Pep Boys 2006 Annual Report Download - page 42

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In fiscal 2006, approximately 37% of the Company’s total revenues were cash transactions (including
personal checks) with the remainder being credit and debit card transactions and commercial credit
accounts.
The Company does not experience significant seasonal fluctuation in the generation of its revenues.
STORE OPERATIONS AND MANAGEMENT
All Pep Boys stores are open seven days a week. Each SUPERCENTER has a Retail Manager and
Service Manager (PEP BOYS EXPRESS STORES only have a Retail Manager) who report up through a
distinct organization of Area Directors and Divisional Vice Presidents specializing in operating their
respective businesses. The Divisional Vice Presidents—Service report to the Senior Vice President—
Service. The Senior Vice President—Service and Divisional Vice Presidents—Retail report to the
Executive Vice President—Operations, who in turn, reports directly to the President & Chief Executive
Officer. The President & Chief Executive Officer serves as the Company’s principal operations officer. A
Retail Manager’s and a Service Manager’s average length of service with the Company is approximately
7.7 and 5.3 years, respectively.
Supervision and control over the individual stores are facilitated by means of the Company’s computer
system, operational handbooks and regular visits to the individual stores by Area Directors and Divisional
Vice Presidents. All of the Company’s advertising, accounting, purchasing, management information
systems, and most of its administrative functions are conducted at its corporate headquarters in
Philadelphia, Pennsylvania. Certain administrative functions for the Company’s divisional operations are
performed at various regional offices of the Company. See, “Item 2. Properties.”
INVENTORY CONTROL AND DISTRIBUTION
Most of the Company’s merchandise is distributed to its stores from its warehouses primarily by
dedicated and contract carriers. Target levels of inventory for each product have been established for each
of the Company’s warehouses and stores and are based upon prior shipment history, sales trends and
seasonal demand. Inventory on hand is compared to the target levels on a weekly basis at each warehouse.
If the inventory on hand at a warehouse is below the target levels, the Company’s buyers order
merchandise from its suppliers.
Each Pep Boys store has an automatic inventory replenishment system that automatically orders
additional inventory when a store’s inventory on hand falls below the target levels. In addition, the
Company’s centralized buying system, coupled with continued advancement in its warehouse and
distribution systems, has enhanced the Company’s ability to control its inventory.
SUPPLIERS
During fiscal 2006, the Company’s ten largest suppliers accounted for approximately 40% of the
merchandise purchased by the Company. No single supplier accounted for more than 17% of the
Company’s purchases. The Company has no long-term contracts under which the Company is required to
purchase merchandise. Management believes that the relationships the Company has established with its
suppliers are generally good.
In the past, the Company has not experienced difficulty in obtaining satisfactory sources of supply and
believes that adequate alternative sources of supply exist, at substantially similar cost, for virtually all types
of merchandise sold in its stores.