Pep Boys' operating income down in Q1

PHILADELPHIA (June 11, 2013) — Pep Boys - Manny, Moe & Jack suffered a 55.7-percent drop in operating earnings for the quarter ended May 4 on 2.2-percent better sales of $536.2 million.

Net income more than tripled to $3.86 million on a one-time tax benefit due to state hiring credits. The drop in operating income—to just 0.7 percent of sales—can be attributed primarily to lower gross profits from service revenues.

Comparable sales increased 1 percent, based on a gain of 4.2 percent in comparable service revenue and an increase of 0.1 percent in comparable merchandise sales. The relatively marginal growth came despite the chain's having 25 more stores in operation than a year ago.

President and CEO Mike Odell said all of Pep Boys' service business categories experienced positive sales comps, except for tires.

"While not quite positive yet, tire sales comps are improving," he said, "and we are capturing more margin dollars from each tire sold. During the first month of our second quarter, our positive comparable store sales trend has continued."

Pep Boys operated 763 stores at the end of the quarter, and Mr. Odell said the company is planning to broaden the test of a new store concept in the Tampa, Fla., marketing area, based on "very encouraging results" to date at the prototype store there.