned projects, impaired asset write-downs
and severance payments. As a result, the Company sustained an
after-tax loss of $63,209,000 ($1.24 per share-basic and diluted) as
compared to net earnings of $9,930,000 ($.20 per share-basic and
diluted) recorded last year.
Nine Months
Sales
Sales for the nine months, which were negatively impacted by the
closure of 38 stores on the morning of October 28, 2000, were
$1,871,078,000, 1.7% more than the $1,839,552,000 recorded last year.
Service labor revenue, exclusive of installed product, was a record
$352,062,000, 4.7% more than the $336,330,000 recorded last year.
Comparable store sales, which include a 1% decline in comparable
merchandise sales and a 3% increase in comparable service labor
revenue, were unchanged during the first nine months of the year.
Service labor revenue, installed product, tires and commercial
delivery accounted for approximately 55% of total sales.
Earnings
Net earnings were negatively impacted by the $96,493,000 in
pre-tax expenses associated with the previously announced Profit
Enhancement Plan, increased reserves, lower vendor enhancement funds,
higher shrinkage estimates, equipment write-downs, inventory
write-offs, abandoned projects, impaired asset write-downs and
severance payments recorded in the third quarter. As a result, the
Company sustained an after-tax loss of $52,386,000 ($1.03 per
share-basic and diluted) as compared to net earnings of $40,088,000
($.79 per share-basic and diluted) earned last year.
Profit Enhancement Plan Detail
After a comprehensive review of its field, distribution and store
support center infrastructure as well as the performance of each
store, the Company implemented a number of changes, including the
closure of 38 underperforming stores, that it believes will improve
its performance. These actions, which were announced on October 30,
2000, include the following:
-- Closure of 38 underperforming stores on October 28, 2000
-- Reduction in store, service and field supervisory positions
-- Closure of two distribution centers by February 1, 2001
-- Reduction in store support center infrastructure
-- Contraction and relocation of special order department
-- Reduction in store operating hours
In conjunction with these initiatives, the Company believes that
it will achieve an annual, pre-tax operating expense reduction of
approximately $70 million.
The Company's third quarter results include a pre-tax charge to
earnings of $71 million related to the Profit Enhancement Plan to
reflect the write-down of assets, severance costs, the ongoing cost to
close the stores and two distribution centers and the contraction of
the special order department. Pre-tax earnings also include increases
in reserves for workers compensation, general liability claims, legal
reserve and sales returns, in addition to a reduction in vendor
enhancements, increases in shrinkage estimates, the write-down of
communications equipment, the impairment of certain assets (FAS #121),
the write-off of obsolete inventory and severance payments, totalling
$25 million, which in the aggregate totals $96 million. In addition,
as a result of the completion of its new $368 million credit facility,
the Company wrote off $1 million in unamortized financing expenses
related to its previous credit facilities, which is reflected as an
extraordinary (loss) gain on the financial statements.
Store Closures
In conjunction with the aforementioned plan to improve its
profitability, the Company closed 38 underperforming stores on the
morning of October 28, 2000. Those stores are listed below.
The Company is generally pleased with the performance of its
remaining 627 stores and does not currently contemplate closing any
additional stores.
California 1 East Puente Hills (Los Angeles)
Connecticut 1 Bristol
Florida 1 Cape Coral
Illinois 1 Forest Park (Chicago)
Indiana 4 Michigan Road (Indianapolis); Muncie; Kokomo;
Fort Wayne
Louisiana 2 Lapalco (New Orleans); Chalmette (New Orleans)
Massachusetts 2 Pittsfield; Revere (Boston)
Michigan 10 Clinton (Detroit); Garden City (Detroit); Oak
Park (Detroit); Lincoln Park (Detroit);
Southgate (Detroit); Saginaw; West Dearborn; Bay
City; Flint; Port Huron
New York 5 Niagara Falls; Cheektowaga (Buffalo); Rotterdam
(Albany); Five Towns (Long Island); Westvale
(Syracuse)
Ohio 2 Franklin Park (Toledo); Airport Highway (Toledo)
Oregon 3 Beaverton; McLoughlin (Portland); Salem
(Portland)
Texas 1 West Bellfort (Houston)
Washington 5 Mill Plain (Vancouver); Hazel Dell (Vancouver);
Federal Way (Seattle); Bremerton (Seattle);
Spokane Valley (Spokane)
--
Total 38
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Pep Boys Financial Highlights
Thirteen Thirteen
Weeks Ended Weeks Ended
October 28, 2000 October 30, 1999
---------------- ---------------
Total Revenues $ 622,382,000 $ 605,833,000
Net Earnings (Loss) $ ( 63,209,000)(a) $ 9,930,000
Average Shares-Diluted 51,112,000 50,839,000
Basic Earnings (Loss)
Per Share $ ( 1.24)(a) $ .20
Diluted Earnings (Loss)
Per Share $ ( 1.24)(a) $ .20
Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended
October 28, 2000 October 30, 1999
---------------- ---------------
Total Revenues $ 1,871,078,000 $ 1,839,552,000
Net Earnings (Loss) $ ( 52,386,000)(a) $ 40,088,000
Average Shares-Diluted 51,055,000 52,051,000
Basic Earnings (Loss)
Per Share $ ( 1.03)(a) $ .79
Diluted Earnings (Loss)
Per Share $ ( 1.03)(a) $ .79
(a) Includes non-recurring charges of $45,590,000 and $16,173,000 of
certain other expenses.