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A little more than a year-and-a-half after beginning the process of integrating CSK, O’Reilly Automotive (Springfield, MO) expects to have all of the CSK distribution centers and stores fully converted to the O’Reilly system and the O’Reilly distribution model by the end of 2010. Greg Henslee, CEO and co-president, told analysts on a recent conference call that, during this time, O’Reilly has accomplished a lot and is on pace with the integration plan that was put into place following the acquisition of CSK.

2009 was a busy year. O’Reilly was able to integrate many of CSK’s headquarters functions, negotiated most of its supplier deals, made product line upgrades and hard parts additions in the CSK stores, and completely changed over 185 stores in the central United States. O’Reilly also merged the Minneapolis distribution center into the O’Reilly distribution center in Brooklyn Park, MN; converted the Detroit distribution center to O’Reilly systems; converted 141 Murray’s stores to O’Reilly systems; opened the Seattle distribution center; and converted most of the Schuck’s stores that are supplied by that Seattle facility to O’Reilly systems.

Since the conclusion of 2009, O’Reilly has completed the remaining system conversions in the stores supplied out of Seattle, opened its southern California distribution center in Moreno Valley and started converting the Kragen stores in the area. Now that the CSK store conversion process has moved out of the central United States, management expects things to go much more smoothly. “The 185 stores that were converted in the center of the country — which included Minnesota, Montana, west Texas and New Mexico Checker stores, along with the Chicago Murray’s stores — were very disruptive,” Henslee explained. “These complete changeovers involve closing the stores for a week — moving the stores’ existing inventory, resetting the store layout, and installing a new inventory, along with new computer systems, operations procedures and everything else that goes along with an O’Reilly store. We basically turned these into O’Reilly stores in one week’s time. This process was very disruptive to the operation of the business.”

The conversions on the West Coast are simply computer system and procedural conversions. “These conversions don’t require us to close the store and aren’t nearly as disruptive as the changeovers done in the center of the country,” Henslee said. “We are progressing with these changeovers at a rate of 30 stores per week and are being completed as we open our new western distribution centers.”

Once the company completes the Moreno Valley area conversions, O’Reilly will proceed with the opening of the Denver distribution center in March, with the opening of Salt Lake City in May; the relocation of the Dixon, CA, distribution center to Stockton, CA, in late August; and the system conversion of the Phoenix distribution center in December. “These conversions are going very well, and we’re not seeing the disruption in business that we were seeing with the complete changeovers we completed in the center of the country,” Henslee said.

2009 also was a big year for the core O’Reilly business. The company began the year with 3,285 stores, 18 distribution centers and plans to grow. By the end of the year, O’Reilly increased its store count to 3,421 and its distribution center count to 20, with three more distribution centers to open in the first half of 2010.

Management’s goal for 2010 is for 150 installations, mostly concentrated in the Eastern states serviced out of distribution centers in Atlanta and Greensboro, NC, as well as the Ohio Valley states serviced out of facilities in Indianapolis and Detroit. There are only a few new stores planned for the West Coast. — Marc Vincent