It has been said that the only constant in life is change. That has certainly been the case recently at two of the oldest,
most venerable names in the automotive aftermarket.
At Pep Boys, 2007 brought a new five-year plan and a new leadership team. However, CEO Jeff Rachor had been at the helm of
the Philadelphia-based company for just over a year when he left May 7 to pursue a new venture.
When asked what brought him to Pep Boys from his previous position as president of Sonic Automotive, a Fortune 300 company
in Charlotte, N.C., Rachor responds, "I saw it as an irresistible challenge to participate in the renaissance of an 86-year-old
brand." Today, however, it is former COO Mike O'Dell who is guiding the fortunes of the company as interim CEO: 565 stores
that had $2.1 billion in sales in 2007.
Meanwhile, as vice president of finance and investor relations, Judd Nystrom is a key member of the new team of executives
who have come to Advance Auto Parts from consumer electronics retailer Best Buy. What brought him to Roanoke, Va.-based Advance,
which has more than 3,200 stores and 2007 revenues of $4.8 billon? "I saw a 76-year-old company that has a rich tradition of growth, but one in which that growth has slowed a little bit in
recent years. That presents a tremendous opportunity," Nystrom says.
Are the renaissances underway?
DIFM leads the way
As mentioned earlier, Pep Boys has 565 stores that had $2.1 billion in sales in 2007. The future of the company, under either
Rachor or O'Dell, lies in a focus on the do-it-for-me (DIFM) business.
"We launched our five-year plan in November, and the overarching umbrella of that plan is to lead with our DIFM business,"
Rachor told Aftermarket Business when he was the company's CEO. "Some of the first steps surrounding that are to really recommit to our core automotive roots."
Since then, Rachor has decided to return to his own core roots in the automotive retail market, joining MSD Automotive Partners
LLC, in Chattanooga, Tenn., as CEO. MSD Automotive will own and operate car dealerships across the U.S.
Where does that leave Pep Boys? While Manny, Moe and Jack were early leaders in the automotive aftermarket 86 years ago, in
recent years the company had introduced a significant amount of merchandise that wasn't true to its automotive heritage.
Therefore, the first step in the five-year plan is a merchandising transformation: ramping up hard parts coverage and upgrading
the company's overall automotive hard parts assortment. That began under Rachor and will continue under O'Dell.
"I came to Pep Boys after participating in the turnaround of the automotive business at Sears," O'Dell notes. "It's really
like déj�u for me. Pep Boys, like Sears, had lost its way in terms of customer focus. But, also like Sears, the components
are in place here to have very successful top-line sales and very profitable bottom-line profit stores."
O'Dell, who told Aftermarket Business that he believes the "interim" will not be part of his CEO title for very long, pointed out that he was part of the team
that devised Pep Boys' recent five-year plan, and he will stick with it.
"Look at the fundamentals of this business, especially on the DIFM side," O'Dell says. "People still need their cars fixed.
Cars are more complicated than ever, and people are more time-compressed than ever. We've got the infrastructure, we've got
the people; it's more about the focus than anything else."
This focus on DIFM is a sound strategy, says Dan Smith, president, Capstone Financial Group.
"The DIFM market is really the way to go for most areas of the country," Smith adds. "The demographics are just about perfect
for it. There are so many things that are causing the DIFM side of the business to grow, including the increasing complexity
of vehicles. So it looks like Pep Boys has really started paying attention to the demographics."
Tony Cristello, vice president, BB&T Capital Markets, agrees. "Pep Boys has struggled over the past few years with their business
model," he says.
Cristello notes that with its large number of service bays, Pep Boys has been driven harder than most to have more productivity
coming through those bays. Add in the struggles with the merchandise mix, and the result was an unsuccessful strategy.
"The service bays were underutilized, and they had sort of lost their identity as a parts provider," Cristello says. "Under
the company's new plan, there's a much more intense focus on running the service shops, and using the retail side of the business
to fuel the service business."
That means inventory and parts coverage to have the right parts to fix the vehicles, and also having enough skilled people
to take care of the customers who come into the service side of the business.
"It's a tough model, balancing the two," Cristello notes, "but I think if they're going to be successful. This is the right
strategy."
Posted 2008-06-21 09:51:45.0
