Less Pep Boys for More Profits

PORTLAND-Pep Boys abruptly closed all six of its area stores and 32 others around the nation Saturday, saying the stores were unprofitable.

The Pennsylvania-based purveyor of auto parts and service opened five of its area stores last year. The company reportedly gave no advance notice of the closure, leaving 1,500 workers nationwide to learn about the closures when they showed up to work Saturday morning. The state’s Bureau of Labor and Industries has been notified by the company that employees will receive final paychecks Friday. Only two stores remain in the Northwest: in Puyallup, Wash., southeast of Tacoma, and in Everett, Wash., north of Seattle.

Officials at Pep Boys’ Pennsylvania headquarters did not return a call seeking comment Tuesday morning. In a prepared statement posted on the company’s Web site, the closed stores were described as “unprofitable,” and the company’s overall cost-cutting plan was described as “a comprehensive profit enhancement plan.” The plan would save Pep Boys $70 million a year, according to the statement, which states also that the company still has more than 600 stores operating in 36 states.

Pep Boys’ revenues rose slightly in the first half of the year while earnings were 75% below analyst estimates at $10.8 million, or 7 cents a share. The Company’s third quarter results for the thirteen weeks ended Oct. 28, 2000, to be reported on Nov. 10, will include an estimated $60 million pre-tax charge to earnings to reflect the required write-down of assets relating to the store closures, severance and other related costs as well as costs associated with the recently completed refinancing of its credit facilities.

In addition to the expected improvement in earnings resulting from the profit enhancement plan, the Company expects to generate approximately $50 million in estimated proceeds from the sale of the retired assets. The company’s share price has plunged from a 52-week-high of $12.85 a share a year ago to $4.50 at Monday’s close. In afternoon trading Tuesday, shares were off another 6 cents to $4.44.