Wednesday, November 26, 2014
Inquirer Daily News

Sales growth comes slowly for Pep Boys auto-parts chain

About a year after a failed bid to go private, the Philadelphia retailer continues to feel the effects of the disruption in the new-car sales market in 2008.

Sales growth comes slowly for Pep Boys auto-parts chain

It was one year ago that the CEO of Pep Boys — Manny, Moe & Jack told analysts that his intent was to grow the auto-parts retailer, not sell it.

Mike Odell’s comments came shortly after a Los Angeles-based private-equity firm had dropped plans to take Philadelphia-based Pep Boys private in a deal worth $15 per share.

As Pep Boys shareholders prepare to gather for their company’s annual meeting Wednesday, I hope one will ask whether when Odell expects to deliver that growth, because there have been scant signs of it in the last three years. The 763-store retailer generated total revenues of $2.09 billion in its fiscal year ended Feb. 2 compared with $2.06 billion in the previous year and $1.99 billion the year before that.

Still, sales for the 13 weeks ended May 4 did increase by 2.2 percent, or $11.6 million, to $536.2 million from $524.6 million for the same period in 2012. Comparable-store sales, which count only locations open during the same period a year earlier, were up 1.0 percent.

Pep Boys, which has been testing a new store format in the Tampa, Fla. region to appeal to female customers, has spent much of the last five years under Odell’s leadership trying to grow its automotive service business.

Unfortunately for Odell, the start of his tenure coincided with the 2008 decline in new-car sales in the wake of the financial crisis and federal rescues of General Motors and Chrysler. “Our sweet spot is vehicles between five and 13 years old,” he told equity analysts on a conference call Tuesday.

The disruption in the upward trend for new-car sales hit the normal maintenance cycle that Pep Boys counts on, causing a “trough” in oil changes first, then tires and brakes, and soon batteries, according to Odell.

With new-car sales having recovered to an estimated 15 million-unit level in 2013, Pep Boys’ sweet spot could look a lot better, starting in 2015, when those 2011 models begin to need more maintenance.

For now, Pep Boys’ shares remain below the $15-per-share offer made and then withdrawn by Gores Group L.L.C. in January 2012. On Tuesday, Pep Boys closed at $12.35, down 22 cents. Certainly not a trough, but far from peppy.

Mike Armstrong Inquirer Columnist
About this blog
Mike Armstrong blogs about Philadelphia corporations and business-related topics. Contact him at 215-854-2980. Reach Mike at marmstrong@phillynews.com.

Mike Armstrong Inquirer Columnist
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