O'Reilly Auto Parts 2009 Annual Report Download - page 5

O’Reilly Automotive 2009 Annual Report
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O’Reilly Auto Parts
NASDAQ Retail Trade Stocks
NASDAQ US Market
Standard and Poor’s S&P 500
Comparison of Five-Year
Cumulative Return
We are pleased to deliver another year of record profits and earnings
per share to our shareholders. Our continued success was the result
of the contributions of our 45,000 team members who embrace
our culture and execute our proven business model every day. The
O’Reilly Culture of honesty, hard work, professionalism and excellent
customer service has been our foundation since the Company
began in 1957 and remains the backbone of the strong and dynamic
Company we are today. Our goal is to profitably grow our market
share in existing markets and enter new markets via new store growth
and acquisitions. We accomplish this growth by providing a higher
level of service than our competitors to both the installer and do-it-
yourself markets (our Dual Market Strategy). In 2009, we successfully
executed our strategy by growing market share in the historic O’Reilly
stores, aggressively opening new stores and continuing the successful
integration our 2008 acquisition of CSK Auto Corporation.
Growing Market Share in Existing Markets
When we purchased CSK in 2008, many were concerned that the
acquisition would cause a loss of focus in our existing markets. In
2009, the core O’Reilly stores proved this concern was misplaced
by generating a 6.7% comparable store sales increase. This strong
performance was driven by both internal and external factors. The
store and DC operational teams in historic O’Reilly markets, which
in large part have not been involved in the integration of CSK, have
continued to successfully execute our Dual Market Strategy and
represent the driving force behind the strong comparable store
sales. From an external standpoint, the aftermarket auto parts
industry benefited from the historically low new car and truck sales
and a shift in consumer behavior toward being more proactive in
repairing and maintaining their existing cars. We anticipate that
consumers will continue to retain their cars at higher mileages and
will be more willing to invest in maintaining their vehicles as they
find that the engineering improvements in cars built in the past
ten years enables cars to be reliable at much higher mileages. With
current forecasts predicting that the economy and jobs market will
recover slowly, we continue to see the macroeconomic environment
as a positive tailwind throughout 2010 and beyond.
New Store Growth
We opened 150 new stores in 2009 and continue to see great
opportunity for profitable new store growth. The fragmented
nature of the automotive aftermarket combined with the advantage
of scale of a large chain makes new store growth an attractive capital
investment for our Company. As part of our strategy to build our
store base in contiguous geographic regions, our new store openings
in 2009 were principally in the markets serviced by our newer
distribution centers (DCs). In 2010, we again plan to open 150 stores.
While new stores continue to offer an attractive return on invested
capital, our 2010 target is below our historic new store opening rate
because we believe our capital investments are best deployed on the
conversions and enhancements that will drive results in the acquired
CSK stores. Beyond 2010, we anticipate increasing our annual new
store openings to capitalize on the attractive opportunities we see
in both the markets within the distribution reach of the historic
O’Reilly footprint as well as CSK markets which will have enhanced
distribution capacity for significant growth.
Acquisition of Existing Parts Store Chains
Our 2008 acquisition of 1,342 CSK stores represented a huge
commitment to expanding our brand. The motivation behind the
LETTER TO OUR SHAREHOLDERS
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