Pep Boys 2010 Annual Report Download - page 62

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Our store growth plans are centered on a ‘‘hub and spoke’’ model, which calls for adding smaller
neighborhood Service & Tire Centers to our existing Supercenter store base in order to further
leverage our existing inventories, distribution network, operations infrastructure and advertising spend.
We opened 35 new stores in 2010—28 Service & Tire Centers and seven Supercenters. Our plans call
for 55 new locations in 2011, followed by 85 in 2012. The typical Service & Tire Center is full service
with approximately six service bays and $1.0 million in expected annual sales. Our Service & Tire
Centers offer customer convenience, allowing us to be close to our customers’ home or work and
generally serve a higher demographic customer than our Supercenters. To further leverage our store
investment, we are focused on expanding our vehicle fleet business by communicating our value
offering to local and national fleet accounts through targeted marketing, improving store execution and
expanding our dedicated fleet resources.
Establish a differentiated Retail experience by leveraging our Automotive Superstore. The size of
our stores allows us to provide the highest level of replacement parts coverage and the broadest range
of maintenance, performance and appearance products and accessories in the industry. We are able to
leverage our Superhub stores, which have a larger assortment of product than our normal Supercenter,
to satisfy customer needs for slow-moving product by delivering this product to requesting Supercenters
on demand. As part of our commitment to carry the best assortment of automotive aftermarket
merchandise, we make assortment decisions by examining every merchandise category using market and
demographic data to assure we have the best product in the right place. This category management
process ensures our assortment includes the appropriate coverage for service, DIY and commercial
consumers as well as allowing us to make good, sound decisions about price, product and promotions.
Leverage our Automotive Superstore to provide the most complete offering for our Commercial
customers. To further leverage our inventory and automotive aftermarket expertise, we continue to
expand our commercial operations. In addition to offering these customers parts and fluids, we enjoy a
competitive advantage of also being able to offer tires, equipment, accessories and services.
STORE IMPROVEMENTS
In fiscal 2010, the Company’s capital expenditures totaled $70.3 million which, in addition to our
regularly-scheduled facility improvements, included the addition of 35 stores and the upgrade of our
store computer systems hardware. Our fiscal 2011 capital expenditures are expected to be
approximately $80.0 million, which includes the addition of approximately 50 Service & Tire Centers,
five Supercenters and the conversion of 24 Supercenters into Superhubs. These expenditures are
expected to be funded from cash on hand and net cash generated from operating activities. Additional
capacity, if needed, exists under our revolving credit facility.
SERVICES AND PRODUCTS
The Company operates a total of 6,259 service bays in 613 of its 621 locations. Each service
location performs a full range of automotive repair and maintenance services (except body work) and
installs tires, hard parts and accessories.
Each Pep Boys Supercenter and Pep Express store carries a similar product line, with variations
based on the number and type of cars in the markets where the store is located, while a Pep Boys
Service & Tire Center carries tires and a limited selection of our other products. A full complement of
inventory at a typical Supercenter includes an average of approximately 26,000 items, while Service &
Tire Centers average approximately 3,400 items. The Company’s product lines include: tires (not
stocked at Pep Express stores); batteries; new and remanufactured parts for domestic and import
vehicles; chemicals and maintenance items; fashion, electronic, and performance accessories; and a
limited amount of select non-automotive merchandise that appeals to automotive ‘‘Do-It-Yourself’’
customers, such as generators, power tools, personal transportation products and canopies.
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