Pep Boys turns corner on profitability, working to become more efficient

By Lisa Kerner

Charlotte, N.C., May 23 - While the Pep Boys - Manny, Moe & Jack faces many challenges, there are plenty of opportunities for the company to rebound, newly minted president and chief executive officer Jeffrey Rachor said during the company's first-quarter earnings call on Wednesday.

"In my first 60 days, I have visited nearly 100 of our stores, met talented and knowledgeable store staff, engaged hundreds of customers and met much of the store support center staff," Rachor said.

"From what I have learned, I am more encouraged by the long-term opportunity for Pep Boys and its shareholders than when I accepted this position. While we have turned the corner on restoring the company to profitability, much work remains to realize the company's true financial potential, including continued margin expansion, cost management and profitable sales growth. These initiatives can continue to improve operating performance, even before sales productivity increases."

Rachor said the company is working on strategic initiatives based on improving operational efficiencies and lightening the balance sheet. For example, Pep Boys is working with a real estate adviser to evaluate its properties for possible monetization by the end of the year.

"Unlocking the significant value of these assets through the structured and strategic process will position us to repay indebtedness and return capital to shareholders," Rachor said during the call.

First-quarter financial highlights include earnings up at $0.60 per share, from a loss in the prior-year first quarter of $0.20 per share. Sales slipped to $546.0 million, from $556.6 million in the year-ago period. Pep Boys' total debt is also up at $596.4 million, but short-term liquidity is good, with $107 million available under the company's revolving credit facility.

Pep Boys is a Philadelphia-based automotive aftermarket retail and service chain.

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