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August 13, 2018 02:00 AM

Icahn Automotive in the red in Q2, 1st half

Tire Business Staff
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    NEW YORK — Icahn Enterprises L.P.'s automotive segment reported $18 million and $52 million losses from continuing operations for the three- and six-month periods ended June 30, respectively, despite higher sales in both periods.

    The segment — which represents about 21 percent of Icahn Enterprise's overall revenue — comprises Pep Boys – Manny, Moe & Jack, IEH Auto Parts Holding and the AAMCO Automotive, Cottman Transmission and Precision Tune Auto Care franchise businesses.

    Icahn did not comment on the reasons for the losses. It did, however, note that the business unit's gross margin improved for the both periods, "reflecting higher margin percentages from franchisor operations as well as higher margins in automotive services due to cost improvements and selective price increases."

    The segment reported 5.7-percent higher sales in the second quarter of $737 million and 6.6 percent in the first half to $1.42 billion. The sales increases were due to acquisitions, which accounted for $71 million of the increase, and organic revenue growth of $57 million for the six months.

    On an organic basis, Icahn said services sales (including labor) and commercial sales both increased 6 percent ($33 million and $25 million, respectively) due to growing do-it-for-me and fleet businesses and growth in Pep Boys' commercial programs as well as increases in IEH Auto sales. Retail sales decreased by $1 million

    The segment's revenue breaks down as 46 percent automotive services, 35 percent commercial sales and 19 percent retail sales.

    Icahn is in the process of implementing a "multi-year transformation plan" for the segment, which includes integrating and restructuring of the operations of the various entities that make up the segment, the company said in its second quarter 10-Q filing with the Securities and Exchange Commission.

    Among the initiatives being implemented are:

    • Positioning the service business to take advantage of opportunities in the do-it-for-me market and vehicle fleets;
    • Growing the commercial parts distribution business in high volume markets;
    • Optimizing inventory across Icahn Automotive's parts and tire distribution network;
    • Optimizing the store and warehouse footprint through openings, closings, consolidations and conversions by market;
    • Digital initiatives including a new e-commerce platform and enhanced e-fulfillment capabilities;
    • Investment in customer-experience initiatives such as enhanced customer-loyalty programs and selective upgrades in facilities;
    • Investment in employees with focus on training and career development investments; and
    • Continued integration of the businesses including, but not limited to, supply chain and information technology capabilities.

    The company has declined multiple requests by Tire Business over the past nine months to discuss this process.

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    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Tire Business would love to hear from you. Email your letter to Editor Don Detore at [email protected].

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