O'Reilly Auto Parts 2010 Annual Report Download - page 4

We are pleased to report another year of
record profits and earnings per share to
our shareholders. 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 continued success is the result
of the contributions of our 47,000 team
members who embrace our Culture and
execute our proven business model every
day. This business model consists of
providing a higher level of service than
our competition and focusing on both
2010. Even though we have made
progress since the acquisition, we
continue to have significant opportunities
for continued sales growth and improved
profitability in our acquired CSK markets
as we fully execute our proven Dual Market
Strategy in the coming years.
In addition to our solid execution, the
macro-external factors of miles driven and
the continued increase in the age of the
vehicle population provided tailwinds for
the automotive aftermarket. The stabilization
of the economy and relatively consistent
gas prices led to a modest increase in
annual miles driven in the U.S. during the
year, a factor which positively impacts
demand for the products we sell. However,
the improvement in miles driven was less
than one percent, and we do not anticipate
a return to strong year-over-year growth in
miles driven until the rate of unemployment
in the U.S. significantly decreases and lost
commuter miles return. The age of vehicles
continues to increase as consumers make
the choice of maintaining their existing
vehicle and defer purchasing new vehicles.
As consumers have increased the length
of time they expect to keep their current
vehicles, they have placed a higher
emphasis on better maintenance, and this
emphasis has been positive for the
aftermarket as a whole. We believe that as
consumers better maintain their existing
vehicles, they will determine it is much
more economical to keep their vehicles
longer. The continuing trend of the aging
vehicle fleet is due in large part to the
better quality of vehicles produced over
O’REILLY AUTO M OTIVE 2010 AN NUAL REPORT PAGE 2
LETTER TO
SHAREHOLDERS
Our Merchandise Department uses finely tuned
processes to make sure each and every O’Reilly
store is stocked with a complete line of parts to meet
our customer’s need. From appearance chemicals to
hard-to-find parts to paint, our Team Members make
sure we have the best coverage in the business so
we can always be our customers’ First Call.
do-it-yourself and professional service
provider customers – our Dual Market
Strategy. Our Dual Market Strategy
enables us to provide superior returns to
our shareholders by profitably growing
market share in our existing markets and by
entering new markets through new store
growth and strategic acquisitions.
GROWING MARKET SHARE IN EXISTING MARKETS
We achieved exceptionally strong,
profitable growth in our existing markets
during 2010, highlighted by a comparable
store sales increase of 8.8% and a 250
basis point increase in adjusted operating
margin to 13.6%. This adjusted operating
margin represents a record for O’Reilly,
surpassing the previous mark of 12.4% set
in 2006, prior to our acquisition of CSK
Auto Corporation. We realized strong
market share growth and increased
profitability across all of our markets. Our
core O’Reilly stores continue to gain
market share by providing excellent
customer service and offering the best
parts availability in the industry. The
consistent execution of our Dual Market
Strategy, coupled with our intense ongoing
focus on expense control, resulted in
significant increases in operating leverage
at these core stores. At the acquired CSK
stores, we continue to make strong strides
in gaining market share by implementing
our Dual Market Strategy. Increased
comparable store sales, combined with
tight expense control, leveraged fixed costs
and resulted in improved operating margin
performance at the acquired CSK stores in