Napa Auto Parts 2007 Annual Report Download - page 13

office products group net sales
in billion of dollars
11
1.46
฀03฀฀ 04฀ 05฀ 06฀07
1.54 1.66
1.78 1.77
S.P. Richards’ comprehensive array of specialized services, logistical
capabilities and marketing programs create value for our customers, which
include independent resellers, large contract stationers, national office
supply superstores, mail order distributors and Internet resellers. Our
fulfillment capabilities allow us to serve all types of resellers, even those
with virtually stockless business models. In addition, our national distribu-
tion network enables resellers to serve their customers on a nationwide
basis. By providing convenient access to a broad range of quality products,
excellent service and innovative programs, we continue to provide our
customers with the tools they need to successfully grow their businesses.
2007฀Performance
Demand in the overall office products industry was weak in 2007 and S.P.
Richards finished the year with revenue down 1% from 2006. is follows
sales growth of 7%, 8% and 6% in 2006, 2005 and 2004, respectively,
reflecting stronger business conditions in each of the preceding three
years. In 2007, the primary challenge for us related to depressed activity
with our national accounts customer base. Sales to independent dealers,
on the other hand, continued to show steady growth when compared to
the prior year. Likewise, in 2007, we were able to grow our revenues at
S.P. Richards Canada, where we added a new distribution center in Ed-
monton, Alberta, expanding our infrastructure to five distribution centers
serving Canada.
Our 2007 growth initiatives emphasized product line expansion and new
products, enhanced marketing materials and e-content and continued
development of new customer channels. Also, we significantly expanded
our Los Angeles distribution center and relocated our St. Louis opera-
tion into a larger facility in 2007. We further expanded our network
with a U.S. redistribution center that supports S.P. Richards’ centralized
purchasing strategy, including our growing global sourcing program.
In addition, we remained focused on initiatives to streamline operations
and realize cost savings via Operational Excellence. Combined, these
initiatives reflect our ongoing efforts to create future growth opportunities
and further improve S.P. Richards’ operating performance.
New฀Products฀and฀Product฀Line฀Expansion
S.P. Richards distributes a broad range of business products sourced
from hundreds of leading manufacturers worldwide. ese manufacturer
partners provide innovation, training and continued investment in quality,
which allow for the ongoing rollout of an expanded product offering
to our customers. is is an essential value added service, as a dynamic
product offering further strengthens our resellers’ position as the single
source solution to their customers’ business products needs. e contin-
ued expansion of our office furniture and emerging product categories,
such as cleaning and breakroom supplies, school supplies and healthcare
products, has helped our resellers acquire new customers and further
penetrate their existing client base. Currently, we are also extending our
product offerings in a variety of safety and industrial products.
Proprietary฀Brands
We meet our customers’ growing demand for competitively priced prod-
ucts through S.P. Richards’ proprietary brand program. Working closely
with domestic suppliers and leveraging our global sourcing capabilities
enables us to provide our resellers a broad offering of products that
deliver both quality and value. Proprietary brand sales were strong again
in 2007 and these value alternatives provide us with opportunities for
more growth in the years ahead. Our proprietary lines include: Sparco
office supply basics; Elite Image new and remanufactured toner cartridges
and premium papers; Lorell office furniture; Compucessory computer
accessories; Nature Saver recycled paper products; Integra writing
instruments; Genuine Joe cleaning and breakroom supplies; and Atlantic
Breeze and HeatRunner climate control products.
Marketing฀Programs,฀Dealer฀Services฀and฀Management฀Support฀Tools
S.P. Richards continues to make considerable investments in new tech-
nologies on behalf of our customers. is investment is often in the form
of improved marketing programs, dealer services and management sup-
port tools. All are designed to help the company and its resellers capture
new business, retain and grow existing customer accounts and maximize
the relationships that build the foundation for profitable long term
growth. Examples include a wide variety of catalog offerings, such as the
full line catalog representing our most complete product offering, and the
innovative Signature Series flyer program, which complements our catalog
offering. We have also introduced new catalogs to further support our
rapidly growing cleaning and breakroom category and proprietary brands.
Other programs and services for the reseller include a comprehensive
offering of management support tools that address such disciplines as:
e-content and e-commerce; technology; operations and profitability;
human resources and training; national distribution; and furniture support
services. For example, in January 2007, we released our new Enhanced
E-content tool that our resellers use on their websites to drive business.
e superior functionality offered by this tool was made available through
our joint marketing agreement with several established software providers
that have demonstrated the ability to support the unique requirements of
the independent office products dealer. We feel very good about the op-
portunities this agreement will provide resellers in the future. In addition,
we are in the process of implementing a sophisticated pricing analysis
program, myanalyst™, that will allow both S.P. Richards and our resellers
to improve sales and margins through enhanced analytical reporting and
pricing tools.
We continue to deliver both product and sales training via SPR University,
a convenient and cost effective on-line training platform available to our
resellers.
SPR฀Advantage฀Program
Another significant offering, the SPR Advantage Program, represents a
collection of services, tools, education and training resources that support
our “first call” independent office products dealers. e services and
support tools in this program are improved each year to best enable the
reseller to compete more effectively in their marketplaces, thus position-
ing S.P. Richards as a valued resource and consultant to our customers.
Operational฀Excellence
In 2007, S.P. Richards remained focused on our Operational Excellence
initiative to streamline operations and realize cost savings. Benefits from
this initiative range from improved freight management and enhanced
fuel programs to greater utilization of our warehouse management
systems and centralized services. We are encouraged by the continued
progress made towards Operational Excellence and the opportunity to
further improve our high standard of customer service and operating
performance.
2008฀Outlook
In 2008, we expect to see a gradual improvement in the office products
industry and, combined with the proper execution of our growth initia-
tives and the continued tradition of delivering excellent support and
service to business products resellers, we look to report improved sales
and earnings for the year.