O'Reilly Auto Parts 2008 Annual Report Download - page 26

PG.24 O’REILLY AUTOMOTIVE 2008 ANNUAL REPORT
MAN AGEMENT ’S DISCUS SION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
2008 COMPARED TO 2007
Sales increased $1.05 billion, or 42%, from $2.52 billion in 2007 to $3.58 billion in 2008, due to the acquisition of 1,342 CSK stores and the
addition of 150 net new O’Reilly stores opened during 2008. e following table presents the components of the increase in sales for the year
ended December 31, 2008:
December 31, 2008, compared to the same period in 2007
(In millions) Increase/(Decrease) in Sales For the Year Ended
O’Reilly stores:
Comparable store sales $ 65.0
Stores opened throughout 2007, excluding sales for stores open at least one year
that are included in that are included in comparable store sales 92.3
Sales of stores opened in 2008 61.8
Non-store sales including machinery, sales to independent parts
stores and team members (1.1)
CSK stores: 836.2
Total increase in sales $ 1,054.2
We believe that the increased sales achieved by our existing stores is the result of superior inventory availability, a broader selection of
products in most stores, targeted promotional and advertising eorts through a variety of media and localized promotional events, continued
improvement in the merchandising and layout of stores, compensation programs for all store team members that provide incentives for
performance and our continued focus on serving professional installers. Consolidated comparable store sales for stores open at least one
year increased 1.5% for the year ended December 31, 2008. is increase in 2008 was less than the prior year’s increase of 3.7% and historical
trends primarily due to challenging external macroeconomic factors in 2008 as well as a decline in comparable store sales in the stores
added in the CSK acquisition. e external macroeconomic factors which we believe negatively impacted our sales were constraints on our
customers’ discretionary income resulting from ination, declining home and investment asset values, higher gas prices in early 2008, increased
unemployment and the impact of a contraction in the US economy. Comparable store sales for O’Reilly stores, including CSK stores aer
conversion to the O’Reilly brand, but excluding the acquired, yet-to-be-converted CSK stores, increased 2.6% for the year ended December
31, 2008. Comparable store sales for acquired CSK stores open at least one year decreased 1.7% for the portion of those stores’ sales since the
July 11, 2008 acquisition by O’Reilly as compared to the same period in 2007 when CSK’s sales were not included in our consolidated nancial
statements. We anticipate that continued store unit and sales growth consistent with our historical rates will continue in the future. We expect
future sales growth as the CSK stores are converted to the O’Reilly dual market strategy. Comparable store sales are calculated based on
the change in sales of stores open at least one year and exclude sales of specialty machinery, sales to independent parts stores and sales to
team members.
e following table presents quarterly results for non-store sales that are excluded from the calculation of comparable stores sales:
(In millions): 2008 2007 2006
For the quarter ended:
March 31 $ 16 $ 17 $ 16
June 30 19 19 19
September 30 21 18 18
December 31 20 16 16
For the year ended December 31: $ 76 $ 70 $ 69
Gross prot increased $507.5 million, or 45%, from $1.12 billion (44.4% of sales) in 2007 to $1.63 billion (45.5% of sales) in 2008. e increase
in gross prot dollars was primarily the result of the increase in sales resulting from the acquisition of CSK, the increase from new stores and
increased sales levels at existing stores. e increase in gross prot as a percentage of sales is the result of improved product mix, lower product
acquisition cost and distribution system improvements. We improved our product mix by continuing to implement strategies to dierentiate
our merchandise selections at each store based on customer demand and vehicle demographics in the store’s market and through ongoing
Team Member training initiatives focused on selling products with greater gross margin contribution. Additionally, gross margin percentage
improved as a result of the inclusion of sales from stores acquired in the acquisition of CSK. Gross margin percentages on the sales at these
stores are higher than existing O’Reilly stores primarily because a greater proportion of these sales are made to DIY customers (which typically