PHILADELPHIA (Sept. 9, 2013) — Pep Boys – Manny, Moe & Jack reported 25-percent higher operating income for the quarter ended Aug. 3 as gross margins improved on most products and services.
Adjusted operating profit for the second quarter was $19.4 million, or 3.6 percent of the $527.6 million in sales, Pep Boys said. Sales revenue was up just 0.4 percent over the comparable 2012 quarter.
When charges against earnings and a reclassification of merger-related costs are taken into account, the operating income drops to $17.7 million, Pep Boys said.
Net earnings sank 83.6 percent to $5.4 million.
Pep Boys President and CEO Mike Odell attributed the income rise to improved product gross margins, including those for tires, sales of which were down in both dollar and unit terms.
"Our strategically important maintenance and repair services remain steady and grew in customer count, sales and margin rate," Mr. Odell said.
Pep Boys is "cautiously optimistic" that tire demand will improve yet this year, Mr. Odell added.
Regarding Pep Boys' recent acquisition of 17 stores in Southern California from AKH Co. Inc., Mr. Odell said the company is converting them to its "Road Ahead" retail format, which he described as having a "more welcoming curb appeal and a comfortable and appealing customer lounge."
Pep Boys did not comment on the expected sales or earnings contribution of the acquired stores.
For the six months ended Aug. 3, Pep Boys' operating income fell 3.6 percent to $24.1 million, while sales increased 1.3 percent to $1.06 billion as improved service center revenue offset lower retail sales.
Net earnings fell 73 percent to $9.2 million.