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O'Reilly Auto Parts: Consistent Execution, Consistent Growth

Thomas Paulson
Oct 28, 2022
O'Reilly Auto Parts: Consistent Execution, Consistent Growth

O'Reilly Auto Parts 3Q22 comparable-store sales increased +7.6% with CEO Greg Johnson saying, "Our sales volumes accelerated as we moved through the quarter…Our professional business again outperformed in the third quarter, producing double-digit comparable store sales growth on robust growth in both ticket counts and average ticket size…Shifting to the DIY business, we were pleased to generate positive results in the third quarter against extremely difficult 2- and 3-year comparisons…[O]ur DIY business was positive each month of the quarter with comparable store sales increases driven by growth in average ticket being partially offset by anticipated traffic pressures with both metrics outperforming our expectations for the quarter. We saw improvement in ticket counts on the DIY side as we progress through the quarter while calendaring very challenging prior year comparisons, and we are pleased to see the resilience in our DIY customer base in spite of continued pressure from broad-based inflation...Comparable store sales growth was again driven by strength in average ticket of approximately 10% on both sides of the business.”

  • As a reminder, O’Reilly and AutoZone are taking targeted price cuts on the professional side to gain market share, principally from Advance Auto and regional players. On per store average basis, professional sales of $1.4M are 30% above 2019’s level. Chief Operating Officer Brad Beckham stated, “Our professional customers rely on us to be an integral partner in the success of their business. We focus on developing long-lasting durable relationships with our customers by providing exceptional service from highly qualified, knowledgeable professional parts people who are committed to overcoming any obstacle to take care of our customers. Our team's sense of urgency, professionalism and dedication to our customers allows us to leverage the significant investments we've made in distribution, hub infrastructure in inventory to provide industry-leading inventory availability, which is absolutely vital to the success of our customers. Our partnerships with our professional customers go even deeper as we support all aspects of their operations through our investments in technology platforms, shop management systems as well as technical and business management training.”
  • Stepping back, the auto part industry, broadly speaking, is benefiting from the average vehicle on the road being older (weak new car sales and more durable vehicles), the household migration to less dense areas (which extends miles driven), the return to office/ chauffeuring kids more, and the still healthy employment market (wages going up and jobs plentiful).
  • O'Reilly's trailing-twelve-month (TTM) sales increased $5 QoQ to $316 and is likely to increase by the mid-single-digits over the next twelve months.
  • TTM EBITDA and free cash flow of $3.4B and $2.5B (representing an EBITDA / FCF conversion rate of 74%) were flattish the year-ago period. These metrics are likely to increase by a mid-single-digit clip over the next twelve months. O’Reilly raised their full-year guidance based upon the improving trend in 2H22.
  • 2Q22 profitability declined due to lower gross margins which was down due to customer mix (DIFM strong, DIY weaker) and the company’s strategic price investments to drive market share growth.
  • O’Reilly opened 38 new stores in the U.S. during 3Q22, ending the period with 5,910 locations. The company remains on pace to open 175-185 stores for the year. For 2023, O’Reilly first shared that they intend to open 180 - 190 new locations.

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Thomas Paulson

Director of Research and Business Development,

Thomas Paulson spent 20 years as a Wall Street analyst and a member of asset management teams at AllianceBernstein and Cornerstone Capital, representing top-50 ownership positions including Target, Home Depot, Nike, Amazon, Google, and many more. He brings consumer related expertise and knowledge of enterprises in retail, CPG, financial services, telecom, and entertainment.

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