Retail Service

Pep Boys suffers a net loss in 2Q

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Pep Boys–Manny, Moe & Jack posted a net loss of $273,000 on net sales of $525.8 million for the second quarter ended Aug. 2, 2014. That compares to income of more than $5.3 million on sales of $527.6 million for the same period last year.

Comparable store sales decreased 1.8%, broken out as follows:

* an increase of 5.4% in comparable service revenue (labor sales), and

* a decrease of 3.8% in comparable merchandise sales (service center revenue and retail sales).

For the first six months of its fiscal year, Pep Boys recorded net revenue of $1.3 million on net sales of more than $1 billion. Compared to the first half of the previous fiscal year, the company's revenue and sales were down 85.5% and up 0.8%, respectively. Comparable store sales decreased 1.6%.

“Our service maintenance and repair business, as well as our digital and commercial operations, continue to be bright spots,” says CEO and President Mike Odell. “However, these gains were outpaced in the second quarter by declines in DIY and tires. During the first five weeks of the third quarter, our performance has improved to a small overall comp sales increase.

“In an effort to grow our top line, we have been investing in our business. Our investments in the Road Ahead, Digital Operations and Service & Tire Centers continue to produce positive results.

"With four markets -- Tampa, San Francisco, Boston and now Charlotte -- grand re-opened in our Road Ahead format, we are growing market share with our target customer groups and, in turn, our sales. As we convert the next three markets -- Cincinnati, Denver and Baltimore -- in 2014 and plan for 50 additional stores in 2015, we have refined our model and expect to reduce the average per-store investment from $550,000 to $400,000."

Odell says investments in www.pepboys.com's digital operations are paying off. "Growth in online service appointments, tire sales that are made online and installed in our stores, ship-to-home sales and products that are ordered online and picked up in our stores have each exceed our forecast."

Pep Boys is aware of the challenges facing its DIY business, according to Odell. "We have been developing plans to further reduce our expense structure by an estimated annual run rate of $25 million.

"Similarly, we are optimizing our inventory investment and continue to evaluate the profitability of our store portfolio and close those stores that do not justify their expense burden as their leases expire or other real estate opportunities arise.”

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