Pep Boys–Manny, Moe & Jack posted net income of $5.4 million on net sales of $527.6 million for its 13-week second quarter ended Aug. 3, 2013. That compares to income of $33 million on sales of $525.7 million for the same period last year.
The company's income-to-sales ratio was 1%. Operating income rose 25.1%, from $15.5 million to $19.4 million.
The 2Q 2013 net earnings reflect a $2.5 million tax burden primarily due to state tax law changes, while the 2Q 2012 net earnings included, on a pre-tax basis, $43 million of merger termination fees, net of related expenses.
Comparable store sales decreased 1.3%, broken out as follows:
* a 0.2% increase in comparable service revenue (labor sales); and
* a 1.7% decrease in comparable merchandise sales (merchandise sold through Pep Boys' service centers and retail lines of business).
Comparable service center revenue was down 0.1% quarter to quarter, while comparable retail sales were down 2.6%.
"Improved product gross margins drove our 25% improvement in adjusted operating income during the quarter," says CEO and President Mike Odell. "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.
"While not yet realized, we continue to be cautiously optimistic that we will see improving demand for tires this year."
Odell says the expansion of the company's Service & Tire Centers continued with the acquisition of 17 Discount Tire Centers locations from AKH Co. Inc. in September. That brings the total number of Service & Tire Centers to 211.
The 17 new stores, located throughout the greater Los Angeles market, will be converted to Pep Boys' new "Road Ahead" format, which features "a more welcoming curb appeal and a comfortable and appealing customer lounge."
For the first six months of its fiscal 2013, Pep Boys recorded net income on $9.2 million on net sales of more than $1 billion. Compared to the first half of 2012, income was down 73%, while sales were up 1.3%.
