Pep Boys beats expectations

The car-parts and repair company sees fortunes rise as people hold on to their clunkers.

By Kim Peterson Dec 6, 2010 5:49PM
Car Trouble © Getty ImagesNew-car sales are slowly improving but not enough to worry Pep Boys (PBY).

Manny, Moe and Jack are having a great few months, seeing shares pick up about 50% since June to close Monday at $12.96. That momentum will likely continue after the company beat expectations on profit and sales.

The company reported a profit of $5.7 million, or 11 cents a share, for the third quarter. That's up from a gain of $2.1 million, or 4 cents a share, a year ago. Analysts expected 8 cents a share.

On the revenue side, Pep Boys reported $496 million for the quarter, up from $473 million a year ago. Analysts expected $487 million. Post continues after video:
"Our third-quarter results reflect sales growth, improved overall gross margin rate and operating expense leverage," said chief executive Mike Odell. The results are consistent with the company's goal of having an operating margin in the mid- to high single digits, he added.

Pep Boys can thank the economy for some of its good fortune. People are still waiting to buy new cars, turning instead to Midas (MDS), AutoZone (AZO) and other service and parts shops for help.

One analyst thinks car-repair companies will see favorable trends for at least two to five more years, Reuters reported. Only about 10.4 million new cars were sold in the United States in all of 2009, and that figure could rise to 11.5 million for this year.




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