Pep Boys closes retail at 123 Florida locations

Automotive stores switching to focus on service instead of sales as market shifts

Imagine if PetSmart emptied its retail store to focus only on grooming and veterinary care. Or if Best Buy got rid of all of its electronics and appliances and left only the Geek Squad.

In a sense, that’s what national auto parts and service chain Pep Boys has done at nearly all of its Florida locations, and at hundreds of others nationwide.

Consumers who haven’t visited a South Florida Pep Boys in awhile are in for a surprise. They’ll be greeted by a large empty space formerly occupied by shelves packed full of car care products and its auto parts ordering counter.

At the company’s Coral Springs location on University Drive, stacks of plastic containers shroud customers’ views of the vacant store, which takes up a majority of the building’s square footage. Signs, meanwhile, announce that the service operation, including tire sales and installation, will remain permanently open.

Elimination of the company’s retail parts operations is part of the company’s strategy to expand the service side as today’s cars, including electric vehicles, become too complex for owners to repair on their own, Pep Boys spokeswoman Arianna Sherlock said.

“It’s really a business model shift, especially nationally,” Sherlock said. “The opportunity is so great in automotive service. We’re seeing a huge shift in demand for ‘do it for me’ service versus ‘do it yourself.’ ”

Customers, she said, are intimidated by the complexity of modern vehicles and the

millions of lines of computer code that make them work.

Most owners don’t even want to change their own oil anymore, she said.

Pep Boys closed 15 South Florida retail stores between April and October, leaving only one store in the tri-county area, in Lake Worth, open for retail sales. Retail operations will continue “in other core markets,” said

another company spokeswoman, Nicole Quinlan.

Statewide, just one other retail store remains open, in Kissimmee, of 125 that now provide services only, Pep Boys’ website shows.

The South Florida closures followed elimination of 120 of more than 500 retail stores by the Philadelphia-based chain since late

2020, according to a story in the Philadelphia Inquirer. The total number of retail closures was not available.

Pep Boys was purchased by billionaire investor Carl Icahn in 2016 and added to his portfolio of automotive businesses operated by holding company Icahn Enterprises, which also includes auto parts retailer Consumer Auto Parts, distributor AutoPlus, and service centers AAMCO Transmissions, Precision Tune Auto Care, Cottman Transmission and Total Auto Care and Just Brakes Total Car Care.

But Icahn’s automotive division has hemorrhaged cash in recent years, reporting losses totaling $625 million in the three years ending in 2020. Over the first three quarters of 2021, auto parts sales declined

4%, even after excluding declines resulting from store closures.

In its 2020 annual report, the company reported a

$47 million decline in retail parts sales, excluding effects of store closures.

“The automotive aftermarket industry is in the mature stage of its life cycle,” Icahn Enterprises’

2020 annual report stated, explaining the company’s strategic shift. A primary reason consumers don’t fix their own cars anymore, the report said, is “increasing vehicle complexity and electronic content, as well as decreasing availability of diagnostic equipment and know-how.”

Not all auto parts retailers have the same downbeat outlook for the “do it yourself ” market, however.

Springfield, Missouri-based O’Reilly Auto Parts, a much-larger chain founded in 1957, has grown from 4,829 stores in 2016 to 5,616 in 2020, including

21 in Mexico, and has seen its sales increase from $8.6 billion to $11.6 billion over the same period. In 2020, same-store sales increased by 10.9% compared to 2019. O’Reilly operates 246 stores in Florida, up from 163 in 2016.

Advance Auto Parts, with 4,809 stores in the U.S. and Canada, and Auto Zone, with 6,871 stores in the U.S., Mexico and Brazil, each saw sales and net profit increase between 2019 and 2020.

Meanwhile, as Pep Boys celebrates its 100th year in business, the company is seeing revenue from its service business increase despite a short pandemic-related downturn in 2020.

Between 2018 and 2019, revenue from services increased from $1.32 billion to $1.37 billion before declining to $1.23 billion last year. During the first nine months of 2021, revenue from services have rebounded to $1.02 billion compared to $913 million a year earlier.

To fill its empty stores, Pep Boys has been inviting former competitors to enter the spaces as strategic partners. Advance Auto Parts took over 109 vacant retail spaces in Pep Boys’ California stores, and Sherlock said the company hopes to similarly fill vacant stores in Florida and elsewhere. She declined to identify potential partners but said Florida consumers would be correct to expect stores here to eventually reopen under new names.

At the same time, Pep Boys has been expanding its service centers to more than

1,000 nationwide, partly by acquiring independent shops and small chains, Sherlock said.

In North Miami Beach, Pep Boys recently opened its first electric vehicle service center, and Pep Boys’ service operations have seen business grow from the the increasing number of delivery vehicles on today’s roads, she said.

Of course, shifting to the automotive service business requires a growing supply of talented mechanics who can produce revenue and keep customers happy.

Even before the current labor shortage, analysts warned that the nation was having trouble finding young people interested in jobs as mechanics. The Bureau of Labor Statistics warned in 2019 that the automotive industry would need an average of 76,000 new mechanics each year to keep up with demand.

The company is well aware of the need to help develop new talent, Sherlock said.

“We’ve been doing a tremendous amount of work, including developing partnerships with technical schools. Those are huge places where we can acquire talent.” she said.

The company’s training program provides part-time jobs to aspiring technicians while they attend classes. Also, the company pays for them to take the National Institute for Automotive Service Excellence’s certification exam.

In addition, Pep Boys awards scholarships totaling $100,000 annually to qualified students studying to become professional automotive technicians.

In July, the company announced five winners of $10,000 scholarships and 10 winners of $5,000 scholarships. Among the $10,000 scholarship winners was a Miami student, Valentin Davy, who studies at Universal Technical Institute in Orlando.

“We’re investing in the future of the industry and people who work in the industry,” Sherlock said.