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Pep Boys Still Needs a Tune-Up

Tickers in this article: AAP AZO MCD PBY WMT
NEW YORK (TheStreet) -- On more than one occasion, I've raised concerns about what appears to be constant misdirection at Pep Boys . The company's been leaking oil for as long as I can remember.

But it hasn't always been its fault. Given the lackluster results from rivals Advance Auto Parts and AutoZone , it is fair to say Pep Boys, which has been marred with weak same-store sales and eroding margins, has not been alone in its struggles.

I won't deny that after a couple of tune-ups, management had made meaningful progress. But I'm still concerned by the air being sucked out of the company's operating model. Not to mention, Wal-Mart , which has an auto services business of its own, is beginning to encroach more on Pep Boys' merchandise business and its services revenue.

However, with shares of Pep Boys now up more than 22% year to date, the Street assumes the company will eventually get its house in order. But that has always been a big bet. It's not the first time investors have chosen a favorite, even if the business model looks flawed. But Pep Boys, which has become a perpetual turnaround story for 15 years, no longer deserves the type of pass that it has gotten.

After what was another disastrous quarter, during which the company missed on both revenue and earnings, I have to wonder if investors, who have shown incredible faith in this company, are not being taken for a ride. Bulls will likely disagree. Look, I appreciate that the U.S. is still dealing with some economic challenges -- many of which have adversely impacted not only Pep Boys' operation, but that of other retailers.

To that end, as with Wal-Mart and McDonald's , I'm willing to give Pep Boys the benefit of the doubt, accepting that consumers might have postponed vehicle repairs due to the weak economy. But here's the thing: I said this same thing regarding Pep Boys not only last year, but also several months ago. After Monday's debacle, which included a 9-cents earnings miss and a revenue shortfall, there's no place today for Pep Boys to hide.