Pep Boys - Manny, Moe & Jack Message Board

For those of you that have followed my posts for years, I was right on again. This company continues to have the worst management in the industry. Instead of focusing on sales in existing units and maximizing efficiencies, they continue to rollout the spokes that effected margin minus 1% last quarter. See below and excerpt from 10Q:

"Gross profit from service revenue decreased by $0.3 million, or 2.1%, to $12.2 million for the first quarter of 2010 from $12.5 million in the first quarter of 2009. Gross profit from service revenue decreased to 12.1% for the first quarter of 2010 from 12.7% for the first quarter of 2009. The decrease in gross profit was primarily due to higher fixed expenses such as occupancy costs (includes such items as rent, utilities and building maintenance) which increased by 100 basis points in the current year first quarter as compared to the prior year, primarily due to adding the new Service & Tire Centers. Excluding the impact of the new Service & Tire Centers (which are still in their ramp up stage for sales but incurring the full fixed expense load), the gross profit from service revenue was relatively flat year over year.



Selling, general and administrative expenses increased $3.6 million, or 3.3%. The increase was primarily due to increased media expense of $3.8 million, and increased payroll and related expenses of $1.4 million, partially offset by lower general liability insurance claims expense of $1.1 million.



Interest expense for the first quarter of 2010 was $6.6 million, an increase of $4.7 million compared to the prior year. The prior year included a $6.2 million gain resulting from the retirement of debt. Excluding this gain, interest expense declined by $1.6 million due to reduced debt levels.



Our income tax expense for the first quarter of 2010 was $7.8 million, or an effective rate of 39.2%, as compared to an expense of $9.0 million, or an effective rate of 44.7%, for the first quarter of 2009. The annual rate depends on a number of factors, including the jurisdiction in which operating profit is earned and the timing and nature of discrete items."

I've been on a 12 day LandCruise and spending 2 more days in Vancouver or would have responded sooner. I had order in last week for 30,000 at $8.95 and didn't hit. I see below $9 again. The info above also points out that they were lucky with a $1.2 million or 2 cents+ gain in tax benefits which is totally something management had zero to do with. Otherwise, they would have missed earnings by almost 3 cents. The $1.4 million gain in payroll is mainly from spokes again.....not paying for themselves. If they had not spent almost 8 cents a share on extra advertising, they would not have eevn had a sales gain. If you take the $409 million in total sales at 1.4% same store sales gain that's only $6 million in actual sales increase apples to apples. Guess what? They spent $3.8 million to get $6 million in sales.............They didn't spend last quarter and had about flat sales. The entire industry is on fire with sales increases. What this tells me is that they probably would have had the same sales increase with ZERO spent on advertising. They just blew away almost 8 cents a share...............DaninFW