Pep Boys “Road Ahead” involves omnichannel acceleration

Pep Boys is looking to accelerate a range of digital and physical offerings as part of a strategy called, “Road Ahead,” after the omnichannel efforts resulted in 152% growth.

Pep Boys operates 800 locations in 35 states with 7,500 service bays which differentiates the company from parts-only players such as AutoZone and Advance Auto Parts who perform basic services in their parking lots such as changing batteries or wiper blades.

“Our new Road Ahead strategy includes strong growth from our digital omnichannel initiatives,” said Pep Boys president and CEO Mike Odell. “Overall, sales from service appointments made online, tires purchased online and installed in our service bays, and products purchased online for store pick up or home delivery grew 152% in the fourth quarter.”

According to Odell, the company’s vision is to be the best alternative to the dealer and the Road Ahead strategy is all about leveraging the retail business to drive the service business.

“Our first completed Road Ahead market in Tampa continues to produce returns in line with our 15% hurdle rate,” Odell said. “Based on those results, we are moving forward to complete an additional 20 stores in three markets – San Francisco, Boston and Charlotte – during the first half of 2014 and initiating plans for an additional three markets to be completed in late 2014 or early 2015.”

Acceleration of the Road Ahead strategy comes as Pep Boy reported weak results for its fourth quarter ended February 1. Sales for the 13 week period declined 6.6% to $35.1 million, but excluding the extra week from the prior year fourth quarter Pep Boys mustered a 0.2% sales increase. A 2.4% same store sales decline was driven by a 3.4% decline in same store merchandise sales offset by a 1.4% increase in same store service sales. The company reported a loss of $3.3 million, or six cents a share, compared to a loss of $14.5 million, or 27 cents a share, the prior year.

“On a comparable store basis, customer count, maintenance and repair sales and tire units all grew quarter over quarter,” Odell said. “While retail tire pricing has recently stabilized, prices are still below last year’s level, which has and is expected to continue to negatively impact top line sales results through the second quarter of 2014. We are also growing our service footprint, adding 30 Service and Tire Centers during fiscal 2014. These new Service and Tire Centers showcase the welcoming exterior curb appeal and comfortable customer lounge of our new ‘Road Ahead’ format.”

Full year sales declined 1.2% to slightly more than $2 billion, but excluding the extra week from the prior year increased by 1.6%. A 1.3% same store sales decline consisted of a 1.6% service sales increase offset by a 2.1% merchandise sales decrease.
 

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