PHILADELPHIA—Pep Boys—Manny, Moe & Jack closed 38 unprofitable stores and took a pre-tax charge of $96.5 million in the third quarter in what it called a "comprehensive profit enhancement plan that will significantly reduce the company's infrastructure and operating expenses."
In addition to the store closures, the company has shuttered two distribution centers, which altogether eliminated about 1,200 jobs. The company also said, in an Oct. 30 press release, that it will reduce its number of field and distribution center supervisors and consolidate its store support centers, eliminating approximately 300 other positions.
By far, Michigan is the state most affected by the closures, with 10 stores shuttered. The company closed five stores each in Washington and New York; four in Indiana; three in Oregon; two each in Ohio, Massachusetts and Louisiana; and one each in California, Connecticut, Florida, Illinois and Texas.
Philadelphia-based Pep Boys currently operates 627 stores—encompassing 6,486 service bays—in 36 states and Puerto Rico. A Nov. 1 statement said the firm "is generally pleased with the performance of its remaining 627 stores" and does not contemplate closing any additional ones in the near future.
Pep Boys also said it has modified the management structure within its stores and "rationalized its hours of operation to better correspond with customer demand on a store-specific basis." It estimated that the annualized pre-tax benefit of the cutbacks and initiatives will equal approximately $70 million.
For the 13 weeks ended Oct. 28, Pep Boys' sales grew 2.7 percent to $622.4 million, with service labor revenue, installed product, tires and commercial delivery accounting for about 57 percent of total sales. However, it said those sales also were "negatively impacted" by the closings.
Service labor revenue, exclusive of installed product, rose by a record 5.2 percent to $117.8 million for the quarter, the company said. But overall, because of the impact of the Profit Enhancement Plan's implementation and other write downs, Pep Boys had a quarterly after-tax loss of $63.2 million compared to net earnings of $9.93 million in 1999.
For the first nine months, sales rose 1.7 percent to $1.87 billion.
The pre-tax charge resulted in an after-tax loss of $52.4 million vs. net earnings of $40.1 million a year ago.
Service labor revenue, exclusive of installed product, hit a record $352 million during the period and was 4.7 percent higher than a year earlier.