Advance Auto Parts 2012 Annual Report Download - page 16

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• the economy, because during periods of declining economic conditions, both DIY and Commercial customers may
defer vehicle maintenance or repair; conversely, during periods of favorable economic conditions, more of our DIY
customers may pay others to repair and maintain their cars or they may purchase new cars;
• the weather, because milder weather conditions may lower the failure rates of automobile parts while extended periods
of rain and winter precipitation may cause our customers to defer elective maintenance and repair of their vehicles;
• the average duration of manufacturer warranties and the decrease in the number of annual miles driven, because
newer cars typically require fewer repairs and will be repaired by the manufacturer's dealer network using dealer parts;
and lower vehicle mileage, which may be affected by gas prices and other factors, decreases the need for maintenance
and repair (while higher miles driven increases the need);
• technological advances and the increase in quality of vehicles manufactured, because vehicles that need less frequent
maintenance and have low part failure rates will require less frequent repairs using aftermarket parts;
• our vendors, because if any of our key vendors do not supply us with products on terms that are favorable to us or fail
to develop new products we may not be able to meet the demands of our customers and our results of operations could
be negatively affected;
• our reputation and our brands, because our reputation is critical to our continued success. If we fail to maintain high
standards for, or receive negative publicity whether through social media or normal media channels relating to,
product safety, quality or integrity, it could reduce demand for our products. The product we sell is branded both in
brands of our vendors and in our own private label brands. If the perceived quality or value of the brands we sell
declines in the eyes of our customers, our results of operations could be negatively affected; and
• the refusal of vehicle manufacturers to make available diagnostic, repair and maintenance information to the
automotive aftermarket industry that our DIY and Commercial customers require to diagnose, repair and maintain
their vehicles, because this may force consumers to have a majority of diagnostic work, repairs and maintenance
performed by the vehicle manufacturers' dealer network.
If any of these factors cause overall demand for the products we sell to decline, our business, financial condition, results of
operations and cash flows could be negatively impacted.
If we are unable to compete successfully against other companies in the automotive aftermarket industry we may lose
customers, our revenues may decline, and we may be less profitable or potentially unprofitable.
The sale of automotive parts, accessories and maintenance items is highly competitive in many ways, including name
recognition, location, price, quality, product availability and customer service. We compete in both the DIY and Commercial
categories of the automotive aftermarket industry, primarily with: (i) national and regional retail automotive parts chains, (ii)
discount stores and mass merchandisers that carry automotive products, (iii) wholesalers or jobber stores, (iv) independent
operators, (v) automobile dealers that supply parts and (vi) internet-based parts providers. These competitors and the level of
competition vary by market. Some of our competitors may possess advantages over us in certain markets we share, including a
greater amount of marketing activities, a larger number of stores, store locations, store layouts, longer operating histories,
greater name recognition, larger and more established customer bases, more favorable vendor relationships, lower prices, and
better product warranties.
Our response to these competitive disadvantages may require us to reduce our prices below our normal selling prices or
increase our promotional spending, which would lower our revenue and profitability. Competitive disadvantages may also
prevent us from introducing new product lines, require us to discontinue current product offerings, or change some of our
current operating strategies. If we do not have the resources, expertise, consistent execution or otherwise fail to develop
successful strategies to address these competitive disadvantages, we may lose customers, our revenues and profit margins may
decline and we may be less profitable or potentially unprofitable.
We may not be able to successfully implement our business strategy, including increasing comparable store sales,
enhancing our margins and increasing our return on invested capital, which could adversely affect our business,
financial condition, results of operations, cash flows and liquidity.
We have implemented numerous initiatives as part of our business strategy to increase comparable store sales, enhance our
margins and increase our return on invested capital in order to increase our earnings and cash flow. If we are unable to
implement these initiatives efficiently and effectively, or if these initiatives are unsuccessful, our business, financial condition,
results of operations, cash flows and liquidity could be adversely affected.