TROY, Mich.—Penske Auto Centers Inc., the nation's largest independent tire dealership chain, closed 133 stores in 69 markets across the country Feb. 20. ``These were stores that were well below where they needed to be,'' said Jim Wheat, Penske Auto Centers CEO and president. ``Their sales volume was down, or they were located in outlying areas so far from other stores that they were difficult to supervise.''
The Troy-based company now operates about 655 stores, compared with 860 when its parent, Penske Corp., acquired the chain from Kmart Corp. in November 1995 for $112 million. At the time, Kmart said the chain was losing $20 million annually.
The closings affected approximately 500 employees, about 200 of whom lost their jobs; another 300 were placed elsewhere within the company. Penske Auto Centers has about 4,000 employees.
The decision to close the stores was made in early February after three months and ``volumes and volumes'' of research, Mr. Wheat said.
``We conducted a deep, broad financial analysis and determined that these locations had no future,'' said Bill McStay, vice president of advertising, marketing and communications.
The closings were decided on a store-by-store basis, Mr. McStay said, and occurred in all four of the company's geographic regions. The largest group of closings was in the Buffalo, N.Y., market, where Penske closed all eight of its stores, effectively withdrawing from the market.
The recent closings were part of a strategic operational and development plan that calls for Penske Auto Centers to focus its resources on revitalizing the remaining 655 outlets, which are attached to or on the same site as various Kmart stores nationwide.
``The plan includes new interior and exterior signage, painting, new equipment and a host of compelling merchandising and marketing materials,'' Mr. Wheat said in a press release.
Last November, Mr. Wheat said Penske Auto Centers had sales around $300 million, down from $360 million when Penske bought the chain.
Penske Auto Centers' average sales per store will increase with the closings, which Mr. Wheat said should be the last for the chain. Tire Business estimated Penske's average per-store sales, for stores open more than a year, at less than $400,000 last year.
``I feel like we have the right stores now,'' Mr. Wheat said. ``We are still at 650 stores, which is a viable number."
Mr. Wheat joined Penske Auto Centers in October after eight years with Jiffy Lube International Inc.
Still, as Kmart grows and opens new locations, Penske hopes to have the opportunity to grow along with it, Mr. McStay said. The company has no plans at present to open stand-alone auto centers not associated with a Kmart store, he added.
Penske's retrenchment comes as many auto-service competitors are opening new stores. Philadelphia-based Pep Boys—Manny, Moe & Jack Inc. said it opened 40 stores in 1998 and will open 40 in 1999. Pep Boys has about 625 stores.
Another competitor, Illinois-based National Tire & Battery (NTB), said it expects to open 30 stores this year, including some in areas vacated by Penske.
NTB, which has 348 stores nationally, is a division of Sears, Roebuck and Co. Some of the new stores will be in Sears full-line retail locations and others will be free-standing.
``We're always looking to grow the NTB format through store openings and acquisitions,'' said Chuck Merydith, NTB director of public relations and communications. ``NTB is looking at the Penske locations. We haven't made a decision.''
Daniel Jarvis, a media relations specialist for Troy-based Kmart, said the retailer is weighing all its options for the property being vacated by Penske.
Some of the service centers may be used for storage or to house other merchandise, he said. The retailer might even seek an agreement with another company, such as NTB, to run the vacant auto service center locations, though Mr. Jarvis seemed to indicate that option was unlikely.
``Penske's one of the very best in auto service,'' Mr. Jarvis said. ``If they can't make it work in certain markets, I'm not sure anyone can.''
Tire Business Managing Editor Larry Wingert contributed to this report.