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Letter to the Editor
Friday May 16
Pep Boys Net Earnings Down 33% in Q2
The Pep Boys, the national full service automotive aftermarket chain, announced the following financial results for the thirteen weeks ended May 3, 2003. The company also announced that it will retire $75 million of 6.625 percent Medium-Term Notes which matures on May 15, 2003, for cash.Excluding non-recurring charges associated with an increase in legal reserves, the satisfaction of a pension obligation and the cumulative effect of a change in accounting principle to adopt SFAS No. 143, the company reported that operating and interest expense reductions were more than offset by lower sales and merchandise margins, resulting in comparable net earnings of $9,100,000 ($.18 per share - basic and $.17 per share - diluted), 33 percent lower than the $13,565,000 ($.26 per share - basic and diluted) recorded last year.
On a GAAP basis, net earnings declined from $13,565,000 ($.26 per share - basic and diluted) recorded last year to a net loss of $9,217,000 ($.18 per share - basic and diluted).
Sales for the quarter ended May 3, 2003, were $529,215,000, five percent less than the $558,973,000 recorded last year. Comparable store sales, which continue to be negatively impacted by lower tire sales, decreased 5 percent.
Pep Boys' President & Chief Financial Officer, George Babich, Jr., made the following comments:
"Industry-wide weakness in the replacement tire market, coupled with low consumer confidence which continues to depress discretionary spending, negatively impacted our tire, service repair and accessory merchandise businesses."
"While we are extremely disappointed with our financial results, with an improved economy, our merchandising and marketing initiatives should begin to improve sales and drive earnings growth."
"We remain relentlessly focused on improving sales per square foot, return on invested capital and deleveraging of the balance sheet. While most of our attention for the past two years has been focused on improving expense management, systems technology and people development, most of our attention going forward will be focused on merchandising and marketing initiatives to drive increased customer count and sales."
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