Advance Auto Parts 2008 Annual Report Download - page 35

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21
2008 financial results included an extra week of operations (53rd week) as well as a non-cash obsolete inventory
write-down of $37.5 million due to a change in inventory management approach for slow moving inventory. We
continued to generate significant operating cash flow that allowed us to invest in business initiatives and return
capital to shareholders through cash dividends and share repurchases.
Fiscal 2008 was a transitional year for Advance, which included several executive management changes and the
introduction of key strategies and initiatives, as we embarked on a concentrated effort to drive changes in response
to diminished sales and earnings growth during fiscal 2006 and 2007. In January 2008, Darren Jackson was
appointed to the position of President and Chief Executive Officer. Mr. Jackson, who had previously served on our
Board of Directors, Audit Committee and Finance Committee, had already been involved with management on the
completion of certain strategic business assessments during fiscal 2007 and the formulation of key initiatives
discussed below. In addition to our CEO, other new management leaders joined Advance in fiscal 2008 to work with
existing leaders on developing and executing a turnaround plan.
Fiscal 2008 Highlights
Highlights from our fiscal 2008 include:
Financial
• We recorded earnings per diluted share of $2.50 compared to $2.28 for fiscal 2007. These results included
approximately $0.10 of diluted earnings per share from the 53rd week as well as a reduction in diluted
earnings per share of $0.25 from the non-cash obsolete inventory write-down. In addition to these items,
our increase in earnings per share was driven by increased operating income, reduced interest expense and
a lower outstanding share count as a result of 6.1 million shares having been repurchased during fiscal
2008.
• Total sales for fiscal 2008 increased 6.1% over fiscal 2007 to $5.14 billion, primarily driven by new store
growth, the 1.7% impact of the 53rd week’s sales ($88.8 million) on total sales and a comparable store sales
increase of 1.5%. Our fourth quarter comparable sales increase of 3% was the highest in 11 quarters.
• We generated operating cash flow of $478.7 million for the year, an increase of $68.2 million over the
comparable period in fiscal 2007, which was primarily driven by higher earnings and the impact of the 53rd
week.
• During fiscal 2008, we repurchased 6.1 million shares of common stock for $216.5 million at an average
price of $35.28 per share, of which 4.6 million shares were repurchased under our previous $500 million
stock repurchase program.
Operational
• Executive management introduced four key turnaround strategies as the primary catalyst for our
transformation and turnaround. These four strategies are:
1. Commercial Acceleration
2. DIY Transformation
3. Availability Excellence
4. Superior Experience
A majority of the initiatives we began and/or completed during fiscal 2008 are centered around these four
strategies, some of which are discussed in the following section.
• We retired the 2010 store format and related remodel program. In early fiscal 2009, we began an
assessment of our store occupancy costs and a potential divestiture of approximately 40 to 55 stores in