O'Reilly Automotive (ORLY) 25 Jul 192019 Q2 Earnings call transcript

Good morning and welcome to the O'Reilly Automotive, Inc.

Second First Quarter 2019 Earnings Conference Call. My name is Brandon, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a 30 minute question and answer session. Instructions]. [Operator

turn the now may McFall, call sir. begin, the will Mr. over you I

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

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

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

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

I introduce to would time, Greg Johnson. this At like

second present. welcome is are with morning Chief Chairman, Officer. quarter Good O'Reilly and McFall, Chief Co-President this Thomas Executive Shaw, Thanks, Tom. David our also conference our Operating Financial on to our me the Participating everyone Jeff and call. O'Reilly, morning, Automotive call this Officer and

I today earns excellent service every that day. business their would team the like providing begin to continued to our call dedication for thanking customers O'Reilly

markets. brand the and customers the in Our of team remains our to all our of relentlessly O'Reilly committed growth

solid. as comparable X.X In underlying was the growth we business sales second our quarter, core store generated very

the adverse weather end which during bottom coming However, of towards in resulted in we quarter, guidance our comparable store sales range. faced the some headwinds

the quarter, as our April, through see which experienced seasonal typically categories. We start the demand and our many of markets strong unseasonably saw impacted weather we in we but cool in a in quarter of moved to rainy piece significantly

out we also release, called new schedule, pushback his thus our new precipitation we press discuss has and store XXXX anticipated will far comments. Jeff construction in the openings yesterday, store significant delayed prepared which at seen As have in

of coupled in expenses $X.XX, of below environment, from with pressures, earnings guided these to performance combination The share top-line our headwinds resulted inflationary SG&A cost second $X.XX our range continued an in $X.XX. of per quarter falling

actual in the confident to drivers results We but market our the of and remain competition the fall our and are of automotive in aftermarket our ability not share. in grow demand underlying pleased expectations, our team whenever short of outperform

our would the to some stronger on contributor. I like growth to positively our store of the second results. our Both professional sides being second composition business quarter color contributed the additional with quarter DIY Now comparable professional and provide of in again sales comp the

comparable gains quarter continued ticket counts DIY driven with as of aggregate, Comparable for the side inflation. on offset consistent customers continued prices. the susceptible rising sales remains this increasing of by complexity on business average accounts were safety pressured recent side and growth store ticket our solid by as to to professional In result increased the trends with a flat parts to be the

acquisition from our product by experienced other on we input suppliers. and basis, year-over-year cost passed On increases inflation driven tariffs

rationally our pricing. to industry these been pass have increase cost has As the in been through acquisition increases historical practice

selling passed additional along anticipate effect increases in the tariffs round June price. will be related we went the mid During acquisition XX% price into of and

product good, headwinds. the However, ticket mix we skew same incremental to in expect by and better, pricing will likely to benefit pressure offset be best counts

on provide of growth our the cadence comparable store second to like I quarter. Next additional during performance sales the would category details some and

we moved and as quarter the mentioned, June. previously I As into off demand May slowed started but well

we increase air conditioning these Typically heat and categories as in months such refrigerants. a see seasonal during related

market June of However, weather many in May in rainy and and we with in experienced unseasonably the our these sluggish categories. demands

we see demand our of performance in-line with sides expectations both the categories hard to we are part and breaks, the and ride solid saw these including key business our continue categories, in Excluding headwinds pleased chassis. with in undercar control of

continue increasing industry drivers, demand driven from trends age the vehicles. have to our miles and We core positive a complexity of positive and increasing underlying strength outlook steadily including of in

remains and conditions. in customers drives volatility this team our on execution service While weather of our best take our business, in and our ability conditions to in share consistency markets the providing focused can call to short-term our everyday possible market all all

of summer X% solid and conditions the start store normal are our demand X% comparable our X%. sales X%. a unchanged on at our Based have and quarter maintaining thus to first in in to half far we guidance the full-year third more comparable weather performance for we in experience quarter off to store we establishing quarter, expectations With third guidance our are sales are the the industry,

over full-year points quarter, XXXX our margin the second XX gross was XX.X% of For margin guidance. gross and of improvement quarter in-line a margin basis with our

margin our seasonal quarter, to pass sales price percentage highlights acquisition our increases. resulted in the margin gross than a the stability and benefit year-over-year to slower along industries in anticipated During mix gross ability

XX.X% our leaving gross For XX.X% at margin unchanged to the sales. year, of full-year we guidance are

based we and results year-to-date expect expectations, now midpoint. to be above second-half Although on the

previously our to X.X% the we dollar operating of for of second and to half and as for sales XXXX was expect range growth a first to within percent Our of profit XX.X%. operating profit X% continue XX.X% quarter full-year the our guided be

our earnings to we $X.XX guidance at quarter establishing share, $X.XX. are third For per

EPS we full-year new year-to-date near from our store pressure the $XX.XX expected guidance and our bottom to Based maintaining results, on to headwinds the delayed anticipating are expect of in $XX.XX. come We continued to openings range. of SG&A,

impact include includes call, the any through full-year additional does repurchased of guidance repurchases. Our shares but share the not

capitalize their XX,XXX to team thank like We continued in in this on remain for and industry our long-term over industry-leading customers. confident I to consistently to very positioned dedication Jeff, after. the our would providing commitment our we to customers for Before the well by again of we day drivers believe, turn our to are I members demand team every and call service very over dedicated

over turn will Shaw. I the Jeff. Jeff now to call

morning, best to Thanks everyone. like steadfast I Greg would and and hard providing our join by thanking the our service to industry. outhustling good Greg in competition, customers their for O'Reilly the work team in commitment earning

possible navigate our environment a Our customers. team business take care on fundamentals continue focused ensuring everything successfully of and sales by staying doing the choppy we to of are our to

SG&A and provide our some business the by quarter like managing color would approach expenses. results for for executing I to on today my our our begin comments and discussing model

from was of as SG&A for the quarter, spend while XXXX. percent average SG&A dollars SG&A a basis, XX our basis On of XX.X% deleverage X.X%, SG&A a points per our grew total which is on store sales higher expectations was than plan.

technology the and goals cost of expected our in tight in initiatives. and service, the pressure variable market. rising the our deleverage as from was customer costs same majority invest and continually The in prior wage to other a see continue from in-store we year to structural rates both Omni-channel we enhance to continue labor time, At

month store hired of new higher for delays the is date new been or So, an a When the SG&A already in a new openings. the per staff training back of than is two, opening is result has expected store existing in stores a portion store store. and growth pushed in

these this delays extremely in for market. is especially Adjusting difficult, labor high

but to our respond an field business, short-term persistent to attempt levels target. have will not periods flexibility short a in in hit appropriately to management trends to of Our teams on adjust adjust drastically staffing time

We our customer are in long-term consistency success. been the feel confident delivering all in to and service conditions very market that critical has in strategy our excellent

do SG&A we to business weather-driven short-term. volatility, particularly when the pressure swings we in encounter our However, sales in experience significant the facing when

drive to constantly prudently and opportunities our evaluate We when business. expenses and profitability. can the adjust will We for increased sales we appropriate overtime have

As continue in outlook Greg have industry of discussed a the as sales to guidance. forward remainder maintaining for to earlier, positive are we look XXXX, and demand our our we the

will range also results SG&A are a XXXX. first end of the As for of X% of in full-year the higher that we guidance store in based in the X.X% our growth expectation maintaining half come range we to with on the result, per towards

store year. In the the like our would total to XX update the provide I to of first year. for opened months net bringing the through of second we an our during quarter expansion quarter, and on Next, the remainder six our XXXX openings the XXX stores new store plans

and opening is we a year a is the of we of hard unfortunately of markets half a of store development. schedule we amount of plans the projects established our into levels coming installation XXXX. in the dedication and shortfall construction, new openings of over first by new the stores significant While saw well result team, store behind are work This significant for in with in precipitation result XXX

with previous busy our entering let heavily the season. underneath us place weighted store to approach new the towards them openings Consistent is new their get for team half our which before more projected afford with the the in calendar opportunity summer of year, them the front years, feet put and

has persistent seeing overall has have spreads wet many projects delayed weather including in week-to-week of and typically XXXX for adjusting schedule. periods overall for material significantly. our basis and the accustomed our are to a impact Unfortunately, on schedule has delays wide not time that We reasons to number impacted to of and would a extended weather any and been

pressure that of persist earlier, half catch delay As this Greg mentioned created we year. quarter as second we the our will up back in the in top-line

remain XXX our achieve However, stores net confident we of for very at new opening we will least goal XXXX.

couple turn projects. update Tom, of expansions like the call to on a would to provide before I I an other over Now

During been acquired five the into XX remaining existing of the of team and addition the great a auto to with second we to stores business opportunities end in pleased at which us. conversion market growth The continue key Bennett successfully completed a grow Bennett Florida, XXXX supply our O'Reilly and the are stores remains the has locations. for merge quarter, we

schedule report Metro to three on in progress that of projects Ohio market in DC I’m Nashville Finally, south pleased south just Cleveland, Twinsburg, Horn and plan Lebanon, Mississippi, in to development Memphis. with continue our Tennessee just facilities the Lake, the of in in new of we

opening Lake followed the projects of an in XXXX. these established the fourth XXXX second and in Lebanon We for plan a quarter have by half schedule Twinsburg of first with of half opening the opening in aggressive Horn

the new hands ability faster DC our Our allow than to find demonstrated consistently standard to service while in achieving customers parts hard our high manage of has get multiple ongoing stores competitors. repeatedly to to team successfully projects our a distribution

we and we enhance will aggressively in establish that best robust made investments this have availability advantage. maintain We the leader the the to infrastructure to a supports capabilities are competitive aftermarket to parts distribution work industry our in distribution

As our to physical delivering important the and our stores on as the our our and our locations and right we inventory that its network right to of efficiently chain important our faster strategy, are than DCs execute XX at customers supply within model equally part our right deploying effectively the location business hub of XXX competitors.

are extremely and in advantage. industry the but to our the execute not high teams will of We at industry-leading ability strive to on our success, as we lead inventory our confident we past availability, rest and expand level

in of once their in has our are to experienced teams the in fluctuations to solid a customer industry. and store Despite position for dedication in finish and service would year demand, we half to our again best the team industry the great results produced like strong. year, distribution thank we the I providing first our continued

over turn will Tom. call to I Now, the

for would their I which customers, O'Reilly our to solid also thank the all continued to like results Jeff. quarter. of in drove Thanks, our second commitment team

a Now we take our at results. quarterly closer will look

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

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

margin as was points up mix. benefits saw we As mentioned, our Greg XX product previously quarter, for the gross basis from

On to the XXXX a went corresponding benefited of also increases. basis, year-over-year of quarter the increases, tariff-driven and [Anaheim] the from which retail prior end sell-through acquisition effect price (Ph) second price at inventory was into purchased XXXX beginning wholesale margin the of in and gross that

but impacted expected as was Within increases. tariffs significant our benefit this we into the to half margin expectations coming our marketplace guidance earlier, gross round XXXX, are be to first unchanged, of by corresponding the margin in recent will results more Greg the our mentioned guidance of be actual to timing the leaving year. of full-year and gross And most

of will nature pricing affords margins that and the power. confident and non-discretionary need us as industry a remain parts significant immediacy sell of rational we remain competitors We

of effective X.X% Our and which benefit of above tax slightly reduced by less was XX.X% which quarter benefit XX.X%, XX.X%, second second comprised rate of expectations our which base pretax than to from plan, rate XXXX was was compensation share-based XX.X% base rent compensation. the reduced income, expected. by for share-based compares a was of a comprised of quarter of This income, pretax X% of rate on with

expect full-year of benefit of the approximately with effective an XX.X% For share-based rate reduced X.X% to XX.X%, by a the XXXX base of we tax continue per compensation. of comprised rate

our of the compensation tax fluctuate leaving year quarter-to-quarter, share-based from these will expectations are rate from unchanged. course benefit over to expect we full-year and the variations out even the While

base be open with lower the tolling relatively our consistent to third exception quarter to period. maybe We of certain the expect which the due rates of tax

to Now, that results flow the full-year move drove XXXX. of and our for for quarter will the we our on and cash free guidance expectations the components

$XXX was Free months $XXX the million versus months cash XXXX. of the flow first million first six for of in six XXXX

increased by the inventory related receivable by and of reduction in quarter pretax driven higher account reduction to day net investment. timing higher balance the impart our a that is offset the ended, a CapEx, With and income week which due

are we range of billion guidance free full-year, to billion. in $X.X the our For $X the flow cash maintaining

from the the the of time which down at and end X.X% year year. up beginning $XXX,XXX from Inventory was this the per slightly was quarter store last of

to quarter growth and opening range of year increases putting the expect this in Twinsburg per to to X% pressure a the percentage. result of continue store We grow acquisition inventory the on X.X% DC as cost fourth of

the quarter XXX%. of from EPD was We up at XXXX. a the end expect approximately XXXX which is the inventory from to of finish second still ratio Our end XXX% XXX% with

ongoing the for million conversion stores in year store the million first the our up of the investments. of and distribution driven which new investments half expenditures XXXX growth of the capital new $XX and Finally and technology were same projects, period was Bennett by $XXX

million coming $XXX to forecast to for to continue We million CapEx to full-year. $XXX the

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

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

year-to-date million the of the million continue have repurchase share to X.X Subsequent date an and have an through press end $XXX.XX repurchased of at of We our quarter execute of share investment a total we second X.X $XXX shares repurchased average and to program for million. our shares release, average at price the of we price $XXX.XX.

buyback to supported very by cash price view and remain is returning continue repurchase business our effective we means of shareholders. our average the available expected for our as of program cash flows future We confident discounted an

would This up open I O'Reilly Company this I dedication we team answer the call be question. your ask the to our prepared at to happy and our like concludes our and comments line to to Brendon our to like I your the Before operator their turn would to thank for will and customers. questions,

sir. you Thank

from And Jefferies we session Jordan. will Instructions] now Please [Operator the begin question-and-answer Bret go ahead. We have

good morning Hey, guys.

Bret. Good morning,

do year? inflation the we year. on the inflation anniversary half you of but year’s follow-up stacking this potential your some up a I tariff Just in addition guess then second the mean new see tariffs commentary. at last look as I How

long quarter. we that thought second we too in on will similar easing two will starts stay a these price, there how looks hitting We a back over expect in our but the pressure expect would tariffs see we that depend higher the be we would that through to costs first half tariffs these flow little there, Originally number. year, bit like acquisition our inflation will as will for that the place. was quarter additional So so into

as they is. right now plan is that will continue Our

you rational. a you seeing that know activity or And Are the small lower competitors pass either any tariffs around question Okay. talked guess, of about I in around demand prices then than more of you slow through accounts? margin, the Great. space pricing even when or pretty look you commercial account from national aggressive is large

do you one? Jeff, to want take that

price the are you For is increases is and most see seeing I a not is a pressure business, the everybody the will as same prices case. the but most we on tool from part, the in I field is to anytime gain that the price there everybody to accordingly. competitors mean, use adjusting the mean some is what under try sales, pressure part for

exceptions attribute of Yes, a players, absolutely. that and of inflation, very of regional It's from course they to during these the things some Bret it's some or the point, any quarter. rational to Jeff's been wouldn’t typically do just to I tariffs

Thank Okay. Great. you.

Kate From McShane. Sachs we Please go ahead. have Goldman

for question. Thanks Hi. taking my

do first Just impacted that you of X% are high business and after by wondering that are seeing of reach the of closer of estimate end being that we wet quarters much potentially that of could still X%, was have you And two how to you gives an weather? range? what you your comps confidence

We to, look refrigerate the What have very been performance in have at our our pressure this would our happy our strong, been you saw tell we absent underlying we are business would Greg into with spoke problems tell business. HVC would we we you quarter. category that where we is, run that category-by-category non-seasonal has that seasonal the comps

weather the of second remains for the good us underlying of we that rest the gives core normal demand in year. always and for So, parts half when confidence the we year, look and hard at plan

circumstances the just you. store opening, I can't when delayed been there time off the time. why case has Is is specific with purely to then before. of it And just of happening recall may more as wetter be stores top of the the number now is or this weather just weather timing it this not happening my is head before, Okay. Thank a the versus

XXXX got could of making mean aggressive but we forecast, first it entirely to the are a case environmental, you be. always related. mean the regulatory the and I We have when may year, fairly plan weather half plan have issues a be year-to-year in it’s I frontloaded whatever

always second during persistent. the normally that stores and volatile most year, new weather is the quarter we quarter wide and year spread weather when and impact There the this of is is extremely from and issues tough was just openings the most have

would Kate can of year the in It's I to so additional just all the add get are What not for is, for locations. that progress, the doors on quick we the locations building. how open are we looking

you. Thank Okay.

ahead. From Wells Zack Fargo, go Fadem. we have Please

morning. good Hey,

in about talked merchandize and us puts of more shift walk products it half, gross here. And benefit so at then pricing. takes as through you inflationary through of you dynamic could do think the to for far you how the the headwind? roll Curious selling if what tailwind year. start could You this tariff this back margin much to been this post pre the curious And tariff point has at

you moving we reordering. products tell quickly the are are would most faster ones less there is benefits, because we those the So,

benefit are last our where we at something But tell back that our And managing the benefit. our that what are look a it’s price is seeing five, of margin. and lines and was more we business. of purchase that it’s we last would ultimately we how it’s five modest helps the gross So, end the you

and looking tariffs, those we for So, appropriately take GMROI are set think to we forward sure are what when to a of the make the to we ongoing on look we make that And each should make need at we going market. look and based margins priced at prices. the product

be and it we So going to being that impactful, think think sustain not we able be percentage. will we negative our forward margin will

expected much And rate the how other the delayed SG&A Okay. deleverage here? the SG&A have store anticipate in from about new year. side, any X% growth with Are specifically openings. going today there of up down And basis forward you on buckets for would you sign XX the store where per a points step

that we SG&A reduction market to SG&A funds So, talked and going than and have continues we part people pricing benefit year expect higher last see tighter. be the invest being they saw tax with the the seen SG&A, receive we is growth would of and year, inflationary in we the from that this about labor that have top-line the is average what forward to the

this some and heavily anniversary our have when in-store we made ramped the payroll, were year those guide we year, going quarter of more in as first So primarily at investments looked weighted we to last they up. second

store when at decrease most we of of second look guidance higher an because the deleverage would that tell was those based these of at We specifically expectation you the that when look pressures, our year, quarter from plan structural tell we the that guidance beginning at the numbers. operating our look was and of you midpoint you on of payroll the would you the profit

amount But to to due sales a unexpected time. the comp and is opening non-comp meaningful sales on not light and stores due slower

make the That it. I time appreciate Got sense. guys.

Daniel have Please ahead. we go Inc, Imbro. Stephens From

taking Thanks for guys. Good morning our questions. Hi.

part last Just your of or actually a about talked have on more you of of question, wage into DC supply heavily more any base business pressure? more chain and pressure SG&A investments broad one specific it the recently in is investing feeling wages. larger that those Are follow-up your kind peers from

across I Board the it’s would Daniel. say

across but wage some country, the pressures moving the we are and wage is office markets wage the are escalating and DCs some pressure corporate the really changes up. store the those of are on in of that in minimum by west is seeing seeing driven We some wage and where they across our in stores, coast,

DCs, some seen wage very years we over of inflation hasn’t a with biggest have seen become lot drivers of have the and that aggressive wage last kept pressure and is the demand the couple supply truck there. with we and of One pressure up areas is market, a DOT our

a that you Okay. talked And think prices market and to last some or before able guys retail rational then to being offset these becoming wage was more quarter I the it of call raise pressures. about

the able through still if you being cost or guys curious being pass from of in to place form you to a pass So market inflation? it in think industry-wide to has what pressures, changed similar able Thanks. keep through

Well, I which second we across slightly being to increasing margin first same is over cover SKU passing to you think both retail percentage. spoken have and gross and the reflection and quarter of up in pricing a X% the our pressures inflation I the cost through increasing tariffs through see the our expenses inflationary that think

Okay. Thanks.

Chris go Bottiglieri. From Wolfe have we Research, ahead. Please

Thanks for the in go to of question. little bit a a tariffs. Wanted taking

about of the Thank that you you. some at become then us or does on land SKUs on SKUs the that percentage of next had you of price seen be affected of comps next same holistically of first it affected this, trade expensive won't are know customer you what is increases. those accelerated may hoping give the and in is terms XX, the something gives is the and lay you set the just already down, that see just in helpful. tariffs, your round reservations deferred in that you the demand will more confidence XX, given level for Just look the And SKU clarity, thinking

take of end back let the part first the Tom question. take Yes, will Chris, and I the

think, been this is in I the there a of has total fourth know, You tariffs. round

a of second more component tariff we was SKUs and more more hit and first increase then the third in The rounds. and

pace round Third XX%. round basically on for an XX% the same of a was XX% And most latest it SKUs. this additional impactful, was the is

calls, on in quarter of tariff base. of that said we XX%, is a at the We our that. to small doesn't increase very are full take subset import that SKU going tariff just mean previous the component either because the direct there at the level SKU we or As a level XX%

less from product. than our of in so one all is a import of we U.S. our China, direct tariffs impact if lines supplier’s of through coming us here imported that little flow facilities of Most the is the for

know on and round. what than far XX% would next what take you round would we this also we So is less expect this seen thus of a increase have XX%, we

go you quarter pressure And prices see discretionary, items to relation up, some their especially more question, reflected what is started from of In year. traffic count. inflation on type that on on second commodity consumer is pressure DIY consumer, second are lower-end we your we and been our that last on see to items as in our

We of less there the business, our on the side professional a of that by less demographic see pressure is general increases. impacted price

and So, when we professional the traffic a look impacted side benefit of less expect tariffs, in see we business ticket. round be would at rolling on through this the there additional of to average

work money. harder to On on traffic pressure people to save DIY to side, we expect see will defer would see the ticket average as we go up, additional but

quick that feasible? that is are of diversify that just from would is then to is be but road this, is do can difficult, is some I you. address there you outside of China, country. to Got Or just know there strategic very one That like the helpful. And anything doing tool traveling? a going question, scale expose you to that is Is going something as you not to

it’s No, of to buy countries to some risk. we try option. and tried it’s to not multiple across diversify the also across we a we where mitigate definitely for years products We short-term just risk that option, mitigate multiple where an can have and suppliers

China, have coming products example got other for from we category and in from break for break from some smaller India So, countries.

like we that other So, there is just build and they short-term alternate not have countries capacity. we sourcing typically that continue to work because change have, it’s locations with to our but not see what capacity are sitting suppliers a these to the

That today. the you for make Alright. Got sense. you. Thank time

go Sigman. the we Please From Credit Seth have ahead. Suisse

to the I taking on question. for clarify just Thanks Hey, the wanted guidance. full-year guys

modifying So, the that EPS well? that the you half due Is low comment second earlier the the or the was half for expectations I actually to expecting at the of first your as for think end performance you range year. be are to now are

Well we factors a quarter many we the continue as catch lower, quite was used to from that and specific the they really we on business. as up drag ramping that stores start expected non-comp in where date a open we year new as based going two to our expectations are their have generate stores are later much second as dollars I later not are it’s word as that different and think as have store openings up don’t generate both to we results revenue sales

then follow-up margin, question as a And could highlighted sense. specifically you a performance mix Make just talk quarter, in benefit. the on Okay. you the about gross the

If quantify that helpful. margin would higher Is the about I previously. I And that be half the think guess of incremental expected talked think you do gross for pricing now still way then second being I right previously year. you the could to flattish mean what to you about really have it, that you

should actually expect the be at year? a we the least for the year half So, back of that could or for bit that little higher

first of Seth question? will I’m we guidance, the be our will we of bit a think able above the sorry, midpoint to maintained have We little you guidance. repeat the

quarter, gross part performance quantify you first was wondering that? margin the could mix. just I’m The around if just in you the highlighted

I’m sorry about that.

nitty-gritty you margin percentage refrigerant lower big but a comps, the tell going seasonal items, of our are percentage in those for products but ticket a our would margin help but what not not into the are so We HVAC gross having gross details, and the of carry sales mix. lot we is

Got it. Understood.

Tom. Thanks Okay.

Seth Please have we ahead. Securities Wedbush Basham. go From

Thanks lot morning. and a good

morning, Good Seth.

customer those a is gap you of that last comps around segments sense to of the DIY this widen two us be and could would between relatively not helpful? quarter trends if My question DISM, between or whether give quarter performance

very saw to professional Yes. similar was DIY. spread Overall out quarter the with we what comping last

as further it And thus XXXX a XXXX? seen Great. you look back have gap in far than we in narrow was

the It’s been pretty quarters. four similar for last

it. Got

widening further it’s as and to customer, lead gap? impact and increases tariffs round pressure Okay. think you the the And pressure this roll do going just leading of more the about on price forward, lastly, higher DIY to you do DIY pocket of to the on you books think

is the about are well is you know these that buy we I that that will of lot spend everything it’s average complexity think Seth, and being our impacted know it talk you it’s they their just tariffs. DIY impacting and not likely not in because products the of as it’s a just consumer, industry

to make. So income discretionary any they have likely postpone and and have their to will it than money is they don't items discretionary repairs was, non-essential spend that they on less

Understood. a Thanks lot.

Oppenheimer Brian Please go have Nagel. ahead. we From

(Ph) taking Jones] for [David my It's questions. Thanks guys. Hey on Brian. for

help demand geographical of year little So, in particular comfort sales. there progressed, I in of category may of comps better point track or the as us in push terms Anything could to we could the so further further first just potentially give could the cadence into, you tends than two what quarters? certain that improving to get trends they monthly seen want far half that back on underlying in the have a be quarter the first

and that to to take then the I will speak David. trend. will let Sure I regional Jeff

on know you have normal things of product rather. road call, breaking the a the you with winter have under-car the team with more a or You categories winter conditions like deteriorating, products, talked normal that follow about know, up, you last

point that in Tom’s to is that quarter. And is saw the we what earlier,

more pattern a normal had we for weather So April.

And into primarily the impacted of related comments. prepared it patterns I categories see of of cooler and sea May year changed we my weather the was in across June, April that those during and weather normally and country that month much quarter, So spoke and was and we than the the see. in weather those a that Tom to strongest time than much normally then said

is, a strongest month would would May cadence then our we standpoint, the and been have by June followed would quarter, month what from say the quarter. of of April the been So have softest

more it. anyway are then towards seeing comps you expense if indication potentially expense end pressure, Is X% that the to think and lower the of those impacts how track to growth overall also in mostly the about couple towards there Got as the side. wages of quarters begin we continue any And over and on next XXXX? on we are look range should subsiding X%

the be in quarter. of for expectations fourth store absent our quarters being stays the store the the our comps folks. will we there from - of means come SG&A out a two are which our timing, expectation exception is When low, will item to will new that our sales some on last pressure opening for and our full-year have people SG&A, high end at growth completing unemployment is pressure third as and but with to very plan solid our at the payroll look that going continue be for we per for solid average So, SG&A

Thank Understood. you.

Horvers. Please we From JP ahead. go have Morgan Chris

Good Thanks. morning.

the follow the So to I gross tariffs, comments respect up want with understand Tom. and your margin on to

margin is wouldn’t - not in different that similar on inventory an So, the so sort way, ahead gross that you roll marketplace And people acquire is another benefit, raising are gross then sort and that, the waiting margin see of to of price it it asked the behavior pricing? around it. raise of and why - that into competitive

increase an what the uneven of price. is Well, application of we see

that reorder do on your much be and reordering items, are the prices are you are addressed the you directly here. So the we you the it and What when it seeing in starting some in are sell moving whether which how water, depends to the of items are through when rate, higher a that sell higher that has is at is faster and supply seeing volume goes when to to is typically at those those chain market. much faster prices we when with starting

the more that slower in the days moving benefit. get that where are items supply items you many So have

items? last moving more fall time first the the go on the did up And quickly slower prices around

What past bigger have typically we be this round tariffs, was go here of gone more the it’s see they you uneven through process. line. in Obviously the through across the them. you are ordering addressed across up I tariffs that just the Well, will when line It’s is the would tell first of than number, we all what latest a round tariffs. the

more So, those probably even quicker we are price application of expecting increases. a

of people about the seems in so it think way their it? feeling to and way right are So, is increases, price this through marketplace like the that sort

Yes.

May of and follow-ups. then in touched on And Understood. this also With not was I’m the rains, you Northeast, it. the that with negative California flooding Got it performance and which I’m from a two not versus then just sure the cooler yet? is is regional terms have Midwest sure if

Yes. Jeff during the softer do June have to take you and May May April. we was any just regional? didn’t not negative months was quarter. the And want than or negative, weeks

Sure.

on consistent really in was we the regional performance You performance, saw our of under know the across most quarter markets.

weather, As the West is with most the of experienced out Where the especially the the our business impact you majority our center business more to country. that impact the across weather unfavorable expect that part were most would we would we calling conditions saw wet of country Coast. the areas the and be DIY really

Understood. of rest the the of the Best year. luck for

Thank you.

Stanley From we go Please have Morgan ahead. Simeon Gutman.

sense have where up, morning the if at comp the the full-year second the Good guide? Thanks. not the the total, or high in been everyone. the of midpoint end at first we weather, Ex the look would have be would just it could of half end you at quarter,

details what with that going categories in are to second tell comps. quarter if okay. is performed would is that We weather we would the normal specific that given you not our into impacted were those especially was get more We happy be

quarter similar remember of there I forget, that underperform - that soft you was part - well weather February. maybe was first that Okay, quarter fair. is did comment as that And a I and or make a you the

So, look sense a just trying of -. to get

had spring when up latter weather at we of clean more a into the early. April that. and we drivers DIY as a which spring from look we bright And when a So, the business on first hard was spring quarter, isn’t out of precipitation at is of April, that get the we more a winter the positive. deferral the we a In up normal with side caught parts look and standpoint, quite in had

the second parts, our demand under look at at quarter we the display when and parts. the car the and quarter core in So, we first that long-term business, ware categories look really the

on tear categories wear their professional year those translated a looked the Our vehicles, and that people of and solid vehicles, all business. into taking the of the solid care have more side the

for the in key business seasonal the us our when The have been is Those look bit categories know with confidence of at headwind for do. come reaffirm that little to core we the air spring gives year half a of our year. demand the you that guidance hit, what back categories we conditioning and industry underlying

larger I the My you in follow-up consolidation because view it's seems margin. of for a not level helpful. toward is like know shop That the change have these and up your it Okay. past, at to from away the is gear you picking bit tend been some chains, is good

still Just to the if wanted that see case. is

a partner and business we in fit When we look a with we is change have and do is efficient them. national a regional there want country there people of the fantastic been job. of some a and Well, that customers tremendous lot were amount supplying that models with at lot consolidation. we in a to service, performance, partner that When are that regional there shops do we of and driving have great of that got have a customer lot

that would wouldn't from shy I business. say of So, away any we that

are with We make business going all do. we to in lead service the sure we that

Tom. Thanks,

And Please from we UBS have go ahead. Michael Lasser.

question. thanks and morning taking Good for my

running they a last than you inflation, You incremental a of year the the thus have that know year. basis Last so adjusting were this pace at unit year half. slower or year comp were below This you they had full-year. points percent first comp for growth have far year XXX last done are of did X.X% in a where you X.X%

So, why that would -.

sorry. I'm

You cut off there Michael.

than demand So, greater price perceived increases what's Tom guidance. you in question you seeing or had what seems to - a elastic by like my are your is, what's suggested than it assumed

this where experienced running and more were Your last you below than year, are year-to-date last comp is inflation they year. with

is, you tell business our continues strong. would we professional what to So, be

at look some more you carries We appearance DIY with ticket and also that in. of of do on DIY business. average lot business when high of are volumes seeing the some the that side a maintenance the low business of very items volatility items of we A

of pressure with oil volume, not like are can things What when look defer DIY So you ticket. the that the wasn't pressure hard appearance, obviously, - as created lot good has very March Those under high well. and weather that perform will parts the forego categories has items tell that and to is we on a been late as you traffic. changes, either customer or continue at

that is and So, when the is drive these of at what your business? that consumer going projects look in the expectation improvement much not an you it differ is would year, the that half second to

look than at half second seasonal that the less it half. when drive in our the business first categories there is we In

up more coming has business difficult then Okay. of just industry several to just O'Reilly Is because become years the doing been per different back It's now And it higher sort for longer-term X%. is are you outlook. to volume O’Reilly comped in comp stage a to the and be since up consolidated, has going store X%?

in and same we good the you of business miles XXXX had years year seven its is professional question of When driven, tell see its kind many the and a business, whether in cyclical increase our more stable. know the that we for What different reasons, DIY side XXXX. You we know driven, you much is is wages. business weather would cycles whether

is go the those have and we put at consumer is that industry industry years, will swung outperform, under we DIY we that quite that years overtime. whether the see when good is up the and we as through pressure DIY at we part. DIY If know run in where up business is base we see customer you current not three under tell when I cycles if the back look three good you that DIY beginning the are pressure, you these saw would years you the When numbers -

of year. the for Good Okay. the rest luck

you. Thank

questions. back reached we turn And remarks. any to have you. Johnson allotted time the call Thank will our Greg for for closing over now I Mr.

quarter thank solid thanking for our entire We Thank and results like would look like today to and the delivering work call continued joining third to in O’Reilly you, by call hard our we for to another would conclude October. quarter. you. everyone forward Brendon. Thank today I reporting our

and Ladies you gentlemen, today’s Thank you. concludes for conference. Thank joining. this

now disconnect. may You