O'Reilly Auto Parts 2014 Annual Report Download - page 34

FORM 10-K
27
2013 Compared to 2012
Sales:
Sales for the year ended December 31, 2013, increased $467 million to $6.65 billion from $6.18 billion for the same period one year
prior, representing an increase of 8%. Comparable store sales for stores open at least one year increased 4.3% and 3.8% for the years
ended December 31, 2013 and 2012, respectively. 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, sales to Team Members and sales from the VIP
Parts, Tires & Service ("VIP") stores acquired on December 31, 2012, due to the significant change in the business model and lack of
historical data.
The following table presents the components of the increase in sales for the year ended December 31, 2013 (in millions):
Increase in Sales for the Year
Ended December 31, 2013,
Compared to the Same Period
in 2012
Store sales:
Comparable store sales $ 259
Non-comparable store sales:
Sales for stores opened throughout 2012, excluding stores open at least one year that are included
in comparable store sales 74
Sales in 2012 for stores that have closed (3)
Sales for stores opened throughout 2013 and acquired VIP stores 134
Non-store sales:
Includes sales of machinery and sales to independent parts stores and Team Members 3
Total increase in sales $ 467
We believe the increased sales achieved by our stores were the result of store growth and the high levels of customer service provided
by our well-trained and technically proficient Team Members, superior inventory availability, including same day and over-night access
to inventory in our distribution centers, enhanced services and programs offered in our stores, a broader selection of product offerings in
most stores with a dynamic catalog system to identify and source parts, a targeted promotional and advertising effort through a variety
of media and localized promotional events, continued improvement in the merchandising and store layouts of our stores, compensation
programs for all store Team Members that provided incentives for performance and our continued focus on serving both DIY and
professional service provider customers.
Our comparable store sales increase for the year ended December 31, 2013, was driven by an increase in average ticket values for both
DIY and professional service provider business, and an increase in customer transaction counts for professional service provider business,
slightly offset by a small decrease in customer transaction counts for DIY business. The improvements in average ticket values were the
result of the continued growth of the more costly hard part categories as a percentage of our total sales. The overall growth in the hard
part categories continues to be driven by the increasing cost of replacement parts necessary to maintain the current population of better
engineered and more technically advanced vehicles. These vehicles require less frequent repairs and the component parts are more
durable and last for longer periods of time; however, when repairs are required, the cost of the replacement parts is, on average, greater.
Both DIY and professional service provider customer transaction counts are negatively impacted by these less frequent repairs. The
increases in our professional service provider customer transaction counts were driven by the chain wide growth of our professional
business, while macroeconomic pressures on disposable income continue to negatively impact DIY customer transaction counts.
We opened 190 net, new stores during the year ended December 31, 2013, compared to 180 net, new stores and 56 acquired stores for
the year ended December 31, 2012. At December 31, 2013, we operated 4,166 stores in 42 states compared to 3,976 stores in 42 states
at December 31, 2012.
Gross profit:
Gross profit for the year ended December 31, 2013, increased to $3.37 billion (or 50.7% of sales) from $3.10 billion (or 50.1% of sales)
for the same period one year prior, representing an increase of 9%. The increase in gross profit dollars was primarily a result of the
increase in comparable store sales at existing stores and sales from new stores. The increase in gross profit as a percentage of sales was
primarily due to acquisition cost improvements, improved inventory shrinkage and distribution system efficiencies, partially offset by a
smaller amount of capitalized distribution costs for the year ended December 31, 2013, the non-cash negative impact to gross margin
resulting from the depletion of LIFO reserve and the impact of increased professional service provider sales as a percentage of our total
sales mix. Acquisition cost improvements were the result of our ongoing negotiations with our suppliers to improve our inventory
purchase costs. The improved inventory shrinkage was driven by our continued focus on inventory control and accountability through