O'Reilly Automotive (ORLY) 29 Oct 202020 Q3 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the O'Reilly Automotive, Inc.

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

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

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

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

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

Vice our Good call. Chairman; me Tom. and on quarter O'Reilly third Auto call are morning, Executive Henslee, conference Tom McFall, present Chief Chairman, and Executive -- Co-President; also Officer. welcome Jeff everyone, O'Reilly, Parts and our Financial Thanks, to with Shaw, are David this the Officer on morning the the our Participating and Operating our Chief call. our Greg

produce results the of challenging of the quarter the are announce periods pleased our one again to third excellent the amazed are at in to of O'Reilly in record-breaking ability and of most history performance our for company. midst team We such

our outstanding quarter, the also protocols midst XX% to our in customers customers of while remained XX.X% team $X.XX, share the and third store in consistently comparable COVID-XX dedicated an health team sales of our to executing increase a protect diluted members Our per in and the the increase earnings drove safety and crisis. in to on

during done adjusting are the from come on excellent environments pandemic. any of face have the business have and XXXX customer far without exceptional our our job we so conduct we focus done sacrificing teams value this routine, providing While during ways the challenges They've our to to service the modifying expect. or current an customers

efforts on We best our focused to revise and practices constantly agencies recommended and extremely safety public continue protocols our to diligent health executing and across company. be evaluate by as governmental in are our

prepared hard customers' deep comments, to for team O'Reilly question gratitude commitment for important a during absolutely our no critical in I in is Team how be customers. lifetime and challenge. to needs, meeting prouder our our There we of continue couldn't like I'd with contributions this is express about our business to once their Before their work our and our

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

discussed line trends conference quarter second we continuation generated through mid-April sales we third we the from strong volume off started As the of the a call, in on June. with top quarter

differences September of months. Sunday our quarter, mid- with the high throughout quarter the teens beginning a at sides robust consistent to the were resilient, the after comparison in to balance we in best through performance quarter progress for the performance continue both between the strong the in performance adjusting on business. in we X quarter As of see these We the perspective, comps steady, of July. and had sales August cadence From

exit below low release comparable strong our press in indicated in store in far sales we third the range. trending As yesterday, our rate quarter are and the remained fourth double-digit thus slightly our quarter

record-setting the in in that been were through been somewhat call progress through about we would half As have This we calls, been from acceleration markets swung how expect third thought that and cautious uncertainty We've gradual our our back quarter And surprised as moderate steady the fourth very seeing at has unprecedented we our been. of direction trends to comment demand extent more sales pleased as we earnings we X quarters' the the and comps and sales quarter, on moderation we in the when strong in we heavily at conference immediate moderate move did both includes the a XXXX. volumes have quarter's on discussed sales last we our last the pace how into that the economy. experienced April. definitely on outlook much time our broader that than

Our from injected the encouraging when business Act the tailwinds unemployment payments fading stimulus are our we more benefits light even in expiration moved being into the under to CARES past enhanced sales were trends those government as economy. and further dollars of of the

DIY business but our with was quarter, the performed the Moving the strong in relative business contributor SKU on quarter third ticket stronger sales tracked ticket the business, cadence on to even of perspective, of in which in the saw and in we both a sides our sides in average From along composition continue the increases we our a both our impact sales our business line discussed. to both same also robust very from count is quarter, well, during comps total the just performance expectations. professional trends average inflation, ticket with though of ticket and I see muted comps for our

categories across DIY believe performance our business these more willingness as the discretionary last volume sales that for indicate results sales the in and quarters, strong We batteries. been want our X performance in category I business. pleased with still we of another some quarter larger saw these clear projects. we the our be reflected continued have to performers outfront work ability customers As even across a for performance been product better very as categories our extremely our have though on strong DIY well to quarter, our our of of all with in second best lines

benefits third this the While is, would incredible categories demand traditional in At to sure I'm everyone robust more are in in our as remain hard the company average were the portion under related We partially at residual discrete certainly to of under call Act than in as and tailwinds the potential continued are likely our and surge of impossible least question, significantly what that failure as and last these look this quarter, not long saw there answered from it's the but have a question that demand car some is as the like historical driving do to quarter, stimulus a today's listening tailwinds point, we several unemployment categories perform how saw provide did benefit short sales still forward. persist? on trends. and Well, and period for time expect factors answer for headwinds sales we for to watching extended in solid are definitive strong were part better we later will our and government they CARES quarter. quite are

a such the as the stress. in of the negative had positive from they pressure the in consumers have on would has we payments of rapid expect consumer impact Even and have increase unemployment period impact normally the mitigated health significant to economic support those lapsed, economic

we new seeing record uncertainty in The take this investing more and reduction care the our purchases expect incentive deferring in their experience maintenance, continue benefit coupled maintaining government consumers to respond existing vehicles. will vehicle, likely driven of this existing cycles underperformed of long as to from a vehicle track We conditions a of combination an recover. with stimulus, economic economic to by also has business industry, and vehicle in have economic

months. us strong significant clear performance gains the the sales macro Aside it's proficient that providing model our service. result share the team automotive that benefits aftermarket, a capital-intensive team that helped business our for course professional delivered of We execute well-equipped, parts outstanding of the of high-touch, past requires have the a technically has people, is over also several to

they of the by haven't promise propositions and blown face We customers. have amazing of been circumstances, delivering in the wavered team. to In commitment value simply extremely the away resilience difficult our our we

us and enormous stable in Our team's when aftermarket customer even pronounced automotive more and consistency us providing market-leading service conditions, the external are the differentiates challenges. facing is advantages results help in in economic these everyone excellent drive

pleased know the As we essential will the aftermarket needs cautious are automotive about drive as we've customer long goodwill further we in believe to demand immediate remain and quarter, we the with great performance but from exist. our remain uncertainties term. our third that the health in see loyalty even given created industry, business customers' outlook still sales crisis this in meeting will strong continue We our the of optimistic in the and team's during

the there risk or did the to also we of do see weather assumption volatile, result under our sales holiday as face instituted has make the and remained to would this can't and the the election any as We we be pronounced we've volatility our government work-from-home impact our demand anticipate and some nor season, additional which which of could as a could consumers ceased, more if particularly strong Ultimately, continued result term, variable has be more year wait driven on macroeconomic consumer we'll fourth in toward jobs on next demand, driven stimulus see demand during as encouraged been In quarter depressed the given We we have miles benefit. As conditions face at see can degree of call that quite miles we government ultimate will would where remind stays arrangements. everyone business, worsen that out. immediate as of the pandemic. dynamics to XXXX. our what can the the demographics time consumer to have some short the be economic whether same level the challenges a week where of likely stimulus pressure is professional

our during solid We broader growth have comps the the confident trends stability to period and by record-setting continued very of sales even feel very deliver the deteriorate. conditions encouraged if been X-month sales economic company of

gross quarter. to Moving on the margin for

as was of reduction his well merchandise margin before margin. impact third was from XX gross comments, year from reduced basis LIFO benefit in the Tom gross the in expected more tariff-related as XXXX the increases, last of XX.X% decrease planned dilution from discuss purchased from driven which point cost quarter will XXXX The Mayasa. Our fully a by

Jeff O'Reilly and offer more quarter of another my sales flow. details our congratulations will delivered of profit an quarter first third X third over margin we of generated For and have the for points cash XXXX, XXX for record-breaking in discuss operating $X.X the want Team our of prepared I XXXX, his the comments. free outstanding of basis an Again, operating XX.X%, increase performance of quarter, billion to team in months to profitability.

to call willingness the Jeff corporate DCs Shaw. unwavering Your ensure or is to Jeff? truly outstanding. our stores, who over to offices, mile enters turn go service also extra I'll while providing everybody customer the now

I Greg, for and and to sincere good today quarter. expressing Greg's everyone. Thanks, want by thanks morning, start another comments incredible to Team O'Reilly my echoing

very capital has business our and a productivity operate Our fine-tuned pandemic our customers protect of team's while of protocols human our members simply value been to and exceptional We diligently results an and follow many ever remarkable. health customers, to best over investment. safety generating line maximizing all that years to model the our shareholder top team is ability the deliver to stable the we've seen of while

in And way have where sustain volumes overnight However, XXXX. a of never yesterday expected it and be Simply and we hard work in of the DCs. such model delivering tremendous put, rate requires a has never scenario in by stores the store and would announced to tested teams we skyrocketed our a for ingenuity the we've our amount months. high X imagined productivity results

growth for market the the As this SG&A macroeconomic operating an increased our results growth limiting company. store share, we basis operating store and XX%, which generating represent of for by points our Greg XXX margin to and dollar environment record third on both both quarter quarter. capitalizing taking in increase to We strong profitability of per while previously of sales, XX.X% profit discussed, operating generated drove X.X% XX.X% profit comparable

record-breaking As starting immediate the we onset a of in discussed to unique our circumstances model changes quarter, crisis, at the dramatic, drive we've created and the perfect XXXX, followed the significant the us seen last headwinds COVID-XX in execute profits. business of in business surge for the with by have opportunity timing and our operating

solely our can result, call we get on historical our in when back of focused sales deferred incremental to outrun costs, we everything a that that indicated power but In continued doing with our have levels we important simply details in the line we're SG&A expectations, expected those to refocused our As would last operating towards provide in business on seen just our as excellent expense service. customer increases on quarter's our SG&A. gravitate we've growth

steady Looking SG&A current each by environment, encouraged been continues expenses, team and and payroll. to our better as adjust sales forward, we've trends seen, especially and to the week to our been by we've we've store manage able the our goes plan

refocusing expenses, there fourth significant a biggest of and in in quarter. the the stores in sales catching as heavy acknowledge team cases. is and are amount a the still we remains important deferred uncertainty as some sales long sales providing environment, what Since appearance will service remaining customer in especially volatile enter our of there that how how last. still member being strong certain level we're training are However, extremely the up such and on our we development, plan And at image more and challenge we tasks cautious excellent season on which in our

will As the always, be to we will in lessons our market far extremely learned moving focused demand to XXXX and expenses leverage forward. respond to conditions controlling service as match our on levels customer so we

of our challenges like for total along permitting stores we've first of XXX and revised And a that update design and revised open delays light briefly new approvals. I'd range we in months project pandemic. capital expect the I call, stores, and expected Through expectations net which Next, after today within for towards new capital we those DC quarter's XXXX, the our on opened of of have stores quarter still stores, development fall ultimately the as new the to faced conference the end encountered store, count plans. our that discussed result expansion in On we've reset XXX X schedule plans. and to updated last is tracked from with XXX my the our touch will We new fourth was new of XXX to top and range. on down expenditure

of opening even new conditions, Now best takes in tremendous a work. store hard a the amount

We teams open our to conference great So pleased off store locations year this for announce typically our new especially a we've new on start. today's target XXXX with and store strong been ability our next of stores solid call. are new cohort to quarter with very year third

preparation members that our just open still new opening However, Mississippi, planning for we due in associated to evaluation in planned have the fine-tuning DC these team our continued travel that concerns year and quarter, facility member Horn second newest train DC south necessary but of permitting, facility. think a in the Memphis health will opening with time many slow first of XXXX to XXXX, Lake, to based shifted get of originally in how successfully Lebanon, as we team stores the our half on the well, this we're to target pandemic through lines. the expectations opening can we'd of lengthy the Tennessee first process given After

have running Our exception. process, great smooth of identifying distribution a project strong DC a is and track no opening record and this teams leadership

to CapEx hardware, vehicle we've We on opportunities of to presented other these enhance initiatives and remain move amount even drive update will and our planned we'll extremely store made a continue the next discussed XXXX distribution we significant CapEx fleet our fall quarter, projects, by aggressively, work though returns. also forward before, our customers service our the plan strong year. excited for into to the Finally, about we've progress third to XXXX projects and good provide modernize other including in the

the again the difficulties turn be meet consistently to O'Reilly at I'm dedication proven call how once up XXXX to another I not has thank never has O'Reilly but to in see I the has to posed, industry. challenges, and our stepped hard Team over Team work Tom, amazed our with in their I'm best the team will since we want third for Hopefully, surprised the Before although year quarter.

company a had in protect including parts we've the class. essential national efficiently quarter to second team full proud I'm close, everyone diligence our is I the the repeat safety I'll way and storm. need, provide all our comment such of our has affected DCs made our teams executing of same many ability our over crisis customers, keeping especially truly is call. a our stores, difficult the profound our of business years, our practices commitment world disasters, and While encountered have of running the they prove weather always customers environments in to that's the shown never their with and of COVID-XX, best To spectrum the they offices, to while to their in on health

call Tom. I'll the over to Now turn

all their Thanks, drove our also the our to of Jeff. quarter. like I'd incredible Team for to O'Reilly thank continued third commitment performance customers, in which

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

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

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

gross quarter as comparison pre-tariff, related third XXXX quarter acquisition inventory well captured XX.X%, to dilution decreased benefits was in to the points from of gross for As margin the year-over-year margin XX the of basis Mayasa. third driven on-hand which previously the Greg by to the mentioned, we significant as sell-through a of

XXXX XXXX and each quarter and would would the a we a prior throughout benefit in inventory margin pre-tariff that price tariff-driven benefit POS. benefit sell-through taper future second purchased was but gross of benefits in received to reminder, anticipated of due headwind that of and inventory continued not quarter, in the we to create benefit the on-hand receive a half XXXX a received full see from off in a cost XXXX As increases XXXX, We XXXX. third since acquisition did the first in decreases acquisition quarter we short-term which

positive a quarter the at did have third materially impact Looking not stand-alone, we LIFO. from

We expect third began the price in more We continue. in to we as industry, the against same to line benefit. headwind The rational received expect the inflation, from with SKU a remains price prior year-over-year fourth see year benefit we in as inventory tariff-driven we the year's and that quarter expectations pre-tariff last again quarter. muted our annualizing in increases compare environment

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

in reduction million per from $XXX,XXX, Act at projects. investment payments was store quarter in offset the by increase as income, we'll a in of increase was X year-to-date. billion and this reflects per an partially in our X.X% in reduction CARES the the inventory, time end in months cash of under tax increase XXXX quarter driven $XXX down the CapEx, months drove deferral XXXX, the up in taxes the $X.X balance payable Inventory first of to year. of which the for versus a our quarter the move solar the third components first net below XXXX. second Free result by and but strong last with on for is of the flow the of beginning net inventory an Now store that was and the and The volumes expectations the and flow cash free results from X sales of year, X.X% a

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

for Finally, driven $XXX first same the were of $XXX lower months from of was capital exceeded new distribution prior of investment which first in store year X development XXXX, project the new distribution projects, year million, and million expenditures down in the the the development which of XXXX. spending months level period X by

our CapEx to plans the we discussed, have projects, we'll pause CapEx current due of on certain resumed previously as which to deferred COVID-XX environment. Jeff impact were As and the continue appropriate, given adjust

to in October. quarter, of end calculation the of excludes the in X.XXx. and structure as does the debt of of XXXX, balance second and issuance first second liquidity structure, redemption of as XXXX, excess both capital unsecured quarter date notes September at of an the X.X%. an sheet our quarter our rate paid retired at to the since well of these XX-year replace notes senior of X.X% from interest include the rate moved senior billion in years were an with cash and September X.XXx, still XXXX which finished issuance the issuance October, ratio held third out XX These execute when very so our bonds our to X.XXx far, sitting but ago. rate XXXX January bond September cash as we carried began call issuing We on reached the bond ratio the notes notes we debt-to-EBITDA We we from on as we compared public proceeds of This are of the to successful end pleased in Moving our with in a best $X.X XX. ratio of September capital our XX. issuance million By adjusted $XXX

approach leverage appropriate. our target of number when be below X.Xx, we'll to continue that and We

last call, XXXX on of quarter's onset to our As we suspending on temporarily XX, liquidity resumed the share program repurchase preserve after May buybacks in we March at discussed COVID-XX.

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

of result available revolving our billion quarter, strong we a quarter As credit continued facility, $X.X have total in the under the of liquidity our held we feel existing ample with the net finished under in third the billion performance this and cash XXXX liquidity in we to borrowings of cash October. retire $X.X facility. And notes

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

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

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

Instructions]. [Operator

Greg of comes from question Melich Evercore. or line the from first comment Our

wanted traffic and the the bit follow-up I more share ticket. a gains on to the in

like still gaining that? you Was do-it-for-me this the now do-it-for-me, bit. side bigger are say or when second, they're healthy, gap side? DIY So between share, on that been DIY and then And sounds a narrowing do if fair quarter, you both it think that it, to that you been about that's the you've into interpret is but think

there. Greg, lot of questions a

I you cash of that those tell the you And were X question, we our quadrants into our positive. divide if each, on quadrants, with ticket First, the for average that and were ticket. X and all traffic charge both count pleased would ticket and

at and between this it DIFM Looking DIY slightly the did time. gap the side narrow our business, of

less. was comp overall Our

performed our side well we quarter. our off the to DIY expectation. business slightly our So And were from was of last traffic where

the to a reflect quarter, back the beginning worked side to side What from on. then dropping of continued spike off that primarily significant that in the nature was The customer second saw of it of longer sales business service and April, in business. the drop was to I of add we would if your the we is car, where the the due on business middle DIY have to professional impacted strong at

it took come So for the longer back. to professional business

So the of challenges the side think, professional second gap quarter, a of narrowing significant the in business quarter. had I the third in that of the more of is the the reflection more

And do you think more you DIY gained share in or do-it-for-me?

That's hard one to determine. a

We time we we and others tell that look would report, What gained data. as will see we over is significant think business. both we industry you at share on sides the of

comment of Nagel Oppenheimer. Brian line comes from or from next question the Our

here. performance nice really a on Congratulations

are -- better. what to question I significant has last that's maybe see that quarter, now first the the now regard on [indiscernible] fourth ask particularly just want for I transition, we If as strength any I'll I'm the the cellphone. difference is here Difficulty]. several we've trends, [Technical to you persisted sales into and QX with but the seen So to again. seeing any recognizing try apologize, QX, quarters

categories So question that the in QX the performing? as customers have these you're change QX, I stores is to headwinds any seeing sales from you persist? it's -- been Are COVID particularly different way has shopping a the there regard are to whether significant with

sorry, a well second to in trend not whether perform shift quarter detailing have the quarter. that those into for meaning carried have of you lot end that of that over the performance frankly, of lot well we customer, tell quarter. I'm parts, been performed like well has there. we A some out from it's A getting in result perform repair. historically a think the like DIFM of And would consumer opposed for on parts, I'm of we second categories But I myself not those performing we of of that repairs. quarter. taking feel in car ahead a saw categories some Brian, fourth lot that the of especially the things well, to as completing quarter. did DIY hot rod of easier to called repairs -- our to We the performance hands those their DIY in third some have that, see the time of continued strong of traditional shop quarter, as themselves more batteries, that repairs DIFM fourth third components, has categories just that did DIFM performed lot some as

would I to that that we away that, part repairs. on business add is much hard restrictions what our their business in as focused strengthens business is, as That on the Brian, COVID from drove. more work professional

extent in that the more have those raising of traditional about but the narrowed categories better, more the than gap, others. weakness done to So it's

Our Goldman next question McShane Kate of from or comment Sachs. comes from line the

My the you still regards can a was in remind areas able prepared know limit first went you're just you through spend? But little dollar where to comments. us question I to growth. your Tom, SG&A being with the that that bit

trends business. staff SG&A our reduced of our very and payroll of accounting have business that to that sounds items have some less and weeks could Okay. deferred lot what went whether service, when those customer and look run to expense go worst question. we drag planning we I'll time hit have our we outlook projects the sales but be cognizant maintenance. but we're been we comments, can run of like some had through great you it's over would at Jeff specifics CapEx driver covered in store anything and be and have deferred look make return at But related, of that vehicles, but the Jeff and conservative through our initial gas utilities some When X those sales, They have biggest or the we speak the to it how implementation. and thought the delivery When where long-term up in the to down of a COVID continue SG&A, sure and we when than our an we significantly for because sales CapEx. our were items evaluations horrible to change. a been P&L, means -- great we still staffing our look we staff, fuel the is at look provide When

positive main caused a driver it P&L and the over SG&A for is store that. Jeff our payroll. impact item those but some main deferrals of So the have comment short-term I'll turn on to to

that just will we headway, continue as demand talked that we try the quarter, the remain tail third into second but very of cautious demand, and trend up the still how the our meet can long to is to knowing sales end we made not add levels second our staffing last. Yes. quarter, quarter, staffing the ramped about in the I'd just in

cost a the make do nights member increasing thing there's Now I'd about the with team made a our are our and service. besides on continues the promotions that with that, team higher within. to of benefits full-time thing more workforce. we but it headway higher benefits for several to on full-time levels more even a that just from member service, company right the of build term, we've believe from but obviously, the obviously, wages, really other mention time year. weekends future And it's There for and especially over associated a mix, productive bench focus to additional And as drive is an we've ongoing long our paid tenured had important, our health off, that and levels will this the

in question on follow-up seen the from car of how sales probably the level, my you've I of was just your history we've then what similar if sales, business? term? wondered timing And a and when sales not And strong that worked over company seeing. used through we used the could been long car kind higher are lift it but very just expect that there the

by a the Historically, we've go seen use being go people car used sales our up, when as as from cars who driven opposed price and cars. to new are the seeking prices many standpoints. One, to up increase that's business benefit is two

cars That's a on outside driven miles positive us. more of So for are warranties.

The is a us to other big else. car new positive sale, somebody it's but for it's used

us. their they're to And making repairs benefit new vehicles, seller as people to people which Both the So both on repairs of side, vehicles. making acquire those vehicles. are sell

or Zach comment question line of comes next Wells Our Fargo. from the Fadem from

or categories the that when typical -- that customer, thinking product project indication your step-up then how's this rate? Could the QX? any compared impact discretionary hobby of in and to you lift And talk versus a run about seeing about you're customers new relative

hard really Well, to determine. Zach, it's

you categories, that's customer" a Some with cover that that time home. sell Or need? a customer? plugs, just from categories, to X Are car the that. like sudden tell. because is that X on on maintenance spark dust hobby more have or a all things years is When other commute, it's don't working for from really project it's obvious a got daily they've a of they to it had it's hobby on hard it They time that work "the working they on have

that, I again, P&L not. is second our care, the those continue really was because we that car anybody were say things performed potatoes -- out, So any unusual and in of don't see to those send it's they industry that quarter. our like our quarter. sell to to that that, see of categories We to sales the that improvement sales to meat throughout want categories that would sell meat the called But did But trend an traditional I the impression performance, similarly we categories. for

the that range, but that's any chain think run we mix forward? of for margin there XX% the you how XX.X% or to Or to think gross you end Tom, about the year? sense. to about supply expectations no compared about gross gross your LIFO makes way the guide, rate can dynamics the in on the the should that And right keep That initial it. And longer margin at items around are beginning table, the the have I Got margin line, mind? going is talk low know one-off the when of on other

appreciate make because we've any guidance talk for the you that that I in comments can't it's acknowledge But relation quarter. to Zach, Well, margin the been suspended we'll guidance about gross and suspended. past therefore, I

prices XXXX seeing have the items increased, had been merchandise a very imposed, benefit we third we and had were as So as were from we on we're to hand, prices on out and but that tariffs pointed Street, call, our and in quarter were conference talked where gross sell-through able we margin we on about from that. selling the seeing benefit a calling

and declining this In suppliers the this year. we saw decreases, second of actually We first the expected of to continue, the price as year, to quarter supply although to chains benefit more to adjust limit of that work second quarter tariffs. through primarily impacts their

case benefit really to charge we the we've items. quarter, LIFO or our when get And it's the annualized it's benefit. be. a case, In this LIFO third So in reflected as those our may

So year, LIFO had of year, benefit you'll see the third it This million. $XX in we $X was it in a our quarter last Q million.

Research. next comment Bellinger comes from David Our or the of line question from Wolfe

quarters. the been Can a strong over some you incredibly the categories, performing better category, talk few battery about have bit past these more particularly sales where of

And are is that you constraints supply margins? working this shaping how So does gross point? up now? what subsequently any to mean at And through

category comment margin Tom the see and the take to I'll if on wants question component. Yes.

all the all about again, very be have our will nearly sell said, very for although well traditional of talked of the we we're about our as But the not categories, material us. The out. surprises, categories performance, I how pleased with as call only As that performed. lines question last

plays sales a you may see some year, to But issues. battery well. industry. out battery to a we've had only And from supply be that both issues as Why? major actually, reasons X sitting probably forward. fourth we've mild from in some supply of so at of had because cars talk are suppliers the throughout There's probably people several couple is If it our quarter, significant think home the seen there supply, handful quarter. the significant suppliers some batteries, the of that quarter why far some a yes, past of third how have pull last of We'll We maybe about There's quarters. had those the performed in related as home. I It's have for suppliers. working specifically winter suppliers

other, than challenges other have requirements, Like social the out the of number work to related they COVID well. can One but wildfires suppliers to both of our them in west. one with shifts distancing related to have better related faced performed categories, case

job. demand. and our competitors levels suppliers, and are it's with keep our to good So tough it's been as great But battery maintain doing for called are us our for like out, we sales overall, just been staffing to suppliers a up tough

in do as few that the to fill we're want I are at the about see X starting you that like, we began, pandemic the Tom, chart past feeling suppliers still effect our you months the not upturn well think over rate. see the from of you would stick as an if look since those and their fill margin hockey impact? talk rate to

Sure.

post a items to we're we is XX.X% said, economic that when conditions, So X direction. go for other are the of consumers we doing all The happy well. are performance what where items DIY in We the point of some unless the constrained really One, Greg can't reasons. which discretionary the our categories. into those comparable out categories reiterate with store typically buying, all get increase

that's So abnormal.

invest going item unperformed and other that helping to wanting or The repair, sales their looking is is vehicles, maintenance vehicles, -- consumers in value. in is just of are wanting reduction their that at the down, our underperformed

So categories are all the well. doing

a difference in those margin. significant significant difference the performance not difference other not the is in So create to enough and gross mix gross margin categories categories and our between is enough

previous follow-up the another Understood. And just question. margin maybe on

your post-tariffs year-over-year Anything But decline? of mechanics, the the through year-over-year else customers in And was perspective the higher the of further that saw us promotional ordinary transportation ecosystem a there. of DIY some or walked ordinary of from basis in terms out you these margin XX costs? to there the anything flow-through the that and period, QX point that keep explains out decline? in anything the So you just

first independent on Mayasa then yes, we got quarter So And they and we much is it's about where dilution, as chopper in covered put in lower the business, our three chopper call gross have -- buckets. talked from a run Mexico, we it business is independent more I'd margin. more some One LIFO, two that.

operating stores. You're the not

stores. leverage. chopper's that in You operating the with have extraordinary we'd high share get the high do this things to out. But so distribution we're think you we with products the would have volume, volume And normally, gross independent is in shipped to case, the having margin centers

headwind some So we there. have actually

are referring that really is inefficiencies and that incredible just trying shipping Tom volume and volume receiving is What our with the to and DCs. really to just created stream in And areas headcount time to catch up help volume, percentages shipping that where our stack need keep as to can until be. we had with temps us use well as they over to we've

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

weeks of back had like a the supply a big recent of supply suppliers, you of supply. has maybe give of supply Could those see above-average specialty disruption the we having sort color, guys it us quarter in-stocks? Do the harder chain up? the sounds chain keeping demand, I performance one a your short couple adjusted sustained chain sort period some in is battery being time ago question, challenges. Or you about the to the their guess On cadence suppliers heard have having some in of stresses improving the of parts of

they also a containers that many product. smaller control. product issues other so would that I improvement. issues What chemical is for Like hand some handful simply to their there I let rate get that towards me fill are really Brett. tell sanitizers. handful of a that are a are question, there's just that of well, There's are said, having out. of are seen Good break going -- There's only In handful words, Yes. you suppliers that we've having suppliers suppliers

back specialty vendors a their favorable into position. these has to of ship trouble are containers shift having getting still that But too started in. to Some products

you rate that there's would supplier a continued really we that I to not really tell chain, of from supply fill what at improvement. And component desire. continuing of handful So seeing are suppliers a only we're the a

we've strong as just as entire at seen. Looking chain chain, equipped as not called supply and for volume Jeff supply strong is sales our they're comparable out, as as the the our perform, store DCs

in on some keeping basis, earlier Jeff's good we've done to hard there we're daily had getting up. product get out a with and to a the we've some really job of stores our backlog but incoming working that seen our So We've point, pressures up on demand. to DCs freight, caught

XX doing normal. days, We're the overall, job good. back chain a say, a we I good Suppliers to caught XX will next feel are So to within doing good be getting our we job. would up. And feel supply of like

us of then Okay. you comps? spread the update what a and kind seeing those lows performance, give on And quick you're and could highs between regional maybe the

do you Jeff, Yes. to that? want take

Sure.

quarter. second our third really the on call, the that into mentioned And our expectations. across all continued our extremely on we of As really, trend quarter were of markets, business both we with pleased exceeding sides the performance

the you'd markets really outcomp As mature outperformance in divisions. all was newer our more our across third continue markets. quarter expect, overall, the of But to our

All of well our expectations. performed exceeding our divisions very

Davidson. comment Our Baker from or next question the comes of Mike from line

I ask the say, couple, A I'll let's guess, gross margin. on

down points. margin So gross remaining you talked the XX -- -- -- so the if about

the on maybe looks talked point that it's about, the think do I LIFO, we if math headwind. like basis you XX a

same saw magnitude? quarter? basis words, the of play will will LIFO same that So we You quarter? out points about the factors from out, more dynamic can importantly, this out think will is how fourth the we or but said it should do assume about we dynamic expect the And we as Mexico? remainder In in impact play roughly the the what other similarly, play XX

Well, there. were would what is -- first some there expect factors item we in other

gross would necessarily So their quarter, P&L. those, we're look our would is we mass not that is when we're we that expect talked wouldn't margin. LIFO I fourth significant about assume we a specifically to -- commenting all have tell impact and on of that not at not on the I What you

Not significant? as significant. not Or

hear. didn't just I Sorry,

significant. Not

significant. Not Understood.

I then, And guess... Okay.

lot -- so you quarter. or But done pretty the we price be to until darn a is of during flat. $X year were know and quarter, million never Maybe quarter more this positive clear, the this changes happen

but margin say basis, about Right. gross So quarter, same change the year-over-year the issue a LIFO in the -- it's impact basis, when let's of way that margin gross the But where that not year-over-year you fourth on on the a or right Is so $X level a year-over-year. million, impacts rate significant think that that's right? comes, say year-over-year it? to around

our within XXXX is quarter impact Our filings. SEC fourth

Yes.

get Okay. No, I that.

Okay.

if same way, area. in the Okay. the perhaps that P&L if as general a By it's still count follow-up,

quarter, On like it SG&A too my you're it insistent going the back after sense from low. more And up second cautious the pretty the the you little sounds ramp was SG&A, to a bit because that now third were the gotten where to the quarter in appropriate? is next going you level commentary quarter. of SG&A the more going it back that the fourth X you think Or into because is think sales months? a that is Is you've are

volume -- the the fourth first onset us to Well, of clearly, COVID is in caught in the by reduce we second quarter, spike workforce on had our results. in surprise based the

leverage. many So there grades of are different

sales. quarter business the our staffing that's for that third Jeff second The our we the or term. to was or closer good long increased And talked expected quarter, the in leverage expected sustainable about, something the as sales is to match extreme, and

the continue in significant quarter. We see leverage third to SG&A

per our continue can to prudently actively that changes be expenses. comments to high-low react store at our see spend that we that the we so around manage can manage we the to we're this double-digit same SG&A think rate in volume going fluctuations and I our that sales our to extent or and are

from Suisse. of question Crédit comes next line from comment or the Our Seth Sigman

follow-up Nice wanted share. on to quarter. I market

like actual this seen manage something now? does perhaps margin like And you independents. gains How good transitory the effectively what's being that structural? others do perhaps share a it of outperformance a maybe inventory wider that How more it that to more by of versus than drivers portion in from able is the is we've driving benefits of think is right about Your from seem seems outperforming the past. results obviously industry, much than

Yes.

And one at itself it's would this tell market pie is the I thing look think think you several you if is I share So year. things. I bigger gains,

I are where coming spent the market some think the whole there's stimulus I supply at supply incentives a inventory in have But to because leverage more money if independents, gains the share the those of aftermarket that and within way that being and string in have. our mentioned chain chain and you look inventory of consumers of as from, result a competitive ability smaller have you such a is our our think that supply in our us gives benefit. positioned chain that a

The to mass the would other I lesser from a retail piece side. degree be much think, that

we're a think side, mass degree categories. share it's although a lesser I some to taking the retail much market because from fewer lot

function able batteries that surprise not they letters but from there's a I big years. they frequently the about that that I the to that evident. store that, been that perform about surprise those with walking interaction in box to over there's is think battery our with with we do we service And that. talking of get the of we I as install letters into that retail box a install in level those lot comes I lot of degree only one of and big And a and knows And not product, along well. consumer delight buy functions. a shift lately, the wiper think to think them customers have called degree provide would set case have a when store, concerned a are like and or goes or out our And of to the customer we into product stores, wipers. And customer box smaller of those that's product ours. a we a get also having blades been some that traditional

new the focus customers both sides I brought So of our share one business the term, and long that that both the our keys is those some described. I under customers and the keeping we've provide on stickiness from stores. level just think we that taken channels for the of service And I market we've from think

just have markets fantastic DC a -- stores the supporting team, an incredibly and to adversity taking I been all on great And disruptive product DCs done teams just then teams the and our regulations our expand execution face, and our in stores. And with stores mean, the an And our a business. all job to months their have corporate done job [Indiscernible] our they in an incredible our incredible office day X our and keeping that. has done last they our it's in in of job customers faced day and is in issues with adversity the all out. just shipping them in-stock have position. the care in lockdowns to

in Okay. about remain double-digit remain it? that All the that then Is constrained to on this low of think rate, you'll quarter? to that like around manage we comps And points right. the mean just this continue sounds SG&A that prior it SG&A, conservatively growth like does QX at one may if saw way

to continue been not of continue we happens strong What are left, leverage. with conservative, see that extent going because current the quarter sales the and be staffing we norms, we of we current can those heightened you up that has business to level the lot to to level drive see we'll of business a will historic results, from is There's to volumes. would what the that the tell means

Thank you.

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

today We'd look conclude year today, and the thank fourth call also dedication reporting and results quarter to O'Reilly I'd Thank customers. we our for like to our our continued full like you, in selfless call to for February. team by our Howard. thanking everyone forward entire to their XXXX joining

the gentlemen, program. in and concludes participating for conference. Ladies today's thank you This

now disconnect. may You