Advance Auto Parts 2006 Annual Report Download - page 4

visit an Advance store, I hope you’ll share your experience with us at
[e-mail].
The fact that more customers than ever are taking time to thank us for
exceeding their expectations is profound. After all, most of the things
a retailer does can be copied by competitors. Many companies could
sell the merchandise we offer, or replicate our pricing. But when we
give customers consistently superior service, we establish their
loyalty for life – giving customers no reason to shop anywhere else
for their auto parts and accessories. That’s the Advance Way.
2006 marked a year of significant milestones for Advance,
including:
•The opening of our 3,000th store
• Commercial sales that exceeded $1 billion
•Our fifth year as a public company
We’re proud of those accomplishments, but 2006 was also a year of
challenges. As I mentioned earlier, customers faced difficult economic
circumstances. That translated into a tough operating environment,
one in which our financial results did not live up to our expectations.
To produce better expense leverage, we implemented a number of
new programs and initiatives to lower our cost of doing business while
enhancing our efficiency, including:
• Streamlining our store end-of-day process, which saves labor,
paper and supplies;
• Implementing a more efficient store-delivery process; and
•Installing energy-management systems that help reduce
energy consumption in our stores;
While our rate of profit growth didn’t meet our target in 2006, we still
grew our earnings per share in a tough year – a sign of true
resilience. We rapidly accelerated Autopart International’s growth,
an exciting business we acquired in 2005 that supplies automotive
parts to commercial customers. This past year, we also repurchased
3.7 million shares of stock and initiated a quarterly cash dividend,
signaling confidence in our future and an ability to self-fund growth
while also returning capital to our stockholders.
Challenging business conditions tested the resolve of many businesses
in 2006. We took the opportunity to reassess many aspects of our
business, to ensure we’re investing where we can achieve the best
returns. We will continue to grow the Advance Way in 2007, albeit
somewhat more selectively, which will help us lower our expense rate
and improve returns. In 2007, we plan to open fewer new stores,
remodels and relocations than we did in 2006. And we believe we can
remodel stores at a significantly lower cost in the future – without affect-
ing the strong customer response our remodel program has generated.
The Advance Way applies to everything we do. In 2006, we set in place
plans to reconfigure our field management structure for 2007. The
new structure gives our Regional Vice Presidents a tighter cluster of
Division Managers to supervise, which we believe will result in
improved store execution. We also launched an incentive compensa-
tion program which rewards our Team Members for selling premium
products. This program gives our Team Members the opportunity to
Advance Auto Parts, Inc. ▲ Annual Report 2006
2
— Continued from page 1
Mike Coppola and the Advance Team joins NYSE President Catherine Kinney to
ring the closing bell.