Pep Boys Agrees to $166 Million Sale Leaseback of 34 Stores Across US

Philadelphia Inquirer - November 3, 2007

Pep Boys - Manny, Moe and Jack, the Philadelphia automotive repair and parts chain, said yesterday it had agreed to sell and lease back 34 of its 592 retail stores.

The $166.2 million sale will reduce the company's debt, which is $560 million, Harry Yanowitz, chief financial officer, said. He said the properties being sold are at randomly selected locations across the nation.

The sale-and-lease-back program, announced last summer, is part of a turnaround strategy that began with the appointment in March of chief executive officer Jeffrey C. Rachor, 45. The chain, with locations in 36 states and $2.3 billion in annual revenue, has lost money in three of the last five years. Since June, its shares have fallen from a 52-week high of $22.49 to as low as $12.48.

The company was founded in 1921 in West Philadelphia. It grew rapidly, aided by Henry Ford's sale of Model T's without such essentials as headlamps - an effort by Ford to create an aftermarket industry that would promote and support automobiles. Two years after opening the Philadelphia store, two of the founders, Manny Rosenfeld and Moe Strauss, took a research trip in a Model T to Los Angeles, where they began acquiring properties. The company today owns properties, on both coasts and in major cities, that have increased greatly in value. It is seeking to convert that to cash to reduce its debt and fund change and growth.

When the pending deal closes later this month, the company will begin work on another batch of store sales. As a store is sold, it will be leased back for 15 years, with four five-year renewal options, Yanowitz said. No decision has been made on how many stores to sell or how far to reduce debt, Yanowitz said. Sphere: Related Content