O'Reilly Auto Parts 2011 Annual Report Download - page 39

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The following table presents the components of the increase in sales for the year ended December 31, 2011 (in millions):
Increase in Sales for the year ended
December 31, 2011, compared to the
same period in 2010
Store sales:
Comparable store sales $241
Non-comparable store sales:
Sales for stores opened throughout 2010, excluding stores open at least one year that are
included in comparable store sales
70
Sales in 2010 for stores that have closed (13)
Sales for stores opened throughout 2011 82
Non-store sales:
Includes sales of machinery, sales to independent parts stores and team member sales 11
Total increase in sales $391
We believe the increased sales achieved by our stores are the result of high levels of customer service, superior inventory availability,
a broader selection of products offered in most stores, a targeted promotional and advertising effort through a variety of media and
localized promotional events, continued improvement in the merchandising and store layouts of our stores, compensation programs for
all store Team Members that provide incentives for performance and our continued focus on serving both DIY and professional
service provider customers. Our comparable store sales increase for the year was driven by an increase in average ticket values,
partially offset by a decline in customer transaction counts. The improvement in average ticket values was the result of the continued
growth of the higher priced, hard part categories as a percentage of our total sales, and the impact of increased raw material acquisition
costs, which were passed through to increased selling prices during the period. The growth in the hard part categories is driven by the
increase of professional service provider sales as a percentage of our total sales mix and a shift in DIY sales to the hard part
categories. During the year, DIY customer transaction counts were negatively impacted by the continued pressure on disposable
income that our customers faced as a result of increased fuel costs and sustained unemployment levels above historical averages,
which offset strong increases in professional service provider transaction counts.
We opened 170 net, new stores during the year ended December 31, 2011, compared to 149 net, new stores for the year ended
December 31, 2010. At December 31, 2011, we operated 3,740 stores in 39 states compared to 3,570 stores in 38 states at December
31, 2010. We anticipate new store unit growth to increase to 180 net, new stores in 2012.
Gross profit:
Gross profit for the year ended December 31, 2011, increased to $2.84 billion (or 49.0% of sales) from $2.62 billion (or 48.6% of
sales) for the same period one year ago, representing an increase of 8%. The increase in gross profit dollars was primarily a result of
the increase in sales from new stores and the increase in comparable store sales at existing stores. The increase in gross profit as a
percentage of sales was primarily due to a favorable product mix, improved acquisition costs, improved inventory shrinkage and
distribution center efficiencies, partially offset by the impact of increased professional service provider sales as a percentage of the
total sales mix. The improvement in product mix was primarily driven by increased sales in the hard part categories, which typically
generate a high gross profit as a percentage of sales. Increasing hard part sales is the result of strong demand as consumers retain and
maintain their vehicles beyond manufacturer warranty periods and our strong growth in sales to professional service providers in the
acquired markets. The improved shrinkage is driven by our converted CSK stores, which are now managed using the O’Reilly point-
of-sale system (―POS‖), installed in all CSK stores as they converted to the O’Reilly distribution systems throughout 2009 and 2010.
The O’Reilly POS provides our store managers with better tools to track and control inventory, resulting in improved inventory
shrinkage. Distribution center efficiencies are the result of leverage on increased sales volumes and more tenured and experienced
distribution center Team Members in our newer DCs. Professional service provider sales in the acquired CSK markets are growing at
a faster rate than total DIY sales as a result of the enhanced distribution model in those markets, which supports the implementation of
our dual market strategy. Professional service provider sales typically carry a lower overall gross profit as a percentage of sales than
DIY sales, as volume discounts are granted on wholesale transactions to professional service providers, consequently creating pressure
on our gross profit as a percentage of sales.
Selling, general and administrative expenses:
Selling, general and administrative expenses (―SG&A‖) for the year ended December 31, 2011, increased to $1.97 billion (or 34.1% of
sales) from $1.89 billion (or 35.0% of sales) for the same period one year ago, representing an increase of 5%. The increase in total
SG&A dollars was primarily the result of additional employees, facilities and vehicles to support our increased store count. The
decrease in SG&A as a percentage of sales was primarily the result of increased leverage of store occupancy and headquarters costs on
strong comparable store sales, improved store payroll efficiencies and positive trends related to health benefits, partially offset by
increased fuel costs for our store delivery vehicles supporting our growing commercial business.
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