Pep Boys 2014 Annual Report Download - page 30

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Total service revenue increased 2.5%, or $11.1 million, to $457.9 million for fiscal 2013 from
$446.8 million for fiscal 2012. Excluding the fifty-third week in 2012, total service revenue increased
4.5%, or $19.6 million, while comparable service revenue increased by 1.6%, or $6.9 million. Our
non-comparable store locations contributed an additional $12.7 million of service revenues in fiscal
2013. The increase in comparable store service revenue was primarily due to an increase in the average
transaction amount per customer.
In our retail business, we believe that the difficult macroeconomic conditions continue to impact
our customers and led to the comparable store customer counts decline of 4.9%, while we experienced
an increase in the average transaction amount per customer resulting from higher selling prices of
1.8%. In our service business, we believe that we experienced a slight increase in comparable store
customer counts due to the strength of our service offering and our promotion of oil changes.
However, this shift in service sales mix towards lower cost oil changes slightly reduced the average
transaction amount per service customer.
Total gross profit decreased by $4.1 million, or 0.8%, to $487.4 million for fiscal 2013 from
$491.5 million for fiscal 2012. Total gross profit margin increased to 23.6% for fiscal 2013 from 23.5%
for fiscal 2012. Total gross profit for fiscal 2013 and 2012 included an asset impairment charge of
$7.7 million and $10.6 million, respectively. Excluding this item from both years, total gross profit
margin remained relatively flat at 24.0%.
Gross profit from merchandise sales increased by $16.4 million, or 3.4%, to $500.3 million for
fiscal 2013 from $484.0 million for fiscal 2012. Gross profit margin from merchandise sales increased to
31.1% for fiscal 2013 from 29.4% in fiscal 2012. Gross profit from merchandise sales in fiscal 2013 and
2012 included an asset impairment charge of $2.3 million and $5.1 million, respectively. Excluding this
item from both years, gross profit margin from merchandise sales improved to 31.3% in fiscal 2013
from 29.8% in the prior year. The improvement over the prior year was primarily due to improved
product margins in tires, brakes, batteries and oil.
Gross margin loss from service revenue for fiscal 2013 widened by $20.5 million to a loss of
$13.0 million from profit of $7.5 million for fiscal 2012. In accordance with GAAP, service revenue is
limited to labor sales (excludes any revenue from installed parts and materials) and costs of service
revenues includes the fully loaded service center payroll and related employee benefits and service
center occupancy costs (rents, utilities and building maintenance). Excluding impairment charges of
$5.3 million and $5.4 million in fiscal 2013 and 2012, respectively, gross margin from service revenue
decreased by 460 basis points to a 1.7% loss in fiscal 2013 from 2.9% profit in fiscal 2012. The decrease
in service revenue gross profit margin was primarily due to higher payroll and related expense of 320
basis points and higher occupancy costs of 154 basis points (depreciation and rent).
Selling, general and administrative expenses as a percentage of total revenues increased to 22.5%
for fiscal year 2013 from 22.2% for fiscal 2012. Selling, general and administrative expenses for fiscal
2013 increased $1.4 million, or 0.3%, to $464.9 million from $463.4 million for fiscal 2012. The increase
as a percentage of sales reflects de-leveraging of selling, general and administrative expenses through
reduced sales in fiscal 2013(fiscal 2012 included 53 weeks).
In the fourth quarter of fiscal 2012, in accordance with Internal Revenue Service and Pension
Benefit Guaranty Corporation requirements, we contributed $14.1 million to fully fund our Defined
Benefit Pension Plan on a termination basis and incurred a settlement charge of $17.8 million (see
Note 14 to the Consolidated Financial Statements).
In the fourth quarter of fiscal 2012, we sold our regional administration building in Los
Angeles, CA, which resulted in a gain from disposition of assets, net of expenses, of $1.3 million.
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