Pep Boys has announced results for the second quarter and first half (26 weeks), ended Aug. 1.
Sales for the 13 weeks ended Aug. 1, were $488.9 million, as compared to $500 million for the 13 weeks ended Aug. 2, 2008. Comparable sales decreased 2.3 percent, consisting of a 5.2 percent comparable service revenue increase and a 4 percent comparable merchandise sales decrease. In accordance with GAAP, service revenue is limited to labor sales and merchandise sales and includes merchandise sold through both the service center and retail lines of business. Re-categorizing sales into the respective lines of business from which they are generated, comparable service center revenue (labor plus installed merchandise and tires) increased 2.3 percent, while comparable retail sales (DIY and commercial) decreased 6 percent.
Earnings From Continuing Operations Before Income Taxes increased to $12.8 million for the second quarter of fiscal 2009 from the $6.6 million recorded in the same period last year. Net Earnings increased to $7.7 million, or 15 cents per share, for the second quarter of fiscal 2009 from the $5.4 million, or 10 cents per share, recorded in the same period last year. The second quarter 2009 results reflect service center revenue growth, improved gross margin rates and tight spending control. The second quarter 2008 results included a $4.1 million gain from the disposition of assets and a one-time $2.2 million tax benefit resulting from the recording of a deferred tax asset.
Sales for first half were $985.4 million, as compared to $998.1 million for the 26 weeks ended Aug. 2. Comparable sales decreased 1.3 percent, consisting of a 4.5 percent comparable service revenue increase and a 2.6 percent comparable merchandise sales decrease. Re-categorizing sales (see above), comparable Service Center Revenue increased 2.8 percent, while comparable retail sales decreased 4.6 percent.
Earnings From Continuing Operations Before Income Taxes increased to $32.8 million for the first half of 2009 from the $16 million recorded in the same period last year. Net Earnings increased to $18.6 million, or 36 cents per share, for the first half of fiscal 2009 from the $10.1 million, or 19 cents per share, recorded in the same period last year. The first-half 2009 results reflect Service Center revenue growth, improved gross margin rates, tight spending control and reduced interest expense. The first-half 2009 results also include a $6.2 million gain resulting from bond repurchases. The first-half 2008 results included a $3.5 million gain resulting from bond repurchases, a $9.6 million net gain from dispositions of assets (primarily from sale leaseback transactions) and a one-time $2.2 million tax benefit resulting from the recording of a deferred tax asset.
“We are pleased with our performance for the quarter and year-to-date and remain on-track with our turnaround,” said CEO Mike Odell. “Our service center and commercial businesses show strong revenue growth and our core DIY retail business is stable. The current environment for sales of more discretionary items remains challenging for now.” The second quarter of 2009 is the last quarter where comparable sales are impacted by a prior period’s sell down of non-core merchandise ($2.4 million in the second quarter 2008).
Odell continued, “On the store growth front, we have started to prove out our ‘hub and spoke’ strategy by opening five new service and tire centers since our first quarter earnings release, bringing our year-to-date openings to six.”
“During the quarter, we continued to improve store execution and maintain our customers first focus, while simultaneously maintaining tight spending control,” said CFO Ray Arthur. “Our first-half SG&A expense was more than $24 million less in 2009 than 2008, helping us end the first half of 2009 with $45 million less net debt than we had at the beginning of the year.”
