Are AutoZone and Pep Boys running out of gas?

As consumers snap up new cars, parts retailers need to rev up sales.

By Jonathan Berr Dec 4, 2012 1:40PM
Image: Man changing oil - Ron Chapple, Getty ImagesAutoZone (AZO), the largest auto parts retailer, has been crushing rival The Pep Boys -- Manny, Moe and Jack (PBY) for years. The company still is the market leader, but these days, both outfits face challenges as consumers increasingly choose new vehicles instead of fixing their old junkers.

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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38Comments
Dec 4, 2012 7:01PM
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most people cant work on their own cars anymore anyway. all the isles in them box stores are full of air fresheners and bolt on do-dads that you dont need to fix a car.seems only the old hot rodders are the ones still workin on their own cars and all of those are from the 70s and back.teens arent into cars like they were back in the day and who can blame them look at all the crap on th road now.
Dec 4, 2012 8:26PM
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Pep Boys in my area has clowns working at it... AutoZone's prices are higher than average. I go to the O'Reilly parts store that is half a mile further down the road. The staff is friendly and will actually answer questions and don't mind going on the computer to see if one of the other area stores has a part in stock... I go into AutoZone and the staff is milling around in the back, and it seems like you are bothering them when you are ready to cash out... ask them a question and they don't seem very knowledgeable...
Dec 4, 2012 2:19PM
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They should hire Pelosi to model one of their Bobble Heads......

Pep Boys new slogan, "you'll have to buy it so you can see what's in it"
Dec 4, 2012 11:35PM
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I have to respectfully disagree Mr. Mcdearmon, a lot of people still work on their own cars. I still work on all my cars (2001, 2008 and 2010 Acuras) as well as my Parents 2 cars (2001 Acura and 2006 Suzuki).  Parts at Pep Boys and Autozone are significantly more expensive than online retailers like Rock Auto and Amazon, but sell cheap  pattern parts at an equal price to the Online OEM's . But even when the Big Box stores match the price, the added sales tax kills them. The staff at Autozone and Pepboys are not very friendly or knowledgeable, and the store is filled with a lot of cheap detailing products, crappy tools and junky add ons. Pep Boys even sells Chinese motor scooters??? I think Pep Boys and Autozone should take a cue from NAPA and O'Riely's 
; shrink the store size, just sell the essentials and train their staff to be knowledgeable and friendly 
Dec 4, 2012 6:53PM
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I worked at Pep Boys from 94 to 96. The stores were large, had quality parts and you could find everything you could need. I noticed back then when they were expanding at a high rate the replacement of name brand parts with cheaper foreign junk. Just like Autozone now with shelves full of Chinese junk. Yeah, the warranty is the same but the parts just don't have the quality. I also miss the aisle for just hardware at Pep Boys they had everything. Now it's the hardware store and hope they have it.
Dec 4, 2012 11:05PM
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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........

Dec 4, 2012 6:37PM
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I recently need a wheel bearing for my van. Looked online, it was $120-150 for 1, but most retailer charge more online and don't even have stock in store. So what's the point of buying at store and wait to pickup which cost more time and money when I have online seller ship to me faster and cheaper. Think tier pricing. 
Dec 4, 2012 11:43PM
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I took my pickup to Pep Boys to have a water pump replaced. They started working on it right away, but took over two hours longer than estimated. Every time I checked there was no one working on it, which seemed strange and I was getting upset. A few days later I noticed the new water pump had been broken around one of the mounting bolts and was gooped up with silicone. I guess I was waiting while the patch job was given time to cure. I was never told that they had damaged the new part and after seeing what they did, I replaced it myself with an undamaged part bought elsewhere.
Dec 4, 2012 10:03PM
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Pep Boys is awful at repairing cars. After I had taken my car for an oil change, I suffered A.C. issues and other problems with my mine-van, which wasn't old and didn't have that many miles on it. They also "claim" that there were other repairs that needed to be attended to. When I took it elsewhere, like Firestone, they told me the "problems" were fine. Pep Boys makes you wait forever, say that only one mechanic was working on your car but it was someone else and you have to come back in the near future, If you are lucky not to have it brought in by a tolltruck, to have the problem fixed again. If you have a problem with them, call the Better Business Bureau a.s.a.p.
Dec 4, 2012 9:02PM
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To old to work on my truck anymore, got somebody to do it for me. But if I need anything for my truck, I go to O'Reliys(?) for what I need. Be it batteries or stuff I can still do own my own. Still think they should still call themselves Checkers(I'm old fashioned, what do you want. ). Anyway, Thanx, Danny
Dec 5, 2012 12:19AM
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i tried to do business with pep boys they wanted to charge 100.00 plus cost of shims for a front end alignment went to a different shop got it done for 48.00 they are not the place to take your car to. 
Dec 5, 2012 6:19AM
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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.

Dec 5, 2012 2:59AM
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I have an autozone at the corner of my street the people are nice,they have a girl that is more knowledgable than most of the guys there.  How ever some of there parts are poor jap junk.  Replaced front sway bar bushings on my Dakota. lasted a couple weeks before same problem. bolts keep loosening even after using thread lock twice. Manager said it was driver abuse and I didnt install correct as Iwasn,t a certified Mechanic. " Ahhh then you shouldn,t be a retail store open to the public ", I told him.   They also sell replacement signal bulbs in 2 packs  when all you want is one. I drive 7 miles to O,Reillys they stand behind there products
Dec 5, 2012 9:08AM
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Pep boys don't honor there warranty on there tires like they use to.I  spend extra money buy the warranty and if anything happened the tire would be pro-rated,now there is always an excuse why they can't do it.
Dec 5, 2012 12:43PM
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Normally, I have no need to go into an auto parts store because I never keep them long enough before the warranty expires.  Except when I buy the usual car-care products.  I happened to be near a Pep Boys and decided to try it out.  Never again.  The cashier had this "world-has-done-me-wrong" attitude and made me feel like Joe Blow applying for a license at the DMV.  I've seen better customer service at McDonald's in southeast DC.
Dec 5, 2012 11:58AM
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I have Autozone and O'Reilly equally accessible in our small town.  Both do a fine job, each a little better than the other at some things.  My experience is that first it depends on the expertise and attitude of the manager(s), and secondly the same thing for the employees. An earlier comment from an Autozone manager hits the spot.  Do your homework, clearly know what you want as detailed as possible, and then decide whether you want the cheapest price or the best quality... you usually can't have both at the same time.  Both stores can provide "economy" or "Quality" lines of parts. I don't use these stores to work on my car, but I agree with many comments about the poor quality of work at many other repair shops.  It's the new American way... employees who often (not always, notice) don't care, managers who are made such in name only but don't have the qualifications, and a lack of willing workers with a "teach me" attitude among the newer generations.  Pick out a private mechanic shop, work with the same person, and communicate; you'll  usually get much better work at a slightly higher price. Well, it's just my opinion. 
Dec 5, 2012 2:00PM
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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..

 

 

Dec 5, 2012 12:21PM
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after repeatedly getting inferior parts and parts that fail I don't bother wasting time and monies. I have found anything you  may save is quickly shadowed by replete labor costs.
Oct 5, 2013 12:26AM
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Autozone has people who do not seem to understand they are there to serve customers.  This is due to Managers who are "Non-existent" and nobody seems to care when a customer stands by the register waiting 16 minutes to buy a gallon of oil because the 2 people working the counter are both talking on the phone and ignore everything else. Nobody greets you nor do they ask to assist anyone.  The simple fact is that nobody is "Managing" the store and the employees are all hiding in back and not doing their jobs.  This will eventually mean all who work at the location will be looking for new jobs but for now they have jobs where they get to do nothing.  And for their next job they will expect to be able to do the same.
Dec 5, 2012 6:23PM
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Pep boys needs to go the way of the DoDo bird!I haven't been in their store since 1998 and wouldn't buy from from them if they had the only part in the country!
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