PHILADELPHIA (March 3, 2005) — Despite getting back into the black last year, Pep Boys—Manny, Moe & Jack is cautioning investors that its interim results this year can be “uneven” as the automotive chain tweaks its retail operation to “thrive over the longer run.”
Pep Boys reported net income of $25.7 million—before an accounting change—vs. a loss of $15.2 million in fiscal 2004, and a sales improvement of 6.5 percent to $2.27 billion.
In the fourth quarter, though, the company's net loss deepened to $9.67 million from a net loss of $5.02 million, while sales rose 4.6 percent to $554.1 million.
In the fourth quarter, comparable retail sales increased 8.2 percent though the gross profit percentage fell to 25.3 percent from 28.2 percent. Comparable service center revenue fell by 0.3 percent, and that sector's gross profit also fell to 27.3 from 28.2 percent.
Comparable merchandise sales for the year grew 7.9 percent, and comparable service revenue rose 1.1 percent.
“Strong comparable sales is a key element of the retail renewal program that we started in the fourth quarter last year, but we have work to do to improve our resulting operating margins,” said Larry Stevenson, chairman and CEO. “This quarter, for the first time, we faced the very high comparable merchandise sales that we achieved over the last four quarters, and I am pleased that we were able to show significant additional comparable merchandise sales growth. I am confident that the continued development of our merchandising program will allow more of those sales to drop to the bottom line in future quarters.”
Mr. Stevenson added, however, that while the service business—which includes tires—saw accelerated comparable revenue compared with the previous few quarters, the bulk of it came from an improved economy and promotional activities instead of core operating improvements. He said the tire initiative, which was part of the retail turnaround, is progressing.
Pep Boys operates 595 stores with more than 6,000 service bays in 36 states and Puerto Rico.