What changed in this filing

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Item 1A. Risk Factors

2024-02-22 compared with 2023-02-23 · 45 added, 42 removed, 171 unchanged (34% of the section changed)

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Senior officers may also make verbal statements to analysts, investors, the media and others that are forward-looking.

Forward-looking statements may relate, for example, to future operations, including the anticipated synergies and benefits of any acquisitions or divestitures, as well as prospects, strategies, financial condition, economic performance (including growth and earnings), industry conditions and demand for our products and services.

Forward-looking statements may relate, for example, to future operations, including the anticipated synergies and benefits of any acquisitions or divestitures, as well as prospects, strategies, investments, financial condition, economic performance (including growth and earnings), industry conditions and demand for our products and services.

We caution that our forward-looking statements involve risks and uncertainties, and while we believe that our expectations for the future are reasonable in view of currently available information, you are cautioned not to place undue reliance on our forward-looking statements.

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• the number of vehicles in current service that are six years old and older, as these vehicles are typically no longer under the original vehicle manufacturers’ warranty and will need more maintenance and repair than newer vehicles;

• the addition of electric vehicles, hybrid vehicles, ride sharing services, alternative transportation means and autonomously driven vehicles and future legislation, including tax incentives and restrictions on the sale of new internal combustion vehicles, related thereto;

• the addition of electric vehicles, hybrid vehicles, ride sharing services, alternative transportation means and autonomously driven vehicles and future legislation, including incentivizing the purchase of electric and hybrid vehicles, related thereto, may result in reduced need for parts;

• gas prices, as increases in gas prices may deter consumers from using their vehicles;

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A variety of factors, many outside our control, affect our suppliers' ability to deliver quality merchandise to us at favorable prices and in a timely manner.

These include, raw material shortages, inadequate manufacturing capacity, labor strikes, shortages and disputes anywhere within the supply and distribution chain delivering products to us, tariff and customs legislation and enforcement, transportation disruptions, tax and other legislative uncertainties, pandemics and/or weather conditions.

In recent years, partly as a result of the COVID-19 pandemic and other factors beyond our control, such as the ongoing Russia and Ukraine war, we have experienced supply chain disruptions, particularly with regard to global labor shortages and inventory sourced from outside the U.S.

These disruptions have not had a material impact on our business to date, but we cannot provide any assurance that these or new supply chain disruptions will not materially or adversely impact our business, financial condition and results of operations in the future.

These include raw material shortages, inadequate manufacturing capacity, labor strikes, shortages and disputes anywhere within the supply and distribution chain delivering products to us, tariff and customs legislation and enforcement, transportation disruptions, tax and other legislative uncertainties, public health emergencies and/or weather conditions.

In recent years, partly as a result of the COVID-19 pandemic and other factors beyond our control, such as the conflict between Russia and Ukraine and the conflict in the Gaza strip, we have experienced and may continue to experience supply chain disruptions, particularly with regard to global labor shortages and inventory sourced from outside the U.S.

These disruptions have not had a material impact on our business to date, but we cannot provide any assurance that these or new supply chain disruptions, including from recent unrest in the Middle East, will not materially or adversely impact our business, financial condition and results of operations in the future.

Furthermore, financial or operational difficulties at a particular supplier could cause that supplier to increase the cost, or decrease the quality, of the products we purchase.

For example, increased pressure for wage and

benefit increases for suppliers in the U.S.

based on the September 2023 strike by the United Auto Workers (“UAW”)

and UAW’s ongoing strategy of targeted strikes could impact our suppliers and increase the costs of the products we purchase.

Supplier consolidation could also limit the number of suppliers from which we may purchase products and could materially affect the prices we pay for these products.

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In particular, the market for replacement automotive parts is highly competitive and subjects us to a wide variety of competitors.

We compete primarily with national, international and regional auto parts chains, independently owned regional and local automotive parts and accessories stores, automobile dealers that supply manufacturer replacement parts and accessories, mass merchandisers, internet providers and wholesale clubs that sell automotive products, and regional and local full service automotive repair shops, both new and established.

We compete primarily with international, national and regional auto parts chains, independently owned regional and local automotive parts and accessories stores, automobile dealers that supply manufacturer replacement parts and accessories, mass merchandisers, internet providers and wholesale clubs that sell automotive products, and regional and local full service automotive repair shops, both new and established.

Furthermore, the automotive aftermarket industry continues to experience consolidation.

Consolidation among our competitors could further enhance their financial position, provide them with the ability to offer more competitive prices to customers for whom we compete, and allow them to achieve increased efficiencies in their consolidated operations that enable them to more effectively compete for customers.

Consolidation among our competitors could further enhance their financial position, provide them with the ability to offer more competitive prices to customers for whom we compete, take advantage of acquisitions and other opportunities more

readily, more successfully utilize developing technology, including data analytics, artificial intelligence, and machine

learning, and allow them to achieve increased efficiencies in their consolidated operations that enable them to more effectively compete for customers.

If we are unable to continue to develop successful competitive strategies or if our competitors develop more effective strategies, we could lose customers and our sales and profits may decline.

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We have operations or activities in numerous countries and regions outside the United States, including throughout western Europe and Australasia.

As a result, our global operations are affected by economic, political and other conditions in the foreign countries in which we do business as well as U.S.

As a result, our global operations are affected by economic, geopolitical and other conditions in the foreign countries in which we do business as well as U.S.

laws regulating international trade.

Specifically, instability in the geopolitical environment in many parts of the world (including as a result of the on-going Russia and Ukraine war, and China-Taiwan relations) and other disruptions may continue to put pressure on global economic conditions.

In addition, countries across the globe are instituting sanctions and other penalties against Russia.

While we do not have operations in Russia or Ukraine, the retaliatory measures that have been taken, and could be taken in the future, by the U.S., NATO, and other countries have created global security concerns that could result in broader European military and political conflicts and otherwise have a substantial impact on regional and global economies, any or all of which could adversely affect our business, particularly our European operations.

While the broader consequences are uncertain at this time, the continuation and/or escalation of the Russian and Ukraine conflict, along with any expansion of the conflict to surrounding areas, create a number of risks that could adversely impact our business, including:

Specifically, instability in the geopolitical environment in many parts of the world (including as a result of the conflict between Russia and Ukraine, the conflict in the Gaza strip, general unrest in the Middle East, and China-Taiwan relations) and other disruptions may continue to put pressure on global economic conditions and supply chains.

For example, the U.S., other NATO members and other countries across the globe have instituted sanctions and other penalties against Russia in response to its conflict with Ukraine.

While we do not have operations in Russia or Ukraine, retaliatory measures such as this have created, and may continue to create, global security concerns that could result in broader military and political conflicts, further disrupt global automotive supply chains and otherwise have a substantial impact on regional and global economies, any or all of which could adversely affect our business, particularly our European operations.

While the broader consequences are uncertain at this time, the continuation and/or escalation of these or other geopolitical conflicts creates a number of risks that could adversely impact our business, including:

• increased inflation and significant volatility in commodity prices;

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• adverse changes in international trade policies and relations;

• our ability to maintain or increase our prices, including freight in response to rising fuel costs;

• our ability to maintain or increase our prices, including freight in response to increased fuel costs;

• disruptions in global supply chains;

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Despite our implementation of various security measures, our IT systems and operations could be subject to damage or interruption from computer viruses, natural disasters, unauthorized physical or electronic access, power outages, telecommunications failure, computer system or network failures, wire transfer failure, employee error/malfeasance, cyber-attacks, security breaches, and other similar disruptions.

Additionally, the techniques and sophistication used to conduct cyber-attacks and breaches of IT systems change frequently and have the potential to not be recognized until such attacks are launched or have been in place for a period of time.

In addition, the IT systems of

businesses that we have acquired or may acquire could present issues that we were not able to identify prior to the

acquisition or other issues that continue to pose risk to us, such as those related to collection, use maintenance and

data disclosure practices or other cybersecurity vulnerabilities.

Additionally, the techniques and sophistication used to conduct cyber-attacks and breaches of IT systems change frequently, including as a result of the deployment of

evolving artificial intelligence tools used to identify vulnerabilities and create more effective phishing attempts, and have the potential to not be recognized until such attacks are launched or have been in place for a period of time.

Maintaining, operating, and protecting these systems and related personal and sensitive information about our employees, customers and suppliers requires continuous investments in physical and technological security measures, employee training, and third-party services which we have made and will continue to make.

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While we also seek to obtain assurances from third parties with whom we interact to protect confidential information, there are risks that the confidentiality or accessibility of data held or utilized by such third parties may be compromised.

To date, we have not experienced a material breach of cyber-security;

To date, we have not experienced a material breach of cybersecurity;

however, our computer systems and the computer systems of our third-party service providers have been, and will likely continue to be, subjected to unauthorized access or phishing attempts, computer viruses, malware, ransomware or other malicious codes.

In particular, in connection with the COVID-19 pandemic and the related increase in working from home, there has been a spike in cyber-security attacks as work from home measures have led businesses to increase reliance on virtual environments and communications systems, which have been subjected to increasing third-party vulnerabilities and security risks.

In particular, the increase in work-from-home arrangements have led businesses to increase reliance on virtual environments and communications systems, which have been subjected to increasing third-party vulnerabilities and security risks.

A serious prolonged disruption of our information systems for any of the above reasons could materially impair fundamental business processes and increase expenses, decrease sales or otherwise impact earnings and cash flows.

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Our retail and business customers increasingly demand convenient, easy-to-use e-commerce tools as an option to conduct their business with us.

The success of our e-commerce platform depends on our ability to accurately identify the products to make available through our e-commerce platform, and to provide and maintain an

efficient online experience with the highest level of data security for our customers.

The success of our e-commerce platform depends on our ability to accurately identify the products to make available through our e-commerce platform, and to provide and maintain an efficient online experience with the highest level of data security for our customers.

Operating an e-commerce platform is a complex undertaking and exposes us to risks and difficulties frequently experienced by internet-based businesses, included risks related to, among other things, our ability to support, expand, and develop our internet operations, website, mobile applications and software and related operational systems.

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Our business, financial condition, results of operations and cash flows may be materially and adversely affected as a result.

We are dependent on key personnel and the loss of one or more of those key persons could harm our business.

Our dependence on key personnel and the increasing potential for union activity could adversely affect our future results and harm our business.

Our future success significantly depends on the continued services and performance of our key management personnel.

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If we are unable to implement these strategic initiatives efficiently and effectively, or if these strategic initiatives are unsuccessful, our business, financial condition, results of operations and cash flows could be adversely affected.

To facilitate this transformation plan, we are making substantial investments, recruiting new talent, and optimizing our business model, management system, and organization, as well as divesting ourselves of assets related to the business products group segment, which we have exited.

To facilitate this transformation plan, we are making substantial investments, recruiting new talent, and optimizing our business model, management system, and organization.

Accordingly, a strong balance sheet that provides the flexibility to invest in these new growth opportunities and maintaining discipline in our capital allocation is critical to the success of our transformation plans.

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Furthermore, if we are unable to successfully drive employee or customer adoption of certain strategic initiatives, we may not realize the full benefits of our plan.

Additionally,

failure to make progress on our plans (or failure to accurately measure progress on our plan), may disrupt the conduct of our business and divert management’s attention and resources.

Additionally, failure to make progress on our plans (or failure to accurately measure progress on our plan), may disrupt the conduct of our business and divert management’s attention and resources.

All of which could have an adverse effect on our financial condition and results of operations.

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However, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

There can be no assurance that all control issues or fraud will be detected.

There can be no assurance

that all control issues or fraud will be detected.

As we continue to grow our business, our internal controls continue to become more complex and require more resources.

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Uncertainty and/or deterioration in general macro-economic conditions domestically and globally, including inflation or deflation, employment rates and wages, changes in tax policies, changes in energy costs, uncertain credit markets, or other economic conditions, could have a negative impact on our business, financial condition, results of operations and cash flows.

Our business and operating results have been and may in the future be adversely affected by uncertain global economic conditions, including inflation or deflation, domestic outputs, political uncertainty and unrest, employment rates and wages, including increases in minimum wage, changes in tax policies, including tax legislation such as the Inflation Reduction Act of 2022, changes in energy costs, instability in credit markets, declining consumer and business confidence, fluctuating commodity prices, rising interest rates, monetary policies, volatile exchange rates, and other challenges that could affect the global economy.

Our business, financial condition, results of operations and cash flows have been and may in the future be adversely affected by uncertain global economic conditions, including inflation or deflation, domestic outputs, geopolitical uncertainty and unrest, employment rates and wages, including increases in minimum wage, changes in tax policies, changes in energy costs, instability in credit markets, declining consumer and business confidence, fluctuating commodity prices, elevated interest rates for prolonged periods, monetary policies, volatile exchange rates, changes in fiscal and regulatory priorities resulting from the outcome of the 2024 U.S.

presidential election, and other challenges that could affect the global economy.

Both our commercial and retail customers may experience deterioration of their financial resources, which could result in existing or potential customers delaying or canceling plans to purchase our products.

Additionally, other economic conditions, including resulting from healthcare pandemics or epidemics, could impact various aspects of our business.

The extent to which these could impact us depends on numerous factors and future developments that we cannot predict, including the occurrence of additional waves or spikes in infection rates, including due to the emergence and spread of variants;

governmental, business or other actions taken in response to certain healthcare pandemics or epidemics and the efficacy of these actions, including partial or complete shut downs, travel restrictions, and stay-at-home orders among other actions;

effectiveness and public acceptance of vaccines;

and impacts on our supply chain, our ability to keep operating locations open, and on customer demand.

Our vendors could experience similar negative conditions, which could impact their ability to fulfill their financial obligations to us.

Future weakness in the global economy could adversely affect our business, results of operations, financial condition and cash flows.

Our vendors may also be adversely affected by these and other uncertain or deteriorating macro-economic conditions, which could impact their ability to fulfill their financial obligations to us.

Fluctuations in foreign currency exchange rates have adversely affected and could continue to adversely affect our operating results.

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The concern over climate change has led to legislative and regulatory initiatives aimed at reducing greenhouse gas emissions (“GHG”).

For example, proposals that would impose mandatory requirements related to GHG continue to be considered by policy makers in the U.S.

and elsewhere.

For example, significant increases in fuel economy requirements, new federal or state restrictions on emissions of carbon dioxide or new federal or state incentive programs that may be imposed on vehicles and automobile fuels could adversely affect demand for the products we sell.

For example, regulations that impose mandatory requirements related to GHG continue to be considered by or have been issued by policy makers in both the federal and certain state governments in the U.S., by the European Union, and by national governments in Canada, the U.K., Australia and elsewhere.

Many of the regulations that have been issued create mandatory, annual reporting requirements related to carbon emissions and other sustainability-related information that will ultimately be subject to audit and could expose our company to fines, regulatory inquiry or negative publicity if we fail to comply.

Additionally, significant increases in fuel economy requirements, new federal or state restrictions on emissions of carbon dioxide or new federal or state incentive programs that may be imposed on vehicles and automobile fuels could adversely affect demand for the products we sell.

We may not be able to accurately predict, prepare for and respond to new kinds of technological innovations with respect to electric vehicles and other technologies that minimize emissions.

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Because we are involved in litigation from time to time and are subject to numerous laws and governmental regulations, we could incur substantial judgments, fines, legal fees and other costs as well as reputational harm.

We are sometimes the subject of complaints or litigation from customers, employees or other third parties for various reasons.

For example, we are party to, among other litigation, numerous pending product liability lawsuits relating to our national distribution of automotive parts and supplies, many of which involve claims of personal injury allegedly resulting from the use of automotive parts distributed by us.

We are sometimes the subject of complaints or litigation from customers, employees or other third parties for various reasons, including as a result of new legal or regulatory frameworks.

For example, we are party to, among other litigation, numerous pending product liability lawsuits relating to our national distribution of automotive parts

and supplies, many of which involve claims of personal injury allegedly resulting from the use of automotive parts distributed by us.

The damages sought against us in some of these litigation proceedings are substantial.

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In particular, on July 8, 2021, the Washington Supreme Court overturned the order of the Washington Court of Appeals and reinstated the trial court's damage award of $77 million against us.

Additionally, we are subject to numerous laws in the various jurisdictions in which we operate as well as governmental regulations relating to taxes, environmental protection, product quality standards, data privacy, building and zoning requirements, and employment law matters.

Additionally, we are subject to an increasing number of laws in the various jurisdictions in which we operate as well as governmental regulations relating to taxes, environmental protection, product quality standards, cybersecurity, machine learning, artificial intelligence, data privacy, building and zoning requirements, and employment law matters.

If we fail to comply with existing or future laws or regulations, we may be subject to governmental or judicial fines or sanctions, while incurring substantial legal fees and costs.

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Changes in legislation or government regulations or policies, particularly those relating to taxation and international trade, could have a significant impact on our results of operations.

Our business is global, so changes to existing international trade agreements, blocking of foreign trade or imposition of tariffs on foreign goods could result in decreased revenues and/or increases in pricing, either of which could have an adverse impact on our business, results of operations, financial condition and cash flows in future periods.

Our business is global, so changes to existing international trade agreements, blocking of foreign trade, increased protectionism, or imposition of tariffs on foreign goods could result in decreased revenues and/or increases in pricing, either of which could have an adverse impact on our business, results of operations, financial condition and cash flows in future periods.

For instance, the United States imposed Section 232 tariffs on many imported products of steel and aluminum in March 2018 and expanded the tariffs to additional derivative products of steel and aluminum effective February 8, 2020.

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Many factors influence our reputation and the value of our brands including the perception held by our customers, business partners, investors, other key stakeholders and the communities in which we do business.

Our business faces increasing scrutiny related to environmental, social and governance activities and disclosures and risk of damage to our reputation and the value of our brands if we fail to act responsibly in a number of areas, such

as environmental stewardship and sustainability, supply chain management, climate change, diversity, equity and inclusion, workplace conduct, human rights, philanthropy and support for local communities.

Our business faces increasing scrutiny related to corporate social responsibility and disclosures and risk of damage to our reputation and the value of our brands if we fail to act responsibly in a number of areas, such as environmental stewardship and sustainability, supply chain management, climate change, diversity, equity and inclusion, workplace conduct, human rights, philanthropy and support for local communities.

Any harm to our reputation could impact employee engagement and retention and the willingness of customers and our partners to do business with us, which could have a material adverse effect on our business, results of operations and cash flows.

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These broad market, geopolitical and industry factors among others may harm the market price of our common stock, regardless of our operating performance and growth outlook, and the value of your investment may decline.

UNRESOLVED STAFF COMMENTS .

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors