Advance Auto Parts 2006 Annual Report Download - page 16

Growing the Advance Way
Advance Auto Parts, Inc. ▲ Annual Report 2006
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There’s no question 2006 didn’t live up to our expectations from a
financial perspective, which brought even sharper focus to our Three
Basics of Profitability:
1. Proper Merchandising
2. Cost Control
3. Shrink Control
Given the tough environment we faced, it would have been easy to cut
back indiscriminately. Instead, we undertook a disciplined analysis, to
determine where we should continue investing for the future and where
we had opportunities to improve our cost structure. Our overriding focus
was to ensure that any cost-control measures we implemented didn’t
impact our customers or our ability to continue growing.
We installed time-delay safes in all of our stores, making them safer
for our Team Members and customers, while also making
them less desirable to robbers; and we were pleased to
see that almost instantly upon roll-out, robberies
and cash losses declined. We installed
energy-management systems in more
stores, which help reduce our consumption of
electricity and natural gas. We optimized our store-delivery process
and streamlined our store end-of-day process, both of which make our
company more efficient, while saving labor and other resources. We
also refinanced our debt, which saves Advance more than $2.5 million
annually. These, and many other initiatives, have helped Advance enter
2007 as a leaner company. This leaner cost structure will enable us to
better weather ups and downs in the marketplace.
Meanwhile, our strong cash flow enables us to continue investing for the
future, a luxury that smaller, less well-financed competitors don’t enjoy.
In 2006, we opened a record number of new stores, remodeled a record
number of existing stores, and continued adding commercial-delivery
programs. In September, our growth reached new heights, when we
celebrated the opening of our 3,000th store in Salina, Kansas, a momen-
tous occasion in our company’s history. In November, we celebrated our
fifth year as a public company. During that five-year interval, Advance
nearly doubled its store count, and emerged as a real leader in the auto
aftermarket. Along the way, we’ve grown our commercial sales to be a
$1 billion business, begun paying a cash dividend to our stockholders,
and been named a member of the Fortune 500
®
.
It’s especially gratifying when stockholders, like the one who
sent us the attached letter, recognize that those accolades
and accomplishments don’t just magically appear. Instead,
they’re an outcome of our focus on having great
people and delivering Legendary Customer Service.
It’s a focus we’ve had for 75 years, and it’s a focus
we’ll always have. It’s our roadmap to success.
It’s the Advance Way.
With the right Team, and a commitment
to customer satisfaction, it’s predictable
that success will follow. When we get
the first two parts of the equation right,
we see the results show up through
increased sales and profits.