Pep Boys Q2 Profit Down 84% On Charges

(RTTNews) - Auto parts retailer Pep Boys - Manny, Moe & Jack (PBY) on Monday reported an 84 percent plunge in profit for the second quarter, as a slight increase in revenues and margins were more than offset by higher charges. Revenues missed analysts' estimates.

Pep Boys' had been struggling with its bottom line in the last few quarters amid an uncertain economy, slow consumer spending and certain business strategy execution problems.

The company's second-quarter net income was $5.37 million or $0.10 per share, down from $33.05 million or $0.61 per share in the year-ago period.

The latest quarter's results include a tax burden of $2.5 million, primarily due to state tax law changes and an asset impairment charge of $1.7 million.

The year-ago period's net earnings included, on a pre-tax basis, merger termination fees of $43.0 million, net of related expenses. The year-ago results also also included severance charge of $0.7 million and the reclassification of $1.5 million of merger related costs.

On average, four analysts polled by Thomson Reuters estimated earnings of $0.19 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenues for the quarter edged up 0.4 percent to $527.62 million from $525.67 million in the prior-year period. Analysts had a consensus revenue estimate of $539.35 million.

Adjusted operating profit for the quarter was $19.4 million, compared to $15.5 million in the same period last year.

Mike Odell, President and CEO of Pep Boys said, "Improved product gross margins drove our 25% improvement in adjusted operating income during the quarter. Our strategically important maintenance and repair services remain steady and grew in customer count, sales and margin rate. Tire sales were down in dollars and units, but grew in gross margin dollars."

Comparable sales for the quarter decreased 1.3 percent, consisting of a 0.2 percent increase in comparable service revenue and a 1.7 percent decrease in comparable merchandise sales.

Pep Boys said it acquired 17 Service & Tire Centers in Southern California.

Odell said, "The expansion of our Service & Tire Centers continues with the acquisition of 17 locations in Southern California in September, bringing our total to 211 including one Service & Tire Center opened subsequent to the second quarter. Each of these new locations will be converted to our new 'Road Ahead' format designed with a more welcoming curb appeal and a comfortable and appealing customer lounge."

PBY closed Monday's regular trading session at $11.52, up $0.19 or 1.68 percent on a volume of 746,793 shares. However, in after-hours, the stock declined $0.82 or 7.12 percent to $10.70.