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Pep Boys: 30 more tire stores in 2014

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(Pep Boys photos) Pep Boys' Road Ahead strategy features modern wood and stone exteriors while inside there are streamlined shopping zones and a large customer lounge with leather chairs, TV, WiFi and coffee bar.

PHILADELPHIA (April 16, 2014) — Pep Boys – Manny, Moe & Jack plans to open 30 Service & Tire Centers during fiscal 2014, predominantly in three key markets — San Francisco, Boston and Charlotte, N.C.

The Philadelphia-based chain said it also expects to add more of its Speed Shops store-within-a-store operations to existing outlets and convert more locations to the firm’s “Road Ahead” modular design.

As many as 20 of the 30 new stores would be opened in the targeted markets during the first half of fiscal 2014, with the others to be opened in three more markets in late 2014/early 2015, according to Mike Odell, president and CEO.

Pep Boys is budgeting about $80 million this year to cover openings of its Service & Tire Centers locations, relocating two Supercenters, opening one new Supercenter, adding 25 Speed Shops within existing Supercenters and converting 42 stores to the company’s Road Ahead format.

In the past Pep Boys has estimated it costs about $525,000 and three to four months to transform a Supercenter store into its Road Ahead design, which includes modern wood and stone exteriors. Inside there are streamlined shopping zones and a large customer lounge with leather chairs, TV, WiFi and coffee bar.

Mike Odell

“Our new ‘Road Ahead’ strategy includes strong growth from our digital ‘omnichannel’ initiatives,” Mr. Odell said. “Overall, sales from service appointments made online, tires purchased online and installed in our service bays, and products purchased online for store pick up or home delivery grew 152 percent in the fourth quarter.”

Pep Boys now operates 228 Service & Tire Centers among its 800 locations in 35 states and Puerto Rico, including 19 featuring the Road Ahead format. Pep Boys invested $64.7 million in 2013 for new centers, conversions and acquisitions — including the purchase of 18 former Discount Tire Center locations in Southern California — along with upgrades to the firm’s information technology infrastructure.

In a conference call with analysts April 15, Mr. Odell said 25 of the 30 new centers will be on the firm’s “build-to-suit” model, which allows Pep Boys to enter “more desirable demographic trade areas.” Ten of the 22 Service & Tire Centers opened in fiscal 2013 were build-to-suit, he said.  

The company also continues to make progress on the sales mix and margin structure at these new stores, he said, helping sales grow on a per-store basis as their store portfolio matures.

“We have not been pleased with the consistency of the sales performance of the Service & Tire Centers that we opened in closed competitor facilities,” he told analysts, “and believe that the build-to-suits are a better tactic for opening new stores around our target customer groups because the key is building new stores near our target customers’ neighborhoods.”

Parallel to the Road Ahead expansion, Pep Boys is moving ahead with adding performance-oriented Speed Shops at existing store locations. The company has 106 Speed Shops in operation, Mr. Odell said, and plans to open 56 more this fiscal year, including 31 in conjunction with Road Ahead conversions.

“Speed Shops support a true DIY enthusiast and also connect with our everyday DIY maintenance customers,” Mr. Odell said, noting Pep Boys is updating its assortment of DIY products to stay current with customers’ desires.

Another key aspect of the Road Ahead strategy is digital operations, Mr. Odell added, noting that sales from digital — online service appointments, tire sales made online and/or products shipped to customers or picked up in Pep Boys stores — grew 152 percent in the quarter and 142 percent for year and accounted for 3 percent of overall sales for the year.

“We have made and continue to make numerous upgrades to our digital operations systems and processes and expect to significantly increase our sales from digital operations during 2014,” Mr. Odell said. “The automotive aftermarket is accelerating in its move to the digital world and we see this area as critical to our successful Omni-channel Road Ahead strategy.”

In the fiscal year ended Feb. 1, Pep Boys suffered a 46-percent drop in fiscal net earnings to $6.9 million, while falling $3.3 million into the red in the fourth quarter.

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