Napa Auto Parts 2004 Annual Report Download - page 9

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The Automotive Parts Group of Genuine Parts Company is one of North America’s
leading distributors of automotive replacement parts, accessory items and service
items. This group consists of 58 NAPA Distribution Centers in the United States
serving approximately 5,800 NAPA AUTO PARTS stores of which almost 1,000 are
company-owned.
The Retail market represents another important customer base for
us. Our commitment to growing the retail business is evident in our
initiatives to enhance the store experience through improved mer-
chandising, service and facility upgrades of our NAPA AUTO PARTS
stores.
In 2004, the Automotive Parts Group improved its sales by 6%, this
group's best performance in several years. We believe our progress
was driven by the combination of the success of our internal initia-
tives, positive industry trends, and improved economic conditions.
As we assess our opportunities in 2005, we expect these same
factors to generate further growth for us.
Growth Initiatives
Our strategy in 2004 centered on a renewed commitment to several
key growth initiatives. We believe our commitment to these initia-
tives contributed to our improved results for the year and feel that
continued focus in these areas will generate further growth for us in
2005 and beyond. To provide clarity on our on-going initiatives, we
have defined our key drivers for 2005 as follows:
Wholesale Business - We want our NAPA AUTO PARTS stores
to become an unrivaled resource for our wholesale customers.
Program offerings for Major Accounts, NAPA AutoCare Centers and
Integrated Business Solutions (IBS) enable NAPA to capitalize on its
expertise in serving the wholesale markets. Our outside sales repre-
sentation also adds significant value in securing sales opportunities.
The Major Accounts Program supports the repair and maintenance
needs of large companies and fleets such as AAA, CarMax,
Firestone and the United States Postal Service, among others.
Programs for NAPA AutoCare Centers, one of the nation's largest
independent automotive service and repair networks, provide effec-
tive business tools and support that help independent owners pro-
mote and grow their businesses. This network grew to over 13,000
members in 2004 and we expect to increase our membership for
many years to come. Integrated Business Solutions (IBS), another
program for large customers, is a sophisticated inventory manage-
ment service that effectively handles their inventory procurement
and stocking requirements.
Technology and Connectivity - An important goal for us is to allow
our customers to conduct business with NAPA and NAPA AUTO
PARTS stores in a streamlined and efficient manner. Already, the
Automotive Parts Group distinguishes itself with a consistent roll-out
of new and improved technologies. Our Wide Area Network (WAN)
connects thousands of stores, creating local access to a national
supply of more than 320,000 quality parts. Other Internet based
solutions, such as NAPA PROLink, serve to connect repair facilities
to their primary NAPA AUTO PARTS store and improve their facility
management capabilities.
Specialty Markets - We intend to effectively compete in niche markets
by setting ourselves apart with trained personnel, tailored inventory
and aggressive promotion. Niche markets offering growth potential
for us include Heavy Duty, Paint, Body & Equipment, Farm and
Marine, and Tools & Equipment. For example, approximately 2,000
stores currently have a focus in the Heavy Duty market, and we see
the opportunity to grow this to 3,000 stores in the next few years.
New Distribution - We are continuing to position our NAPA AUTO
PARTS store base in market areas where we anticipate significant
growth opportunities. In 2004, we added 47 net new stores across
the U.S. and believe we have tremendous additional opportunities
in over 2,000 market areas that currently do not have a NAPA store.
During 2005, our goal is to add another 100 net new NAPA AUTO
PARTS stores.
The Store Experience - We are working to improve our NAPA AUTO
PARTS store merchandising, service and facilities to enhance our
customer relationships. We strongly believe that a better overall store
offering will benefit all areas of our automotive business. Effective
planograms, space management services and the ability to more
accurately align each store's inventory with its market through Market-
place Inventory Classification (MIC) are just a few examples of how
we can create an improved store experience for our customers.
Brand Advertising
The NAPA brand is widely recognized by North American consumers.
Our national and local advertising is designed to reinforce continued
brand awareness and to position NAPA as the source for the high-
est quality auto parts and services. The NAPA Advertising Program
delivers high visibility exposure through national television, radio
and print advertising, targeted sponsorships and high-quality local
advertising materials.
Looking Ahead
The Automotive Parts Group will remain focused on furthering our
service capabilities, product offerings and detailed understanding
of the automotive parts business. This fundamental strategy, along
with the continued success of our internal initiatives, positive industry
demographics and a growing economy, will provide our parts group
with significant opportunities for growth in 2005 and beyond.
The Automotive Parts Group also includes
other areas of business, such as Balkamp,
Inc., a majority-owned subsidiary of the
Company that purchases, packages and
distributes over 27,000 service and supply
items through the NAPA system. Under the
name Rayloc, we operate five plants where
automotive parts are remanufactured and
distributed. Furthermore, we operate
Johnson Industries, one of the nation's
largest independent distributors of ACDelco,
Motorcraft and other aftermarket parts,
equipment and supplies.
Our market extends throughout North
America with businesses in Canada and
Mexico. NAPA Canada/UAP, Inc. is one of
Canada's leading automotive distributors as
well as Canada's largest heavy-vehicle parts
distributor. The operating programs and
marketing initiatives utilized in our Canadian
operations are fully integrated with our U.S.
NAPA system. In Mexico, we are represented
by Auto Todo, one of the largest automotive
aftermarket organizations in the country. We
are encouraged by our progress in Canada
and Mexico and our outlook is positive for
continued growth in these markets.
The Automotive Parts Group distributes
parts and provides service to a wide range
of markets throughout the U.S., Canada and
Mexico. Wholesale markets represent pro-
fessional service and repair facilities and
serving these customers has become our
greatest area of expertise. We expect the
wholesale market to remain a significant
growth driver for the automotive aftermarket.