Advance Auto Parts 2011 Annual Report Download - page 41

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customer traffic. AI produced sales of $202.6 million, an increase of $36.9 million, or 22.3%, over Fiscal 2008.
Excluding the $2.3 million impact of the 53rd week in Fiscal 2008, AI’s sales increase was 24.0%. This growth was
primarily reflective of a 9.9% comparable store sales increase and sales from the net addition of 31 new stores
opened within the last year.
Gross Profit
Gross profit for Fiscal 2009 was $2,644.2 million, or 48.9% of net sales, as compared to $2,399.1 million, or
46.7% of net sales, in Fiscal 2008, or an increase of 220 basis points. Excluding the impacts of the $37.5 million
non-cash inventory adjustment and the 53rd week in Fiscal 2008, the increase in gross profit rate was 149 basis
points. This increase in gross profit as a percentage of net sales was primarily due to continued investments in
pricing and merchandising capabilities (including global sourcing), increased parts availability resulting in the sale
of more parts which generally contribute a higher gross profit and improved store execution partially offset by
decreased inventory shrink.
SG&A Expenses
SG&A expenses for Fiscal 2009 were $2,189.8 million, or 40.5% of net sales, as compared to $1,984.2 million,
or 38.6% of net sales, for Fiscal 2008, or an increase of 187 basis points. Store divestiture expenses comprised 48
basis points of the increase in SG&A expenses as a percentage of net sales. The remaining increase was primarily
due to:
• increased investments in store labor and Commercial sales force;
• higher incentive compensation driven by the favorable financial results in fiscal 2009; and
• continued investments to improve our gross profit rate and to operate our new e-commerce operation.
These increases were partially offset by lower advertising expenses and occupancy expense leverage. Excluding
store divestitures, this increase in SG&A expenses is primarily linked to the targeted investments we are making to
support each of our four key strategies which have already begun to yield benefits in our sales and gross profit
results. While our transformation will require continued investments in areas such as Commercial, e-commerce and
global sourcing, management plans to balance increases in fixed and variable SG&A expenses relative to our sales
growth.
Operating Income
Operating income for Fiscal 2009 was $454.4 million, or 8.4% of net sales, as compared to $414.9 million, or
8.1% of net sales, in Fiscal 2008, or an increase of 33 basis points. This increase in operating income, as a
percentage of net sales, reflects an increase in gross profit partially offset by higher SG&A expenses. The increase in
SG&A expenses reflects many of the investments we are making in our business with short-term benefits already
being realized in net sales and gross profit resulting in an overall net increase in profitability. The Fiscal 2009
increase in our operating income also benefited from the $37.5 million non-cash inventory adjustment, partially
offset by the approximately $15.8 million impact from the 53rd week, in Fiscal 2008.
AAP produced operating income of $446.8 million, or 8.6% of net sales, for Fiscal 2009 as compared to $410.7
million, or 8.3% of net sales, in Fiscal 2008. AI generated operating income for Fiscal 2009 of $7.6 million as
compared to $4.2 million in Fiscal 2008. AI’s operating income increased primarily due to its positive sales results
for the year and leverage of supply chain costs as a percentage of net sales.
Interest Expense
Interest expense for Fiscal 2009 was $23.3 million, or 0.4% of net sales, as compared to $33.7 million, or 0.7%
of net sales, in Fiscal 2008. The decrease in interest expense as a percentage of sales is primarily a result of lower
outstanding borrowings and increased sales during Fiscal 2009.