Pep Boys 2006 Annual Report Download - page 41

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PRODUCTS AND SERVICES
Each Pep Boys SUPERCENTER and PEP BOYS EXPRESS store carries a similar product line, with
variations based on the number and type of cars registered in the markets where the store is located. A full
complement of inventory at a typical SUPERCENTER includes an average of approximately 22,000 items
(approximately 21,000 items at a PEP BOYS EXPRESS store). The Company’s product lines include: tires
(not stocked at PEP BOYS EXPRESS stores); batteries; new and remanufactured parts for domestic and
import vehicles; chemicals and maintenance items; fashion, electronic, and performance accessories;
personal transportation merchandise; and select non-automotive merchandise that appeals to automotive
“Do-It-Yourself” customers, such as generators, power tools and canopies.
In addition to offering a wide variety of high quality name brand products, the Company sells an array
of high quality products under various private label names. The Company sells tires under the names
CORNELL®, FUTURA®and DEFINITYTM; and batteries under the name PROSTART®. The Company
also sells wheel covers under the name FUTURA®; water pumps and cooling system parts under the name
PROCOOL®; air filters, anti-freeze, chemicals, cv axles, lubricants, oil, oil filters, oil treatments,
transmission fluids and wiper blades under the name PROLINE®; alternators, battery booster packs and
starters under the name PROSTART®; power steering hoses and power steering pumps under the name
PROSTEER®; brakes under the name PROSTOP®; brakes, starters and ignition under the name
VALUEGRADE; and paints under the name VARSITY®. All products sold by the Company under
various private label names accounted for approximately 24% of the Company’s merchandise sales in fiscal
2006, and approximately 22% and 33% in fiscal 2005 and 2004.
The Company has service bays in 583 of its 593 locations. While each service department has the
ability to perform virtually all types of automotive service (except body work), the Company continuously
evaluates the types of services it offers, focusing on the most profitable maintenance and repair services.
The Company’s commercial automotive parts delivery program, branded PEP EXPRESS PARTS®,is
designed to increase the Company’s market share with the professional installer and to leverage its
inventory investment. The program satisfies the installed merchandise customer by taking advantage of the
breadth and quality of its parts inventory as well as its experience supplying its own service bays and
mechanics. As of February 3, 2007, 459, or approximately 77%, of the Company’s stores provide
commercial parts delivery.
The Company has a point-of-sale system in all of its stores, which gathers sales and gross profit data by
stock-keeping unit from each store on a daily basis. This information is then used by the Company to help
formulate its pricing, marketing and merchandising strategies. The Company has an electronic parts
catalog and an electronic commercial invoicing system in all of its stores. The Company has an electronic
work order system in all of its service centers. This system creates a service history for each vehicle,
provides customers with a comprehensive sales document and enables the Company to maintain a service
customer database.
The Company primarily uses an “Everyday Low Price” (EDLP) strategy in establishing its selling
prices. Management believes that EDLP provides better value to its customers on a day-to-day basis, helps
level customer demand and allows more efficient management of inventories. On a weekly basis, the
Company employs a promotional pricing strategy on select items to drive increased customer traffic.
The Company uses various forms of advertising to promote its category-dominant product offering, its
state-of-the-art service and repair capabilities and its commitment to customer service and satisfaction.
The Company is committed to an effective promotional schedule with a weekly circular program, extra-
effort promotions supported by Run of Paper (ROP) and radio and television advertising during highly
seasonal times of the year and various in-store promotions.