Pep Boys Reports 2.0% Q3 Comp Sales Decrease; Net Loss from Continuing Operations of $0.21

Operating Results

Third Quarter

Sales

Sales for the thirteen weeks ended October 29, 2005 were$545,206,000, 2.4% less than the $558,465,000 recorded last year.Comparable merchandise sales decreased 0.6% and comparable servicerevenue decreased 8.2%. In accordance with GAAP, merchandise salesincludes merchandise sold through both our retail and service centerlines of business and service revenue is limited to labor sales.Recategorizing Sales into the respective lines of business from whichthey are generated, comparable Retail Sales (DIY and Commercial)increased 2.1% and comparable Service Center Revenue (labor plusinstalled merchandise and tires) decreased 7.6%.

Earnings

Net Earnings (Loss) from Continuing Operations decreased from NetEarnings of $6,669,000 ($0.12 per share - basic and $0.11 per sharediluted) to a Net Loss of $11,410,000 (($0.21) per share - basic anddiluted).

Nine Months

Sales

Sales for the nine months ended October 29, 2005 were$1,685,409,000, 1.8% lower than the $1,716,534,000 recorded last year.Comparable sales decreased 1.6%, including a decrease in comparablemerchandise sales of 0.5% and a decrease of 6.7% in comparable servicerevenue. Recategorizing Sales (see above), comparable Retail Salesincreased 0.6% and comparable Service Center Revenue decreased 4.8%.

Earnings

Net (Loss) Earnings from Continuing Operations decreased from NetEarnings of $35,155,000 ($.62 per share - basic and $.59 per share -diluted) to a Net Loss of $13,070,000 (($.24) per share - basic anddiluted).

Commentary

Pep Boys Chairman and CEO Larry Stevenson, commented, "In ourretail operations, we continued the process of managing our productmix and price points to improve our margin rate. In this quarter,while gross profit from Retail Sales continued to be adverselyaffected by the increased occupancy expense associated with our storerefurbishment and systems investments, merchandise margins improvedfor the first time on a year-on-year basis. As we enter Q4, we expectRetail Sales comps to be modest, but continued improvements inmerchandise margins should allow us to surpass the gross profit fromRetail Sales that we generated in fiscal 2004 Q4."

He continued, "It was again a very difficult quarter for ourService Center operations, with comparable sales down 7.6%, whichincludes a 11.6% decrease in tire sales. Adjusting for the effect ofthe non-cash increase to the tire warranty reserve discussed below,Service Center operations comparable sales were down 6.7%, whichincludes a 8.9% decrease in tire sales. While the disruption caused byour recent field restructuring is not yet behind us and the spike inenergy prices has disproportionately affected our lower incomecustomer base, the recently-announced addition of Joe Cirelli to theservice and tires team has helped to re-energize our field leadership.Revenues were soft for the entire quarter, but were particularly softduring the immediate aftermath of Hurricane Katrina, and subsequentincrease in fuel prices."

CFO Harry Yanowitz said, "During the quarter, we had a few notableitems that are incorporated in our results. We recognized a $1.0million expense for the self-insured costs related to hurricane damageclaims. In addition, we increased our road hazard tire warrantyreserve, resulting in a non-cash charge that reduced Service Centersales and gross profit by approximately $1.9 million. We did not sellany stores in either this quarter or the same quarter last year. Asnoted as a subsequent event in our last 10-Q, we also re-purchased1,283,000 shares during the third quarter for approximately $15.5million ($12.10 per share)."

We grand re-opened six stores in our Harrisburg market during thequarter and an additional 31 in our Las Vegas, Phoenix and Tucsonmarkets last weekend. The remodeled stores continue to yield increasedcustomer count and incremental sales and we expect approximately 200of our 593 stores to be grand re-opened by the end of this fiscalyear.

Mr. Yanowitz commented, "Even though our year to date cash flowsfrom operating activities are only $4.3 million less than last year,we have reduced our investment rate to reflect this more challengingoperating environment by stretching out the completion of our storerefurbishment program to the end of 2008. We now expect $80 to $85million of capital expenditures in fiscal 2005, rather than thepreviously forecasted $110 million."

Accounting Matters

Service Labor Reallocation

As previously announced, effective the first day of this year, werestructured our field operations into separate retail and serviceteams. In connection with this restructuring, certain retailpersonnel, who were previously utilized in merchandising rolessupporting the service business, were reassigned to purelyservice-related responsibilities. The labor and benefits costs relatedto these associates, approximately $5.4 million in this quarter, whichwere previously recognized in SG&A, are now recognized in Costs ofService Revenue.

Co-op Advertising

Currently, a portion of our vendor support funds are provided insupport of specific advertising costs or "co-op," which, in accordancewith EITF No. 02-16, we account for as a reduction of SG&A. We are inthe process of restructuring our vendor agreements to provideflexibility in how we apply vendor support funds, to eliminate theadministrative burden of tracking the application of such funds and toensure that we are receiving the best possible pricing. Based on theserenegotiations, we believe that future allowances received fromvendors will be prospectively accounted for as a reduction ofinventories and recognized as a reduction to cost of sales as therelated inventories are sold in accordance with EITF No. 02-16. We nowanticipate that the majority of the new vendor agreements will befinalized and in effect by the end of the fiscal year. Assuming thatall of our vendor agreements had been so restructured as of July 31,2005, both our SG&A and Gross Profit for the third quarter would haveincreased by approximately $7.5 million, without materially impactinginventory valuation or Net Earnings from Continuing Operations.

Pep Boys Financial Highlights


Thirteen Weeks Ended: October 29, 2005 October 30, 2004
--------------------- ---------------- ----------------

Total Revenues $ 545,206,000 $ 558,465,000

Net (Loss) Earnings From Continuing
Operations $ (11,410,000) $ 6,669,000

Average Shares - Diluted 54,774,000 58,326,000

Basic (Loss) Earnings Per Share
from Continuing Operations $ (0.21) $ 0.12

Diluted (Loss) Earnings Per Share
from Continuing Operations $ (0.21) $ 0.11


Thirty-Nine Weeks Ended: October 29, 2005 October 30, 2004
------------------------ ---------------- ----------------

Total Revenues $ 1,685,409,000 $ 1,716,534,000

Net (Loss) Earnings From Continuing
Operations $ (13,070,000) $ 35,155,000

Average Shares - Diluted 55,288,000 64,977,000

Basic (Loss) Earnings Per Share
from Continuing Operations $ (0.24) $ 0.62

Diluted (Loss) Earnings Per Share
from Continuing Operations $ (0.24) $ 0.59

Pep Boys has 593 stores and more than 6,000 service bays in 36states and Puerto Rico. Along with its vehicle repair and maintenancecapabilities, the Company also serves the commercial auto partsdelivery market and is one of the leading sellers of replacement tiresin the United States. Customers can find the nearest location bycalling 1-800-PEP-BOYS or by visiting pepboys.com.

Certain statements contained herein constitute "forward-lookingstatements" within the meaning of The Private Securities LitigationReform Act of 1995. The word "guidance," "expect," "anticipate,""estimates," "forecasts" and similar expressions are intended toidentify such forward-looking statements. Forward-looking statementsinclude management's expectations regarding future financialperformance, automotive aftermarket trends, levels of competition,business development activities, future capital expenditures,financing sources and availability and the effects of regulation andlitigation. Although the Company believes that the expectationsreflected in such forward-looking statements are based on reasonableassumptions, it can give no assurance that its expectations will beachieved. The Company's actual results may differ materially from theresults discussed in the forward-looking statements due to factorsbeyond the control of the Company, including the strength of thenational and regional economies, retail and commercial consumers'ability to spend, the health of the various sectors of the automotiveaftermarket, the weather in geographical regions with a highconcentration of the Company's stores, competitive pricing, thelocation and number of competitors' stores, product and labor costsand the additional factors described in the Company's filings with theSEC. The Company assumes no obligation to update or supplementforward-looking statements that become untrue because of subsequentevents.

Investors have an opportunity to listen to the Company's quarterlyconference calls discussing its results and related matters. The callfor the third quarter will be broadcast live on Friday, November 11 at8:30 a.m. EST over the Internet at Broadcast Networks' Vcall website,located at http://www.vcall.com. To listen to the call live, please goto the website at least 15 minutes early to register, download andinstall any necessary audio software. For those who cannot listen tothe live broadcast, a replay will be available shortly after the call.Supplemental financial information will be available the morning ofNovember 11th on Pep Boys' website at www.pepboys.com.