Pep Boys -- Manny, Moe & Jack
) reported a significant increase in profits to $13.2 million or
25 cents per share (excluding debt refinancing expense of $11.2
million and an asset impairment charge of $8.8 million) in the
third quarter of the year ended October 27, 2012 from $7.0
million or 13 cents per share in the comparable quarter of prior
year. With this, profits in the quarter surpassed the Zacks
Consensus Estimate by 8 cents.
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The company's revenues for the quarter decreased 2.4% to $509.6
billion from $522.2 million a year ago. It missed the Zacks
Consensus Estimate of $532.0 million.
Comparable sales slashed 2.7% due to a 3.2% drop in the company's
comparable merchandise revenues to $401.1 million, which was
partially offset by a 0.8% increase in comparable service
revenues to $108.5 million. In the U.S. automotive aftermarket,
the company generated Service Center revenues of $271.4 million,
which was flat year-over-year, and Retail business revenues of
$238.2 million, a 5.6% decline from the prior year.
The decline in merchandise revenues can be attributable to a fall
in the Retail business revenues. Meanwhile, the increase in
service revenues was due to a 0.2% increase in comparable store
service revenues resulting from higher customers, which was
partially offset by decrease in the average transaction amount
The company launched the Buy Online and Ship to Home in the
eCommerce business. This move will be adding to the other online
capabilities of the company including TreadSmart (tires from
information to installation) and Pick Up In Store. The company
further plans to integrate automotive service offerings and
automotive superstores with the digital capabilities.
Pep Boys had cash and cash equivalents of $78.7 million as of
October 27, 2012, up from $58.2 million as of January 28, 2012.
Total debt amounted to $200.0 million as of October 27, 2012
compared with $295.1 million as of January 28, 2012.
During the quarter, the company reduced debt by $95.0 million and
extended the maturity period to 2018. This refinancing activity
leads to a one-time charge of $11.2 million, while it reduced
annual interest expense of the company by approximately $11.0
During first nine months of fiscal year 2012, the company
generated cash flow of $116.2 million compared with $85.1 million
in the first nine months of fiscal 2012. Capital spending
decreased to $36.8 million from $50.8 million in the first nine
months of 2011.
Pep Boys, based in Philadelphia, supplies tires, batteries, new
and remanufactured parts for vehicles, chemicals and maintenance
items, fashion, electronic, and performance accessories. It also
provides non-automotive merchandise such as generators, power
tools and personal transportation products.
The company, which competes with
O'Reilly Automotive Inc.
), currently retains a Zacks #2 Rank, which translates into a
short-term (1 to 3 months) Buy rating.