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Stuck in the sand?

Retailers, even those that focus on something like auto parts and services, are supposed to revel in the holiday season. It’s one coffee-infused sales bonanza. But the Q that Pep Boys Manny, Moe & Jack (PBY) filed yesterday, shows that there’s not all that much to be happy about this season.

For one, the Q noted that Nikota, a former tool supplier that went out of business earlier this year, has sued Pep Boys in California for breach of contract and “certain related contract claims”. But as Pep Boys notes in the Q, the complaint failed to include any charges of accounting fraud or the much more serious-sounding RICO violations that Nikota’s receiver had raised in the past, during negotiations with Pep Boys and that Pep Boys disclosed in the Q filed on Sept. 7. Is that still a possibility? Hard to say from the filing.

Then there’s the brewing proxy fight. Three weeks ago, a group led by Barrington Cos. Equity Partners filed this 13-D that basically said the company’s current management was getting in the way. This past Tuesday, Barrington followed up on the 13-D with a more extensive proxy that Barrington described as a “shareholder forum” for others unhappy with Pep Boys. The filing, which looks like a PowerPoint presentation, sharply criticized the company’s turnaround plan as too expensive and ineffective and calls for the company to sell off its service operation and to reduce the size of its stores.

What’s the right answer for Pep Boys investors? The Barrington PPT clearly makes a strong case that management hasn’t exactly been tending the store. Yesterday’s Q would have been a good chance for Pep Boys to make its own case. But the company punted. There’s no mention of the word challenge (in all of its forms) or any of the other words companies commonly use in this situation, which only serves to reinforce the claims that management’s heads are in the sand.