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Stifel 'Encouraged' by Pep Boys' (PBY) Focus on Fragmented Service Business; CEO Search Ongoing

December 9, 2014 11:07 AM EST
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Price: $25.00 --0%

Rating Summary:
    3 Buy, 1 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 13 | Down: 11 | New: 11
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Stifel maintains Pep Boys (NYSE: PBY) with a Hold rating following Q3 results and update on CEO search.

Analyst James Albertine highlighted key points from PBY's results:

  • Management noted a mix shift to branded from private label; Chinese made tires insulate PBY somewhat from tire tariff inventory/pricing/demand repercussions relative to its peer group. Management also noted branded tire manufacturers have held pricing to date (relative to increased pricing during the prior 2010-2012 Chinese-made tire tariff period). We note PBY did not increase inventory purchases ahead of the expected tariff decision. PBY noted a +3.1% increase in comp tire units and a +1.2% increase in comp tire pricing during 3Q14, blending to +4.3% tire comp sales.
  • By region, PBY noted strength in Florida, Georgia, and San Francisco markets, as well as the Mid-Atlantic and Western service and tire center regions more broadly. Management noted weakness in the Central and North Central markets.
  • Management highlighted gross margin pressures stemming from a mix shift to tire sales, commercial, and e-commerce businesses, as well a broad-based increased in promotional activity (market and PBY) y/y. We note digital sales rose +48% y/y in 3Q14 and represent roughly 5% of total sales, according to management.
  • PBY reiterated its owned real estate value of roughly $720 mm.

For an analyst ratings summary and ratings history on Pep Boys - Manny, Moe & Jack click here. For more ratings news on Pep Boys - Manny, Moe & Jack click here.

Pep Boys - Manny, Moe & Jack closed at $9.36 yesterday.



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