Q4 2024 Earnings Summary
- O'Reilly has diversified its global supply chain and increased its proprietary brands to over 50% of revenue, positioning it well to manage tariff challenges and reduce dependency on hotspots.
- O'Reilly continues to see strong demand in maintenance categories like oil and filters, indicating resilience in key categories despite competitive pressures from nontraditional retailers.
- O'Reilly operates in a $168 billion industry, and as a $16 billion to $17 billion company, it has plenty of opportunity to grow and continue to take market share in both DIY and DIFM segments.
- O'Reilly Automotive's 2025 comparable store sales guidance has been lowered to 2% to 4%, down from the typical 3% to 5%, due to ongoing pressure on discretionary categories and a cautious consumer, indicating potential for slower growth.
- The company has a significant sourcing exposure to China (approximately 25%), and potential tariffs could impact costs and margins. Management acknowledges uncertainty in dealing with these challenges and has not included any tariff impact in their guidance.
- Capital expenditures are expected to increase due to a shift towards owning more stores, with owned stores costing $3 million to $4 million compared to $400,000 to $600,000 for leased stores, which may pressure returns on capital.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +6.9% (from $3,832.0M to $4,095.6M) | Q4 2024 total revenue increased by approximately 6.9%, driven by higher comparable store sales and new store contributions as seen in previous periods where similar factors boosted revenue through increased average ticket values and transaction volumes. |
Operating Income | +2.8% (from $718.74M to $738.65M) | Operating income saw a modest improvement of 2.8% YoY, indicating that although revenue grew significantly, rising SG&A expenses and other cost pressures continued to offset earnings gains, similar to the margin compression observed in prior analyses. |
Net Income | Essentially flat (from $552.50M to $551.13M) | Net income remained flat YoY despite the revenue increase, suggesting that factors such as incremental operating costs and possible tax or non-operating expense adjustments were at play, echoing the challenges seen in previous periods where margin gains were neutralized by rising expenses. |
Depreciation & Amortization | +366% (from $112.48M to $461.89M) | Depreciation & Amortization experienced a dramatic jump of nearly 366%, a significant increase that most likely reflects aggressive capital investments, expanded asset bases, and possible revisions in asset lives, paralleling earlier periods where large property and equipment purchases led to higher non-cash expenses. |
Basic EPS | +2.3% (from $9.34 to $9.56) | Basic EPS increased by approximately 2.3% YoY, benefiting from both a modest net income improvement and a reduction in the weighted-average shares outstanding, consistent with prior periods where share repurchases played a key role in amplifying EPS gains even when overall earnings growth was subdued. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Total Revenues | FY 2024 | $16.6 billion – $16.8 billion | no current guidance | no current guidance |
Effective Tax Rate | FY 2024 | 21.8% | no current guidance | no current guidance |
Diluted EPS | FY 2024 | $40.60 – $41.10 | no current guidance | no current guidance |
Free Cash Flow | FY 2024 | $1.8 billion – $2.1 billion | no current guidance | no current guidance |
Accounts Payable as % of Inventory | FY 2024 | 127% | no current guidance | no current guidance |
Gross Margin | FY 2024 | 51% – 51.5% | no current guidance | no current guidance |
SG&A per Store Growth | FY 2024 | 3.5% – 4% | no current guidance | no current guidance |
Operating Margin | FY 2024 | 19.4% – 19.9% | no current guidance | no current guidance |
Comparable Store Sales Growth | Q4 2024 | +30–40 basis points benefit | no current guidance | no current guidance |
Total Revenues | FY 2025 | no prior guidance | $17.4 billion – $17.7 billion | no prior guidance |
Comparable Store Sales Growth | FY 2025 | no prior guidance | 2% – 4% | no prior guidance |
Earnings Per Share (EPS) | FY 2025 | no prior guidance | $42.60 – $43.10 | no prior guidance |
Gross Margin | FY 2025 | no prior guidance | 51.2% – 51.7% | no prior guidance |
Operating Profit Margin | FY 2025 | no prior guidance | 19.2% – 19.7% | no prior guidance |
Effective Tax Rate | FY 2025 | no prior guidance | 22.6% | no prior guidance |
Free Cash Flow | FY 2025 | no prior guidance | $1.6 billion – $1.9 billion | no prior guidance |
Capital Expenditures | FY 2025 | no prior guidance | $1.2 billion – $1.3 billion | no prior guidance |
New Store Openings | FY 2025 | no prior guidance | 200 – 210 | no prior guidance |
Average SG&A per Store Growth | FY 2025 | no prior guidance | 2% – 2.5% or 2.5% – 3% excluding Q4 2024 charge | no prior guidance |
Accounts Payable-to-Inventory Ratio | FY 2025 | no prior guidance | 125% | no prior guidance |
Same-SKU Inflation | FY 2025 | no prior guidance | 1% | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Total Revenue | FY 2024 | $16.6B to $16.8B | $16.708B (Q1: $3.976B, Q2: $4.272B, Q3: $4.364B, Q4: $4.096B) | Met |
Diluted EPS | FY 2024 | $40.60 to $41.10 | $40.64 (Q1: $9.20, Q2: $10.55, Q3: $11.39, Q4: $9.50) | Met |
Operating Margin | FY 2024 | 19.4% to 19.9% | 19.46% = (Q1 EBIT $752.48M+ Q2 $863.30M+ Q3 $896.73M+ Q4 $738.65M) / (Q1-Q4 Revenue) | Met |
Gross Margin | FY 2024 | 51% to 51.5% | 51.2% = (Total Revenue $16.708B− COGS Q1 $1.942B, Q2 $2.104B, Q3 $2.113B, Q4 $1.995B) / Total Revenue | Met |
AP as % of Inventory | Q4 2024 | ~127% | 128% = Accounts Payable $6,524,811/ Inventory $5,095,804 | Met |
-
Lower Comparable Sales Guidance
Q: Why guide comp sales at 2%–4% vs. usual 3%–5%?
A: Management guided to a 2%–4% comp sales increase for 2025 due to a cautious consumer and choppiness in the business, especially in discretionary categories. Despite a strong Q4 comp of 4.4% , they are cautious given pressures on the lower-end DIY consumer. -
Sourcing Exposure and Tariffs
Q: What's your sourcing exposure to China, Mexico, and Canada?
A: Approximately 25%–26% of sourcing is from China, high teens percentage from Mexico, and low single digits from Canada. They are prepared to manage potential tariffs through supplier negotiations and have been diversifying their supply chain to reduce dependency on hotspots. -
Impact of Competitor Closures
Q: Are you seeing gains from competitor store closures in the West?
A: It's early to gauge the impact of competitor closures on the West Coast. While there may be opportunities to win additional business, they are cautious to pursue only quality sales that align with their business model. -
Inflation and Pricing Trends
Q: Why is inflation below general economy levels?
A: Same-SKU inflation was under 1% in Q4. The industry doesn't adjust prices weekly, so inflation impacts occur more gradually. Currently, there's no indication of a sharp inflation spike in their products. -
Gross Margin Outlook
Q: How did mix and complexity impact gross margins in Q4?
A: Gross margins were influenced by the inclusion of the Canadian business and product mix shifts due to seasonality. Some factors affecting margins were transitory, and management feels positive about cost management moving into 2025. -
Automation in Distribution Centers
Q: Will new DCs include automation features?
A: Recent DC projects included goods-to-person automation to enhance efficiency, labor savings, and accuracy. They view this as an ongoing evolution and will continue to assess the need for such technologies in future DC projects. -
Owned vs. Leased Store Economics
Q: What's the cost difference between owned and leased stores?
A: Owned stores cost $3–$4 million including construction and equipment, while leased stores cost $400,000–$600,000. Both models provide strong returns, and they see stores as an attractive investment over the long term. -
Fuel Prices Impact on Expenses
Q: How do fuel prices affect operating expenses?
A: Fuel costs are not a significant mover in operating expenses unless there are substantial price changes. They manage fuel costs as part of their overall spend, and it doesn't typically impact the business meaningfully. -
Self-Insurance Cost Pressures
Q: How are rising insurance costs impacting the industry?
A: The cost of resolving accidents is creating pressure, but it's an inherent part of operating their fleet. They will continue to manage these costs as a component of their operating expenses. -
Nontraditional Retail Competition
Q: Is competition from nontraditional retailers affecting DIY market share?
A: They haven't seen significant impact from nontraditional competitors. Maintenance categories like oil and filters continue to perform strongly, and their focus on service and availability differentiates them from price-focused competitors.
Research analysts covering O REILLY AUTOMOTIVE.