CORRECTED-(June 7)-Pep Boys says demand trends improving

Fri Jun 8, 2012 5:35am EDT

(Corrects paragraph 3 to clarify that comparable-store sales rose 0.3 percent, not 3 percent)

June 7 (Reuters) - Auto repair chain Pep Boys Manny, Moe & Jack said demand trends have improved since the end of May when a private equity firm terminated a deal to buy the company citing weak results.

Pep Boys also said it was not considering other strategic alternatives.

Comparable-store sales have increased 0.3 percent since the deal termination on May 29, Chief Executive Mike Odell said on a conference call with analysts and investors on Thursday.

They fell 2.6 percent from the time the deal was announced on Jan. 30 to the termination date, he said.

Pep Boys announced lower-than-expected first-quarter results on Wednesday. A mild winter, which caused less wear and tear on vehicles, and deferred purchases by customers due to a weak economy are hurting the auto repair industry.

"We expect to return to consistent sales and profit increases during the third and fourth quarters," CEO Odell said.

Los Angeles-based Gores Group walked away from a $791 million deal to buy Pep Boys citing serious deterioration in the company's business and a breach of covenant under the merger agreement.

"Our intent is to grow, not to sell the company," Odell said on the call, adding that the merger agreement with Gores was signed after the private equity firm approached it, not the other way around.

Reuters had reported after the Gores fallout that Pep Boys intended to operate as a standalone public company and was not actively looking to sell.

Pep Boys will receive the $50 million breakup fee from Gores on Friday, Odell said.

Pep Boys shares, which have fallen about 40 percent since Gores warned about cancelling the deal, were flat at $8.76 in morning trading on the New York Stock Exchange. (Reporting by A. Ananthalakshmi in Bangalore; Editing by Maju Samuel)

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