O'Reilly Automotive (ORLY) 30 Jul 202020 Q2 Earnings call transcript

Welcome to the O'Reilly Automotive, Inc.

Second Quarter 2020 Earnings Conference Call. My name is Bridget, and I'll be your operator for today's call. [Operator Instructions]. I will now turn the call over to Tom Mcfall. Mr. begin. may you Mcfall,

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

call, second period. discuss After today's we'll During conference our comments, host our we'll quarter a question-and-answer prepared results. XXXX

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

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

company, like downs never safely of industry. can years’ on Tom. call. we've second experienced and in seen Thanks, five call our collectively Chief in us conference on we and Vice morning, Operating Chief today year's me O'Reilly Henslee, Executive to XXX Co-President; aftermarket, and Shaw, Officer. Tom quarter. of say the Officer a present XX-year Financial experience many with O'reilly, history But Chairman, Jeff The morning call. automotive our over Participating the this are our ups the Chairman; David quarter Greg quarter our the and second and Good Auto Parts our many, are Executive a the the and this everyone, I call conference welcome have on McFall, in also combined our have

vehicles has of executing first, health the comment continue parts our how start and role just our like significant team begin and amazing ongoing important the to while remained of evident face team Team pandemic, company's from O'Reilly for challenging the our customer road. and our thank COVID-XX has difficult As your serve but the with today, our our their periods communities most which the and more comments keep our protocols service during providing is steadfast we to critical in I'd most in prepared dedication the protect they never one to is need customers The with and to we challenges history. on performance expect safety outstanding providing service. It customers been essential they our to in

our our of $XXX our second experienced are all the earnings delivered on Team up This year-to-date quarter, of the and sales comparable swing quarter. the work we I stepped increase a congratulate store of and dedication The extremely have record-breaking a to incredible in combined tireless cash reflection proud ever we're team in business And the challenge and seen. of increase most in dramatic how a highlighted XX% the to quarter, we demand a million. XX.X% performance in of team. over with flows of per share, numbers hard your operating And want increase by O'Reilly

COVID-XX health continued how like responding results provide to to to Before would their ensure and our we safety our of members and the I are the brief dig further teams into quarter, our on a team for customers. update

the utilization local these WHO social and increasing and the the measurements state we equipment. and with the of onset efforts, cleaning on appropriate significantly agencies. last COVID-XX, measures protocols by of on quickly These recommendations numerous of quarter's call, implemented personal governmental implementation very our -- companies discussed safety sanitation and across we As distancing based protective include practices CDC,

face Our all currently, and team their of protocols have our rapidly of the best members pace flexibility diligent evaluating members and as company-wide evolving and did revising and recommendations team committed remain our the safety are crisis, of resilience of job the working our have emerged. in a the face have installed demonstrated We Throughout constantly covers. remained circumstances. and extraordinary difficult extremely period have wearing teams and in distribution centers execution stores, practices slowed dedicated to in initial the change through offices, great course in corporate requirements

like details our on performance second to some I'd provide Now quarter. robust in the

quarter to our delivering pleased and the line even these top results execution with are of in pleased incredible results. We more with the sales extremely O'Reilly Team

announced we was in beginning March, marked the headwind, by the was second of our release, starting pressure first saw quarter our coinciding a with COVID-XX significant As continuation our orders. in in we and a of quarter the stay-at-home implementation which of recommendations press of middle business the

conference quarter's through continued the this middle call, April. of As we on trend last discussed

the customers moving of customers in improved what as benefits began third sales factors forecasting we and from stimulus we these no duration At CARES to week nor had of under way magnitude the other our that of the could our payments payments impact economic would impact the time, As anticipate our forward. business receive Act. April the and

Simply the the we we flexibility result, through respond business all and maintain the plan exceeded took to April expectations. sales stance week our ample remainder third a headwinds. further of to how performance quarter in a for put, on cautious As our from

We're strong a DIY the with also staying frame, on DIY. stronger the in this turnaround gradual middle to professional May Sales business business April, more quickly coming of June. During but side was in contributor April, than of pleased on that see the of our the performance very the middle at and began improvement the in of immediate pace business. also time very in our at improving

began June progress generating orders as quarter, and economy and our the May However, reopening. began above through home we state to in sales strengthen, lifting professional comps as continue the broader robust expectations

cadence thus July. both business, result similar have of May on store sides and were total in this remained and for far our June, sales As of a comparable strong

color like provide on to little our results. of record-setting sales a would drivers I Next, the

a quarter, For us we second to very industry able a favorable to produce obviously had increase XX.X% comp in be environment. the

However, begin, in it the of of business our I'll supporting the what the governmental positive Act it's to CARES our demand predict markets. first it's supporting under we've to the sales quarter. But payments catalyst DIY tough turn To was terms seen results magnitude receipt from would as that the also of the sharp been the in have evident just general each the seen, macro we've as in the sales growth very factors. stimulus difficult discuss in quantify positive

that robust given However, driving demand as enhanced quarter. we of it's degree the which a business, unemployment the trends benefits been to clear also have through and we're prominent the to move have us tailwind persisted, likely in sales more

of reopening and economy as that that partial recovery believe especially to of a also is our was April. service We more professional home the our the likely demographic business miles driven factor, customer have and March during from in positive worked

short but and double-digit the dynamics beneficial the measure believe Although other There are are over could a of hot difficult a of to lost we've about it's our the strong period had, has to demand comps. likely in be another little contributed have we talking also any the the of industry been other for gets we'll impact time. industry. In weather weather year, quarter, positive in world

purchase age vehicle. postpone the economic an It's yet often the financial cautious on to the be safety long-held leading a motivate difficult or could concerns daily have travel, vehicle financial of we're vehicle. invest to to either clear outlook, of be cautious a with consumers seeing times We Consumers repairing and have benefit. them more existing new maintenance, about of in and existing focusing but -- of magnitude vacation modes seeing we from transportation their or of uncertainty catch-up commute other picture underperforming increased make some a more an of maintaining for benefit have more could also a vehicle maintaining

a smaller the from in expenditures share of a stores gains aftermarket in shift from dollars away our Finally, ticket line could with in ticket robust second during automotive we for the customer but benefiting demand discretionary be perspective, more seeing big-box ticket increases inflation business saw demand in expectations. size we COVID a also average increased activities was environment. shifts competitors ticket, From in of possible and our significantly. either quarter, count not general average or With

on ability product categories. offerings, being ticket. the performance the These projects the performance including have in a the customers the and items and and strong So on saw category On to and work larger appearance result as of ticket to their and time dynamics driven jobs second maintaining or especially quarter as demand in ticket spend our having category a basis, vehicles. primarily suggest of realized desire good repairing strong our increase they results accessory throughout more more some we size by is larger we

of forward of positive balance duration cautious As backdrop. would stimulus or to would particular, we can't can't additional speculate and whether demand have benefit. government of outlook concerning the we to market look potential exists which our enhancement recognize the the and employment the to the will that significant year, impact uncertainty as benefits very In project and in there the we the be sales our the remain still current degree

very sales at the growth the of increased miles to work-from-home a point conditions XXXX. Ultimately, difficult deteriorate. could concerned expect moderation some be if feel economic remain deliver positive company We see a to even our conditions a that to back also record-setting driven we other arrangements continue to sales We the to in if catalysts economic and pressure solid headwind from half be temporary. broader prove pace of continued confident

customers, It is the to the time our outstanding hard handle of were the in It's the strong and the profit while quarter, of work have volume allocating another additional our could outstanding saw having one As incredible and to challenge the of up to important demand. margins time to execution takes tremendous the at a history team It's line the live catalyst market team. delivered not to we right top growth contributions general this reflected by our second have strongest we to precautions. on such business part of fire the thing as the the for extra in results amount right we're quarter were factors take care our in company. of without safety

the our above point and XX% For second of margin XX the improvement a XXXX over gross of quarter basis our expectations. margin quarter, was

heavier robust in on Our sales well on benefited volumes margin expenses the more DC headwind leverage margin Partially as business, gross was our our professional decreases Tom strong small gross incremental from a comments. in cost more positive which factors discuss in gross higher which in these during acquisition the in offsetting cost margin quarter, improvements. by carries LIFO a detail DIY will business and mix the as prepared his driven

XX.X%, operating For the second of previous team performance quarter quarter, over XXX an single profit our basis our best which exceeds by points. generated well margin

SG&A press long the As over sustainable over our when we him we reported dynamics term. And cover turn more these release to don't in leverage fully in a the these to be view I will call levels yesterday, of Jeff moment.

just while however, to Before customer tightly and on these ability even excellent controlling I service, Team want I expenses. your O'Reilly results great to do provide congratulate that,

never performance saying speaking quarter of second and -- turn Your call our unwavering for company's incredible now commitment have I I'll contributions shareholders in to more extraordinary your feel been to comfortable Jeff customers. you thank our over an Jeff? and our and and the you serve apparent, that success the saying all for Shaw. to

model deep my O'Reilly Greg, you Team begin extreme to generate to able and morning, team the I'd quality our by performance of everyone. my second gratitude for comments like Greg the validate in of The good our strength results expressing the both to and culture. their joining quarter. and amazing were Thanks, and

together sales I is Your to comparable of And catalyst continue working what capitalize accomplish. ability growth profit XX% truly market-wide team proud dollar XX.X% generate of to extremely our be a of operating can and on positive incredible. growth store and

provide further the performance describe color the SG&A Now our and of some for quarter I'd on like to expenses our team. remarkable

the April As been history, first having the our and in business, the our and payroll we impact Throughout COVID-XX March representing we've discussed of was quarter variable our at steps length our our call, response business. we with conference driver. on undertook active detailed of to in company's managers expenses several spend, in largest

pandemic. and analyze in the expected we adjustments caused we the environment business we our existing trends, we were rightsize our model by the beginning appropriate in As of were made the felt middle to seeing for March,

refund the comments, through didn't in in At initial the so remain progress CARES during month demand quarter the SG&A more very we positive to slowly strengthened see to began payments closely be outlook. We've were encountered we instead we mid-April. of Stark May in trends didn't levels to know researches tax our forward-looking seeing. time, $X,XXX know through environment the sales we experience with service refer the improvement sales and of positive the prepared positive we April prepared short the were the would As long reverse, tend in discussed as the since increase we similar the sales our to and our but lot progress cautious trends of sales with for were The June and to demand since match and tailwind to to began that his how season Greg persist, the wave to sales we pressured Act. time especially closely trends under initial had spend stimulus aligned from mid-March the spikes we nature, in we due a

basis XXXX. we as sales a SG&A immediate by decrease spend SG&A expense X% control saw truly store April in rebound, exited and combined a May. second highlighted approximately at XXX the points. quarter of compared SG&A of this a result, than of in reduction SG&A of with a the quarter, result profitability drove to in second per net the during a spend exceptional higher of resulted June percentage This cadence of we rate drastic remarkable expense The the in in a in quarter discipline sales average As

out. recognized our were numbers and performance of circumstances in for the also played While our how team the in quarter, the deserves all by impressive credit the great driven quarter that we the part unique second timing

sustainable. provide over required consistent SG&A is As Greg our productivity level build previously term, to to service mentioned, know the long not customer we of of level the business this

Our priority have next just enough we our neglect for power been the throughout to the levels of our of to our past X we that of the company business. understand everything But can't in other to months fundamentals take care do experience has customer. all

image on back of store the of for [indiscernible] half year, running member details gets stores As that the comps, we development. the move when through important as refocus deferred and training our team the we're we will double-digit business such and

this will leverage However, process. we the lessons through learned

While back on top towards our strong SG&A navigate line we growth. will to diligently levels, and we dollar see expect be historical spend driving focused robust leverage and

Next, schedule. so first successfully to were much from of opened development Lebanon, expenditure our our home Tennessee. I'd distribution stores, line like new we stores briefly properties COVID-XX the newest our These prior disruption capital original state orders Through pretty facility plan and XXX new opened on to complete and XXX touch underway the And of able and well to in we to in onset XXXX. expansion were the open months plans. X we new net in on the with XXXX,

new significant design in seen schedules for the cities our back half the our economic At the as safety development move were the as openings permitting uncertainty line our planned local and were have we time, plans year. required store as store and well both slowed priorities with facing. how judicious measures. health delays approvals with Especially project implemented the we've in of as same in capital the for very However, we other in forward we expansion

were and to resume the in in As we development. pace May our store open improved, new to market local see June, communities we conditions able our began up

the original expect new we open XXXX And now been We've fall our guidance. coming XXXX seeing prudent control we was initiatives would of approvals. store we we final service and XXXX, but distribution further and with in of have However, open XXX exciting within to first where year, as locations new we half of returns. our to to this that our the the to out our store we and to given pleased drive delays strong our be between new store withdraw it customers and range XXX new anticipate we delays identified great in to in the ultimately experienced the stores ability restarted into localized somewhat provide that Outside enhance projects will growth, permitting year.

of haven't for in spent of we XXXX. X gain the level gap While to year, the first these close the these planned projects CapEx we in initiatives seen the months remainder will of begin that as

enhance stores, appearance measures converting and vehicle distribution vehicle high to the to progress make that benefits hardware and our safety has forward. to of in continue based presented these runs in our expectations and improve reap so modernize on experience to stores, projects excited our continue our our by invest XXXX, we're our of omnichannel the image great fleet, We capabilities. fleet initiatives our implement store far and these opportunities None on the the diminished from projects we'll in moving to enhanced

the I before the Team their again turn want Finally, over O'Reilly Tom, to for once I to call efforts second quarter. in tremendous thank

number crop team been reasons, commitment a really met that they're the a to stores, customers running every of our DCs business with keeping XXXX year. is protect customers. shown different in parts, up need to cream and the proved our and in best essential world they challenging in has everyone Their of industry. the has our has safety to But very truly our class. our while our diligence challenge offices, proud of the health efficiently of executing practices especially and I'm provide stepped our For the team and

to Now turn over I'll the call Tom.

and second of phenomenal of all driving Team our O'Reilly the and in in thank also the quarter. would I hard to for work care customers performance Jeff. taking Thanks, dedication like their

at a our quarterly take we'll closer look results. Now

in of sales in nonstore $XXX comprised sales quarter, permanently decrease the $X a store a in million XXXX noncomp $XX $XX a with sales million, closed $XXX million our and increased a comp For line increase sales, increase store million plan. increase million in stores from noncomp

past practices. planned closures are these clarification, out our broken reporting For and store consistent with were

a to time. ongoing reminder, related resuming at As our we not uncertainty the guidance guidance withdrew are XXXX COVID-XX, this we previously and given

LIFO $X gross leverage As includes XX.X%, DC mix, charge margin quarter increased cost second Greg headwind a points offset XX of mentioned, partially which previously to the the from by benefit benefits, acquisition basis and million. for

As a benefit tariff-driven see anticipate sell-through XXXX. from on-hand margin the purchased would that during gross prior reminder, coming that the to XXXX, of into we to a continue we inventory price was increases

this LIFO was any higher which headwind we gross to benefit pre-tariff point, POS acquisition although continue. they full However, -- the But the year moving saw environment as remainder charge. situation to margin benefit us realized will decreases in and second short-term reductions benefit expect this At acquisition represent XXXX in reduced that to of result will cost will further rational, cost we have benefit the POS increases of the XXXX. remains our a we margins. a throughout margins. inventory in quarter, and This The is prior cost again, to in future and forward similar LIFO pricing benefit the the our

our was and XX.X%, to certain tax of X.X% compares benefit fluctuate XX.X% to periods. from expectations. of for rate be This quarter XXXX XXXX lower the reduced rate rate quarter-to-quarter, of which Both tax compensation. by income, income, the tolling a tax tax effective with our of Changes rate which fourth rate of benefit a of X.X% comprised of pretax of a share-based quarter benefit a compensation the second the second of XX.X% can of as were from of Our comprised pretax compensation. of was remainder expect base XX.X%, share-based from quarter continue reduced the line in by to we in share-based result in base

a time cash X Now of our in the timing at these X cash generate on that year billion. increase can to in net payment first quarter. of result the inventory the second in net solar balances of with $X.X credits, XXXX, our months made $XXX,XXX, Act in in of flow move by investments months offset a free under taxes and of and create was for Inventory remainder Versus deferral reflects per increase in was year. Free solar CapEx, XXXX, a drove increase the cash the partially XXXX investments investments but XXXX, by in reduction of in taxes the the a quarterly beginning partially the this inventory a strong of projects we'll paid inventory an driven in in up the flow projects. income, the the investment for $XXX The cash million store the as reduction These first an sales result tax payable with increase and benefit which components from was by the tax will of the unevenness flows. which last reduction as investments additional results first in quarter end quarter in X.X% quarter offset volumes. even of the CARES the

of moderate Our inventory quarter inventory enhancement AP in the as end ratio is XXX%, per this will our volumes inventory over the in still and history influenced we extremely AP XXXX turns ratio at growth sales percentage to the second strong our quarter. second the resume of heavily in in initiatives, anticipate the in the our which and We and store inventory by remainder time. highest increase was the

a of Finally, first the of decrease million capital versus the driven of the $XXX X expenditures in was for new period by projects the prior which level months were first XXXX. $XX year investment of same million, X distribution the from months XXXX, year

and continue the adjust given COVID-XX CapEx which due As appropriate the our plan impact CapEx will to Jeff as environment. current previously paused we resumed discussed, deferred projects, to were of

capital Moving liquidity and on to structure.

in the with preserve we as the We result measures and the year second took a in quarter. liquidity to coupled liquidity, continue earlier to have of flow extremely cash performance capital the ample strong

end as with of excludes compared XXXX end of the the and calculation X.XXx ratio quarter our an million X.XXx, quarter. to ratio result, the we of of X.XXx. finished quarter This the first a cash held debt-to-EBITDA the adjusted we $XXX of ratio of as As second of

to As March. preserve at the in the of share buyback our we one measures temporarily onset COVID-XX, middle liquidity of suspended of the program

to May of Year-to-date, liquidity. repurchase program and repurchased share for a XXXX. million a in $XXX.XX business on million. evaluation, total at quarter to of continue end the as repurchased XX, of and an evaluate conditions release, average We shares price we've of our result date Subsequent X.X And through the of we this shares resumed price press $XXX.XX. X.X million second $XXX our the of at an average share

result in liquidity performance our ample quarter under As second available finished under facility. this credit and liquidity cash strong our a we of total the billion and revolving feel borrowings $X.X $X in we have of existing facility, quarter, we with billion the

on of As our we we debt. grade capital our position, the public rating moving strong including share investor and leverage, evaluate our to financial repurchase use prioritize liquidity, forward, program will continue maintaining

history take a balance steps managing stability of ensure the our will of health the We to and long to and have prudent continue conservatively sheet company. long-term

to answer your dedication time, to team questions, like thank our for open prepared happy concludes operator, I our At up the Before the the the resilience months over to and line, like to This I'd the customers. and we'll questions. their to and call last shown Bridget, this your to open O'Reilly company be ask several I'd they've for comments. our continued

question-and-answer We the begin will session. now

[Operator Instructions].

of with comes Your McClintock first Raymond from James. line question Matt the

on results. the execution. say Congrats to have I outstanding

a I'm industry. figure history, that's been with trying to could of that, or out Right? bit driver strength least And being the occur how to such Regarding little still conceptualize miles driven main over clearly, this at trying pressured.

or So be large versus of you a what talked industry? apparel factor try appearance can growth or through in through you strength was when think sustainable in the onetime about us parse the And accessories, kind might that outperformance? and in help to

Sure.

see if Jeff or and So on. Tom I'll want start add to let

When that of are and years, is a doing you things think to like anything? just taking So cases, about of they more add because that strong first, care, in categories can cleanup, discretionary number us. as rides. found up more seen cars this -- that the car rides. money lot items frankly, that. They're typically what not want online. that of real are have the Tom, that's sales the the items, to not in us. accessory, of accessories may that a up. you backyard well was real hobby-related might are people did The stores we tuning And performing category sellers And for spend place, trinkets we've typical in in that as parent they are in or part have for a average because buy hot activities have lot the typically waxes, for reason And family not spike maybe of those think events we garage and performance-related a those -- they're peripheral type typically -- categories. they have some a items, done a our They're strong sporting street prior for you not Those on time. is in years items been of quarter in consumers are, covered closures,

we add is look acted for we saw strength it see about. across our to we in of When that unusually what talked spoke Matt, all that particular I'd Craig categories. downturns, as what to categories We usually set because at that the or vehicle quarter. unperformed look And And like driver, is underperformed people downturns, feel catching the see purchases. up deferring outperformance maintenance. for what new was the at we when biggest we we we on historically, look people

this to But because and to take seen don't quarter. ahead away think But get did that this from you've never of I we've a as step to want not to the how performance about on try to the I'm year, you this next anything further take we ourselves, in outstanding to of growth history. like do growth this just seen really trying year top but you look

you just growth what and next compare think to year this trying year to keep to next anything So who say year? the means we're can about for

the on this they've nail head And there. turned the the a bridge. to middle the lot unprecedented around. is and pandemic. go got How results hit time, the you quite an of think We've I Matt, in dramatic. of still water we're under are This

us for to So appropriate speculate on think, year, time. next be would I to not

guys. job. the appreciate really I Great color. Congrats,

Thanks, Matt.

is line with from Bank America. Our next of the Suzuki of Liz question

just growth of quarters? and the of run through you just next a were March the takes and expect back run where as you And of you sales. can to SG&A rate Could any get the go kind the on percent X dollar as normal made whether in of that puts SG&A maintained of in reductions year-over-year some be to April

we ran second take to of stores quarter, we in customers. various work the conferred and need care We that to some just do the SG&A of know the in

So based that to will our Obviously, that our we pared staffing demand. ramp anticipate significantly didn't thankfully the comp we persist. back negative on meet staffing up it a XX%

we store continue let to discretionary that know And payroll, us speak day-to-day to that. to I'll a for we're biggest on detail, and to So is the going going SG&A higher basis. spend. Jeff We're have manage a

-- a what volume dramatic things like our see. best always time, mid-March we've has always managed than and done. do accordingly. normally would downturns weeks. seasonal would And payroll have we for that the Well, in more really we our and this we store We drastic always adjust staffing was there to being, a or few in X react and our I to drop tie obviously hit when that. our I levels tried our to we to mean, in payroll had mean, as to pandemic at business that persisted We a

hiring procedures the mean, the just we people So do store, transfer based the appropriately payroll, in normally overtime, business. have hours part-time with between hours, then freeze the adjusting implemented manage and to hiring. payroll that reducing the stores. the adjusting we starting we things the not in demand place volume I manage of all And our would obviously that on our for to

color bit a to more Jeff add to Liz, saying. what little is

the of the just fundamentals the that, his run a tight have to frankly, that we've few store comments, suffered we And last our Jeff weeks. of some said in very got I the think over have on and some weeks. budget back, things appearance prepared past on get several stores as very,

we're So ever is as the started to We've stores. that customer as and dollars SG&A back has sure to make our put been. going high stores, the to more some already it have that experience into appearance

mean, one a more And early than in and on corporate tax Great. airtime in I which policies election is rate. stores. follow-up some investments the the one potential of getting increase in in labor just season, but are it's there others, still

in reductions Tax rate Jobs those some company Act into savings can -- wages So 'XX if you're areas cuts goes or tax But where to are of a O'Reilly and you effect. up, make effects. invested back technology. into XXXX, Cuts tax mitigate and think lot the in when those went do there

of our we can a our out is basis, an be generate system company tell the how tax profit we to year-over-year done. is the we to profit that's dollars which we've need that and extent would increasing operating control. dollars. operating after And changes, continue focused environment in on what what that Liz, a To on year, best we you increase create do to year a model

Our Jefferies. next question Bret Jordan of comes with from line the

smaller during Do you population smaller think were? On the big-box stress or some of any the share retailers from for distributors the think maybe gain, Could some talked share what you've about you taken of having bucket who you of the you we've And donors quarter. seen other potentially bigger in those I competitors. smaller players? guess, change lot think parts real obviously, a

don't professional we've We've a the the parts little of our yet think of on side business. nothing change lot bit, but installer seen or material. I seen store side a

it's few continued and e-commerce and box And and auto performance say maintain next over customers the share, staying market the position, won't but we've were up comment challenges to the the for but We know weeks, pickup sales It's of hard board. several we our it business big very, and both all product As pandemic what in-stock struggled we've volume to pleased that sales no the and with in we parts Bret, competitors outages, through our around weeks box improved like We to store our our we taken in specifically, very brick-and-mortar store only releases. results not pickup because very as an and our quarter. but sure or big the implemented. until It's that drove past position shift shift. somewhat myself for pure others centered this at online we're for that sector, feel seen online that earnings some is When pandemic. to and this teams players our in-store, of of the We're end chain hard look really seen due far they've until of some see been our a very, our have e-commerce like. the gain, just what strong. has market either a in-stock to supply business, share in trend we the you have DC know that tell to had as to an the store, has their necessarily look see proud lot curbside that we've able of majority continues our we've retailers, most has in secret drive

I So supply performed pandemic. And consumers that have strengthened confidence those brick-and-mortar the regained really have chain. the their some that players, of it a especially well in lot of think through

Okay. already second you so question my Well, online, answered it. was

markets to So markets the the weakest the us my where be for is you guess, question a they could and second and spread performance. going I give strongest were. between regional feeling

you do that want Yes, to take Jeff, one?

pandemic seen in on mean, stimulus week the April, COVID I persisted the markets. comments, business. all really, I country sides we've across exceeded for in mean really talked in in the checks both a market when then in third it and it prepared impacted And our of country. the are there really mid-March, we we Yes. But weeks. about starting saw we across as this and entire chain the has in the pressure -- in I several mean, every And the dramatic all expectations of business, across the our uptick

times prepared challenging times. taking one stepped we're through care and of our As in have satisfying we've to customers, our way proud mentioned the thing, demand of mean, really team comments, these plate the but up needs I our members is several their extremely

question JPMorgan. Horvers And next the with comes line our Chris from of

DIY. has question my So do to commercial with versus

robust trends could, And between side also into talk the about the about in Can what quarter? and months can of and the commercial the of maybe May July? talked evolved the gap DIY if define exactly in do-it-for-me over business. you you June You robust And you how is?

the the really DIY kicked out of would and May for side X the into and that would overall, tell of DIFM more tell said stronger comments you have trends April, in prior and prepared April would positive May we you July. much business. the ramped that our between X What than as in, And call, everyone up started being say with the out our slow. June and quickly business June, side DIY months, we continued I not DIFM. that going all break We're our comped subsidies on Yes. those I to months, numbers I our government in as is, I and realizes think of

the DIY sound DIY and gap the like commercial exceeded quarter? doesn't between did DIY narrow into June? over presumably, But -- commercial It

orders The business business fashion the took So stamp until business started. professional side didn't to DIY was really stimulus in comps. of yes, DIY as checks dramatic to the started as the the The really around start our contributor bigger soon lift. the home to off turn

there very those remain throughout narrowing X strong. inherently, but was the quarter, a of both So

on a gross Understood. And follow-up margin. then the

mentioned tariff increases You the ahead being benefits the potential XQ through fully comments had headwinds baked around price and on LIFO. of in some

leverage you comp year? goods to half trends them be potential cost in net other of a how Will So ex the you components? do very those back about expect strong the in headwind line, the of the from are thinking they --

Well, will reduce acquisition costs some pricing. label. trying on to to and and We're private that through what sourcing with scale our happens depend always extent,

we So decreases, continuing to When our actually quarter. that of and second we looked second look headwind. get benefit depending. be will in itself, negotiated offset we had the quarter But when plan, because the at a we a anticipating price LIFO at were that

attached annuity but we of we distribution So pricing prices the leverage the in end we goods. year we quarter, When to and had our plan was cost. as -- higher lower that the -- through was acquisition we would the have expected be headwind for sold an improvement would it margin by a anticipate benefit theoretically the mix the higher and costs. as forward, DIY relatively look the less through pre-tariff stable a to margin, driven acquisition to have gross year-over-year Otherwise,

year. So we'd the the expect of relatively for to neutral be remainder

is of question Gutman next line Simeon with Our from the Morgan Stanley.

a on you're how wanted like there. where like the ask going I'm DIFM -- side. out taking sounds It sense you're the to I market you in and running words channel? put to share, double-digit. It sounds and Do much is market have running that

to say. difficult That's

is out reporting Chaps guess, The our business and Street customers, We're for strength. can't customers Greg we're in to our difficult. strength our on long-term ability haven't foot market the with when a and about, our calling on to talked of That's I As the take up mentioned trying reported, our although, of earlier, supplier now. happy normal how door to one's care chain benefit And competitors the build parts that We're and Greg come us the able supply trending. provide with. is get as

We our a continue try safety been help in safe protocols them has them a this, call in difficult then environment and with very which the through also. to to shops for way

would add availability. this I chain would of Tom's just on comments the -- I is supply to strength the Jeff. really

move our supplier, part primary level, grow you have business. professional call shelf, that availability. up As the bar big is on in maybe could And in and a in a you doesn't, when was else we've And the list being the prided shop. to know, key you maybe always availability of service that the you that could somebody on ourselves

makes Yes. sense. No, that

same industry. lot right, running in a leads let's driven in tell Maybe that about it's versus it you're mentioned things of the that, where level. like of and down seem important think is exited you I may and say, could miles be. is sustainable you're digits cautious the both the you It And does how into like you for understanding, seems my double sides the which question, business. year, rest your next

in stimulus. curious to maybe what of to know I'm don't look, the if Because harder going and the terms flows that we is that cautiousness the momentum theory, demand so of continue in side, And get how do, should some which just through. we pent-up is, we're if understand

on own your just strength. want on the dots comments exiting despite cautious connect I to So the

forever. We for Yes. is won't forever. world and is the is right one last the this we're know seeing going trends for not time that it's last a Simeon, thing now It's to sure typical. unique not

this if -- opinion at the short-term driven talk you you look down my term. and miles will you persist, break that it to that term, and If about on is long on long

come miles driven back. think will I

drive people the will as cars miles in past. done think more they've I their again,

there's a transit perspective. of still think about from systems mass are safety lot that concerned and I a consumers health

better is more and more out read of about moving traffic, driven, less major to You the mass suburbs miles and cities, automobile the people more which for transit.

would of will us term. caveat happen shelter-at-home going things be I think round perspective, know to So miles that for if know all to orders another stimulus. driven. short-term a those is those markets, from short with potentially of all us negatively in there'll support the driven what's growth long-term impact The of in None miles of some things none of these

in uncertainty because reason the prepared that's our called out and our with that the list of for So all degree that, of comments.

Our Sigman next Suisse. Seth from is question Crédit with

commercial. to commercial base. what you're follow-up wanted across you'd your wondering on customer if about I talk And seeing

there was I over think sure as disruption essential, of I'm well. last but So months few were the many them some

furloughs and shortages. Some cases, cases, some in

seeing? on a I'd So thoughts the that side? your at get on just love factor Is are just all that. curious, to I'm commercial limiting you what

of orders all in I that shortage coming some place. a actually hours, shelter techs there's in seems this statement been of the No doubt like May into it Jeff. period. one. place I'll I when that, shops shops. obviously, in some that and were pandemic that to were And But during and that reduced shops is there the some kind and it broke on there Yes, early mean rebounded -- June. of is that a out speak guess was the this closed were has markets that

these back shops several little slowed bit outbreaks we just from opened some down new kind hearing have about some a maybe in it of they up. when with states, where are outbreaks, back COVID Now comments were

to on related markets ensure parts industry sure early And repair we if essential, essentially. on auto worked with of not all, and organizations most, that lot a make supply would that

COVID on in that point Got it. up picking around to of Are And there follow-up shops markets moderating is growth then now. now? where just the what's signs and happening

it little It bit. seems like where seems working slowed places shops it's down few here spotty. I a mean just for maybe have a like we're the

for markets, are concern again, that And your still think to taken these I teams those oil comment changes, the with to sales of a those shop may there's for degree safety got things times the in that I that, for home, as you breaks, core jobs. tackle want might car before. have like traditionally to at tasks shop, some where this of taking a you some from saying multiple our said shops I've heard I some perhaps of

got totally from perform off not inside you're more car to those someone your dropping you perspective. don't having and you yet know just and time car a Now safety half, comfortable that

I think concern of there's there. still degree some, some

with Lasser UBS. Michael our And next is from question

DIFM in business So based in was on July June? those slowed where comments, it to running has relative your

quarter, X going to the not comment within weeks Michael. on We're

if with suggesting parallel XXXX, from is here? are Or were think that look what demand it to about identical, differences? how any does major good to you've perspective overly for for period that, And there and XXXX, Tom, a a category Okay. seen you the aftermarket take from

those very went comments. products type bit. and of unusual. Greg XXXX performance discretionary brought appearance XXXX, Well, in And a quite more and maintenance commented a and took big failure the [indiscernible] parts the XXXX, in appearance out and hit we that's categories up reason prepared to is Compared all

this different that's time. So

do staying and it think stimulus home. people the at with I the has to

repairs look that they back you interval if these consumers thought mean, service we is expending I delaying 'XX, of Right. in 'XX some could. and

same time We seen thing around. the haven't this

those consider where be to for goes that That's whereas a the on a the -- more we uncertainty it's to you And So We pandemic with wish great was 'XX, answer from would here, had experienced? longer-lasting based difficult sector of answer 'XX just a Michael. this great that, that. this comments, tailwind temporary question. I really

significantly downturn this Mike, what the we is is more of would pickup more to, particular point in than and XXXX, immediate the magnitude XXXX. though, you economic

Markets. of from RBC Scott Capital the comes with line question next Our Ciccarelli

obviously, bit. So headcount adding quite SG&A about down back and you into the talked stores, is a

you on related SG&A growth from have do target back those you per about bringing that, a of So were then store first, you're do plan guys perspective? an to thinking same employees And of some kind do of on up and have takes basis? or and hire go while you kind furloughed kind to start train a and a people? And of that them fresh them productivity to in obviously, out ramp

had would downturn, build to we've goal in the in. to seen -- by react demand headcount happened knowing Yes, Scott, we was. as up no continued it's we businesses for on that's as and obviously, our would staffing per and adjust up. comments, staffing we what as always leveraged We like And provide year. want run we a -- ramp long grow stated for G&A back we'll continue our long we've the something we store with in, that by about that headcount. mean, the our this average things the we'll to this I'll staff not might cautious But as start that. do we've as those managed that business, again, business stay to to that time, when ago. talked over that. the XX back in service No mentioned, to and that. We've move talking what as And really And toward we've And last. And took accordingly. much early demand to sales we're our But customer hit dramatic ramped had we've the s Greg Tom would as doubt, seen, is the relationships, about as we week prepared back business. how going the And put unsustainable, chime idea -- maybe uncertain there, times. days compensate our on had week, pandemic We've place. the business been to we store, maybe always I already and I in think to to normally the

Scott, this the thing, other is Greg.

professionalism you the hand think in underestimate shorthanded we've that's just at I our we our the sometimes here. When built speaks volumes the at look on. to where task stores success to there. that and and tend our operating are It delivering stores, sales

got in situation so same we've And our centers. distribution the

long Our into working a some and sustainable up stores more, of some distribution They're our with long We've that's working lot stores. labor put dollars in to DCs. in shorthanded. demand And centers operating cases not weekends just They're hours. to are term. more got our back And keep

focused full-time who our If we question, sure that your unemployment extremely now. environment, to part is back people the we're going bring intent in of to Scott, business. look win at And COVID, to employment to are to I people think parts need the and selective low, the professional address on much that people. professional be bring hire we -- who higher make full-time right other very parts pre the was we're back we we higher or building core

Johnson have Greg remarks. questions. Mr. I back will reached to allotted We for over for now the call our closing time turn

the third O'Reilly the to customers. to our you. like Bridget. today our to Thank you, entire thank like for look to Thank their today, dedication Team We'd call joining October. conclude we for forward reporting thanking our in I'd by call and results quarter everyone continued selfless

for and you conference. Thank you, This Thank today's participating. ladies gentlemen. concludes

You may disconnect. now