Pep Boys Does Everything for Less…Including Second Quarter Earnings

Andrew Klips |

Shares of Pep Boys - Manny Moe & Jack (PBY) are hitting a speed bump in extended trading on Monday after the auto parts/auto care retailer posted an 84-percent decline in second-quarter profits, although sales were slightly higher for the quarter.

For the quarter ended August 3, the Philadelphia-based company said that revenue increased by 0.4 percent, or $1.9 million, to $527.6 million.  Net earnings totaled $5.4 million, or 10 cents per share, compared to $33.0 million, or 61 cents per share, in the year prior quarter.  Last year’s second quarter benefited heavily from a $43.0 million gain from merger-termination fees.

Wall Street was expecting a profit of 19 cents per share on revenue of $539.0 million.

In May 2012, private equity firm Gores Group LLC dropped its $804-million ($15 per share) takeover offer to take Pep Boys private as shrinking profits scared the group away.  Gores had to pay a $50-million break-up fee for walking away from the deal.

Same-store sales, which are closely watched as a growth metric because they eliminate fluctuations due to stores opening and closing, decreased by 1.3 percent.  Within comparable sales, service revenue improved 0.2 percent, while merchandise sales slipped 1.7 percent.

Improving gross margins helped the company reports 25-percent higher operating income.  Adjusted operating income rose to $19.4 million from $15.5 in last year’s quarter.  The company said that tire sales were down in dollars and units, but grew in gross margin dollars.

Chief executive Mike Odell commented that the company continues to be “cautiously optimistic that we will see improving demand for tires this year.” No guidance for the year was provided.

Pep Boys announced on Friday that it acquired 17 Discount Tire Centers in Southern California from AKH Company.  The company is converting the stores in its “Road Ahead” format with more curb appeal and a comfortable lounge for customers.  All tallied, Pep Boys now has 211 service and tire centers.

Shares of Pep Boys traded higher all day on Monday, but pulled back into the closing bell to pare gains at 1.7 percent at $11.52.  In extended trading, however, shares are trading as low as $10.50, the lowest level since late in April.  So far in 2013, shares are up 20 percent through the end of regular trading on Monday.

Shares have lagged industry peer O’Reilly Automotive, Inc. (ORLY) , which is up about 40 percent in 2013, but outperformed Autozone Inc. (AZO) , which has gained about 17 percent through Monday’s close.

 

(image courtesy of Flickr)

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Companies

Symbol Name Price Change % Volume
AZO AutoZone Inc. 776.42 -7.32 -0.93 391,743
ORLY O Reilly Automotive Inc. 276.47 2.53 0.92 911,459
PBY Pep Boys-Manny Moe & Jack n/a n/a n/a 0
FRCH Frenchtex Inc 0.00 0.00 0.00 0

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