Advance Auto Parts 2015 Annual Report Download - page 23

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Item 1A. Risk Factors.
Our business is subject to a variety of risks. Our business, financial condition, results of operations and cash flows could be
negatively impacted by the following risk factors. These risks are not the only risks that may impact our business.
If overall demand for products sold by our stores slows or declines, our business, financial condition, results of
operations and cash flows will suffer. Decreased demand could also negatively impact our stock price.
Overall demand for products sold by our stores depends on many factors and may slow or decrease due to any number of
reasons, including:
• the number and average age of vehicles being driven, because fewer vehicles means less maintenance and repairs and
vehicles that are seven years old and older are generally no longer covered under manufacturers' warranties and tend
to need more maintenance and repair than newer vehicles. If the number and/or average age of vehicles being driven
were to decrease it would negatively impact demand for our products;
• the economy, because during periods of declining economic conditions, both Commercial and DIY 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 manufacturers' dealer network using dealer parts
pursuant to warranties (which have gradually increased in duration and/or mileage expiration over the recent past); 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; and
• the refusal of vehicle manufacturers to make available diagnostic, repair and maintenance information to the
automotive aftermarket industry that our Commercial and DIY 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 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 Commercial and DIY
categories of the automotive aftermarket industry, primarily with: (i) national and regional chains of automotive parts stores,
(ii) discount stores and mass merchandisers that carry automotive products, (iii) wholesalers or jobbers stores, including those
associated with national parts distributors or associations (iv) independently-owned stores, (v) automobile dealers that supply
parts and (vi) internet-based retailers. 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, more desirable store locations, better store layouts, longer operating histories, greater name recognition,
larger and more established customer bases, more favorable vendor relationships, lower prices and better product warranties.
Consolidation among our competitors could enhance their market share and financial position, provide them with the ability to
achieve better purchasing terms and allow them to provide more competitive prices to customers for whom we compete.
In addition, 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, we could lose
customers to our competition. 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.
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