In a bid to enhance shareholders’ value, Pep Boys — Manny, Moe & Jack (PBY) recently announced a share repurchase program worth $50 million.
Pep Boys plans to fund the program with its available cash in hand and future cash flows. It had cash and cash equivalents of $78.7 million as of October 27, 2012, up from $58.2 million as of January 28, 2012. During the first nine months of fiscal year 2012, the company generated cash flow of $116.2 million compared with $85.1 million in the first nine months of fiscal 2011. Given its strong balance sheet, we believe that Pep Boys is well positioned to support this share repurchase program.
The company expects to repurchase shares either in open market or through negotiated transactions. No particular time limit and price target was provided for the completion of the program.
Pep Boys reported a significant increase in its profit (excluding debt refinancing expense of $11.2 million and an asset impairment charge of $8.8 million) to $13.2 million or 25 cents per share in the third quarter of the year ended October 27, 2012, from $7 million or 13 cents per share in the comparable quarter of the prior fiscal year. The earnings per share surpassed the Zacks Consensus Estimate by 8 cents.
The company’s revenues for the quarter decreased 2.4% to $509.6 million from $522.2 million a year ago. It missed the Zacks Consensus Estimate of $532 million.
Pep Boys, based in Philadelphia, supplies tires, batteries, new and remanufactured parts for vehicles, chemicals and maintenance items, fashion, electronic, and performance accessories. It also provides non-automotive merchandise such as generators, power tools and personal transportation products.
The company, which competes with O’Reilly Automotive Inc. (ORLY), AutoZone Inc. (AZO) and CarMax Inc. (KMX), currently retains a Zacks #4 Rank, which translates into a short-term (1 to 3 months) Sell rating.
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