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Letter to the Editor

Pep Boys Reports Lower Q4 Results

Sales for the thirteen weeks ended February 1, 2003, were $482,786,000, 5 percent less than the $508,408,000 recorded last year. Comparable store sales, which were negatively impacted by a 12.5 percent decline in comparable tire sales, declined 5.2 percent.

Improved merchandise and service center margins and effective expense control did not offset the decline in sales. As a result, the company reported comparable net earnings of $1,470,000 ($.03 per share basic and diluted) as compared to $5,615,000 ($.11 per share basic and diluted).

Sales for the fiscal year ended February 1, 2003 were $2,172,488,000, 0.6 percent less than the $2,184,560,000 recorded last year. Comparable store sales declined 0.7 percent.

An improvement in merchandise and service center margins as well as effective expense control offset the 0.7 percent decline in comparable store sales. As a result, comparable net earnings were $48,740,000 ($.95 per share basic and $.90 per share diluted), 26 percent greater than the $38,660,000 ($.75 per share basic and $.74 per share diluted) that was earned last year.

Pep Boys CEO Mitchell G. Leibovitz commented, "After eight consecutive quarters in which earnings increased at least 30 percent, we are disappointed with our fourth quarter results. Unfortunately, higher merchandise and service margins and effective expense control were offset by the sales impact of extremely low consumer confidence and a very depressed replacement tire market.

Despite a very challenging retail environment, we were pleased to achieve a 26 percent increase in comparable net earnings for the full year.

Going forward, our main focus is to improve sales in all four areas of our core business. Given the progress that we have made in merchandise and service margins, expense control and the ongoing improvement of our balance sheet, we are positioned for growth when the economy and replacement tire market normalize."

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