The Pep Boys Meets, Investors Not Thrilled

Jun. 8.10 | About: Pep Boys (PBY)

The Pep Boys – Manny, Moe & Jack (NYSE:PBY) showed a profit of $11.95 million or 23 cents per share for the first quarter of its fiscal year ended May 1, 2010 compared with $10.9 million or 21 cents per share in the year-ago quarter. With this, the automotive retailer has exactly met the Zacks Consensus Estimate during the quarter.

Revenues in the quarter inched up 2.7% to $510 million. Comparable sales increased 1.4%, consisting of a 1.7% increase in comparable merchandise revenues and a 0.1% increase in comparable service revenues.

Merchandise revenues scaled up 2.8% to $409.2 million. The segment continued to account for 80.2% of total revenues compared with its year-ago level. Service revenues rose 2.6% to $100.8 million. The segment continued to account for 19.8% of sales compared with the year-ago quarter.

Operating profit rose 21% to $26 million during the quarter. As a percentage of sales, operating profit increased to 5.1% from 4.3% in the first quarter of the previous fiscal year.

Pep Boys’ cash and cash equivalents significantly increased to $88 million as of May 1, 2010 from $21 million as of May 2, 2009. The long-term debt-to-capitalization ratio remained almost unchanged at 40% as of the above period.

In the quarter, cash flow from operating activities increased more than threefold to $59 million from $18 million a year ago. This can be mainly attributable to increases in accounts payable and accrued expenses.

Investors were not happy with The Pep Boys’ results. They seem to be dissatisfied with the company’s earnings merely touching the estimates and the lack of an earnings outlook. Consequently, shares are down over 12% today.

Pep Boys - Manny, Moe & Jack is a leading automotive retail and service chain. The company is engaged principally in the retail sale of automotive parts, tires and accessories, automotive maintenance and service and the installation of parts. The company's primary operating unit is its SUPERCENTER format. The format allows the company to serve both “do-it-for-me” (which includes service labor, installed merchandise and tires) and "do-it-yourself" or retail customers.