Pep Boys 2011 Annual Report Download - page 58

• national and regional (including franchised) specialized automotive (such as oil change, brake
and transmission) repair facilities that provide additional automotive repair and maintenance
services.
Tires
• 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, have
a higher geographic market concentration 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.
With respect to the service labor category, the majorities of consumers are unfamiliar with their
vehicle’s mechanical operation and, as a result, often select a service provider based on trust. Potential
occurrences of negative publicity associated with the Pep Boys brand, the products we sell or
installation or repairs performed in our service bays, whether or not factually accurate, could cause
consumers to lose confidence in our products and services in the short or long term, and cause them to
choose our competitors for their automotive service needs.
Vehicle miles driven may decrease, resulting in a decline of our revenues and negatively affecting our
results of operations.
Our industry is significantly influenced by the number of vehicle miles driven. Factors that may
cause the number of vehicle miles and our revenues and our results of operations to decrease include:
• the weather—as vehicle maintenance may be deferred during periods of inclement weather;
• the economy—as during periods of poor economic conditions, customers may defer vehicle
maintenance or repair, and during periods of good economic conditions, consumers may opt to
purchase new vehicles rather than service the vehicles they currently own and replace worn or
damaged parts;
• gas prices—as increases in gas prices may deter consumers from using their vehicles; and
• travel patterns—as changes in travel patterns may cause consumers to rely more heavily on mass
transportation.
Economic factors affecting consumer spending habits may continue, resulting in a decline in revenues
and may negatively impact our business.
Many economic and other factors outside our control, including consumer confidence, consumer
spending levels, employment levels, consumer debt levels and inflation, as well as the availability of
consumer credit, affect consumer spending habits. A significant deterioration in the global financial
markets and economic environment, recessions or an uncertain economic outlook could adversely affect
consumer spending habits and result in lower levels of economic activity. The domestic and
international political situation also affects consumer confidence. Any of these events and factors could
cause consumers to curtail spending, especially with respect to our more discretionary merchandise
offerings, such as automotive accessories, tools and personal transportation products.
During fiscal 2009, there was significant deterioration in the global financial markets and economic
environment, which negatively impacted consumer spending and our revenues. While the economic
climate improved somewhat in fiscal 2011, consumer spending has not returned to pre-recession levels.
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