O'Reilly Auto Parts 2006 Annual Report Download - page 4

o’reilly automotive 2006 annual report
page 2
David O’Reilly
Chairman of the Board
Greg Henslee
Chief Executive Officer and
Co-President
Ted Wise
Chief Operating Officer and
Co-President
Tom McFall
Senior Vice President
of Finance and Chief
Financial Officer
management to stores. To better support
our Professional Parts People, the new
store openings were concentrated around
our newest distribution centers in Atlanta,
Georgia, and Indianapolis, Indiana. This
increased market penetration provides
improved economies of scale as it relates
to brand recognition, advertising,
distribution and operations.
In addition to the new stores opened in
2006, we completed the integration of
our acquisition of the Midwest Auto
Parts chain, which was purchased in
2005. With our merchandise mix in
place, systems fully converted and our
team members “Living Green,” we are
ready to increase our rate of expansion
in the Northern Plains. To support this
growth, we will relocate the St. Paul,
Minnesota, distribution center in mid-
2007 to a new, larger (240,000 square
feet) and much more efficient distribution
center in Brooklyn Park, Minnesota, a
suburb of Minneapolis. As has been our
history, acquisitions will continue to be
a key component in our growth strategy.
We will continue to be opportunistic
industry consolidators when the
geographic location, culture and value
meet our acquisition requirements.
Excellent customer service doesn’t begin
and end at the stores. Providing the high
level of parts availability our customers
have come to expect requires an extensive
logistics and distribution network. Our
3,188 dedicated distribution center team
members are totally committed to pro-
viding excellent customer service to their
customers - our stores. The distribution
center team provides the highest level of
store in-stock rates and parts availability
in the industry by delivering to every
store five nights a week and providing
four to eight daily deliveries to our stores
in metro markets that have a distribution
center. To support our contiguous
growth, we expanded our distribution
footprint in 2006 by adding our 14th
distribution center in Indianapolis.
This distribution center allows us to
service all of the markets in Indiana as
well as Cincinnati, Ohio; Louisville,
Kentucky; and Dayton, Ohio.
From the day we opened the doors at
our first store, expense control has been
ingrained in our Live Green culture. All
team members are continually reminded
to reduce expenses without negatively
impacting our goal of providing excellent
customer service. With comparable store
sales below historical levels and rising
energy costs, we experienced tremendous
pressure on our operating, selling, general
and administrative costs (OSG&A), but
by Living Green, our team was able to
reduce per store OSG&A costs by
1% per store in 2006. We were able to
accomplish this by: tightly controlling
payroll without sacrificing our high-level
of customer service, reducing our energy
usage through energy management
enhancement initiatives at the distribution
centers and stores, improving safety
performance (another tenet of Living
Green), and scrutinizing every expense
item. While expense control is a continual
focus, our team members’ expense
discipline held the line on OSG&A in
a challenging year.
The road to achieving our “Four-N-Ten
Everyone Wins” goal of reaching sales of
$4 billion by 2010 begins and ends with
excellent customer service. Our ability to
continually exceed customer expectations
in our 1,640 existing stores, and the 190
to 195 new stores that will open in 2007,
will be the key to our success. Staffing
our stores with knowledgeable, friendly
Professional Parts People armed with
the tools and support to help solve our
customers’ problems and meet their needs
will continue our tradition of building
customer trust and relationships. These
win-win relationships will be the vehicle
we use to drive sales, because in the
end … people buy from people.
Our distribution centers stock over 116,000 part
numbers. Once a part has been ordered, our advanced
inventory control system and handling technology
allow the part to be picked, packed and delivered to
the store and to our customer within 24 hours.
01 02 03 04 05 06
1,500
1,250
1,000
50
250
0
500
1,50
In 2006, we plan to open 190 to 195 new stores, located
primarily in markets served by our newest DCs in
Minneapolis, Indianapolis and Atlanta.
Our co-founder, C.F. O’Reilly once said, “People do
business with people they like.” This is a philosophy that
has been adopted throughout our Company and the reason
our customers continue to reward us with their business.
total number
of stores