The Pep Boys - Manny, Moe & Jack (NYSE: 'PBY')
Sales for the thirteen weeks ended February 2, 2008 were $517,639,000, as compared to the $578,951,000 recorded for the fourteen weeks ended February 3, 2007. Excluding the fourteenth week of Q4 2006, comparable merchandise sales decreased 4.4% and comparable service revenue decreased 1.0%. In accordance with GAAP, merchandise sales includes merchandise sold through both our retail and service center lines of business and service revenue is limited to labor sales. Excluding the fourteenth week of Q4 2006, re-categorizing Sales into the respective lines of business from which they are generated, comparable Retail Sales (DIY and Commercial) decreased 7.0% and comparable Service Center Revenue (labor plus installed merchandise and tires) increased 0.9%.EARNINGS
Net Earnings (Loss) from Continuing Operations Before Cumulative Effect of Change in Accounting Principle decreased from Net Earnings of $7,936,000, ($0.15 per share - basic and diluted) to a Net Loss of $18,505,000 (($0.36) per share - basic and diluted). This Net Loss included (i) $8.5 million of margin reductions related to the exiting of non-core merchandise, (ii) $6.2 million in store closure costs and (iii) $6.0 million in debt pre-payment costs.
Sales for the fiscal year ended February 2, 2008 were $2,138,075,000, as compared to the $2,243,855,000 recorded last year. Excluding the fifty-third week of 2006, comparable merchandise sales decreased 4.2% and comparable service revenue increased 1.8%. Excluding the fifty-third week of 2006 and recategorizing Sales (see above), comparable Retail Sales decreased 7.2% and comparable Service Center Revenue increased 2.8%.EARNINGS
Net Loss from Continuing Operations Before Cumulative Effect of Change in Accounting Principle increased from $7,071,000 (($0.13) per share - basic and diluted) to $37,438,000 (($0.72) per share - basic and diluted).
President & CEO Jeff Rachor commented, 'On our third quarter conference call, we announced our merchandising transformation strategy to edit and exit our substantial non-core inventory and improve hard parts coverage and core automotive category management. As noted on that call, in addition to the third quarter inventory write-down, we planned to sell through remaining non-core product at its book value, contributing little or no margin as it was sold. While the difficult economic backdrop created sales challenges during the fourth quarter, we are pleased to confirm that our progress to date leaves us well positioned to complete this first important step in our strategic plan by the beginning of the second quarter of this year.
Service center operations continued an eighth consecutive quarter of positive momentum, posting improvement in both sales and adjusted gross profit margins during the fourth quarter despite the difficult macro-economic environment.
It is important to note that despite the Q4 challenges, the current quarter to date results indicate that retail gross profit margins have rebounded to Q1 2007 rates and that service center operations remain strong.'
CFO Harry Yanowitz commented, 'Certain costs associated with the initial steps in our long-term strategic plan negatively impacted the fourth quarter by $0.27 per share. Adjusting for these items, the Net Loss was $0.09 per share.
Our efforts to reduce indebtedness and strengthen the balance sheet are continuing. In the fourth quarter, we closed the first of a series of sale leaseback transactions on 34 stores for gross proceeds of $166.2 million. Proceeds were used to partially pay down our outstanding real estate-backed term loan and related interest rate swap. Yesterday, we closed a second sale leaseback transaction on 18 stores for gross proceeds of $63.6 million, which we will also use to pay down debt.'
Pep Boys, Philadelphia
Investor Contact Harry Yanowitz, 215-430-9720 Media Contac Alex Spooner, 215-430-9588