O'Reilly Automotive (ORLY) 27 Oct 222022 Q3 Earnings call transcript

Welcome to the O'Reilly Automotive Inc.

Third Quarter 2022 Earnings Call. My name is Vanessa and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct our question-and-answer session. Instructions] [Operator

turn to now Fletcher. call the will Jeremy over I

You may begin.

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

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

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

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

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

are O'Reilly Good this Beckham, call. and everyone Jeremy. our to [ph] Operating and Officer; with on welcome Chief conference our Thanks Jeremy third present Parts Hensley, morning David Supply Chairman; quarter Executive Fletcher, Participating Vice the call morning also the Greg Brad on Auto me our Chief Officer; and are Chairman Financial our Officer. Chief Brent Kirby, the Chain our O'Reilly, call. Executive

our and customer work by to the O'Reilly begin your Team service, strong commitment hard third in providing like call quarter. to today excellent results thanking I'd our which drove for

XX.X% store in by results and in increase impressive and sales XX.X% stack were two quarterly X.X% a comp sales three-year Our respectively. resulting of an highlighted comparable

all behalf the to by the and so through all Ian. loss our being in by walk sympathies express families devastation On those hurricane. by of comments wanted impacted I regions today affected of details Team prepared Hurricane begin O'Reilly, felt by of call we to the I our of performance greatest the our the and want acknowledging many for Before

are company, incredible teams rapid fortunate the storm. very their their shines with we incurred serve all response how and simply efforts. recovery Hurricane critical recovery incredibly of again the of to Team were extremely were a team up during members way our to these times I only limited in communities in the our supplies in from proud challenging to appreciative damage always As we O'Reilly stepped of once the aftermath and am the Ian necessary have

Thank friendliest the of excellent producing living outstanding XX,XXX you each parts well, of customer for culture so discuss will we results team today. town, for to service the store our members truly in over our and being

comparable see these to to driven We of month I'd trends, in business, continue with both Now, on growth with quarter. comparable sales pleased the business performance sales saw quarter. store the we July color the and as to turn sides improving our move like through provide what we in volume some our quarter started on of many positive trends side the DIY and professional the store warm each part both across the our weather markets through and of by of we're quarter on

quarter. quarter Our store our we call. guidance through as September were volumes basis, strong strongest the on the month, with comparable a exceeded moved communicated sales of as the stack accelerated, finishing and month quarter sales three-year the we each On second our

average ticket outperformed size. in quarter, Our producing counts business growth sales store double-digit again in the both ticket third comparable on growth professional robust and

and supplemented of continuation we by with the we're remain average quarter, this of momentum and availability our the confident gains professional growth to we've strong seen continued business. our from store very comparable business competitive in in professional volume. saw side durable of Our our in pleased about third growth the inventory was count benefit nature service sales and professional on second sales highly a the excited very ticket strength advantages the We're accelerating see ticket our quarter in customer

We expect our market of consolidate and competition to to our and the professional grow team the in motivated to all industry is highly continue our share outperform areas.

the quarter the pleased DIY in pressure to DIY were in forecast. extremely third three-year half business. results comparisons, our We and the two the of against Shifting first sales to guidance the reversing positive generate trend and difficult year outperforming to of

comparable in each metrics was outperforming month previously positive with DIY increases, the partially pressures, inflation. improvement being our broad-based I We we on offset very noted, DIY the by as pleased driven counts in progress calendaring prior in average traffic DIY both comparisons quarter, and are the of side, for sales spite ticket pressure expectations continued see ticket, year saw of base, while the through As quarter. store we with from challenging the our business resilience anticipated our quarter, customer in growth by to

again business DIY larger professional in surpassing our we driver side was XX% with performer, be the for expectations was business and combined of the second In business our quarter. approximately what the the third DIY in store our which improvement the continues both saw stronger Although total, the comparable by professional of ticket, on to sales strength the driven was in average sides consistent quarter. and our growth in

In quarter, coming acceleration inflation of in also levels in levels, our the was similar higher XXXX. with Same-SKU which consistent inflation quarter third began were the second average third the our ticket we anniversary increases, benefit the to in to at quarter, above expectations.

benefit much as year-over-year originally on a moderation see not did basis. expected we in as However, this

product and in to through increases. passing have costs that We selling experience acquisition continued are increases we operating price in

the traffic our we cost that of ability Pricing across our for maintain through but economy, inflation consumers in rational, result pass remains our face persistent continue in to caution, also pleased an and business. be our to industry increases, could with element as headwinds

of broad-based business in categories our standpoint, the the warm quarter. normally heat, category the strength as including across from experienced temperatures a that beginning we benefit support summer we at From saw

was modest benefit performance in contributor business, in outperformance versus a such, expectations view we perspective, we significant fairly consistent our quarter. the a as the areas, our through as weather-related do However, regional our not outperformance to our quarter. From and total widespread to with in weather relationship as was categories the across market our move

our sales to like and industry I'd to outlook. Now, updated turn guidance

increase release a quarter the updated yesterday, noted full As third year a performance. for our expectations comparable sales our year to This of press guidance updating range have our full X.X%. store we X.X% in for to primarily result is to in

our to are volume quarter to thus October, ahead we experienced the quarter, in see fourth far been in Looking the line have with pleased trends have results. third which we

We resilience remain weather and consumers places the spending pressures but in can season the sustained that significantly we consumer have as face continued and dynamics cautious holiday seen upcoming broad-based on the for year. vary demand, that of inflation, remainder

have year well-above retreated experienced started prices consumers, some current where peaks to providing as gas June, the volatile relief remain last many level we the year. we in this as time we very well and of from While that fuel prices recognize

factors can of demand weather fundamental price important is fact from fuel influence economic our demand spikes, short-term the can and in industry. the such that drivers uncertainty distinguished It as to these in the be note long-term

periods and recovery miles recent fleet health stronger the and US support favorable We as the now be of than aftermarket, of in automotive healthy uncertainty with by to our continue wage position supported confident driven We employment in still are very customer dynamics. and a strong believe in view continued consumers base steady vehicle in growth. from economic

Consumers result quality strong of vehicles manufacturing able of at the mileages increasing be value of continue and to their on engineering a capitalize vehicles to the the existing investing as higher and on higher road. proposition in

of industry existing for economic for expect resilient remain facing demand uncertainty, the are taking high newer and We vehicles order who than on in vehicle. price higher prioritize a maintenance avoid our as consumers in payment to their a to inflation

gross margin. Now, turning to

margin, from our in of expectations. quarter third For quarter, but our XXX decrease with line was the margin basis third guidance gross XXXX the point gross XX.X%

and Our year-over-year his discuss in reduced in impacted which with Jeremy benefit, from of XX.X% rollout range business. continue be our price LIFO initiative, by full our combined primarily incorporating After quarter margin expect more results, growth in details third XX.X%. be faster a to we professional the will the comments professional continues to to to of pressures our year prepared of gross a margin

third Our diluted quarter results in earnings strong to XXXX. strong with $X.XX, increase team over EPS worked top to share a relentlessly to increasing a into growth per XX% comparison line translate outstanding

our team's have our While to impressive the third year-over-year increase compared basis tough our comparisons growth ability through profitable business we a the executing per model deliver on quarter three-year year, consistent compounded alone XXXX, EPS regardless of to increased XX% is faced. highlighting

our fourth quarter full XXXX year and increasing $XX.XX to expectations. EPS to results $XX.XX, are our guidance year-to-date We reflecting

our As additional of EPS include does includes not shares. call, any impact but a reminder, repurchased shares through the guidance this

up a business. our day. fellow commitment in providing the to our team from every for customer success customers culture, your that challenge my our and excellent to customers wrap best to down and team members and want comments, makes thank To backing again and your Team never I It the our service O'Reilly consistent drives each you is

Brad I'll over turn call the to now Beckham. Brad?

and O'Reilly for would I delivering to to their good our excellent dedication service out-hustling thank and continued also everyone. commitment by personally morning, and our Greg success competition. Thanks, out-servicing to Team customer like

team's results Our day to members and proud testament market of and are I our centers stores the the our for distribution ability go a way and quarter to team am compete to in win. our top line to each every

to our our has teams I and join aftermath my the store Ian. chain up and in as Greg for of are Hurricane to repeatedly of teams appreciation our our proven customers well the operations showing in and team leadership DC in way they the took challenge care Our Southeast as want supply any

locations safely back and can with communication our always families up and safe. has and focus like teams soon primary culture their no critical Ian O'Reilly, running members to we the getting been stores team our Team value Then no ensuring our way event generator during weather waste safety a as back as power make their is store often leaders are our time on Since for our systems.

parts meet have recovering source with only This families their and critical incredible goodwill hard but their with options our basic to limited supplies storm. often home need sacrifice start to the not they the at needs and from customers the vehicles, to with work tremendous who creates

Now color I'd like to the for our on some performance quarter. give additional professional sales

professional for ticket traffic and As in on to the our underpinned quarter previously store see business. our to strength we in side pleased our this are and comparable both business continue discussed, extremely sales growth Greg growth robust of

our XX since have our DNA the professional momentum our the in core competitive to this founding been ingrained the commitment in company's result side Our execution has of years. driven business on business fundamental that solid for advantages of generated XXXX. customer is The our same we've of

Our us care customers of our focus by professional exceptional be customers customers. our rely parts integral durable professional long-lasting to qualified committed success on in partner of with the highly people overcoming on their knowledgeable are from developing any business. relationships obstacle We providing take service an who to to

of team's made professionalism absolutely provide urgency, in of the which to to allows availability leverage our distribution, inventory sense and customers infrastructure significant customers. is the success hub dedication industry-leading we've us inventory to vital our Our in investments to

in their go management our operations support deeper as of train. platforms aspects with shop technical technology even partnerships management and as professional investments business Our as customers through systems our we well all

and and service for to right effectively like strategies retain things includes training the effective how technicians. manage to grow how Above training profitable a technical market this and advertise technicians, and business beyond best to

all existing It's the our competitive not us foundational the the aftermarket. a new best pricing overall that the priorities of to give aided retention earn that customers' all these professional business automotive in equals opportunity business strategy on value that execution by earn only

our with professional broader results our within initiative and competitive length at the seen we've pleased very remain from We've the discussed aftermarket. positioning we pricing this year

we pricing invest normal to in overall environment that rational continue are pricing the a and and dynamics. this confident professional was time to We competitive see right

Our to existing both sales value alike. delivered future service, know teams best provide attractive that with our teams customers by our go one the the is in we confidence an the and proposition we new and premium market for professional a industry

the to retail like business, well to the as Next business. I'd on grow see as the we opportunities of our share discuss DIY side

While consolidated the see the DIY business, we opportunity. professional share market than tremendous is much growth more

our our and value that drive DIY business professional professional critical business. components provided The of excellent key are customer also parts availability, service to parts by strong relationships people

customer Our DIY consultant customers heavily our one to The of customer provide providing play the visit we encounter, parking walk highly information in a DIY through them on our a of in stores. is pull a to display you job. and or nature walk out DIY creating door see the typical during service the rely customers technical when lot the on and our they in and of really can advice team professionalism this total

side existing trouble test vehicle, code. an by standing customer, or their to includes often This redo with side park the

Our professional to tools for have their committed to job have the complete customers parts people and identified and first necessary time. our solution knowledge correctly are ensuring parts, the all the problem the right

our decades many come of Simply DIY play, in hand. customers is that and with beyond work business into the hand our this our each put When shop in referral DIY growth program go established ability, market we DIFM our ago. customers professional

believe our continued third and business execution and customer team's on drove with was improvements rates that expectations We our excellent of position inventory it our coupled in our store fundamental fill in-stock focus in quarter. the results model above service, intense

The pressure on facing ticket our turn broad are counts. a challenging, in continues on placing pressures to DIY environment with DIY these customers the be scale,

We transaction business. are customers' and faced team's in extremely and share have to the with DIY years our repeat pleased ability comparisons difficult DIY our earn from past the we've over generated also surge our grow two-and-a-half counts

our the taking no The the customer's we means never a not immediate for ready one stores green at philosophy an that very automotive have repair ingrained of country their a are hands say only every our It on their are to is solve with counter professional but earning parts standing understanding important. maintenance putting part so people sell across every the business in a in time today or need, next job. they

was the quarter the third a given with for of expectations leverage basis, the the points average quarter for in the percentage an quarter. to and third from up for our XX basis operating I'll full our XX.X%, SG&A our the quarter On was spend line SG&A and of of Now, the XXXX. turn volumes. profit SG&A Total updated for results sales largely came as SG&A year. better-than-expected sales per-store X.X% expectations a

increase For third quarter as the on reflecting now to in we grow inflation. variable X% per operating expenses year, with expect cost incremental sales between store better-than-expected SG&A well full ongoing X.X% volumes the and the as

current in Our able and teams are operating expenses managing inflationary we prudent trends continue to also of to being the both be significant in margins. to while face very levels our impacts, sales appropriately responsive optimize service ensure to our

raising the comparable be are now XX.X%, which per in both our to increased of profit guidance, store our expect and growth operating year range. our of in to adjustment reflective XX.X% full range store to sales We SG&A is

Mexico net achieve puts net and store to This track store XXX in store us our bringing opened of Now approximately the net our third new XX XX growth I'll We stores store total update new provide on an US openings. our across for in to states target to XXXX. XXX new during openings one quarter. new the year-to-date

noted press US we we to are us pleased opening announce XXX XXX the in net new yesterday, across to new of footprint our our As opportunity and store XXXX stores to our expand target the Mexico. providing release

each allows store see as store and across new attractive This continue one spread build our is time and part existing place, be again the markets right having pleased distribution important our professional continue at to expect, and supply DIY performance of will to existing an parts to chain. ever and capital. deployment These world-class new industry-leading with on distribution to our the store right us and by markets and at continue fully our availability, every of be our we our for new on We growth the superior network. in to and are the openings customers of future build value single one right customers committed than more

enhance with investments the quarter last was inventory in the also local of the beginning While network, availability. X% improve $XXX,XXX, to distribution and from this average inventory we inventory finished an up further overall we are year. store of from position XX% our per investments making which We time made to our year

we with XXXX incremental store store when with add plan year aggressively to over throughout a level target to was enter finish our per Our the the year dollars average inventories inventory up to an X%.

inventory are pushing continued critical and now would to cost us at current into levels position units focused overall with hard-to-find originally our looking unit are We This inflation These combination up right a per expectations. investments success. expected store customer of position. store expectations line with finish XXXX increase inventory average local our higher with finishing a while and single around above have are in due our price, to inventory slightly parts of than every for component our having market, with the strategic consistent common

Deploying inventory has -- network we're customer both our hubs of their strong happy customers, their base, with growth also paramount. approximately their incrementally productive now Particularly XXX sides end dollars and keeping truly turn enhancing additional supported in business. turning hub at keeping our and into DIFM professional is on technicians our

say us is for professional it our repeatedly, customers. You've heard time money

customers faster right turn together. more we put the turn in profitable So back and their the in on hands, the part their become can get they the quicker road we can the their base

their and stores who that to To is with Excellent I and It commitment happen. hustle, team customers. easy. am make I single the each to are, comes thank work is it hard to every X,XXX-plus to this truly to every service my our dedicated of single customer but and in customer, dedication doesn't work, day, thankful, work mean want takes our comments, again hard once O'Reilly for close Team dedication we who

turn over will call I to Now the Jeremy.

would in add like long-term I Brad. all to my success. performance Team Thanks, dedication continued our to for the your third of also company's thanks to and quarter O'Reilly,

will updated cover some of results, guidance additional XXXX. we Now details our on and the for quarterly remainder

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

billion line billion now range $XX.X XXXX, is revenues and increase be For comparable $XX.X from store is we guidance range total in Greg earlier. discussed to which an sales our of previous our updated $XX.X billion, $XX.X to expect to with the billion

our performance gross with our LIFO was noting profit quarter rollout from gross with the pricing covered Pro that Greg year-over-year sales for in mix headwind. earlier, professional and comparisons of line pressure margin anticipated third the expectations accelerated the initiative,

Since details provide awaiting of LIFO on sure additional to comparison, anxiously all gross detailed you're inflation our discussion, the we and I'm results. margin some accounting a view flow-through in how want cost acquisition I the

of impact in We is earlier where current still to the LIFO think a to position to reporting helpful debit a returned LIFO XXXX, it traditional our credit when have situation contrast LIFO were we the balance. prior we versus

the selling position. lower and existing inventory as that cost throughout prices that went on-hand at our meant due carried from historical acquisition discussed costs we the realized As application accounting benefit a to of of LIFO LIFO XXXX, up, debit the sell-through we we

LIFO those we a are of flipped for which LIFO line we XXXX, our This expectations. nonrecurring back XXXX, comparison third now balance benefit gross back margin a quarter to guidance anticipated with results reserve to credit the and our in in seen we've is accounting. typical in Since and headwind

we inventory last is costs treatment LIFO And first acquisition results. most how acquisition the margin or closely sold performance. application best gross Under is useful view accounting, clarify, it our I goods gross and the of our margin out picture we this and gross runs our in cost through of and of believe the results, think costs to reported our reflects of current the margin

and reporting on with inventory adjusting This how process, evaluating costs. changes we based aligns manage of our in prices

consistent cost from suppliers. cost or ahead of increases Our a increases with timely in manner, to along receipt our teams diligently actual work pass of

the inventory From sheet in the increase balance, periods are which calculation. a reflects credit when balance see LIFO rising, our in costs LIFO perspective, we of application an

margin and not gross basis because view to results. discrete prices, on evaluate the as However, current costs a performance acquisition we charge LIFO of gross we our do application selling the of normal margin

our exhaustion cost in approach, have driven perfectly. extent we gross muted of pricing consistent timing debit expect not our changes Since chains. in reflect as well years disruptions much significant our see The some costs performance. we last reported did several acquisition see impact align corresponding impact margin and the relevant gross of from results can this balance, as to and LIFO movements results take a we created supply our But forward in that more as volatility to results the temporary moving picture margin more ultimately, inflation LIFO in the of by a reported

of tax a XX.X% Our XX.X% rate for to rate by share-based rate for of income benefit XXXX share-based rate quarter of of comprised base comprised XX.X% effective third the third of benefit of X.X% of base by X.X% pre-tax compensation. reduced quarter XX.X% compares a a was of a pre-tax reduced This income compensation.

of was line quarter with expectations. third in rate The our base XXXX

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

variations in fourth the certain quarterly benefit expected fourth XX.X%, and from quarter is to rate expected in rate. be fluctuations due our Our tax to anticipated tax create tax in compensation energy rate and full tax can of quarter investments share-based benefits to from periods. renewable our our continued year Also, tolling commitment year-to-date below of the the

versus $X.X XXXX we capital results. and differences accrued XXXX nine expenditures XXXX Now, components and was drove nine by $X.X of decrease the to first driven for in that move cash the billion Free the months compensation. on of the flow and for our with will cash months versus XXXX in flow billion first free higher

year in to million now for and balance the versus for remainder development with the our first for appearance to $XXX between million continuing the image new strategic the $XXX the expenditures Capital enhance XXXX. to technology of full CapEx information to million first come the year months months of of $XXX the in projects, of for store projects. expect stores, nine million investments the of We $XXX convenience initiatives and spend DC XXXX the nine support were and

The to million our the of million is and $XXX result new range $XXX guidance to reduction and in primarily of projects. supply our previous expected DC vehicles from chain ongoing various challenges fleet complete store CapEx acquire

Our third company the heavily which AP to ratio impact from at extremely of inventory the strong inflation an quarter has was was with costs. set turns end again sales XXX%, once the and by the our inventory in acquisition all-time high and along volumes increased for product influenced

– anticipate inventory ratio. this off expect not off ratio – inventory of do below quarter high investments, we to anticipate to inventory our our to we I'm to moderate historic third year sorry, AP this the but moderate inventory our additional AP We finish as our slightly of ratio do we complete to now

and $X.X year spend billion billion. flow billion generating flow increase based $X.X year, to cash year-to-date are for an our in of our we the CapEx net range of free of full the inventory $X.X guidance expected to billion $X.X $X.X billion, from $X.X on to a guidance free previous After cash of million expectations and updated our increasing remainder

$XXX notes retired on million debt, to in we September using cash hand. maturing XX-year available senior Moving of on

above debt-to-EBITDA but of X.XX and times is ratio ratio our of ratio end X.XX quarter times adjusted result a XXXX of down X.XX with times. the of our quarter which an As we second the maturity, from finished of third

target to number continue our X.X We of below that times. appropriate. we'll approach be when And leverage

We share for repurchased a through share million the we $XXX.XX program. during quarter continue to the million at investment of repurchased repurchase pleased at an yesterday, of billion. an shares we average price Year-to-date investment average million. shares total of $XXX $XXX.XX, of release And $X share total be for one X.X press with a third our of price execution our

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

Finally commitment entire before again I to comments. concludes their our I our to would the and your our questions, thank This customers team, like up to company. open prepared our for call O'Reilly

to Vanessa, to be time, this questions. like ask answer to would your I the line. return happy the we At to operator, will And

Thank you.

Greg question-and-answer We our session. will with the Evercore now question [Operator Melich We Instructions] have ISI. from begin first

Hi. Thanks.

on it the trends to kick quarter you -- in a is Just it's view say it how measuring into the that year-over-year, the as that? strong that you quarter when on as current are or or off third was three-year

thanks for Greg the question. Yeah,

our about we I were the think comparisons when we that the move factor as really of think versus those up it's expectations and and kind through year, against.

look in three-year So, really we've to of where been kind environment just have you this do at unique two-year, performance.

comps So just based around up what we'd upon do nominal say comparisons. the the is its kind basis of that move on

color a could between, because and size second, great. inflation color more there us little It be seems DIY. would a little be and you would average then, And DIY on in and any it. but less higher Pro a give Pro they little ticket PPI, Got of than like,

about it the benefits made similar think right business. our on the specific about thinking when we inflation level, side seeing you're when think I moves We're strategic SKU the exclude you Greg, way. Yeah, that professional we've year-over-year of

both components cost that initiative, to very That's in average -- the through the to seen the pricing of pass view ticket we just of average we've has probably in sides other favorably, think it Average our a a seen. And to really very the ticket. professional price growing well. long. But ticket so given from Pro that as what we But benefited success that's side on strength because year all we've always beyond the of continue we've effectively little the ability largest helper. bit of increases we've we driver just seen

box is trade the anything down. the business? then seen on either through side of And last you Have

more down, really have Greg, movement, where of haven't up result been and availability. perspective brands. proprietary category and consolidated we for that category. for down of both brands basis or stands seen brands either value and inventory a anything material really very national by Trading this on example seen out. at supplier the it's oil up or both closely, look across and our And a we performance We

That’s great. and luck. Thanks guys good

Thanks, Greg.

We question next have Hoevers with Christopher from our JPMorgan.

morning, Thanks. guys. Good

following question cadence. So maybe the about on up

So, basis. on a month it best was three-year the

fourth September and eight or comparison basically, And of the So hundred you're plus sort in degrade quarter, uncertainty pricing as then we a around versus gains? by the weather accelerated points holidays basis is the handle and pro basically for we then comp. few consumer inflation some and that look the an minus

Yes, Yes. Chris.

you're think, this right. I thinking about

We're called pleased we our is quarter. doubt. very with third and challenge well the quarter unknowns in were that back performance. quarter-to-date we the And we The the a of may have without half challenges experienced through October frankly, pleased volatility. the out, with we As the

to you fourth well. in always years. quarter When around the weather, always at on and in volatility Chris, just an haven't wildcard the prices, in many, what weather fuel the as are holidays you do. environment And the And inflationary look of the the you quarter, volatility we layer about beyond layer a just they're worry frankly, uncertainty fourth we consumer many going seen holidays the

fourth Those inflation the the on reasons in for quarter. we're are component. our cautious outlook layer all the You

LIFO everybody Got loves. it. then open which margin maybe, up gross And bit and little a

the and product really headwind you've substantially. there or should go basically, year lapped through you a costs, so -- quarter. in left forward, acquisition from all no expectation your LIFO bit go there's little Maybe last fourth the lower, So is be as

into to so, the tailwinds And 'XX, product that on expect margin product some actually you you gross if lower as mean acquisition you side? acquisition costs that start go forward, getting could see then does

don't it our with costs, factors, to optimistically. work work we're really seen always that obviously we're we Chris, increases several reductions always wage they've so our we're that sure what to pressure base building the can. plus, We're as an that back move in Obviously lot from ensure lockstep A to far walking rates, in. Yes, that last see year But we'll going cost raw by that we'll seen the has that course from would a where I driven and including that's of any been helper of significant know view realizing be supplier cost see that a relief expectation forward. perspective. And that materials we cautious to have over we've with seen appropriate out. pressures, us for we're play pretty freight going to in from rolling going suppliers any be we input

our very do will some intent. whatever the that maintain see obviously, side We that on We'll, around well, cost do as prices. feel to are we That's the see any that able out of relief be selling stay. probably those confident but plays certainly degree cost the that how increases to industry these

fourth one then numbers side, amount quarter? us mean, how of in you the a around third Jeremy points does one that de the in LIFO quick And really terms minimis down on in some it. Got many mean, basis to we're I And just was the give maybe can XXX. quarter? go that I

in what at Chris, Yeah, really headwind that quarter. called good best think still fourth up bit. a to It I look We the the last is guys positive softens out just a year. have little we way

and can more now, how around, the moves really us cost environment of For seem to as adjust sure prices. it's you quickly be a function

the for fourth that. prior our out and be how first line. to looked we're significant foot a would and ahead. behind quarter, have then Other LIFO little quarter quarter when less Sometimes little we bit just year a back times largely credit we're fourth less than comparison in But more us will next after than bit headwinds

Thanks Best so of luck. Great. much.

Thanks, Chris.

our with Jefferies. Jordan from We Bret question next have

Hey, guys. good morning

Good morning Bret.

back do from WDs inventory rates, space your my guess, guys you'd an And or market pre-COVID? to competitors share? fill is in relatively standpoint you like Are where other well, around I be and of Question to I versus versus in helping how you the market? stock fill the Are usual. the broader guess some still your the see rates that as

start then to can situation? maybe Brad want you that do competitive talk the and Brent, about

to We've making Yeah. back healthy from sure great our parts rates. few have still lot that make but got and need Yeah, team the professional. they of suppliers got some a sequentially where suppliers fully back Bret, are for sequential credit aren't really give supply I we've pre-COVID. are that with our both question. fill improvements Sure were a suppliers. the DIY customers chain improved to We've that our rates work fill got to available

in availability good still get but to little work feel areas. position continuing our operating we're in. with that a we So to given market the some backdrop yeah do we're But better, sequentially

-- question ahead The go please. another on

Sorry, Bret.

Brent -- to standpoint. in and pleased store what needed up But sales the some back better we categories operations good. just I'll hit maybe the we're quick and said Street got that basically better. especially we real we're from it pretty from Brent get Just

have against Bret, a a but the done but landscape We great competitors, some feeling work sure. we've we for. that good competitors good always a respect feel job. gains our better, They've We are smaller from we there's say we they're really of tremendous for do, we some few some done still large we competitive as that like like to maybe have hope just or share players have

some you. Thank great. offset the on pricing offset then expenses or obviously, see expenses. factoring that I down in again or cost that? hitting the have a side. pricing to you the other shipping Do of mean, Okay, are question like that a And rates come that step-up supplier

Yeah.

in to but if and cost and up on seen Yeah, down little while I of that rail domestic some forever market. rates add seen some, costs think with about we've baked But go to the are lanes certainly up. seeing question, some you to some Bret, rates wage ocean now. think seen goods go maybe of color the can't previous around begin the a pretty come normalize Jeremy's we've that We've we into we've is inflation come up. much of seen suppliers

So going is versus to still that elevated way. trend remain and high is historicals probably

our be of we those. increases pass the event on So remain we to and we those any see confident there more point to in ability to able in remain cautious earlier, Jeremy's

I guess specifically ask around that inflation, see that the offset for rates though, Is since most the of near-term the necessarily suppliers expense? factoring not do are to incremental saying or you case? they're to pricing a going

some than the in some the won't a relative it have work the market way. -- that be more cost that little bit determined into could a that supplier may think go in have impact broadly potential it going of by It's supplier out more providing other we Bret, of where to of maybe there's the pressure I to that things rates hits. the others Those that have. a same buy products

back some And those. And will in ability competitively push they see of so think some on I to you'll through. flow instances other

obviously how about we're greener in some work. a think But stuck point. things, in of active probably We part equilibrium will some the costs. those is be of think it I gets we and at There'll conversations that acquisition scheme

Some of is bigger identified are Brent that expect our other obviously -- to stay a things views the on for to around And the continue that it that we while. drivers. we do

Thank you. Great.

Bret. Thanks,

Our next Gutman Morgan Stanley. question is with from Simeon

Good morning, everyone.

like fair I it of if a ago. will I or lose heavier Is about about pricing inflation any based inflation on points. to seems have the have lap some material First And subsides the like where we're going to in about that it? you're topic think not shock the from year it think think step feel answer, And it to about outlook, there increases is inflation. Does It five way feels thinking down a to be we're on then structural. price and maybe like -- we how trying follow-up. and it's a cadence, prior the rate it doesn't a and

Yes, Simeon that's think fair. I

we we in quarter As purely a comparison this year-over-year just into really fourth standpoint, quarter came from third moderation that expected the year, from and had benefit.

had we've through passed incremental increases cost As the we move year, continued we've them through.

line. benefited it's top know, As you our

quarter with rational. because we we out at the the it's where been some would that pressure up And of significant rest I the the positive think we'll pretty than end beginning year-over-year there. for think of a where we where of expected. year extent versus year more as I of fourth the won't that to have see have that's be would still plays in thought And that there's

not resilient change. But that. to Hopefully of the -- Street to rollbacks Moving to would work forward, see some caution going continue be to pricing middle the to seen I match rational anticipate an see we and of volume the that a some we've dramatic we'll we're to really moved don't We we'll magnitude be market perspective, to that is since level improvements from cost to that expectation our of get that down. the XXXX. that think expect on or for

been directionally, of are about go the in and It headwinds And hear hold to away. I pricing feel maybe margin the maybe to tailwinds Johnson Greg is to like this there it. wanted follow-up and may jump not industry some thinking magnitude. mentioned does reaction wouldn't gross the say has obviously, rational. some I

good So, margin there some the that guide be in theory should and cost holds pullbacks. to a if pricing are

incremental doesn't to even for it raw whatever an be you. that And some extent lapping material costs favorable and then PPI, You're headwind. could freight moderate, become

the of headwinds some that say go to flip to tailwinds se. per fair it is So, may maybe away they not

removal I that the headwinds. least of at acknowledge think being to hesitant you're but

about to as pressures as that is those thing think we've one I middle The in of the I appropriately worked stay out pricing and in really maybe would on those along Simeon Yes. last year. you passed think front aggressively caution we headwinds, of since being

to we a Our approach that them the cost has perspective from always increase from right for for scrutinize us. our making anything highly sure to pricing taking a to -- justification see we're provide sending make been through suppliers

during further. two. that also of and see it we've couple course negotiations costs And impact year then the And some chain you to the of then hold we've month had back that through that last the not had a push ability some often end those with that the for tail really delays got off we or of supply

us given that's So, ample opportunity.

the by we feel see to prices to float that started really the sure time of those to that impact We like already Street. the be we've

they of for I have approach that of headwinds our otherwise So, you that might just same because us created expect. think level the in not doing that maybe

other one topic. Simeon thing And that add maybe to on

to we able brands national in we're offering better our further that best brands those than good in are diversify supplier you As growth across base a and about base. proprietary our supplier think

made as that it that speaks point to about way. some of well So the if just you kind think of Jeremy

guys. thanks Yes, Good luck.

Simeon Thanks

Lasser next Michael question UBS. with Our from is

question. for Good morning. Thanks my lot a taking

O'Reilly in part price in generate is key growth the retail and the of these XXXX been principal driver the until all of increases it broadly debates One growth of can or now. passing the not on auto along sector up have absence that more whether

demand to elasticity there response like O'Reilly's accelerating that the share what if that pricing is And of think at elasticity third you doesn't seemed quarter see in delayed will an be year volumes B, grow and the likely you in the there a whereas can reaction next within to to up pressure category Pro do rate pick industry initiative earlier abates improve? so A, the continue elasticity even implemented So, the will this year? pricing

it's Jeremy. questions of Thanks. lot a There are within Michael, that question.

just So bit of a little back. maybe want take you to step a

situation where XXXX to – that be continue a guided passed haven't we're through. cost being We yet in cost obviously, – to impacts, impact unique are – haven't inflation in there pricing inflation

out we'll we does. where that or is it think see tell what flattens would where you what I that

if becomes our inflation that for relatively And will inflation very think that we continue inelastic. rational to see to see expectation us, more modest elevated or able to is customers. be effectively we and pass I through we that our

to say from bounces don't we know relief it that we that that that pressure. we I back. degree of that, would any whatever think see So type

that's just For be pretty like is shakes out industry think us that that then an our have will the we And shape expectation approach and have Those for think We will in industry the for consumers where that in drives general continue driven positive to that. from ability proposition in I all their comments about value prepared and the what pieces our a incredible an feel in vehicle That's and prospects aftermarket dynamics perspective talked that broader the our comp. always that think existing pursue perspective, we we Greg aggressively positive for grow recover we share. his to to to within think the from and things be the and invest miles a automotive vehicles. all fleet been that for helpful. that the grow things good the we continue of

I just to prepared remain industry and the my very think result take share. been sides to feel market year on whole, in inflation. of into want said We on to inflation or that purely growth to both we'll our comments share this the Michael, ability confident XXXX. I a as as has don't that, we bullish and market add Yes anyone both continue price our to business taking we're very the of do that continue to so

follow-up just one, on a Greg. that And

what think in was you quarter lag that quarter? the the to impact recognize it changes beginning return going than second into that could you not from You're and the think was the the the the the impact Pro year? given that the say of in it just commercial on these But impact the pricing to some quantify pricing third investment to might been in you reasonable, greater of take And has customers for it in fourth grow quarter is it your next initiative. could qualify

gain talk point you will you've a it did take was your as do anything quarter we time third of from miraculously reasonable period to traction everybody our answer knew out marketplace. from the our to going switch compound He's to and that. is and and and But said or time grow was across as kick easy benefit living sudden expect generally it continued obviously, not and then to grow. think some that these seen? in programs of over it question and the see pricing and to was pricing We it the to time. going I'll specifics a a in our in and continue to this Michael, flipping competitors Yes Brad. realizes better out We very with I beginning take At sales all that dealing professional day to day Brad it stabilize. will do want any

in mentioned delayed it impact Really yes Michael, we I last said is pretty but did, also our And think saw answer we Greg directly impact. we well. feel testing like effect it out immediate some saw rolled after saw Yes. what we as both question as a we the we do for there's quarter a in sure. building your Greg to

what see And a Michael, traditional independent bought have on of couple just has for decades. a Kind of or a business at is, or maybe third the level maybe maybe an side call if that in fourth we're shop of even. particular we the big really second you market the repair street from

competitive day that Just two-step competitor, start that be we them. from because a after our with price lower that independent doesn't us buying to more just we the lot they on call mean

fourth combine the from second can we we move relationship our the a best to town, urgency it competitors, be example, happens that the It service, to from call a pricing be everything to of could team means happen, may the with and best in moved one our that the then later, first. could best list. and availability that move may with ball, third what time drops may if what year sense that We later, be third it if month it goes the of six independent along for be is, later, the and And we just then, second. could up months

building that there's also immediate effect. there's impact, So, but some

so you Thank Awesome. much.

Thanks Mike.

Thanks, Michael.

Ciccarelli Our comes with next Truist Securities. Scot from question

there's Michael's a to five, that talking Is I that that? we let's pricing call like of of these Pro a -- a it guess store frame follow-up are much typical guys. occurs is time that waterfall going what of Basically, Thanks, like something it fair? changes. maturity presumably mature I shorter -- new a about with I kind kind store question. or a it kind curve six have almost on mean that sounds is than business over year

just harder that's a The Yes our you ramp. way guide try. dynamics different. perspective, the Scott, definitely are that It's think best gain. a hard are comparison from those But to I and think just are to I on

huge not build level time, they're of stepped up. incremental they're over that improvements So

a move Brent's bit a to bit as And some continue that better we But point, to analogy, of think little benefit I same I think tough. to that. that we'll So through little it's then think make realized the we it. point, to will at have try the get

to to add Scot, Yes that. I want

only growth continue inventory level Let's it's ensure keep in growth. market and than on smaller market is availability more well a items one piece. mind and to focus those that component component It's as pricing share just service to share execution we the of lot a pricing than

you So weren't doing of other as that guys as there you piece was of some familiar where, much changes with. any outside kind started that for you one have or with Riley's we're make maybe game of business a or pricing customers on all gained business reluctance guys Are that there maybe with with the initiatives those share to plan another?

-- keys the the it customer out success that our we we are Scot, earlier, a our differences comments, any side I to about to it No, was more what fundamental Brad don't profitable run know business, do. the real business. of pointed keys and professional on helping prepared success our talked partners in

be a same about the partner our the sure that customers things the time. do that to we with we've are best So things for we're talked long

we've for added of push in in that think year, the this improvements stores chain. Brad talked script supply availability, inventory to continue what I investments in the terms about us, continuing

us I business. tackling is think of and those reap some a blocking have But helped benefit this too. the

I get relationship things Yes, is, to a type customers. to Scot, might we've back thing lot in-person add supplier with only that the to been able of our

place. Our training programs in are back fully

that able to helped do we're strengthening from a probably been Some because of things and day-in relationship pandemic, day-out. we of and back the doing haven't the That's to perspective.

didn't said not start was want I And That that simple. it's nothing real in in It's we month. but had managers our focus just our a regional field best, We meeting. Brad. simple quick blocking work it really, into from is on our to Springfield execution. add this tackling. Scott, fundamental And last the new, Jeremy Yes, and business. easy,

out to battle acceptable we EVP high But have year, has COVID manager Bragg that's Stores and really just high all the way our the turnover, been, not high accept turnover turnover, we're of stores, store going we're we get we Doug sure to don't built funk more may not that where member cry team do. made with and the built from in our and couple our last of not making of seeing out from everything excuse we getting ourselves company customers, that getting that that the COVID for years, that we back just hangover execution unfortunately business, that having have our

Thanks, Understood. guys.

Thanks, Scot.

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

Thank to fourth We'd Vanessa. like quarter. to forward for everyone results your our entire and you, team the conclude our today reporting for O'Reilly call quarter to in thanking I'd hard the by you. joining we thank continued year Thank in February. look third like and today work our full call

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

now may You disconnect.