PHILADELPHIA (June 10, 2014) — Pep Boys – Manny, Moe & Jack reported a near doubling in operating profit in the quarter ended May 4, but net income dropped 58.3 percent to $1.6 million.
Pep Boys attributed the operating income gain—to $6 million—to extraordinary items, including $4 million in litigation accruals, and the net earnings drop to tax benefits accrued in the 2013 first quarter.
Sales grew 0.5 percent to $538.8 million on the strength of higher service-related revenue, which offset lower merchandise sales. Comparable sales fell 1.4 percent, consisting of a 3.2-percent increase in comparable service revenue and a 2.8-percent drop in comparable merchandise sales.
Pep Boys President and CEO Mike Odell attributed the operating profit improvement to a higher gross margin.
“Our core service business remains solid and we expect tire sales trends to improve in the back half of the year,” he said, noting that the company’s service business through the first five weeks of the second quarter has improved despite the continued pressure in tire pricing.
“Our service business footprint also continues its growth with 25 new Service & Tire Centers planned for 2014,” Mr. Odell said, noting that the company is reopening remodeled “Road Ahead” format stores in the San Francisco, Boston and Charlotte, N.C., markets.
“By differentiating ourselves in a competitive landscape,” he said, “we aim to grow market share with our target customer groups and, in turn, our sales and profits.”
The Philadelphia-based retailer also said it expects its pepboys.com digital operations — which includes on-line service appointments, on-line tire sales installed in Pep Boys our stores, ship-to-home sales and products ordered on-line and picked up in store — to keep growing.
Digital operations accounted for 4 percent of sales in the quarter vs. 2.3 percent a year ago, Mr. Odell said.