Pep Boys 2012 Annual Report Download - page 44

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Supercenters and information technology enhancements including our eCommerce initiatives and parts
catalog enhancements. Our fiscal 2013 capital expenditures are expected to be approximately
$65.0 million, which includes the planned addition of 31 Service & Tire Centers, seven Supercenters,
the conversion of 15 Supercenters into Superhubs and the addition of 50 Speed Shops within existing
Supercenters. 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
As of February 2, 2013, we operated a total of 7,303 service bays in 752 of our 758 locations. Each
service location performs a full range of automotive maintenance and repair services (except body
work) and installs tires, 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 market where the store is located, while a Pep Boys
Service & Tire Center carries tires and a limited selection of our products. A full complement of
inventory at a typical Supercenter includes an average of approximately 28,000 items, while Service &
Tire Centers average approximately 2,000 items. Our 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 select non-automotive
merchandise that appeals to our target customer segments.
In addition to offering a wide variety of high quality name brand products, we sell an array of high
quality products under various private label names. We sell tires under the names DEFINITY,
FUTURAand CORNELL, and batteries under the name PROSTART. We also sell wheel covers
under the name FUTURA; air filters, anti-freeze, chemicals, cv axles, hub assemblies, lubricants, oil,
oil filters, oil treatments, transmission fluids, custom wheels and wiper blades under the name
PROLINE; alternators, battery booster packs, alkaline type batteries and starters under the name
PROSTART; power steering hoses, chassis parts and power steering pumps under the name
PROSTEER; brakes under the name PROSTOPand brakes, batteries, starters, ignitions and chassis
under the name VALUEGRADE. All products sold by the Company under various private label names
were approximately 24% of our merchandise sales in fiscal 2012, 26% in 2011, and 31% in 2010. The
decline in the mix of private label merchandise sales is primarily due to the addition of popular
branded tires.
Our commercial automotive parts delivery program, branded PEP EXPRESS PARTS, is designed
to increase our market share with the professional installer and to leverage our inventory investment.
The program satisfies the commercial customer’s automotive inventory needs by taking advantage of
the breadth and quality of Pep Boys’ parts inventory as well as its experience supplying its own service
bays and mechanics. As of February 2, 2013, approximately 80% or 458 of our 573 Supercenters and
Pep Express stores provided commercial parts delivery as compared to approximately 81% or 459 stores
at the end of fiscal 2011.
We have a point-of-sale system in all of our stores, which gathers sales and inventory data by
stock-keeping unit from each store on a daily basis. This information is then used to formulate pricing,
inventory, marketing and merchandising strategies. We have an electronic parts catalog that allows our
associates to efficiently look up the parts that our customers need and to provide complete job
solutions, advice and information for customers’ vehicles. We have an electronic work order system in
all service centers; this system creates a service history for each vehicle, provides customers with a
comprehensive sales document and enables us to maintain a service customer database.
We use a competitive pricing strategy, setting prices based upon market forces and then
complementing them with promotions. We believe that targeted advertising and promotions play
important roles in succeeding in today’s environment. We are constantly working to understand our
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