Exhibit 99.1 Press Release issued by the Company dated May 12, 2005.
Pep Boys Reports 0.3% Q1 Comp Sales Decrease
- Net Loss from Continuing Operations of $0.04 -
PHILADELPHIA - May 12, 2005 - The Pep Boys - Manny, Moe & Jack (NYSE: "PBY"),
the nation's leading automotive aftermarket retail and service chain,
announced the following results for the thirteen weeks (first quarter) ended
April 30, 2005.
Operating Results
Sales
Sales for the thirteen weeks ended April 30, 2005 were $564,226,000, 0.3% less
than the $566,133,000 recorded last year. Comparable merchandise sales
increased 0.7% and comparable service revenue decreased 4.6%. Recategorizing
Sales to more accurately reflect the two areas of automotive aftermarket in
which the Company competes, comparable Retail Sales (DIY and Commercial)
increased 1.0% and comparable Service Center Revenue (labor plus installed
merchandise and tires) decreased 2.1%.
Earnings
Net Earnings from Continuing Operations decreased from Net Earnings of
$15,082,000 ($0.27 per share - basic, $0.25 diluted) to a Net Loss of
$2,386,000 ($0.04 per share - basic and diluted).
Commentary
Pep Boys Chairman and CEO, Larry Stevenson, commented, "As I have repeatedly
cautioned investors, the near term results of our turnaround will continue to
be uneven. While Pep Boys has a very exciting future ahead, achieving
fundamental and sustainable performance improvements will take time. On the
Retail side, we continue to refine our product mix, pricing and promotional
programs to achieve the most appropriate balance between retail sales growth
and profitability. As we continue to work against our Service Center
improvement initiatives, we expect our financial results to begin to reflect
the benefits of these initiatives during the second half of the year."
He continued, "We are excited about our store refurbishment program, which has
yielded very positive customer response and incremental sales in the markets
that we have renovated to date. During the first quarter, we grand re-opened
76 stores in our largest market, Los Angeles. Our second largest market,
Philadelphia, is scheduled to re-grand open in June, with Chicago to follow in
July."
CFO Harry Yanowitz said, "While business conditions remain difficult, we are
working to return our product margins to historic rates and carefully adjusting
elements of our SG&A costs to more closely fit our current revenues. Our
retail comparisons will continue to be a challenge in the second quarter given
last year's strong results, but the service comparisons will ease slightly.
While we remain concerned about gas prices and product cost increases,
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particularly with their effect on our lower-income customer base, the Pep Boys
team is focused on delivering long-term operating improvement."
Accounting Matters
Service Labor Reallocation
As previously announced, effective the first day of this quarter, we
restructured our field operations into separate retail and service teams. In
connection with this restructuring, certain retail personnel, who were
previously utilized in merchandising roles supporting the service business,
were reassigned to purely service-related responsibilities. The labor and
benefits costs related to these associates, approximately $4.7 million per
quarter, which were previously recognized in SG&A, are now recognized in Costs
of Service Revenue.
Co-op Advertising
Currently, a portion of our vendor support funds are provided in support of
specific advertising costs or "co-op," which, in accordance with EITF No.
02-16, we account for as a reduction of SG&A. We are in the process of
restructuring our vendor agreements to provide flexibility in how we apply
vendor support funds, to eliminate the administrative burden of tracking the
application of such funds and to ensure that we are receiving the best
possible pricing. Based on these renegotiations, we believe that future
allowances received from vendors will be prospectively accounted for as a
reduction of inventories and recognized as a reduction to cost of sales as the
related inventories are sold, in accordance with EITF No. 02-16. We anticipate
that the majority of the new vendor agreements will be finalized and in effect
by the end of the second quarter. Assuming that all of our vendor agreements
had been so restructured as of January 30, 2005, both our SG&A and Gross Profit
for the first quarter would have increased by approximately $8.8 million,
without materially impacting inventory valuation or Net Earnings from
Continuing Operations.
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Pep Boys Financial Highlights
Thirteen Weeks Ended: April 30, 2005 May 1, 2004
-------------------- ------------------
Total Revenues $ 564,226,000 $ 566,133,000
Net (Loss) Earnings From Continuing
Operations $ (2,386,000) $ 15,082,000
Average Shares - Diluted 55,185,000 63,587,000
Basic (Loss) Earnings Per Share
from Continuing Operations $ (0.04) $ 0.27
Diluted (Loss) Earnings Per Share
from Continuing Operations $ (0.04) $ 0.25
Pep Boys has 593 stores and more than 6,000 service bays in 36 states and Puerto Rico.
Along with its vehicle repair and maintenance capabilities, the Company also serves the
commercial auto parts delivery market and is one of the leading sellers of replacement
tires in the United States. Customers can find the nearest location by calling
1-800 - PEP-BOYS or by visiting pepboys.com.
Certain statements contained herein constitute "forward-looking statements" within the
meaning of The Private Securities Litigation Reform Act of 1995. The word "guidance,"
"expect," "anticipate," "estimates," "forecasts" and similar expressions are intended to
identify such forward-looking statements. Forward-looking statements include management's
expectations regarding future financial performance, automotive aftermarket trends,
levels of competition, business development activities, future capital expenditures,
financing sources and availability and the effects of regulation and litigation. Although
the Company believes that the expectations reflected in such forward-looking statements
are based on reasonable assumptions, it can give no assurance that its expectations will
be achieved. The Company's actual results may differ materially from the results discussed
in the forward-looking statements due to factors beyond the control of the Company,
including the strength of the national and regional economies, retail and commercial
consumers' ability to spend, the health of the various sectors of the automotive aftermarket,
the weather in geographical regions with a high concentration of the Company's stores,
competitive pricing, the location and number of competitors' stores, product and labor costs
and the additional factors described in the Company's filings with the SEC. The Company
assumes no obligation to update or supplement forward-looking statements that become untrue
because of subsequent events.
Investors have an opportunity to listen to the Company's quarterly conference calls discussing
its results and related matters. The call for the first quarter will be broadcast live on
Friday, May 13, 2005 at 8:30 a.m. EDT over the Internet at Broadcast Networks' Vcall website,
located at http://www.vcall.com. To listen to the call live, please go to the website at
least 15 minutes early to register, download and install any necessary audio software. For
those who cannot listen to the live broadcast, a replay will be available shortly after the
call. Supplemental financial information will be available the morning of May 13th on Pep
Boys' website at www.pepboys.com.
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Contact:
Pep Boys, Philadelphia
Investor Contact: Harry Yanowitz, 215-430-9720
Media Contact: Bill Furtkevic, 215-430-9676
Internet: http://www.pepboys.com