O'Reilly Automotive (ORLY) 26 Jul 182018 Q2 Earnings call transcript

Welcome to the O'Reilly Automotive Incorporated Second Quarter 2018 Earnings Conference Call. My name is John, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a 30 minute question-and-answer session. Please note that this conference is being recorded. turn over will Mr. I now the to call And Tom McFall. Mr. begin. McFall may you

you, and everyone, Good you Thank morning, us. thank John. for joining

conference XXXX. period. After discuss will prepared comments, and the call, a quarter our quarter today's question-and-answer host third year results for our our full and we'll XXXX outlook During second we

Safe today covered this and the we statements begin to provisions by we protection forward-looking we Harbor I'd Before the remind everyone XXXX. statements the to be forward-looking contain like morning, that and claim Reform our contained comments Securities Private for intend Act under in of Litigation

company's You could, results from assumes materially and forward-looking by will, any introduce statements anticipate, call. could XX, forward-looking statements company's may, would, any several time, important to SEC Greg due filings. expect, as Report ended the The Annual I'd consider, in should, At latest estimates, Johnson. company or can December obligation factors Form XX-K actual identify year during other like this believe, intend, described project, recent statements the differ made words these no plan, for to to such words. XXXX, this on The forward-looking update similar

Officer. quarter and solid Greg O'Reilly Officer Auto today Operating morning, my and welcome Good half Team Executive and our by Shaw, this Chairman; Co-President; It's call second pleasure me XXXX. everyone, are first a O'Reilly, on David Tom Thanks Tom. the present. strong the a on with of Vice begin our Chief Henslee, Executive quarter to and Parts Chairman to also congratulating our the and conference O'Reilly second call Participating Jeff Financial Chief call. morning our McFall, are

increase to provide range. X.X%, great service of of comparable team's which sales store value drove proven our a the guidance exceeded our end second quarter top Our and ability superior

experienced more weather continued first balance demand quarter, start, our for But many winter the of spring markets the in benefited as second arrived difficult like a of quarter as normal got for of patterns off the discussed and to at our weather. call, we the end As April. up quarter picked we

Our service providing our results dedicated driving XX,XXX stepped strong challenge customer in outstanding over team up team by and the the sales to of quarter. members

SG&A remains X.X% team driving legal with moment. quarter an committed an pleased reserve to will focus and of quarter growth a are adjustment, of to taking in as last unrelenting our the Our to care increase sales from profitable compared on second second year's profit XXXX benefit in we of which driven Jeff operating have the on a customers excluding touch

benefit to Our range exceeded guidance performance coupled net operating and also our testament expenses a continued the of best end $X.XX an tax profit earnings $X.XX top per unwavering in to the and share, sales the the providing reform to in commitment which O'Reilly per aftermarket. of the share of from with drove XX% automotive of Team and experience income is increase controlling to customer

of We results. on our provide pressured additional the the comparable ticket markets as specifically of sales beginning headwinds DIY second and April to like cold I'd color counts winter weather experienced quarter the Now, store some of many business. wet driven on in our at side unseasonably our

it quarterly our the comp the at improved quarter, trends did With our to contribute same-store softest the sales growth. end April, of beginning although onset of month spring of was and the April

performance quarter and did an the of Our our up pent best May. on delivered teams in capitalizing the job, excellent demand

typically a and line was we see we the thus solid the expect of a As in trend we which far selling steady in on normal on DIY quarter. that many season summer weather sales with contributors first our continued backdrop. growth markets July, our to business in again would a the side of demand were of is Similar to June, professional strong positive growth have typical ticket steady our second in comparable and from move to hot to our quarter, both in the we the contributor with our sides weather business store what performing professional to count as saw better

mentioned to our performance strength I spring business to broadly complexity typical expectations be mix stabilized our finished of across in increasing normal comparable flat by part the solid combined of categories a the counts failure categories quarter. controller comps ticket increase in favorable as earlier, demand Similar management. vehicle As Average arrival for we overall contributor SKU sales quarter, commodity a related store count the basis DIY two On our ticket a ride same saw quarter. continues hard of at a after driven pricing pricing the with our ticket strong the with of during were inflation line from basis effective On winter. continued but the such the brakes weather. beginning modest on driven pressured repairs, category and past benefited quarters and a to some we maintenance with

HVAC good maintenance back categories of As we the you refrigerants in through quarter. would typical expect as moved spring in well as we weather the categories, performance strong also hot the on and saw performance half particularly as quarter

discuss expectations with the far a the by weather and average impact drivers of present aftermarket core the line is headwind However balance underlying business view I which continued driven, our miles assumption number determined to in we've the our vehicles and over year the consumer. moment. XXXX of health long-term in weather margin the normal demand business of automotive of and in of in remainder our an will of weather typical cycle the these We a as for swings weather. the experienced Ultimately heat age of and in for include mix related strength the gross of categories the out thus

on in as these and employment guidance comparable sales outlook the economic have the average remain the we stable continues and to last increase. calls, favorable for age for indicated a As have store two XXXX drivers our vehicle consumers we outlining outlook in

adjust short-term or otherwise some from driven impact miles to economic to as including or prices consumers However, to uncertainty any of rising pressures economy tariffs. the gas we prices face to respond to the higher disruptions temporary expect

historically we the lowest the guidance few In will from additional an to the approximately incorporates addition, XXXX. basis additional week the the and day impact XXXX points our Sunday compared headwind headwind face as our of a store sales. quarter of Sunday quarter Sunday in is comparable of to has been third volume

to results, on to factors we we third the our comparable these third establishing our of guidance to our at guidance and X% comparisons our in quarter the maintaining are result year-to-date a fourth stores quarter X% face difficult we're year X%. X%. As Based full guidance quarter,

For gross an full which into expectation was within was margin margin margin our our point of the basis improvement over our year X XXXX quarter, of the built quarter guidance. XX.X% gross second

from I a such well of were more increased This lower HVAC and earlier, transportation contributors comparable carry weather gross the cost offset As as second lower sales and quarter, store categories margin refrigerants which but in our discussed by strong on LIFO as detail. discuss headwind in mix percentage. average gross will gross continued from impact which Tom sales as we some hot dollar a profit headwinds margin were headwinds faced significant to growth,

gross to year We guidance our XX.X% margin leaving full unchanged XX%. are at

to forward. to pressure come expect bottom the expect And that of see now some we in range. continue the we mix However, to from dynamic at moving half

We continue industry. our to see within rational pricing

inflationary of other of monitoring the as impact are industry's sources increases. price our in confident as pass tariffs We through potential to well and remain closely inflation ability

We XXXX guided of within full sales. to our to also XX.X% year operating profit XX% range expect to of continue our for be previously

guidance $X.XX year. midpoint establishing would $X.XX third to of $X.XX, share, our a third the For we which increase represent the at over quarter earnings in last EPS quarter per are XX% of at

guidance to of everyone are through for repurchased updating call, reflecting and through comparable any not we guidance of $XX.XX, repurchases. our to increase would I does EPS We full profit shares the this have includes gross the quarter an but impact shares additional our the call our performance full purchased today. the midpoint, sales $XX.XX year year at remind second $X.XX also share that include

increase industry the call for their our now in again XXXX our providing performance market first service very to exceptional remain the solid to in and half our I'll O'Reilly demand to confident on we day. the to Jeff would the long positioned drivers and to Jeff? capitalize like we Team share. Jeff, of turn term every thank customers call to I Before very We demand Shaw. this well I over consistently the turn and over continued are for in believe dedication

solid second their to and notch everyone. today team morning Thanks, customer by Team begin our congratulating O'Reilly top a like I'd continued Greg to on good for thank commitment providing service. and quarter

moved as quarter. and saw performance resulted previously discussed, our Greg As we and the which with in pleased through business a the second in we in comp quarter of the we're store hard pickup dedication work the team, very X.X% our

from few quarter. sales SG&A XXXX. deleverage percent like points SG&A the I'd of of a as to basis spend for Now our discussing minutes a XX was results a XX%,

time discussed at reduction of to benefit However, year non-recurring legacy of legal second million this we included $X reserve. our a last a quarter for as XXXX

our maintaining than legal grew as points, was benefit which our drove XX the the excluding line anticipated our time from sales X.X% reserve which XXXX, basis prior in in On also while year team with our per average expense benefit strong discipline. an store one this results, strong Excluding SG&A better delevered was we basis expectations. SG&A

to our significant As allocate the appropriate higher training we we're improve very investments guidance, the these offer to reform investments level key customer is we're the The of and performance. weighted member These some driver will per growth. we we very taking levels our of are heavily customers. and And the in remain payroll of that initial our cost retaining to continued than confident year-over-year benefit tax SG&A into our commitment it's professional back that savings continue best team the of the store strong to normal and drive by service plans. outlined store hiring, these beneficiaries parts industry of business our in XXXX of feel ensuring to care enhancing people

per expect store plan SG&A for We incremental disclosed growth and previously our in year to follow to these we're our reiterating of continue guidance X.X%. investments X% full regarding to

opened spend on goal expansion plans in and stores to like year. stores are new We for successfully XXX target I'd of six store of XXXX. and months hit our months in some net remainder for to the talking new the about first six time the Now first of net XXXX the XXX our our

six new months great with be successful the pleased to the be continue states. and our XXXX identifying to continue first country across of We in in store growth with across stores of performance spread the our different XX locations

balanced and more backfill heaviest Our markets, with continues our Ohio, store markets, to between in the Mid-Atlantic growth and the mature Northeast including be Texas existing expansion the Florida, in concentrations U.S. Western and the

Our and selecting new service in our in continues us our hiring ability markets, while selectively training new provide customer presence also to expanding effectively importantly, store enter a to teams in give excellent outstanding markets, advantage existing great and new sites more identifying, to stores.

be to for with country in industry I'd them day that XXX,XXX from can outstanding teams supplier store in and when local feet our service. hub teams Carolina first in store distribution set of a the quarter August DC very outstanding teams dominant the XXXX their those congratulate hard a to without Day availability. access to our Our on wouldn't remain along find the highlight supplier to service great across Southeast and parts and to the customer by our facility. to deliveries XXX,XXX opened recently in our entry our five-night-a-week and XX to new Greensboro, support we continued in the like our one successful to We'll throughout we in be existing strong multiple DCs have standard at North the the our provide The growth This second leading to provided equip or DC with host the success work was parts. continued to teams opportunity Analyst our market A stores, expansion stores solid new ensuring industry the our teams. with ability is continued stores located in key the thank markets our to was upcoming support square XXXX Mid-Atlantic. to the distribution expanded of in possible

year a strong. close thank I great I company's to to the position of my all in As success. had year so far finish for Team a O'Reilly comments, continued want our we're We've their solid to and dedication

Our day. rest future but is business and out-hustling earning our the past in and to won't instead remain every the and out-servicing current competition, our success and on dependent customer best committed success, service industry customers' providing upon each our we

to the over Now I'll turn call Tom.

thank first half Thanks, drove Jeff. Team and their good I'd also quarter results all hard O'Reilly second a like solid to work dedication, for of of and the year. which

closer a full take results our guidance update for we'll look Now our quarterly the year. and at

comprised $XXX store million a sales, comp and $XX For of million million $XXX increase in the a store quarter, closed increased sales, stores. non-comp in $X million a non-store increase in non-comp sales sales increase decrease from $X million

XXXX, continue to billion expect to to total our billion. $X.X revenues For be we $X.X

faced X headwind gross mentioned margin from up had the from quarter, for benefited was our Greg earlier, but points as As basis mix, we the LIFO.

benefits acquisition to these were from benefit to the cost but prices. in commodity by we During many areas, related offset continued increases quarter reducing

result, a $XX quarter LIFO charge year. did we a not during versus last a As see million the charge

For expect now the we do have a charge. year, to of remainder the not LIFO

earnings However, our will tax potential inflation a commodity positive dramatic go second this on dependent rate Tax Cuts Act on be on highly basis. quarter continue our and impact a will on XXXX have pricing to tariffs. have forward on impact of and significant Jobs and The

share effective quarter our Our tax the deductions benefit including tax which was for of X%. based XX.X% tax income, for rate by the rate reduced from second compensation, pre-tax

year rate changes we of our expectations. share in from to create pre-tax based tax be mind keep expect Excluding full XX% income XX% to in in rate share XX.X% and will our was the income. of our tax tax tax with line in of our effective tax benefit Please the XX.X% now from compensation tax pre-tax was benefit compensation based rate fluctuations our Year-to-date, rate.

of year-to-date and cash guidance the which lower Free our a for the million inventory by to cash taxes investment. Now we'll from results XXXX. drove driven expectations components in $XXX and and million, for the income, move second is pre-tax net our year prior flow $XXX reduction that year on was our higher flow free full increase cash quarter

store of For quarter this cash and the time full Inventory the free maintaining beginning guidance our last up the end in was per at billion $X.X $XXX,XXX, billion. was slightly flow $X.X to we're year, year. from the of from range the which year of the

year, store of ongoing in we expect growth inventory our than to ensure generate. to per goal X% per is continue store grow We to to store grow inventory sales lower the at range this X% as rate a the comparable we

ratio was at year. Our end of of end inventory be second we AP the able to the maintain through to which the XXX%, quarter we'll the anticipate

were with for capital the half and million, from slightly same the which down $XXX of Finally, expectations. the line of in year expenditures first our XXXX period was

forecast for to We between million $XXX continue to CapEx in million and year. come $XXX the

times XXXX. on our at The increase quarter in with X.XX of bond to our revolving the credit compared reflects our Moving ratio on times, end May adjusted to the We issuance leverage ratio in second finished an borrowings as unsecured facility. debt-to-EBITDA X.X our of debt. of

our target of approach that newly will below number when and times are stated appropriate. We X.X leverage we

flows cash program of price remain continue cash discounted of program as total repurchase we shares We We $XXX.XX per execute $X.X our expected is continue our shareholders. year-to-date X.X to confident investment and available repurchased supported an average that future means to view at average share returning share our to a billion. our we've buyback million and of the very for repurchase effective by business of price an

answer their our like comments. Team prepared open up customers. will ask the the I'd time for And John this and be operator for the and questions. to thank return to the like I'd concludes our your to to we to dedication call This at company O'Reilly our Before I questions, line to your happy

our And question Horvers JPMorgan. you. from Christopher Thank from first is

on April markets the hot guys. Northeast and talk But that's the morning, good very your on West to I really was did West ahead, Texas trend and Thanks, in would seen a the Midwest, look particularly and in it have weak a Coast weather the expected understanding you that weighted more, bit think the quarter. the Can as during little the DIY Upper spike like strong a front heavily Coast. heat about like seem you have continue

think that driving about hot overall comp? as does of and that, the continue the you So weather performance this sort provide categories could extended of where just you the to season see in hot

under looking hot, strong I'll you're of the of and the categories parts. What is is you the a weather component that favorable then benefited unseasonably that quarter earlier in some in breakage-type we rotating markets from continue and continues lot the the and markets hot This colder if in had seen Chris. the expect electrical continue chassis at When were weather Greg. markets sales in refrigerants, failure Sure, car hot results those weather tell that. we in to HVAC, markets those point strong where sales cold southern weather, in We steering-type markets weather your trend sales hope and like to we've would we we things seen we and our we've hot have. weather that certainly

Greg. tougher we're so there. hot up last some that Coast I year comparables West add against Hey, the was out might

the to I this considered didn't points have And mean, to then, if sort guiding third Sunday the would X% quarter, perhaps have think so extra but as the from X% the you in in speculative basis of quarter versus XX X%? question, headwind you this, about a you here X%

miles press especially our comments his historically and dampen Chris, prices, ability Greg The and math low seeing gas which some we about basis growth calendar put and it impacts consumer is Tom. also their and also We're XX just afford points this end tended our has in in to release. rising talked is as to based, items.

of I we to guidance when the to had items those it's X% think a continue that X% us to give So second quarter. combination led strong

it say trend? that is of miles fair to terms shown hasn't driven in necessarily But the up impact

to be say. will That fair

Okay. Thanks very much.

miles but we But period our driven quarter. we data yet. that Obviously, have in of the short don't latest seen we're the a in haven't business

Thanks guys. very much,

from is question Dan from Wewer next Our James. Raymond

offering couple as I to this XX% promotions strategies When online any different ship-to-home Greg, ask you're these program. of revenues offering promotions. of each the size. thoughts at you're if A you there's how your to for are on ticket for ship-to-home strategy week, pricing you ago wanted Thanks. integrity jeopardizes not on about risk part types this look pricing. of depending store weeks your XX% it go using ship-to-home forward with promotions What channel? you'll you do of and maybe sales about that discounted the any think in week And

Sure, on that. Glad Dan. great picked you a up That's question.

One anniversaried new competitors quarter first at types of different strategy; point, change promotions changed of I year To a where rollout looking announced believe. a anniversaried we're we're just weeks options having and ago promotions testing significant And the we're but your channel of our different the their increases couple online online. that, testing they of running our we're periods and during not testing had we through things. we last strategy few and our website the we're some online

in just we the process – started a that few weeks So ago. we're

our all first the discounted interacting get to to job in-store promotion a need rate consumer varied with is that promotions they reasons I still store. about need; measuring for consumers plus on time. online our promotions would cycle. transactions online, of our we need a big to help parts historically people as of two tell have that of counter price the pickup the the Even pricing we're to to as sales in by transparency of in-store. impact professional And run the running with percent on well price are the we're the those and installation online, What on/off ending confident one sure that XX provide one, the complete you though the the So is feel the of process for the in immediacy parts they about are the make transaction the really

And how elasticity Okay. pages auto those was you went follow-up through this tariffs, attempt consumer? list. parts surprised the you to of the of to on to the a expect this XXX pass demand were proposed the or And many question talk about I Can prices if you we items inelasticity is were included. through would the on

in couple tariff that that we've suppliers type more or XX%. tariff component reasons first couple Yeah, first were a the and are Dan, supplier give tariffs impacted. a quarter. on that try on imposed it have of the They've to any all had varied when base be value being reached our tariffs out of you at rate. would subject understand fourth those trying To-date, of categories was been broadly little a have history expect that when of a as been that and page be based we that overhead to I'll early are to And cost. either immediately process, announced we to only their manufacturing you in product us XX-plus face where would based the to none other to-date of started at categories full document, of which a you And there's or fractional look lot included on coming tariffs to during a

thus impact, passing I the So, far an have tell would a you historically able pass along. we and job but big been from really so has our in that a we seen done tariff along. is industry to year far And what both of a is, that haven't inflation nice standpoint

Yes? you. Thank great. Okay,

but years. most as operate – necessary up, the are required see long the gone maintenance to see that do safely. where a they'll are goes where run the oil down to changes and extend obviously that the people lot how extend are parts we and you of price vehicle to we performance And often items, add up do and how items over can they'll items cycle. And being dress-up pricing vehicle more your oil to on And elastic that commodity has

Okay, great. Thank you.

Stephens, question from Ben is from Bienvenu next Our Inc.

Thanks morning. taking good Hi, questions. my for

Good morning, Ben.

around repairs, but improving wanted as whether might you environment wanted are a sense it to I commentary give car maintenance relates repairs any maintenance not seeing car trends background that I you to sense secular evidence the you're park? a or the park in of that as ask, some to get made seasonal the related to

Yes. those things really When one inventories progress that of at there's we to talked increased of look and park. contributing on things our sales of quarter, stores lot a Each quarter. store through the is that and are about car our of customized the each some specific this our our We them for would VIO. be based of

the example, we would But a for breakage have I some repairs winter improvement. that are if the just doing that cycle of routine say result of hard repairs. to of seen differentiate or weather, there Some those it's or categories it's

would I think be brakes one of those.

replacement I be think battery would another.

And light In the SAAR enter the softer younger really of professional. aggregate vehicle, those to vehicles more a it as was sweet to than from apt spot. continued the be is repaired by expected years last a beginning business professional the our year the

tailwind. year-to-date us professional time, into we've of strength as a to the being be makes good over business the market. And flat, then the opposed and come a our the SAAR seen return headwind, should in that worst years So to feel

helpful. That's question I your ticket traffic then a Understood. ask about business. versus to the mix wanted And of

you to a up need not past. perk I'm time? of have curious that's with You've inconsistent the period given environment traffic see delivered your to strong But what in primarily business driven year-to-date would over ticket about comps

bigger the the aggregate see ticket the business, business extensive a from the higher by a average In lower of our results, we ticket volume, in at DIY counts positive our our of look we standpoint average need carries stronger impact and XXXX. on which strength ticket because to When traffic XXXX, versus as overall we on average which in and strong ticket repairs, performance XXXX ticket. but undercar of this really categories average to saw traffic our see stronger side driven more higher year, especially will professional a is has

luck. of Thanks. Great. Best

from Our next question is Morgan Gutman from Simeon Stanley.

Good generally so quarter. the I from Nice you are do gas ask strength why. ask Tom, think pretty weather morning, looked your mentioned there? DIY, first is which I you gains seeing wanted yet any to strong. accelerating more to guys. not that just prices, you're impact related on or wanted share

what do winter side we'll and to of people get really always people do that the under business business. The pressure and more didn't liked to April other normal Obviously, of we've Well, take lot was see report. out as was at the allow look DIY weather a a beginning the of repairs.

business deferred we all we the but business you business people to that we can. like share that to Some execute and to the and cars do of was strongly When just everything feel the going cleaning to May. we take is look can for of at their we're market the up out getting very lost continue season, in DIY side

or to are could store My going be you, to growth, Jeff, for mentioned that. it the Jeff you X.X% SG&A X% for per to follow-up, Tom. stick

next but was should basis I year. talk basically having investment. we that wanted Is if the just expect any away level And elevated ask points fully of XXXX, about year? to of logic some early you probably think about It's that expenses to I debate maintain to go or or right to expectation? next this is XX so there

change. also expenses extent top-line. that drive dollars work from do A next offset we'd there's a broad-based in To this drive labor we because inflation to to higher, tax gross dollars the lot that expect versus more within to the performance tailwind had from in anticipate This look inflation investment that year year have looks we've making market like. our top-line this has to of with of expect margin our lot comp year, tailwinds at year to additional but that. that we about talked When XXXX, with the didn't what we to we'd

Okay. Thanks, Tom.

Our of A Suisse next here. Securities Nice Credit Suisse. Good (USA) Sigman question is from morning, Seth Thanks. - Seth Sigman follow-up couple guys. LLC quarter. I. from Credit questions

commercial commercial that you DIY, in of overall the second did I'm terms quarter. acceleration the Obviously, first so versus in quarter in was in just First, both versus DIY? wondering quarter. earlier your just impacted see accelerated DIY comps the and

the Just comp was actually lower if in not QX. clear QX versus

business Yes, comp just Seth. contributor Seth Sigman risk Got sort say LLC April - that and side around DIFM, (USA) and of once larger then gas weather Is the it where it. were now? I. And impact feel the DIY was prices. the you Both Credit got that Suisse professional are of side. just Securities state the fair about professional than potential but of statement the from you DIY to a better to you positive, through outside DIY

Yeah.

count it the release, store the wasn't quarter. side When business, Credit strong just professional are follow-up with or give it employee Is Suisse this I. labor (USA) does then Can Seth you side like investing? we're you DIY investments. business pleased far. Okay. Securities Sigman you other a quite seem the where that in of areas? stepped the bit it up of LLC fairly - Thanks. look at a just sense us While as thus And our on the as to of the

some focus Credit IT opening Also the to adding all Okay. and and the LLC - Thank (USA) initiatives we're I. in support on labor staff of with service. headquarters investing Seth the increased department you. Yeah, obviously stores omni-channel new Securities store Sigman primarily. Suisse customer

from is question McShane Citi. Kate from Our next

taking Good Thanks question. for my Hi. morning.

meaningful the the be investments, incremental from are would the return of half it Would up as expecting just be second more as on when of it to question a Just the for those investments? to year you XXXX? about or see more follow early

year When having the weather more question. think look that our some have we great year to from is service. saw and But do acceleration also last a that's we we of last due Kate, accelerated year. part providing with at pressures year, customer that comps this better this has to Well, normal of

investment feel we return a on we're So, like seeing our now.

in in to drove mentioned had leveraging dollars spent anticipated. anticipated, quarter, higher we Jeff sales and the second we better his comments, SG&A As controlling than those speaks the prepared which we expenses

mentioned. is you drivers, keeping Is or And thank great, macro gas is then just seems there anything guidance just this up and the at point? the of higher in an it's X% to it outside you you're keeping on prices are else higher question like prices X%, Okay, gas the in environment you. at as primarily changing, eye resulting whether on follow macro my is

I to the and think on potential would driven Tom anything concern one we'll Jeff, prices big or the be there, seeing. you that? big impact the to economic Gas Kate. hit you to that add have do miles overall be

the proposed and that there and the lot was tariffs talk pulling past. we back that a in creates actions. those and them monitor this in environment We'll We're some take seen haven't of Obviously, yesterday closely are like appropriate different so continue some of situation a of proposed uncertainty. to

you. Thank

from next question is Jefferies. Our Bret from Jordan

Good morning guys.

Good morning, Bret.

Good morning.

question. how sort follow my in a you about market more guess this as that's expansion up And of sort servicing Ohio look bit distribution at from do of the I'll and Hey, think ask Devens further Mid-Atlantic, you I that infrastructure DC?

state different central or targets? there those there? into materially better more look markets, potentially you environment is Are the As M&A

And going back fairness Yeah, but off. passionate, capacity about him. I to I'm constantly to Bret. kick talk about monitoring to Jeff, I'm kick know, all areas. We're to distribution. our this as you I'm this across distribution, of going to in market like distribution guys our

added So, eye his in you want keep Jeff, We to Jeff look we and continue to capacity our as a on opportunities. do do Devens distribution accordingly. mentioned have capacity, capacity we've to that? prepared but we to and planning obviously still Greensboro, comments very for close are add in

obviously I to pretty days. to do I you these something geographical one a it. think we're that here going about there's mean void have there well of covered

folks guess general down can Eastern there's those I in Mid-Atlantic, the talk the about question, M&A there M&A maybe now? in think but are markets mean, obviously would like I that right or you there think And how about you targets about Okay. more in you

one we might into I team relationships. store, parts look is, to disciplined internally, opportunity time do it to we somebody and What be a an we people a the very acquire front that. Every tell is to on so to having in chain look what go parts stores might very would And we and market, see a with the generate continue challenge for a we be are have to new see up market. M&A you to business opportunity technical those there a is is buyer. the existing who selling It of

make looking, always for we're sense So, going return a that but to standpoint. make are acquisitions we us from

Okay. you. Great. Thank

Our next question is from Elizabeth Suzuki from Bank of America.

has on years last Great. actually that over seems than driven? further and just It you lower the been prices quite slowing some on short-term in a for miles Thanks average time like the little Can despite question. gas for trend comment XXXX. my taking pressure few expand about

you a some are a issue? impact could So – really of play really short-term that auto growth there's the is here longer-term this think do the aftermarket? headwinds Or at there

say would I I an what yesterday. that – industry on this to analysis and watched Yeah,

you may as of the webinar well Some seen NPD. have from

period don't prices have their and that, short-term pricing, But we're fuel in I for years the Fuel adjusted and miles I XXXX to year I impact to they in a across lower as were ability – may And that the growth around per to continue that you a year of think, two, driven, the swings increase fuel than one, that the we're three a long-term see operate normal will these see trend. miles higher-than-normal the sure think their driven probably increase. time consumer price on alluded has I this don't U.S. to increased while long-term have three think vehicles.

potentially proposed that with change through impact no negotiate assuming tariff, And Great. charge prices the could XX% to of Thank the in just there gone product or imported you the where for or you've you. tariff, vendors be, of consumer? that an list, much prices that source so would you how you list as could longer your products

closely like that said China, in them. this confident the be. be We I that But impact Yeah, exact to our falling. those pass what where of we'll along. are at haven't point – will of we primarily really know bulk tariffs these increases across very uncertainty with a earlier, We're is there suppliers, don't working able lot again, we feel

very Thanks right. much. All

Our is from next from Wolfe Chris question Research. Bottiglieri

was this taking inflation like-for-like pricing. interesting it year, the wondering next was that. a you start want to I could passed Thanks the inflation to could proxy if I'll has handle being – with hear Hi. I for start you maybe pricing how off on quantify for what contributed And comps through to as question. coming years.

Tom, do to want that you one? take

the or less acquisition that. and deflation significantly three we've you pretty certain years, and it's in those aggregate been maintaining that increases we've had percentage. passing had four big X%. aggregate, last it's than we've I would category-by-category, than gross been Even successful is margin What more In that though our over categories along had moves, have tell at

then Got seeing tariffs, resins, like you. your even are even given right helpful. ignoring where cetera, looking think priced now, suppliers, oil, And just just that That's aluminum, costs. I et Chinese input steel's the ones, higher where, would

half maybe into are So to some about trending XXXX? like of could like you can the extent kind talk how back those you you see inflation ignoring even or discussions and tariffs, what think in

Sure.

up will We or to conversations work the increase the taking increase take suppliers place, more always those every no a they're back typically there may similar team. that discussions While push And openly way a of very start much trend. our don't increases. they at rate through given rate end negotiations. and merchandise price We our hard day be with increase either to trending during really lower

you. Got

Thank for helpful. you time. very That's Okay. the

Thank you.

Basham is question Seth Our Wedbush next Securities. from from

what's guidance, morning. good you for year. question to – about also think and despite performance? the to with just and else? the quarter flat guidance your it And your My the you expect flat guidance, leading in you're said your strong it effects? and which your to be the seeing decision the year-to-date normal guidance, a potential you and about hold the year to increase something keep this comp it when is macro is hesitation the or weather, on normal was Thanks your Or simply of inflation, Is concerns benefit there from balance

quarter to based had roughly the you has talked Sunday said That the impact, that it said, contribute that quarter results on to far, at XX lot of Sure, about solid, of talked historically the costs that's we rising July we're as started threats and thus about, XX% pleased to potential most look quarter, my things Seth. the quarter, felt in is just out we thing on X% talked this, and rather. When point or about the prepared there's the all us. through the around ahead we've the prudent based comments, fuel basis with and And solid, on I we've – July, at of that we're guide tariff, X%. obviously, in and and based extra a a in

Fair enough. Thank you.

from Our Scot next Ciccarelli question from Capital. is RBC

questions Hi, seen it guys. mix Scot miles much label business, private stores? you Ciccarelli. an gas a is of private change historically have rising is online private your I had environment prices/lower your then label driven? couple label secondly, the than And of in different mix on much your specifically in

Scot. Yeah,

the will have be unable heavy or product Pretty the much same our products offering are with ship We – that be would store exception offering available label private store we're really restrictions. high Our of the because in to in shipping that's online. would online. cost offer as it be available that full of

I demand? was I about asking wasn't guess was of available. what I kind or the asking I guess about sell-through

It's similar.

Okay.

is mix similar. The

seen then much And have trade-down assume sort environment the effect. have in miles historically of Tom, how maybe is, of change seen label you. you much right how – prices question, mix gas private typically rising driven? would some I Got or you or the there's lower an

much. feel for get how trying a Just to

to a growth volume the carry percentage. time creates tend Well, sales. our has is do support brand we and box. private purely But what the economic growth source on there in I margin in around time label down, label been grades. products of our our some we on drivers to little But in trade the house to standpoint, end uncertainty, private centered headwind which you private From bit a labels significant ability is quality the high of would Those a we dramatically higher have biggest tell that. every see our a those really increased high ability is see economic label products pressure uncertainty, private over always some during which gross the obviously and

guys. Thanks, it. Got

question UBS. from Our is next Lasser from Michael

taking lot my a for Good morning. question. Thanks

your the quarter. a saw you from in was about first more X% talked contribution comp You to like sounds It than inflation. that

to So in guidance that acceleration was bulk XQ the of you XQ your you comps your full comps year inflation? about have factored saw in by the And in accelerating what the for driven inflation?

you to want do take that? Tom,

than and is number second consistent to I and primarily misspoke, items. but through the have quarters related and less first X%, pretty may commodity-driven the it was

across it our we that to within to extent muted we to inflation of Our guidance continue see don't have or broader acceleration line – inflation that the see top bands. sales. expectation expect tailwinds is will more in our We'd

that Tom, And margin? that your will how impact happen as gross

our dollars. anticipation margin that Whenever is on expectation within gross we margin range, of be gross is previous Greg dollars. drive to the price going to anticipate we comp our increases, range. in better are be the that stated end percentage, will still generate We profit lower said, but more that pressure as gross we There take gross slight our some but going margin may we're

And you give my the for sense lower quarter than some how April much can was all in is comp? terms the us over follow-up question of

April. better our in we we we We don't generated say was demand month, positive sales give is where pent-up specific May saw that that store released. comparable prepared did numbers, in but comments what a

on comment that. that's our So

Thank you.

Your from question Goldman Sachs. next Fassler is from Matt

questions, Thanks it. a them have the two today. lot Appreciate guys. for I of taking

really over First about percentage thinking have off weeks of kissing the point changes prices you. bounced prices, of it this year initial as levels you be the price lot gas round at so several but also see $X kind has of have $X, obviously, about gas what of all, increases. a did energy we're on focused now the We've over you're certainly the do And thinking the past heard to observations increases magic think more talking $X, past we are a ago? years few about that or both two, bottom about you your in and on Based how of which consumers gas this is or seasonal kind at peak responded year-on-year this more important?

what We consumer it's about increase, Yeah, Matt. price the cost. more driving think which don't fairly important about and been point is changes talk talk is habits We because price we steady a more fuel the rate typically at of a given of increase.

income things swings like holiday, lot at to of prices consumer where spend have if they then faster fuel on But rise that. as the looking travel, a consumers based some on a to forward, rate, be lower You at as a our either of that very bake continue will much into trend that rise rate, or If starts they we will budget very drop their slight dollars. feel can. their like selective

question car park. to the then my follow-up And relates

for the and of et good that vehicles, the the the cetera. commercial think, responsible go generally improvement you through your car of demographics that in the I very to have the coming flow cars you model, perhaps within of side seeing kind make business. you way, your older your is about are You spoke, right cars and stabilization are visibility that the make I being a to servicing, that you year, pause park likely know in evidence Are speaking way this that the that as of starting into that stores?

comments on So two that.

weather is winter normal we level where a that few expected that and on of of this beginning to SAAR the the seen year, side the that. of normal seen being down would the that we've years also be As light think last going headwind which business, repair we What the was under car about from after professional job, we to years. professional we a the at from neutralize talked year, it we primarily had we is business the see expect

Johnson our the closing reached allotted now Greg we've remarks. will for And time turn I over call question. back to for

in the today look call dedication XXXX October. the our you, our your everyone reporting joining I'd to to third We'd you. like our service continued to thanking Thank for team to results call by forward quarter thank customer for in second like entire quarter. O'Reilly today conclude John. and we Thank

conference. and you ladies today's disconnect. gentlemen. Thank and for you This now Thank you concludes participating may