Pep Boys 2014 Annual Report Download - page 11

addition of 47 Speed Shops within existing Supercenters and required expenditures for existing stores,
offices and distribution centers. Our fiscal 2015 capital expenditures are expected to be approximately
$60.0 million, which includes the planned addition of 15 Service & Tire Centers, one Supercenter, and
the conversion of up to 25 stores to the new ‘‘Road Ahead’’ format. 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 January 31, 2015, we operated a total of 7,524 service bays in 800 of our 806 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 carries a similar product line, with variations based on the number and
type of cars in the market where the store is located. 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; 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,
FUTURA and 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 PROSTOP and brakes, batteries, starters, ignitions and chassis
under the name VALUEGRADE. All products sold by the Company under various private label names
were approximately 25% of our merchandise sales in fiscal 2014, 20% in 2013, and 24% in 2012.
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 and tires inventory as well as its experience supplying its
own service bays and mechanics. As of January 31, 2015, approximately 80%, or 456, of our 569
Supercenters and Pep Express stores provided commercial parts delivery.
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 on 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
target customer segments’ needs and desires so that we can deliver outstanding customer service and
build long-lasting, loyal relationships with them. We utilize advertising, promotions and a loyalty card
program (Rewards) to convey our commitment to customer service and to promote our service and
repair capabilities and product offerings. We are committed to an effective multi-media promotional
5