PEP BOYS-MANNY, MOE & JACK HOW TO MURDER THE COMPETITION
By Alex Taylor III

(FORTUNE Magazine) – MITCHELL LEIBOVITZ, CEO of Pep Boys-Manny, Moe & Jack, wants to annihilate other auto parts retailers. When intense competition from Pep Boys forces chains like Auto Zone, Western Auto, or Genuine Parts to abandon a location, he adds a snapshot of the closed-down store to his collection. He burns and buries baseball caps bearing their corporate logos and videotapes the ritual to show his 14,500 employees. ''I don't believe in friendly competition,'' he says. ''I want to put them out of business.'' An accountant who got his MBA at Temple University at night, Leibovitz, 47, treats retailing like war. He says consolidation is under way in the $125- billion-a-year aftermarket for parts and servicing, so survival demands that Pep Boys be ''a killer.'' That means offering superior selection, price, and service. For instance, Pep Boys stocks fan belts not just for current car models but for 98% of all cars on the road. With Leibovitz behind the wheel, Pep Boys continues to accelerate. Its success demonstrates that unswerving dedication to a single concept, no matter how homely, can create a dynamic, growing business. Since Leibovitz became president in 1986, he has more than doubled the number of stores, to 358, and doubled sales to over $1.1 billion for the fiscal year ended February 1. For the first nine months of 1992, comparable store sales grew 13%, and earnings per share increased 35%. Alone among its major competitors, Pep Boys can install what it sells. If you don't want to do it yourself, Pep Boys will do it for you -- everything except bodywork or replacing engines and transmissions. Nearly all its stores have ten or so service bays that keep long hours. They stay open 13 hours a day Monday through Saturday and nine on Sunday, no appointment needed. Says Leibovitz: ''The service business is hard to manage. But if it were easy, everyone would do it.'' To curb the overcharging and superfluous repairs that are endemic in auto service, Leibovitz mixes sticks with carrots. Mechanics get a percentage of their labor charge, but -- contrary to common % practice -- no share of the price of the parts they install. If work has to be done over, they may forfeit their cut. Customers can register complaints and compliments through an 800 ''squeal'' number and postage-paid feedback cards that Leibovitz reads himself. Brickbats go to district managers for action. The company performs repairs more cheaply than dealers do, largely because it charges no markup on parts. According to a survey last year by Wertheim Schroder, a New York investment bank, Pep Boys outlets got an average of $195 for parts and labor to replace the alternator on a 1988 Toyota Camry, while a typical Toyota dealer wanted $376 to install a part of comparable quality. Pep Boys was founded way back in 1921 by ''Manny'' (Emanuel Rosenfeld), ''Moe'' (Maurice Strauss), and ''Jack'' (W. Graham Jackson), who was replaced within a few years by ''Izzy'' (I. M. Strauss, Moe's brother) -- a historical fact of little note except that Izzy's face was grafted onto Jack's cartoon body in the company logo. The company grew to more than 100 stores by the early 1960s, when conservative family management slowed expansion. Pep Boys went public in 1946, but the family kept a majority holding till the mid- 1980s. Leibovitz, who started as controller of the company's Eastern division in 1978, reworked the merchandising concept. Out went nonautomotive items like bicycles as well as cheap private brands of parts. In came more national names with strong warranties (Purolator and Fram filters, Raybestos brake pads, Dayco hoses) along with a computerized inventory system. New ''warehouse look'' stores have concrete floors and exposed roof supports, which make vinyl tiles and ceiling panels unnecessary. Leibovitz even pitches the company's stock to shoppers, urging them to ''become our partner -- our shares can be purchased through your stockbroker.'' Last year Leibovitz decided not to take on new debt, so he added only 30 stores -- all that could be financed from cash flow. He wants to open 40 stores this year as part of a 270-unit expansion by 1997. He has plenty of room to grow. Pep Boys is concentrated in 20 Sunbelt states and had no outlets in Florida or New York until 1992. With the expansion, Leibovitz expects to double sales again and to triple profits by the end of 1997. Says he: ''If you want to have ho-hum results, have ho-hum goals.'' No doubt more baseball caps will get trashed in the process.

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