PHILADELPHIA — Pep Boys reported its financial results for the thirteen weeks, which ended on July 31. At the same time, the company announced a number of organizational changes that are effective immediately.
Sales for the quarter ended July 31 were $593,426,000, 6.7 percent higher than the $556,030,000 recorded last year. Comparable Sales increased 6.9 percent, including an increase in comparable merchandise sales of 8.4 percent and flat comparable service revenues. Recategorizing sales to more accurately reflect the two areas of automotive aftermarket in which the company competes, comparable retail sales (DIY and Commercial) increased 16.7 percent and comparable service sales (labor plus installed merchandise and tires) decreased 5.3 percent.
On a GAAP basis, Net Earnings (Loss) from Continuing Operations Before Cumulative Effect of Change in Accounting Principle improved from a Net Loss of $13,579,000 ($.26 per share – basic and diluted), which includes after tax expenses of $30,103,000 related to the July 2003 corporate restructuring and other non-operations activities, to Net Earnings of $14,649,000 ($.25 per share basic and $.23 per share diluted), which reflects an increase in shrinkage reserves and a shortfall in Service Revenues and includes after tax expenses of $3,290,000 unrelated to the current quarter’s operations.
The company believes that reporting Adjusted Net Earnings from Continuing Operations is more representative of its operating results. Accordingly, Adjusted Net Earnings from Continuing Operations of $17,939,000 (excluding after tax expenses of $3,290,000 unrelated to the current quarter’s operations) increased 8.6 percent from the $16,524,000 last year (excluding after tax expenses of $30,103,000 related to the July 2003 corporate restructuring and other non-operations activities). Adjusted fully diluted Earnings Per Share were $.29 this year (which includes an additional 6.9 million shares issued in the March 2004 equity offering and upon option exercises) versus $.30 last year.
On a GAAP basis, Merchandise Gross Profit margins increased by 560 basis points to 29.2 percent this year from 23.6 percent last year, while Service Revenue margins increased by 60 basis points to 23.4 percent this year from 22.8 percent last year. After making the aforementioned adjustments, Merchandise Gross Profit margins decreased by 80 basis points to 29.3 percent this year from 30.1 percent last year, while Service Revenue margins decreased by 120 basis points to 24.5 percent this year from 25.7 percent last year.
Recategorizing Gross Profit to more accurately reflect the two areas of automotive aftermarket in which the Company competes and after making the aforementioned adjustments, Retail Gross Profit margins increased by 20 basis points to 28.2 per this year from 28 percent last year, while Service Gross Profit margins decreased by 210 basis points to 28.9 percent this year from 31 percent last year.
On a GAAP basis, Selling, General and Administrative Expenses decreased by 270 basis points to 23 percent of Sales from 25.7 percent last year. After making the aforementioned adjustments, Selling, General and Administrative Expenses decreased by 60 basis points to 22.4 percent of Sales from 23 percent last year.
Sales for the six months, which ended on July 31 were $1,159,559,000, 8.7 percent higher than the $1,066,940,000 recorded last year. Comparable Sales increased 8.8 percent, including an increase in comparable merchandise sales of 10.3 percent and an increase of 2.8 percent in comparable service revenue. Reallocating sales to more accurately reflect the two areas of automotive aftermarket in which the company competes, comparable retail sales increased 17.4 percent and comparable service sales decreased 2 percent.
Net Earnings (Loss) from Continuing Operations Before Cumulative Effect of Change in Accounting Principle improved from a Net Loss of $20,906,000 (40 cents per share – basic and diluted) to Net Earnings of $30,840,000 (55 cents per share basic and 50 cents per share diluted).
In addition to reporting financial results, Pep Boys announced a few organization changes in its upper management. While President George Babich will assume direct responsibility for the operations side of the business, the company has appointed Harry Yanowitz to the CFO title and responsibilities. Yanowitz previously served as senior vice president, Strategy & Business Development, and previously served as a CFO of a public company. Babich, Yanowitz along with Hal Smith, executive vice president of merchandising and marketing, will constitute the company’s newly created Office of the Chief Executive, reporting directly to CEO Lawrence Stevenson. Brian Zuckerman, vice president general counsel and secretary, will also report directly to Stevenson.
For more information about Pep Boys, visit: www.pepboys.com.
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