Pep Boys 2006 Annual Report Download - page 47

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9
Risks Related to Our Industry
Our industry is highly competitive, and price competition in some categories of the automotive aftermarket or
a loss of trust in our participation in the “do-it-for-me” market, could cause a material decline in our revenues
and earnings.
The automotive aftermarket retail and service industry is highly competitive and subjects us to a wide
variety of competitors. We compete primarily with the following types of businesses in each category of the
automotive aftermarket:
Do-It-Yourself
Retail
•automotive parts and accessories stores;
•automobile dealers that supply manufacturer replacement parts and accessories; and
•mass merchandisers and wholesale clubs that sell automotive products and select non-automotive
merchandise that appeals to automotive “Do-It-Yourself” customers, such as generators, power
tools and canopies.
Do-It-For-Me
Service Labor
•regional and local full service automotive repair shops;
•automobile dealers that provide repair and maintenance services;
•national and regional (including franchised) tire retailers that provide additional automotive repair
and maintenance services; and
•national and regional (including franchised) specialized automotive (such as exhaust, brake and
transmission) repair facilities that provide additional automotive repair and maintenance services.
Installed Merchandise/Commercial
•mass merchandisers, wholesalers and jobbers (some of which are associated with national parts
distributors or associations).
Tire Sales
•national and regional (including franchised) tire retailers; and
•mass merchandisers and wholesale clubs that sell tires.
A number of our competitors have more financial resources, are more geographically diverse or have
better name recognition than we do, which might place us at a competitive disadvantage to those
competitors. Because we seek to offer competitive prices, if our competitors reduce their prices we may
also be forced to reduce our prices, which could cause a material decline in our revenues and earnings and
hinder our ability to service our debt.
With respect to the service labor category, the majority of consumers are unfamiliar with their
vehicle’s mechanical operation and, as a result, often select a service provider based on trust. Potential