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The Pep Boys - Manny, Moe & Jack PBY)

F4Q2013 Earnings Conference Call

April 15, 2014 8:30 a.m. ET

Executives

Michael R. Odell - Chief Executive Officer, President and Director

Sanjay Sood - Chief Accounting Officer, Vice President and Corporate Controller

David R. Stern - Chief Financial Officer and Executive Vice President

Analysts

Bret Jordan – BB&T Capital Markets

Glenn Krevlin – Glenhill Capital

Operator

Greetings and welcome to the Pep Boys Fourth Quarter 2013 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Sanjay Sood, Chief Accounting Officer and Controller for Pep Boys. Thank you. You may begin.

Sanjay Sood

Good morning and thank you for participating in The Pep Boys' fourth quarter fiscal 2013 earnings conference call. On the call with me today are Mike Odell, President and Chief Executive Officer; and David Stern, Executive Vice President and Chief Financial Officer. The format of the call is similar to our previous calls. First, Mike will provide opening comments regarding our results and our strategic priorities, and then David will review the financial performance, balance sheet and cash flows. We'll then turn the call over to the operator to moderate the question-and-answer session. The call will end by 9:30 a.m. this morning.

Before we begin I'd like to remind everyone that this conference call is governed by the language at the bottom of our press release concerning forward-looking statements, as well as SEC Regulation FD. In compliance with these regulations, we are webcasting the conference call on www.investorcalendar.com. For anyone on the webcast who does not have the financial statements, you can access them on our website, www.pepboys.com.

I’ll now turn the call over to Mike Odell, our President and Chief Executive Officer. Mike?

Michael Odell

Thanks, Sanjay. Good morning and thank you for joining us today. I want to start today by thanking our 19,000 associates for their commitment to making Pep Boys the best places to shop and care for your car. We are in the midst of transforming our brand experience to create a new market model. While this transformation encompasses changes to our store appearance, merchandizing, marketing and technology, the most important difference is with our associates and how they build genuine relationships with our customers that lead to repeat sales and completely satisfied customers. I’m proud of their commitment and determination to execute our mission, which is people taking care of people and their cars.

After my comments Dave Stern will review our results, including adjustments for the 53rd week in 2012 and other unusual items. Our fourth quarter results were below expectations, starting with weak topline sales. My comments will focus on where we have fallen short and how our ongoing business repositioning strategy which we refer to as the Road Ahead, addresses our shortcomings. This will include what we have accomplished in key initiatives supporting our strategy to uniquely differentiate Pep Boys with our target customers.

There are three primary components to our business strategy. Number one is to continue to lead with and grow our service business, which represents the largest and faster growing segments of the automotive aftermarket. Number two is the transformation of our Supercenter stores to differentiate our brand with our target customers. And number three is the enhancement of our digital business to drive Omni-channel growth in both our service and retail businesses.

Starting with service as our strategy leads with service, since we favor the fundamentals for do it (indiscernible) over the long haul, the demand for maintenance and repair remains consistent which continues to drive the growth of our service customer base. We provide a great value and are quickly proving our customer experience. There is a huge gap between the dealer experience and its cost and the rest of the automotive aftermarket with this lack of consistently positive customer experiences and we intend to own that position which we call being the best alternative to the dealer to fill that gap profitably and to use our retail business to further complement our repositioning.

As an example, we traditionally have acquired new service customers through tire and oil change services like the rest of the industry. More recently, we have expanded our funnel for acquiring new customers by offering free professional installation of wipers and batteries. Traditionally we would have viewed these customers as retail customers, but what we have learned is that while they start as retail customers do to the convenience, they’re quick to take us up on our offer. And we know that any customer that lets us install their wipers or battery for them is really a service customer for most of their automotive needs. What we have also learned is that oftentimes they are actually picking up those wipers or that battery for a friend or a relative to install for them. So our offer is an even greater convenience for them. That is two examples on how we’re using our retail business to drive acquisition of customers for our service business.

Our service revenue for the fourth quarter grew 3.9% in total on our 13 week to 13 week basis and declined 0.3% on a comparable store basis. On a comparable store basis, customer count grew 1.1% while average ticket declined 1.4%. The source of the decline in average ticket was tires. Breaking the business down further on a comparable store basis, maintenance and repairs grew a healthy 3.5% with growth in every major category, while our tire business declined 7%. While we grew our tire business on a unit basis, our average all-in price per tire declined 8% during the quarter.

We discussed the decline in the average price per tire last quarter as well and in order to provide some forward visibility, retail pricing for tires has stabilized, which means that prices are not continuing to decline. The tire prices are still below last year comparisons and will likely remain so through the second quarter of 2014. To provide a little more color, our all-in price per tire, including the installation package, peaked during the third quarter of 2012 at $116 per tire. Our low point since then was this fourth quarter of 2013 at $106 per tire. During the first quarter of 2014, prices have inched back up but current pricing will not pass year ago pricing until the third quarter of 2014.

With respect to our Service & Tire Centers, we just opened our 228th location. Our 19 newly designed Service & Tire Centers which showcase the welcoming exterior curb appeal and comfortable customer lounge of our new ‘Road Ahead’ format continue to run ahead of their pro forma projections. As we have refined our real estate model over the past five years, we have also developed a build-to-suit model that allows us to enter more desirable demographic trade areas. 10 of the 22 Service & Tire Centers that we opened in 2013 were build-to-suit versus existing competitor facilities. And in 2014, 25 of the 30 that we plan to open will be build-to-suits. The build-to-suit model allows us to serve the attractive and less competitive neighborhoods that were built since Pep Boys’ previously discontinued building new stores back in the 1990s.

We’re also making progress on the sales mix and margin structure of our Service & Tire Centers and sales continue to grow on a per store basis as their store portfolio matures. We have not been pleased with the consistency of the sales performance of the Service & Tire Centers that we opened in closed competitor facilities and believe that the build-to-suits are a better tactic for opening new stores around our target customer groups because the key is building new stores near our target customers’ neighborhoods.

The Road Ahead; we have spoken about the transformation of our super centers for the past year. We started with one store in Tampa during the fourth quarter. And during the fourth quarter, we completed the remainder of our stores in the Tampa market. The first store has now been re-launched with just over one year and continues to perform very well. The rest of the stores in the market made up of five supercenters and five Service & Tire Centers have now been re-launched for 19 weeks. While still early and sales momentum is still building, we are experiencing a double digit sales lift that will produce returns in line with our 15% hurdle rate for internal rates of return.

While monitoring the results, we have also initiated plans to convert three additional markets. During the first half of 2014, we’ll complete our stores in the Bay Area of Northern California, the greater Boston area and the Charlotte market. Our objective is to be the best alternative to the dealer. We already have the service capability in terms of technicians, equipment and range of services and these physical changes bring our stores to dealer level in terms of customer experience as well. When you experience one of these new stores, you will clearly see our vision for Pep Boys to be the best alternative to the dealer and also how we can use our retail business to drive our service business with unique, free, professional installation services for retail shoppers and an awesome shopping experience.

Our age-old problem has been the disconnect between the expectations of our service customers, especially the more attractive segment of the service market and traditional DIY-ers. Our redesigned supercenter on one side caters to our appearance matters customer, which are customers who may never pick up a wrench to work on their cars and trucks but still love how their cars and trucks look. Our redesigned supercenter on the other side, appeals to our DIY proud customers who are enthusiast customers that are serious about the performance and appearance of their cars and trucks. The experience that both of these customer groups desire that we can provide is more consistent with being the best alternative to the dealer. While the cost of the store changeover is extensive, the sales lift we have experienced provides an attractive financial return and expands our customer funnel to draw in new customers well past tire deals and oil changes.

Another important element of the Road Ahead is our merchandising. On the DIY proud side of the store is our Speed Shop of which we now have 106. 31 of the 56 Speed Shops that we will open in 2014 will be done in conjunction with the Road Ahead conversions. Speed Shops support a true DIY enthusiast and also connect with our everyday DIY maintenance customers. Again, the other side of the store caters to our appearance matters and service customer segments. We still have the dominant assortment of products to improve the interior and exterior look of your car and to personalize your vehicle, but the visual presentation appeals to a broader audience than the traditional DIY-er and also includes automotive related impulse product. Work is underway to update our assortments for our customers who love their cars and car lifestyle. As we continue to dig deeper into our customer segmentation research, we are identifying new product opportunities to target these customer segments.

In March, we were fortunate to land John Kelly as our Senior Merchant. John is a passionate car guy which is great, but just as importantly, he’s a seasoned merchant in hard line fields of fashions and digital. John understands the customers we’re looking to attract for both service and retail. New exciting product has already started landing in our stores during the end of the first quarter, but expect more product changes for our target customers as well as improved promotional intensity and inventory efficiency as John gets settled into his new role.

The third leg of the Road Ahead for Pep Boys is our digital operations. Sales from digital operations include online service appointments and tire sales that are made online and installed in our stores, shipped to home sales and products that are ordered online and picked up in our stores. Sales through digital operations grew 142% for the full year and 152% during the fourth quarter. From a mix of business perspective, sales through digital operations counted for 4% of our sales during the fourth quarter as compared to 3% for the full year. We have made and continue to make numerous upgrades to our digital operations systems and processes and expect to significantly increase our sales from digital operations during 2014. The automotive aftermarket is accelerating in its move to the digital world and we see this area as critical to our successful Omni-channel Road Ahead strategy.

Much like our overall customer centric efforts, our digital content design and functionality are targeted to our key customer segments who are increasingly starting their shopping online and expect an effortless Omni-channel experience. There’s much more in the works from dramatically expanding the online assortment while reducing inventory levels to increasing key online partnerships to new content and functionality, all of which we look forward to sharing with you in future quarters as we hit each milestone.

In summary, 2013 was a transitional year for the 93 year old Pep Boys brand. From a sales and profit perspective, we did not grow enough or improve our profitability. We must and will execute better. However, we made good progress for the future growth of our company as we completed the [retooling] of our senior management team. We developed a strategy for our retail and service business that our key customer groups are strongly endorsing with new and repeat business. Our digital operations had strong growth and will further complement our retail service businesses through stronger on the channel integration. And we grew our critical service business to take advantage of this larger segment of the automotive aftermarket. Our customer centric efforts are guiding our strategies to grow our target customer groups, grow our sales and differentiate our sales in a competitive landscape.

Thank you for your interest in Pep Boys. I’ll now turn the call over to Dave Stern, our Chief Financial Officer, to review our financial results.

David Stern

Thanks, Mike. Good morning, everyone. This morning, I will review our results on both a GAAP and a line of business basis. The last page of our press release includes financial information in the line of business format.

Sales for the fourth quarter of 2013 were $495.7 million, a decrease of $35.1 million or 6.6% from the fourth quarter of 2012. This decrease was primarily driven by the loss of one operating week in the fourth quarter of 2013 compared to the fourth quarter of 2012. As a reminder, 2012 was a 53 week fiscal year. During that additional week in 2012, sales were $36.1 million. Excluding that additional week, sales would have increased by $1 million. Sales from non-comparable store locations during the quarter $12.6 million and were partially offset by a decline in comparable store sales of 2.4% or $11.6 million. Comparable store service revenue increased by 1.4%, while comparable store merchandise sales declined by 3.4%. This decline in merchandise sales was primarily driven by the decrease in tires, generators which was an impact of Hurricane Sandy in 2012, and oil sales.

Gross profit for the fourth quarter of 2013 was $104 million, a decrease of $13.2 million or 11.3% from the fourth quarter of 2012. The decline was primarily due to one less week of sales in 2013 compared to 2012. Gross profit margin, which is fully loaded with service payroll, warehousing and occupancy costs, was 21% of sales, a decrease of 110 basis points. Excluding the impairment charges of $2.8 million and $1.8 million in the fourth quarters of 2013 and 2012 respectively, gross profit margin was 21.5%, a decrease of 90 basis points from the prior year. This decrease was primarily due to higher employee expenses, partially offset by higher product gross margins.

Selling, general and administrative expenses for the fourth quarter of 2013 as a percentage of revenue were 22.3%, an increase of 20 basis points from the fourth quarter of 2012. In dollars, selling, general and administrative expenses decreased by $6.8 million or 5.8% from the prior year, primarily due to the impact of one less operating week in 2013 compared to 2012.

Operating loss for the fourth quarter was $6.6 million, an improvement of $9.8 million from the prior year. The current year included asset impairment charge of $2.8 million, while the prior year included an impairment charge of $1.8 million and pension settlement charge of $17.8 million, partially offset by a gain on disposition of assets of $1.6 million. Adjusted for these items, operating loss for the fourth quarter of 2013 was $3.8 million, compared to operating profit in 2012 of $1.6 million.

Interest expense during the fourth quarter was $3.9 million. This includes refinancing costs of $400,000 to re-price our term loan facility to reduce the interest rate by 75 basis points or approximately $1.5 million annually. Interest expense in the prior year fourth quarter was $4 million.

The income tax expense for the quarter was $6.8 million or an effective rate of 68% compared to a benefit of $5.7 million or an effective rate of 28% in the prior year. For the full year, the income tax expense was $2.2 million or 24.1% in 2013 compared to $9.3 million or an effective rate of 41.5% in 2012. The decrease in rates from period to period was primarily driven by a reduction in pretax income in relation to certain permanent tax items and tax credits. In addition, the rate was impacted by a change in foreign tax law enacted during 2013 and a favorable adjustment through deferred tax assets in our foreign operations.

Net loss, which includes the discrete items noted above for the fourth quarter of 2013 was $3.3 million or $0.06 per share, compared to a net loss of $14.5 million or $0.27 per share in the fourth quarter of 2012. Full year earnings for 2013 were $6.9 million or $0.13 per share as compared to $12.8 million or $0.24 per share for 2012. On a pretax basis, 2013 results included a net charge of $8.7 million comprised of the $7.4 million asset impairment charge, $600,000 severance charge, $400,000 debt refinancing expense, while 2012 results included on a pretax basis net benefits of $3.8 million comprised of the $42.8 million net merger termination proceeds, and $1.3 million gained from disposition of assets, partially offset by a $17.8 million pension settlement charge, $11.2 million of debt refinancing expense, $10.6 million of asset impairment charges, and a $700,000 severance charge.

I will now turn to results on line of business basis as opposed to a GAAP basis for our service center and retail operations for the fourth quarter of 2013. The service center business, which includes service labor revenue and installed merchandise, generated revenue of $269.1 million in the fourth quarter of 2013, a decrease of 3.3% or $9.4 million compared to the fourth quarter of 2012. This decrease was due to the additional week in 2012, which added $19.6 million to prior year sales, combined with lower comparable store sales of 0.3% or $800,000, partially offset by $11 million of sales from non-comparable store locations.

The decrease in comparable store revenue was due to a 7% decline in tire sales driven by price decreases. Excluding tires, service center comparable store revenue grew by 3.5%, driven by the continued strength in repair and maintenance service offerings. Service center gross profit was $42.1 million, a decrease of 10.5% or $4.9 million from the fourth quarter of 2012, primarily due to the impact of one less week in sales in 2013 compared to 2012.

Excluding $1.8 million and $800,000 asset impairment charges in the fourth quarters of 2013 and 2012 respectively, service center gross profit as a percentage of service center revenue, was 16.3%, a decline of 90 basis points from the same period of the prior year, primarily due to higher employee expenses and increased store occupancy costs, partially offset by higher product gross margin.

The retail business generated $226.6 million in the fourth quarter of 2013, a decrease of 10.2% or $25.7 million from the fourth quarter of 2012. This decrease was due to the additional week in 2012 which added $16.5 million to prior year sales, combined with lower comparable store sales of 4.6% or $10.8 million, partially offset by $1.6 million of sales from non-comparable locations. Retail comparable store sales declined primarily due to generators related to Hurricane Sandy, chemicals, filters, winter goods and oil.

The retail business generated gross profit of $61.9 million for the fourth quarter of 2013, a decrease of 11.8% or $8.2 million from the fourth quarter of 2012, primarily due to the impact of one less week in sales in 2013. Excluding the asset impairment charge of $900,000 in both 2013 and 2012 fourth quarters, the retail gross margin rate was 27.7%, a decrease of 50 basis points from the same period in the prior year. This decline in retail gross margin was primarily due to deleveraging of the fixed components of occupancy and warehousing costs against lower sales volumes, partially offset by improved product margins.

Moving to the balance sheet and cash flow. Cash at the end of 2013 was $33.4 million, a decrease of $25.8 million from the prior year end. Inventory at the end of 2013 was $672.4 million, an increase of $31.1 million from the prior year end. This increase was primarily due to investment in our new stores, adding Speed Shops to existing Supercenters, the conversion of Supercenters to super hubs and the introduction of new product offerings.

Accounts payable, including the trade payable program at the end of the year was $385.8 million, a decrease of $8.6 million from the prior year end. The accounts payables inventory ratio at year end was 57.4% compared to 61.5% at the prior year end.

Capital expenditures in 2013 were $64.7 million, including the acquisition of 18 Service & Tire Centers in the Southern California for $10.7 million. Capital expenditures also included the addition of 29 new locations, the conversion of 11 Supercenters into super hubs, the addition of 63 Speed Shops within existing Supercenters and required expenditures for information technology enhancements, including our e-commerce initiatives, as well as our regular facility improvements. Capital expenditures in 2012 were $54.7 million.

Free cash flow is defined as cash flow from operating activities plus amounts financed under our net trade payable program, which is included in cash flows from financing activities, plus cash flows from investing activities. Free cash flow for 2013 was $126 million less than that for 2012. This was primarily driven by the inventory and payables activity just covered, incremental capital investments of $10 million this year and the inclusion of $42.8 million of net merger termination settlement proceeds in 2012, partially offset by the payment of $14.1 million to terminate the decline benefit pension plan and the payment of $9.4 million to refinance debt last year.

For 2014, we anticipate capital expenditures of approximately $80 million. We plan to open 30 Service & Tire Centers, relocate two Supercenters, open one new Supercenter, add 25 Speed Shops within existing Supercenters and to convert 42 stores to the new Road Ahead format.

I'll now turn the call over to the operator to begin the question-and-answer session.

Question-and-Answer Session

Operator

(Operator Instructions). Our first question comes from the line of Bret Jordan with BB&T Capital Markets. Please proceed with your question.

Bret Jordan – BB&T Capital Markets

Could you talk a little bit maybe about the cadence of business in the quarter as it progressed? Was there any negative impact from weather as it got extreme late in the quarter? And then maybe if we could get some color, given the fact we’ve got a fair amount of time behind us since the quarter ended, maybe any visibility on what you’ve seen market demand wise since quarter end.

Michael Odell

There was some impact of the weather on the service business more so probably even than the retail business in terms of store closings and I would say it affected February as well which is not in these results. But overall the weather that we experienced is favorable for us. We’re definitely seeing more customer demand in the northern markets. Those comments around weather, around that, the weather is obviously confined to the northern markets. We definitely see better consumer demand in the northern markets as compared to our western markets where there really hasn’t been, in fact there’s been a lack of weather in the western markets. That’s the other extreme.

Bret Jordan – BB&T Capital Markets

Okay. And then on tires as a percentage of business mix in the quarter, clearly they seem to be having a fairly significant negative impact. What was their representation as a percentage of sales?

David Stern

They were about 18% of sales.

Bret Jordan – BB&T Capital Markets

Okay. And then you commented on oil as a category that was a headwind. Is that -- do you think you’re losing -- becoming a more competitive market and as a share shift for oil change, or what do you think was the driver for oil?

Michael Odell

I think that we were less promotional and that’s actually I think what you’ll see with John on board here. One of the opportunities for improvement is just our promotional intensity affecting both the retail and the service business. And no need to read like pricing impacts or anything in that promotion, but just the offers, the time in the offers supplier participation in the offers et cetera. And then we have opportunity to improve our execution there.

Bret Jordan – BB&T Capital Markets

Another question and I'll pass it along, but with John on board, I guess we look at inventory and the AP'd inventory is down a little bit and absolute inventories are up some. Where do we see expectations on inventory levels from here or maybe payables levels from here? Is there a category --

Michael Odell

The objective or the plan is to reduce the networking capital both through the inventory and through the payables. John has only been here for a short while so we haven’t put numbers to it, but we know that we’re not going to continue to increase our networking capital like we did last year.

Bret Jordan – BB&T Capital Markets

Okay, neither categories that he's looking at, but aren't currently in the box, that we would expect inventory to grow around or?

Michael Odell

Nothing to comment on. We did add obviously, if you’ve been in our stores in the past month you’ve seen apparel land in the stores, but we have more opportunities to reduce slower moving inventory then that will be more than any new products that we introduce.

David Stern

Bret, this is Dave. Also during the year, we opened up 7 Supercenters which of course consume more inventory than Service & Tire Centers. This year coming up we’re opening up one additional. We’ve got two reloads so that’s just a movement of inventory. We opened up 58 Speed Shops, again more than what we’re doing outside of the Road Ahead initiatives. That was an increase in inventory. We also added five additional super hubs. So there’s more activities this year, this year being 2013 and we would anticipate to consume inventory in 2014.

Bret Jordan – BB&T Capital Markets

Okay. And then the Speed Shop, what's the comp lift you're seeing in the store when the Speed Shop is hitting and now that you've got a few more data points?

Michael Odell

Sure, we’re seeing -- really the way we measure it Bret isn’t so much as just what are the Speed Shop categories lift, but what does it do to DIY? We’re seeing a spread in lifting DIY by about 10 percentage points.

Bret Jordan – BB&T Capital Markets

Okay. So a 10% comp by putting a DIY Speed Shop into the retail side of the store?

Michael Odell

That’s correct.

Operator

(Operator Instructions). Our next question comes from the line of Glenn Krevlin with Glenhill Capital. Please proceed with your question.

Glenn Krevlin – Glenhill Capital

Two questions. One is just, you talked about Service & Tire, 30 of them open this year, 25 build-to-suit. The other five I'm assuming are acquisitions or something else, if you could just fill in the blank there. And then secondly, on the last call, Mike you talked a bit about testing some new product in retail among the car enthusiasts. Can you give us -- maybe it's too early, but give us maybe some color around how some of those new products have fared?

Michael Odell

The other five stores will be taking over existing facilities in areas where we do have a demographic. So, not necessarily acquisitions, but not a build-to-suit that’s taking over existing facility and converting it to the Service & Tire Center. No acquisitions on the horizon at the moment. And in terms of the new product, a lot of that is just starting to hit now as we set for the spring in terms of the apparel, in terms of the new Pep Boys branded wash and wax chemicals, and some of the other new products that we’ve introduced. So I’d say the early signs look promising, but it is still relatively early.

Glenn Krevlin – Glenhill Capital

Can you also give us a sense, assuming you complete the three market rollouts, how many stores by fiscal year end, this fiscal year end will you have in the new format?

Michael Odell

Do you have that number handy?

David Stern

Probably about 60 stores.

Michael Odell

About 60, most of those being Service & Tire Centers.

Operator

Our next question is a follow up from the line of Bret Jordan with BB&T Capital Markets. Please proceed with your question.

Bret Jordan – BB&T Capital Markets

As we look regionally, and I guess an extreme winter in much of the country, and maybe some expectations that improves demand in 2014, could you talk at all regionally where you were seeing relatively more strength or weakness around the country for your volumes in the quarter, and then again maybe since quarter end?

Michael Odell

Again stronger in the northern markets, with really the only exceptions being losing some days during the quarter, but generally stronger in the northern markets. That’s from the Midwest of Chicago on over to Boston and New York, New Jersey, Pennsylvania. The southeast has performed pretty well for us and our big soft spot really has been in the west, particularly in southern California. I don’t have complete answers. There is -- we know that when it did rain, we got some nice demand. We know that new car sales are stronger in the west, but I’m not sure that explains completely why the difference between the east and the west.

Bret Jordan – BB&T Capital Markets

Okay, and then on tires, you've gotten more branded mix given that Michelin test market year-over-year. What of the 18% tires that are in mix, what's branded versus non-branded now?

Michael Odell

I have to think about it more. I’m going to answer the question more on vendors. Maybe if I give you a -- branded is down to -- non-branded is, let’s see, the way I was going to answer that question, Bret is that I would say that 40% of our mix now comes from suppliers that we didn’t have three years ago. So that would be the introduction of new brands. Obviously previously we had our prior supplier sold us a mix of private label and branded, but it’s now up to about 40% of our mix is suppliers that we did not have previously.

Bret Jordan – BB&T Capital Markets

Would that include direct source out of Asia? Would that include low-end Chinese buyers that you're buying directly in that 40%?

Michael Odell

Yes. That’s not a big part of the 40%. Most of it is we’ve added Michelin not to all stores, but to many stores. We’ve added Continental. We’ve added Falcon and then a little bit pieces of some other brands as well.

Bret Jordan – BB&T Capital Markets

Okay and one last question. As far as Tampa goes, you've got 19 weeks on the new stores. Are there any outliers to the downside? I guess to some extent, are Road Ahead stores in general meeting expectations, or universally meeting expectations?

Michael Odell

Yeah. There are some variants by store, but that’s also variants by week and by day which really points more to executional consistency that it is the Road Ahead strategy. So I do think that the Road Ahead strategy can apply to most of our stores. And as we go market to market, we are using that opportunity to figure out which stores might -- for instance in Charlotte one of those stores will actually convert to a Service & Tire Center. We’ll be leasing out the retail space, but the rest of the market we will be converting all the stores.

Operator

Mr. Odell, there are no further questions at this time. I’d like to turn the floor back to you for any closing comments.

Michael Odell

Okay. I just want to say we appreciate your time today and your interest in Pep Boys and look forward to a brighter 2014. Thank you.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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