On Thursday, “Mad Money” host Jim Cramer recommended investors avoid Pep Boys - Manny, Moe & Jack’s stock.
“Pep Boys is stuck with an outdated business model from the 1920s and their execution has been downright lousy,” Cramer complained. “I don't even know how this company could get its act together, but it would take a real genius to turn the thing around.”
Most stocks in the auto parts retail industry have rallied year-to-date, Cramer said, but Pep Boys is down 14 percent year-to-date and is currently flirting with its 52-week low. In Cramer’s opinion, part of the problem involved a failed takeover bid for Pep Boys.
In May, private equity firm Gores Group walked away from a $791 million deal to buy Pep Boys. Gores had offered $15 per share for the company in January in a deal that gave the company an enterprise value of $1 billion. Several months after making the offer, though, it sought to delay the completion of the deal, citing serious deterioration in Pep Boys' business and a breach of covenant under the merger agreement. Both the parties then tried to negotiate a settlement, a source familiar with the matter told Reuters.
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