PHILADELPHIA (Aug. 20, 2001) — Pep Boys–Manny, Moe & Jack reported a significant increase in earnings for the 13 weeks ended Aug. 4, although sales declined for the period.
In announcing its second-quarter operating results, the Philadelphia-based full-service automotive aftermarket chain said an improvement in merchandise and service center margins as well as lower operating expenses more than offset a decline in sales. The retailer achieved net earnings of $12.5 million, including a $234,000 net gain on the early retirement of debt, compared with profits of $4.38 million in the second quarter last year, when it saw a $967,000 net gain on the early retirement of debt.
However, the company noted its second-quarter sales—which reflected the impact of 38 store closures and other steps taken in October 2000 in conjunction with implementing its “Profit Enhancement Plan”—were $572.9 million. That was 9.6 percent less than the $633.9 Pep Boys reported in last year's same period. Service labor revenue, exclusive of installed product, fell 6.5 percent to $109.5 million from $117.1 million in 2000.
The company said the impact of steps taken last October to pare costs contributed to s 6.7-percent decline in comparable store sales. During the quarter, comparable service labor revenue and comparable merchandise sales declined 3.1 percent and 7.6 percent, respectively.
Service labor revenue, installed product, tires and commercial delivery accounted for about 55.4 percent of total revenue, according to Pep Boys.
For the six months ended August 4, Pep Boys reported net earnings of $21.6 million vs. profits of $10.8 million last year.
The company said sales for the half—which reflected the store closings and “Profit Enhancement Plan”—dropped 10 percent to $1.12 billion vs. $1.25 billion last year. Service labor revenue, exclusive of installed product, fell 6.9 percent to $218 million from the previous year. Comparable store sales declined 7.2 percent during the period while comparable service labor revenue and comparable merchandise sales declined 3.5 percent and 8 percent, respectively.
Service labor revenue, installed product, tires and commercial delivery accounted for approximately 55.7 percent of total revenue. An improvement in merchandise and service center margins, the company said, as well as lower operating expenses more than offset the period's decline in sales.
Pep Boys CEO Mitchell G. Leibovitz said the firm was "pleased to report another very positive quarterly performance. Although many of the steps that we took last October to enhance our future profitability have had a negative impact on sales, they have had a very positive impact on earnings.
"As was the case in the first quarter, we achieved significant improvements in our merchandise margins, gross profit from service operations and general and administrative expenses. Although we have been impacted by a weak replacement tire market, we are encouraged by the trends in the balance of our retail business and enter the third quarter with optimism."