PHILADELPHIA -- Pep Boys' board of directors has reduced the company's quarterly dividend from 6.75 cents per share to 3 cents per share. The next quarterly dividend is payable on April 27 to shareholders of record on April 13. The company also provided preliminary fourth quarter and fiscal 2008 results. Full and final fourth quarter and fiscal 2008 results will be reported on April 8.
 
“Given today's tight credit markets and the reduction in stock valuations, the board of directors determined that a reduction in our dividend is both prudent and appropriate at this time,” said chairman of the board James Mitarotonda. “We will continue to review the dividend level quarterly and will make adjustments as warranted to account for improved market conditions and company performance.”

Pep Boys expects to report fourth quarter sales of $466 million, a decrease of 10.1 percent from the $518 million reported for the prior year period. Fiscal 2008 sales are expected to be approximately $1,928 million, a decrease of 9.8 percent from the $2,138 million reported for the prior year period. The expected loss per share will be between 59 cents and 69 cents per share for the fourth quarter compared to a loss per share of 39 cents for the fourth quarter of last year. The expected annual loss will be between 53 cents and 63 cents per share as compared to an annual loss of 79 cents per share for the prior year.

The general pullback in consumer spending during the fourth quarter of 2008 resulted in a weak holiday season and the deferral of tire purchases. In addition, fourth quarter 2008 results were adversely affected by increased legal and inventory-related accruals of approximately $8 million; asset impairments of approximately $4 million; the accelerated amortization of approximately $1 million of expenses related to the company's recently replaced credit facility; $0.6 million in costs associated with previously announced cost-cutting initiatives; and a reduction of the company's tax provision benefit by approximately $7 million due to changes in the company's effective tax rate.

“We spent much of 2008 repositioning Pep Boys for future success,” said CEO Mike Odell. “We cleared non-core inventory, updated our hard parts assortments, re-merchandised our stores, installed a new service selling system, tested new marketing programs, implemented new incentive compensation programs designed to improve customer service and sales and also reduced our overhead costs.”

Odell continued, “We are encouraged that operational improvements designed to drive a better customer experience are beginning to take hold as customer service scores continue to rise and customer complaints decline dramatically. We fully expect these efforts to pay off with improved results and for Pep Boys to be profitable in 2009.”

Pep said company-wide sales trends have greatly improved from the 10.1 percent decline it experienced in the fourth quarter of fiscal 2008 to flat sales in the first five weeks of fiscal 2009 versus the same period last year. The company said it is experiencing positive sales comparisons year on year in both its service and commercial businesses, particularly in the Northeast. Sales trends in the retail business have also improved, but are still running single-digit declines due to reduced customer demand in discretionary categories. During the third and fourth weeks of February, Pep Boys launched new TV and radio ads focused on tires and oil changes, and experienced significant sales increases in its service business during the promotion.

“Our new marketing program is driving customers in, and our store associates are embracing our ‘customer first’ culture by delivering fast, expert service, every time, to keep them coming back,” said Odell.

Furthering this focus on service, Pep Boys expects to open its first three service “spokes” by the end of the second quarter. These service-only facilities will be located in Ventura, Calif.; East Puente Hills, Calif.; and Bridgeport, Pa.
 
In addition, the company has previously announced the completion of a new $300 million senior secured revolving credit facility to support Pep Boys' operations and growth.