NEW YORK CITY-With just 18 months on the job, Pep Boys’chairman and CEO Larry Stevenson says during GoldmanSachs Twelfth Annual Global Retail Conference thecompany has “a long way to go.”

Stevenson points out that Philadelphia-based Pep Boysis actually two businesses under one roof–retail andservices–and both need a lot of work. “The businessunder performed for a number of years,” he said,adding that the retail business is improving slowly,but the service business’ recent results weredisappointing. “It’s been two steps forward and onestep back,” he noted.

Specifically, Pep Boys’ retail turnaround is focusedon providing a new range of merchandise andrefurbishing the store portfolio, according toStevenson. The typical Pep Boys supercenter boasts18,200 sf of retail and service space–nearly twicethe amount of its competitors.

Stevenson said that one of the biggest challenges forthe retailer was maximizing its space and figuring outhow to fill 3,000 sf to 4,000 sf of surplus space ineach of its 593 stores. The company has sinceintroduced several new products, including a line ofpower tools and transportation-oriented products.

While most of the stores now carry the newmerchandise, the refurbishing activities are far fromcomplete, Stevenson said. “We’re only a quarter of theway through our portfolio,” he noted, referring to thenumber of stores that have been retooled.

The renovated stores–located in Los Angeles, Chicagoand Philadelphia–have improved layouts to enhanceshopping convenience. The company will spend the nexttwo years completing the refurbishment program.

On the service side, Pep Boys is emphasizing tiresrather than other types of services such as oilchanges and tune ups, Stevenson said, adding thattires represent 40% of the company’s service business.

In order to compete more effectively for the share oftire purchases, Pep Boys introduced several brandedtires. So far, the new brands have performed well, and Stevenson is hopeful that the expanded range of tire products will attract more customers.

Stevenson also noted that one of the company’s biggest challenges with its service business–having the right service manger at each store– has been resolved. “Since June we’ve hired 300 new service managers,” he said. However, these new managers still need significant training and time to get up to speed. To that end, he doesn’t expect the service side of the business to show significant financial improvement for another six to 12 months.

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