No sale: Icahn’s Pep Boys speeds retail-store shutdowns, with two close to its Phila. home; garages stay
But owner Carl Icahn is keeping the service garages and tire sales
Pep Boys — the iconic chain marking its 100th anniversary — is stepping up closures of its familiar retail stores to concentrate on its tire and service garages, even when the two are in the same building.
Since late last year, the chain’s retail has shut or arranged to sell at least 120 of the 500-plus stores that billionaire Carl Icahn acquired when he bought what was then a publicly traded company for $1 billion five years ago. His purchase followed years of weak sales growth at Pep Boys.
The most recent shutdowns target stores in Audubon and Stratford in South Jersey. Employees in the Camden County stores told callers Tuesday that they were running clearance sales at deep discounts.
The plan is to shut the stores later this spring and to reopen them under a different store brand if deals are completed, according to employees who spoke on condition they not be identified.
The accelerated closings are a response to a drop in sales and further losses, Sung Cho, chief financial officer for the automotive group’s parent company, Icahn Enterprises, told investors in a conference call last month.
The South Jersey closings are the first near Philadelphia, the city where four World War I veterans — a Manny, a Jack and two Moes — opened their first store at 63rd and Market Streets. Last fall, the company sold its longtime headquarters at 3111 W. Allegheny Ave. but continues to rent office space there. CEO Brian Kaner is based in Indianapolis.
The national toll of closures includes more than 100 California locations that the company agreed earlier this month to transfer to its larger rival, Advance Auto Parts. Pep Boys has also shut or sold clusters of stores in Seattle, in the Chicago and Detroit areas, and in New Mexico and Louisiana, among other places.
The stores are part of Icahn Automotive Group, owned by Icahn, 86, and his son and heir Brett Icahn. Icahn bought Pep Boys in 2015 after a costly bidding war against tire maker Bridgestone Firestone and initially expanded it by buying a string of local garage chains.
But Icahn lost big by betting on higher oil prices (energy prices instead fell, during the last years of the Trump administration) and sold his car parts manufacturing business, Federal-Mogul, in 2018.
As it became clear that Icahn was no longer building a large, diversified automotive company — he has recently become interested in pharmaceuticals — top Icahn Automotive executives departed. Sale fell despite an agreement to install tires for customers who order through Amazon.
In the last three months of 2020, sales for the automotive group totaled just $596 million, down from $703 million in the last quarter of 2019. The business has continued to lose money despite cost cutting.
But Icahn Automotive officials say they will continue to invest in the tire and service business, which isn’t as vulnerable to competition as the retail stores. Even when Pep Boys shuts its retail stores, it typically continues to sell tires and do repairs from the adjoining garages.
Pep Boys still has 13 retail stores in Philadelphia, 11 of which include service garages and two of which are retail-only. It also operates two stand-alone garages, in Frankford and South Philadelphia.
But nationally, the group’s remaining retail stores are far outnumbered by 1,000 of what Icahn calls Pep Boys’ “do-it-for-me” service locations. Icahn Automotive wouldn’t say exactly how many retail stores remain.
Besides Pep Boys tire and service centers, the Icahn automotive group also operates hundreds of Precision auto-tuning and Aamco transmission shops. Like Pep Boys, Aamco originated in the Philadelphia area.
Even where the stores are going away, ”Pep Boys Service Centers will remain, and reinvest in the market,” said Arianna Sherlock, Pep Boys’ spokesperson