Are AutoZone and Pep Boys running out of gas?
As consumers snap up new cars, parts retailers need to rev up sales.
AutoZone reported Tuesday that profit in its last quarter rose 6.4% to $203.5 million, or $5.41 a share. Sales rose 2% to $1.99 billion. Wall Street analysts expected $5.39 a share in profit on sales of $2.02 billion. Same-store sales, a key retail metric that measures revenue growth at locations open at least a year, gained 0.2% in the quarter. MarketWatch notes that figure was the slowest growth rate in years.
Pep Boys, though, fared much worse. The Philadelphia chain reported a 2.7% decline in same-store sales in its quarterly results Monday. Overall, Pep Boys lost $6.8 million, or 13 cents a share. Revenue fell 2.4% to $509.6 million as costs rose. A gain in service revenue wasn't enough to offset a decline in merchandise sales.
Earlier this year, Gores Group pulled the plug on a $1 billion deal to buy Pep Boys after the chain's financial performance proved much weaker than the private equity firm had expected. Pep Boys has 740 locations in 35 states and Puerto Rico, far smaller than AutoZone, which owns 4,703 stores in 49 states, the District of Columbia and Puerto Rico. The outlook for Pep Boys seems dim.
Investors have speculated for years that either AutoZone or No. 2 player Advanced Auto Parts (AAP), which also is struggling, will pick up Pep Boys. Such a deal hasn't happened yet and may not ever occur because there doesn't seem to be any sense of urgency for it to happen.
For one thing, cars are built much better than they were years ago. The average vehicle on the road is nearly 11 years old -- a record, according to Autoblog. Auto sales surged 11.9% in November, fueled by rising demand spurred by Hurricane Sandy. New car sales should do well in 2013 as well, provided that the economy doesn't dive off the fiscal cliff. In theory, these cars should need little in terms of maintenance and what work needs to be done will probably be covered by warranties.
--Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
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Hey...........Pep Boys.......Gat a word for You CASHIERS!!!!!!!!!!!!!!!!!. Your new system of full time parts counter and if you get a chance.....take the customers money????. I have walked out of your stores 4 times this year because nobody wanted to take my money. Drove down the street to O'Riellys who had a person who took my money.......................WHAT A CONCEPT!!!!!!!!!!!!
SO SURPRISED YOUR LOOSING MONEY........
It would help idf AutoZone didn't make you come back 3 times because you asked for brake pads for a Saturn and got brake pads for a VW or a Rambler.
Their counter wait times are ridiculous . Who has time to stand around waiting for the guy in front of them identify a lock nut for an 87 Subaru?
Finally, O'Reilly did a lot better when they were Kragen. There now is virtually no difference between them and AutoZone which is not a good comparison.
I always go to my LOCAL NAPA store. Quality parts with knowledgable counter people. I pay more but PRICE IS NOT A DECIDING FACTOR FOR ME ..... Plus i support my local business owner not some ONLINE place..
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Strong sales in November kept a strong year on course, and solid profit margins helped as well.
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