We all know these three guys
The Pep Boys – Manny, Moe & Jack (NYSE:PBY) was founded in 1921 and today has over 750 locations in the U.S. and Puerto Rico. Its locations sell and install tires, parts, electronics and other vehicle-maintenance products. The focus at The Pep Boys – Manny, Moe & Jack (NYSE:PBY) is on service and installation.
In the first quarter, sales increased 2.2% to $536.2 million compared to last year. Comparable sales increased 1%. Earnings rose from $0.02 per share last year to $0.07 this year.
Going forward, The Pep Boys – Manny, Moe & Jack (NYSE:PBY) is testing a more customer-centered strategy in the Tampa, Fla. market. The company started with one location and the positive results are leading it to test the strategy in the entire market. The new changes touch every aspect of the business model and start with the company’s employees.
The plan is to build lasting relationships with its customers whether it’s for service or retail needs and handle all of their automotive care. The test store in Tampa, Fla. was completely remodeled with new waiting areas and a more inviting retail environment to appeal to all customers, including women. According to CEO Michael Odell on the company’s recent earnings call,
The cost of the physical changes for the rest of the Supercenters in the [Tampa, Fla.] market is about $525,000 per store. It requires a 13% comparable-store sales lift in year one to produce a 15% after-tax internal rate of return. The results to date are a lift in comparable-store sales that is significantly higher than that.
Foolish assessment
There’s still room for growth with these auto-parts retailers. The average vehicle age in the US is over 11 years old and repairs are needed. Even though the U.S. economy has recovered and new auto sales are up, many people are still choosing to keep their cars longer. This trend will benefit the auto-parts retailers.
Of the three companies, my favorite is The Pep Boys – Manny, Moe & Jack (NYSE:PBY) because it’s the smallest and has the most room for growth. A successful implementation of its new store concept in Tampa, Fla. will help the company going forward as it expands the concept into its other stores, boosting comparable sales.
AutoZone, Inc. (NYSE:AZO) and O’Reilly Automotive Inc (NASDAQ:ORLY) are both in a position to consolidate the fragmented auto- parts business and expand their respective footprints. Look for further gains from all three companies over the long term.
The article These Auto-Parts Retailers Are Running at Full Throttle originally appeared on Fool.com and is written by Mark Yagalla.
Mark Yagalla has no position in any stocks mentioned. The Motley Fool owns shares of O’Reilly Automotive. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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