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Declining Sales Hurt Pep Boys' Profit

Associated Press
Published | Updated

CHICAGO – Profit at Pep Boys-Manny, Moe & Jack (PBY) tumbled 48 percent in the latest quarter, hurt by a decline in sales from its service-center business, the auto-parts retailer said Thursday.

After the news, shares of Pep Boys fell $1.21, or 8 percent, to $13.97 on the New York Stock Exchange (search).

The Philadelphia-based company earned $7.6 million, or 13 cents a share, for the fiscal third quarter ended Oct. 30. That compares with $14.7 million, or 26 cents a share, in the same quarter a year ago.

The latest results fell short of Wall Street's expectations. Analysts polled by Thomson First Call had expected, on average, for Pep Boys to earn 20 cents a share.

Sales rose 4 percent to $559.2 million from $537.7 million. Sales at stores open at least one year, also known as same-store sales, climbed 4.1 percent.

Same-store sales in the company's service center, which include labor plus installed merchandise, declined 3.4 percent.

Pep Boys' executives have said in the past that the economy, gas prices and execution would be challenges for the service business in the quarter. But chief financial officer Harry Yanowitz told Dow Jones Newswires that the company is putting responsibility for the results squarely on its own shoulders.

"We think execution is the primary issue," Yanowitz said. "The macro environment was not as helpful as it was in the first quarter, but we do think that the fundamental business is ours to fix."

Pep Boys' service-center business sales have been flat or negative for the past four to five years, and the company is working to turn around that performance by improving customer service, Yanowitz said.

For the first nine months of the year, net income was $37.1 million, or 62 cents a share, compared with a loss of $30.9 million, or 59 cents a share, last year, when results were hurt by restructuring charges. Nine month sales rose to $1.72 billion from $1.6 billion.

Pep Boys had revenue of $2.13 billion for the 2003 fiscal year ended Jan. 31.