PHILADELPHIA -- Pep Boys has announced its results for the first quarter, thirteen weeks of 2007, ended May 5.
Sales for the thirteen weeks were $546 million, as compared to the $556.6 million for the first quarter of 2006. Comparable sales decreased 2.3 percent, including a 3.1 percent comparable merchandise sales decrease and a 1.5 percent comparable service revenue increase.
Recategorizing sales into the respective lines of business from which they are generated, comparable Retail Sales (DIY and commercial) decreased 4.6 percent and comparable Service Center Revenue (labor plus installed merchandise and tires) increased 1 percent.
Net Earnings (Loss) from Continuing Operations Before Cumulative Effect of Change in Accounting Principle increased from a Net Loss of $867 thousand ((2 cents) per share - basic and diluted) to Net Earnings of $3.22 million (6 cents per share - basic and diluted).
In his first 60 days, new President and CEO Jeffrey Rachor said he is encouraged by the long term opportunities for Pep Boys and its shareholders.
“In particular, I am excited about the scale of the opportunity in service, a business I have worked in for 25 years, that has struggled for Pep Boys,” said Rachor. “It is encouraging that our financial performance has started to turn, before we have begun to fully seize upon these opportunities in service. Before I joined Pep Boys, the company had already initiated programs to improve its operational efficiency and take advantage of asset monetization opportunities. I plan to accelerate both of these initiatives while I develop a longer term strategic plan with our board.”
CFO Harry Yanowitz commented, “ Operating margins remain an important focus for Pep Boys. This quarter, we improved gross margin rates in both our retail and service center lines of business. SG&A expenses, especially if one excludes CEO transition costs, were down significantly, as our p rod uctivity initiatives launched last summer start to show through to our results. As we announced on last quarter ’ s earnings call, at the end of the fourth quarter 2006, we ceased commercial sales in certain of our stores, which while reducing our first quarter comparable sales (2007 vs. 2006) by approximately 1 percent, is consistent with our prioritization of profits over sales.
“First quarter Operating Profit improved by $8.8 million from $7.2 million in 2006 to $16 million in 2007. Operating Profit included (i) in the first quarter of 2006, a $0.4 million Net Loss from Dispositions of Assets and a $2.3 million gain from the settlement of a p rod uct liability legal reserve and (ii) in the first quarter 2007, a $3.7 million gain from an insurance claim for stores impaired during Hurricane Katrina in 2005 ($2.4 million recognized in Net Gains from Dispositions of Assets and $1.3 million in merchandise margins) and a $3.9 million charge to SG&A for CEO transition costs.
“EBITDA, a non-GAAP indicator of levels of our financial performance that includes the gains and charges noted above, improved in the first quarter of 2007 by $8.6 million to $39 million, as compared to first quarter 2006. Our trailing four quarter Operating (Loss) Profit has improved from a loss of $7.3 million to a profit of $44.9 million, while our trailing four quarter EBITDA has nearly doubled from $76.9 million to $139.4 million. During the quarter we repurchased $50.8 million of our common shares, retiring 5 percent of our shares outstanding as of Feb. 3,” said Yanowitz.
For more information about Pep Boys, visit: www.pepboys.com.
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