O'Reilly Automotive (ORLY) 27 Jul 232023 Q2 Earnings call transcript

Welcome to the O'Reilly Automotive, Inc.

Second Quarter 2023 Earnings Call. My name is Matthew, and I'll be your operator for today's call. [Operator Instructions] I will now turn the call over to Jeremy Fletcher. Mr. begin. may you Fletcher,

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

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

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

words, You expect, as can identify project, words. these statements should, consider, may, by plan, believe, forward-looking will, or similar such could, anticipate, intend estimate, would,

described results from annual like due statements The latest company Greg forward-looking made during recent for company's report update would on materially call. At differ obligation introduce Form time, The filings. forward-looking could other year assumes XXXX, actual and the no Johnson. I XX, to in to this ended XX-K SEC December company's important any factors the statements to this several any

their everyone, the for and Officer. like O'Reilly welcome to well and Executive Vice Jeremy Thanks, this morning, call service call dedication David on thanking to Fletcher, Chairman; are also Chief providing Greg excellent me Parts Brad Participating Team on present call. I'd customers. and conference our Chairman, begin Henslee, O'Reilly, to our are our as Good to the Executive with today Auto consistently our continued the morning Co-Presidents, Financial our second Brent Jeremy. Kirby; quarter Beckham O'Reilly call. our as

to X%, and second comparable high expectations both exceeding execute store of ability sales professional business our team's a our of strategy quarter sides business. the level our on our increase DIY drove Our at proven

the in industry. the of focus generated customer we service our result sales, comparable in store months X.X% our which best first unrelenting on the a providing increase direct X is of For XXXX, team's

members the but team assets. on and I made quarter Our our warrants call, remain it statement greatest same first exact repeating. our culture our

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earn profit share. Our and to produce growth, EPS greater compounding customers operating aggressively enhanced results are on value the provide our for ability committed our opportunities we we dollar strong, to to see reflect and market capitalizing even

our full result of and midpoint top call. a As to performance, EPS now our $XX.XX year results XXXX repurchased last a we quarter range, increasing $XX.XX, of guidance over expect to At to we line range XX% revised our second are strong reflecting our this XXXX. year the our since increase shares EPS full of

of Beckham the in disclosed Officer At our Executive leader with service Board we Chief made role to retire as decision I've as last years responsibility XX night, executive the time, our our next to As of company, press team. that releases the Brad direct my take to after January. over will

to also role be promoting company We of will Brent the President. Kirby

lead past business they history, have the know, year, process of Jeff very Co-President and many taken leadership the and our earlier several the of XXXX. levels Brent talented family our Brent and leadership and responsibility the ways, upcoming in and important in confidence of over are and a will experienced including company's transitions top were XXXX individuals in were long-term As Brad at both elevated deliver leadership always we you and company's track has assumed company the planning who full of change on Greg successful record success. members to our I of our in both have continue Shaw extremely mirrors and before increasing I In years. Succession in roles and and been prominence when CEO the methodical the have selected team, to company. the and in Brad of seen COO have the our our as roles Henslee every Ted support first they non-O'Reilly on Wise

now of the from -- complete and the now to Brent. Brad will the we of transition period of the company through January XX, operations Over day-to-day

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in congratulating I morning, performance Greg, like O'Reilly the Thanks, quarter. another everyone. good excellent to Team would by second begin on and

service, the direct company's sales would like all our is industry-leading thank work our of their of members customer result team excellent to culture continued of Our hard unwavering our and team's to and dedication. I for providing performance commitment

into that in our top Over the and several line strength sales our quarters, last our tremendous team quarter, generated performance. outstanding has carried driving the second momentum business,

April. Those execution versus the were resulting results sales from quarter, each with expectations outperformance cadence quarter's trends of last of our strong a end month in we month perspective, each our both to team sales the of normal timing after of at quarter. weather in throughout product of in I month conference weather our more our levels business consistently month the on pleased performed continued as first quarter has spring in the be consistent absolute discussed spring faced our with in ability in to our our steady is fundamentals. first we've how compared half terms of and but business the of the From couldn't the some growth of expectations. The call, And high quarter, As the the of our onset of sustained pressure Team key drive O'Reilly very daily rebounded XXXX.

details additional Now our like and provide professional sales would I to DIY. in performance on

professional again was second the Our in outperformer business the quarter.

double-digit level the and our of us second customer XXXX. The that on a to business increased in the this a that Our of exceptional to we of side future compounded team gives to delivered execution translate are quarter comps increase customer earn sales in seeing quarter strong our top with chance gains professional has us call store gains in customer's of of sustained mid-teens value professional a into professional sales business incredibly prove our the even reflect high opportunities. growth comparable allowed on business the service have business. with we next Every ability more capture coming and

to have market and these years, over incremental business the opportunities, we see leverage have gain model continue seen runway teams execution business store our few our proven the of to our made to As share. grow most last and we

to DIY. Turning

the to with consistent growth, business comparable quarter. in steady continue our store with teams side sales overall delivering reasonably We be our trends pleased our this first of with

performance past steady of each we first the spring month As in with been at beginning DIY experienced positive we move the the end second quarter, consistently quarter weather very our volatility of the and has of quarter. the business

increased ticket Our see flat increase we same in comparable business SKU values pleased were average digits a was of comps aided was DIY combined count also our by by the store basis sales our Average the the our and inflation, driven ticket comparable but larger in store DIY ticket share in business for sides on second increase. mid-single sales of drove quarter. growth both to

in in strength comps, our outperformance ticket However, our to was larger professional the business, count our expectations. contributor versus especially

which primarily in benefit growth our coupled business. and our ticket average in product line modest mix complexity by was same-SKU with inflation, expectations, professional from with was a Our driven

inflation same-SKU realized tailwind down we in the quarter. the in first ticked the quarter we saw anticipated, As second from

sales on on updated I like half our macro XXXX. benefit guidance price This year and comments into industry remains the we full of outlook. strength increases. for as expect prospects unchanged. To back expectations We the guidance perspective, continue to wrap up bullish XXXX initial From a to and our the in remain and built our highlight to impact XXXX sales, would continue remainder moderate to of we of see was dynamic lap this of my

to for on base repair of order to and Our newer, and the to very maintenance taking willing resilient customer in existing payment a vehicles costly their more prioritize vehicles. avoid has continued be

outlook a total store to to the increase backdrop our to regard with market a believe X% economic through the economy that caution of increasing X% element the range an we increase light year with our to we our are to maintain to backdrop, reflects strong guidance performance for demand still potential U.S. sales industry. In guidance today's we call. full of billion combine heightened dynamics While year-to-date previous overall of to of This a range our provide $XX.X this in sales pressures, comparable for X% from corresponding $XX.X current X% for in billion. and

from year expectations in realize increases. SKU same as in store of already anticipate benefit sales I've we half discussed, moderation As our built-in comparable the back we less the

expectations the half count both of XXXX. The the in as months the the also deceleration back comparisons challenging of X of generated year. is increase factors store XXXX the first ticket comparable our X.X% combined versus of driving Our in move we the incorporate these in more we second sales impact half through guidance of anticipated

we our However, in market, level to delivering momentum. of our to take in sales remain every highly customer diligent service share accelerate motivated and high a remain teams

as pleased weeks in have Before July. I of the add extreme from in many strong incremental to of off from to year start strength with will move I the robust first are our the in trends the third quarter first the continue sales the in heat be we on seen we that of markets a half sales, few

was consolidate SG&A the XXXX. This XX%. percentage to Now our SG&A quarter heightened results, SG&A driven I deleverage deleverage XX.X%, discuss in driven a of key our of for initiatives SG&A identified few rate was into recap. Coming quarter anticipated model. the incorporated came to XX store business and ultimately we expectations second several key necessary and by capitalize XXXX, from with increase which briefly to was higher initial to above of quarter came part original higher This a competition enhance than our further approximately operate second our have expectations will by the an per to of factors the but considerable I sales our would in ourselves long-term the in an than basis level in targeted in momentum as market. growth business on of into for XXXX our operational we intent were points like from separate long-term strength a generated the

increase We good the second realized in have well of as improved to our refreshing and the targeted initiatives stores, image year on in is this been with of of progress these relates facilities. accelerate strategic an our the at a general opportunity appearance few investments maintenance instances, our these existing plans which as to pleased quarter. A both our spend example and to projects

a new normal to post sought have return to pandemic. We

deferred we years. me, on have maintenance have been last stores return normal that a we of of have unfortunately over excuse working our to to -- new accumulated been as pandemic, needs hard catch couple the to post We up have sought

of part issue. result, this share in was than pressure traffic, a is driven second gains The image, to faster stores the customer in incredibly and quarter satisfaction drive address shoppability turn important of time. our going SG&A appearance planned to originally ability our As over and our to by DIY

member to team We seen and experience benefits. our traction have efforts good also in enhance our

moment, Jeremy -- of initiatives store make the decisions we within and our remain our costs. team have driver significant have unfortunately discuss claim the these compensation around which we Ensuring team member levels the also added in our we industry in success. if Ultimately, delivering not driver a the total SG&A growth and better-than-expected coupled to possible exposure contributed of our SG&A inflation retention overall the of reaped the pressure of decisions also most in during here stores. customer the will our of service Our with business, headwind enhancements, control to cost payroll one important, deferred the but enhance best quarter long-term most auto appropriate important have we driven these spend retain staffing self-insured is strongest faced most liability the our and from we of a higher-than-expected to quarter. Outside deliberate by the SG&A

per in wage the with count the payroll expectations. compensation higher-than-normal driven higher largely total staffing to in store rates and another was our incentive with contributor line spend by coupled SG&A head increase quarter total second levels, Our with

As the past, manage our with we a key have discussed spend often SG&A long-term we of in this focus. component

As ensure service business of are last last stores customer of since develops in are have we both our customers to supplier turn accelerate year-plus business. we situations, we about have service repeat value new we earn proposition level that opportunity see the share with to on prove that long-term as the we maintains over judicious exiting an X we our prioritized trusted the staffing existing high and sides we we and years, excellent a these ensuring delivering over continued to industry-leading delivering relationships. as the create how pandemic, our our gain have levels expanded manage seen and business. When In are a

our today. look balance for now will investments to a As the in results have reflects what first X%, have guidance year, the first we of in is our expense highly our pursue of making the continue expectation versus initiatives which to we and SG&A as store remainder we're half set control the committed outlook for productivity long-term to that of our expect value this the we half seen of approximately XXXX moderate growth the even see expectations strategic culture Implicit high year. business. We increase SG&A in we store forward and per per of remain an to the as

We our value we business. structure expenses long-term have drive and track conditions record our our a cost are in managing our adjust of operating will prudently long business diligently match markets, to continue seeing we the in to to

to profit continue expect come our sales. to still the within margin operating of range year XX.X% we XX.X% Finally, of full in to

I Brent, And with I to opportunity next the thank -- to side years our company's people outstanding drive Chief service entire so Before XXXX. our and turn to in parts come. to side performance excited XX,XXX I extremely more couldn't to work Executive turn the team work humbled service am parts call commitment unwavering next our to the possible I by over for to to our be professional for and their -- best over Officer. would have in provide like our dedicated customers hard far

Now I'll over call turn the to Brent.

in like And quarter. Thanks, our Team of the Brad. the I second in would to join Greg O'Reilly performance Brad congratulating and strength on

Our team strong line providing market share commitment excellent And team's of our and to our and our to the I direct performance their is want a for all to relentless to result thank service. top gain and sales our members ability outperform of dedication continued company customers. to customer

inventory, store with exciting and distribution gross margin in investments margin. and and second environment expenditures. Beginning Now, our I the in gross what will developments through capital are growth quarter our results, competitive we in discuss seeing walk our

gross our just basis XX.X% the the second XXXX Our from down X of second top at margin expectations. end and was of points quarter of quarter

these XXXX year-over-year lapped a second performance, factors our represents the a which atypical read first after excluding in have fully the much Our the noise caused rollout that pricing initiative quarter LIFO quarters. professional gross us on quarter of impacts, we prior provides of margin clearer and have

our especially professional stability of in the are our extremely face pressure we We performance continue results, of the pleased light strong the of from with gross to profit business.

rational our acquisition we we in industry on solid have pricing short that of with offset chain are able in competitive seeing positive stable, continued dynamics margin also our is has and the shrink consistent the to pressure this headwinds cost quarters. business remains and like the gross our provide over very supply expenses past incremental in of pricing seen with to would be markets. environment industry, our color to mix have the several outperform, results. I and improvements leverage answer and of side have distribution some both and acquisition and across sweet we but faced to this cost, been continue our to what side cost As on The

seen are in at in of from our how puts incremental what and takes normal view pattern occurring partners able time, product market industry significant we while across the more have XXXX. in continue costs, to into conditions professional XXXX Our continue a degree industry pressure, seen in to than we perspective. Pricing historical and costs supplier product we not price XXXX customers pricing inflationary changes opportunities to categories. These passing much will the been to be and that reduce acquisition confident through increases see dynamics realize future. and some rational. Where in And we normalized some remained these would have continue the acquisition are in and we with increases has experienced industry we line in DIY this in same are the in other and in successful in selling have a to

on many where As factor ultimately have that will a customer we times discussed not deciding calls, the always price take determines their these is business.

have Our continues level by at at win perform industry. product a customer share delivering competitive service, and appropriate a in gross team these industry-leading us availability to margins excellent enabled to and strengths high

expectations, beginning up of compared to to last the in X% the to results and at which As But pass-through XX% within year. per into year the the we XX.X% timing $XXX,XXX, time gross based half we quarter product our can year the quarter back changes. vary the from move maintaining guidance full finished line any this of individual our are mix acquisition of back margin half the year to and the our or sales margin of fall expect on XXXX, gross cost XX.X% store range. Inventory the continue was with in of

continue inventory of We toward the our by of track per to XXXX. store increase planned end X%

Our was beginning line second better strong than with and of the AP-to-inventory end ratio in the XXX%, inventory turns. the our at of the and sales expectations, supported slightly volumes quarter year by

and the pleased health has our continued factor right us is and are store at in We inventory store in to our availability we results, network. hub driving to our position improvements prioritize our a and sales key been inventory continue that the with position. chain supply industry-leading optimal deploying It DC, robust in-stock of the clear

initiatives and growth our to Turning investment. capital

We operations are in the new very will facility for earlier of service Guadalajara, July. center Since have XXX more surrounding business foot the entry of strategies new in regions be Mexico our successful ultimately game part by distribution facility our distribution smaller extremely excited XXX,XXX of Mexico Mayasa. will complete XXXX, our in in to opening first O'Reilly our importantly, we supported a in inventory the This changer capacity square stores the centers Mexico. Even Guadalajara that area Metro and into historical warehouses a in Mexico. were model utilizing and of network our have to

leader markets, in Our significant goal execute our provides availability in inventory leverage part new putting more domestic ability Guadalajara to gives position. It competitive enhanced Mexico, right is much the to new deploy and of our inventory faster in the hands highly the all our a platform our And this us necessary competition. the to and strategy. as customers facility the than investment in our just be industry in the facility

but incredible requires development new to new history during by facility. a store outwork not center successful net opportunities work openings, is It drove in our our the of more perspective, bringing across competition are a our energized partnership we a of facility successful the to Mexico distribution teams quarter, to new our long dedicated share. From the teams this XXX hard store pleased that of U.S. very and year-to-date they that unlocks. center and an coordination that understatement new the say grow the they And second advantages to Mexico leveraging total acquisition, between opened and successfully organization. We significant all have could competitive highly opening undertaking openings. our are distribution our XX store each as stores be and market with We is growth

is to store to team Our of net openings our plan on new hit XXX for pace XXX XXXX.

Our very of across new store Rico Puerto in footprint XX balanced our half coming states, year were and the stores well in the first different Mexico. online openings with

growth new teams in drive highly spread selective ability our the hiring stores. many us of Our outstanding and be to our across the positions training success markets that to

growth We We on our and and range priority line gains capital first initiatives continue of against hard up growth performance dedication once million. To X to to be our I view remain million XXXX, O'Reilly XXXX key and to guidance substantially long-term to want ambitious months pleased my first X $XXX were Team plans our expenditures again capital for $XXX $XXX expenditure million, in to hit the the for customers. projects use drive of our operational continued of our new with as from with capital. Total deploy store their stores capital that a organic our to our work of the months will close target and of for but business. for comments, thank

Now call over Jeremy. I'll turn to the

hard Thanks, Brent. for would Team and to thank also continued their work like professionalism. exceptional I O'Reilly

guidance quarter the we on XXXX. second cover remainder for details additional of some Now results will our and

$XXX increased stores additional covered in sales million noncomp how through increase our and on our a yet nature given compensation want SG&A store income driven some opened expense that statement. expenses comparable by of in this provide runs in X% did contribution the the XXXX base. Brad color $XX quarter, comp I the our and XXXX entered detail, plan For have not million to quarter but deferred a from in the plan sales

and plan. holds in future, a the asset the maintains the members for compensation team members plan, in the pay qualified the a funded be in adjusted assets company is deferred Since this plan liability For value team of whose the to plan. otherwise would company fully performance sponsored reflect nonqualified to a XXX(k) for corresponding and deferred our limited a obligation many the for participation participant-directed the also years, comp to has asset nonqualified

market value changes are income second in an highlight driving in the of assets offsetting models. The has both increased on value or plan so However, the the to points we changes the the be size the of XX year-over-year planned other difference able of update net favorable an you with and with the and value year-over-year in million item, expense million impact expense. to market quarter given wanted and $X not basis been to swing in market in planned items different line in XXXX, the increase line more significant line in corresponding income. expense that your either will values in on below and XXXX statement assets a increase a SG&A reflected the benefit $X drove other our significant SG&A but change an Historically, income increase

quarter Our a of the pretax compares base share-based by income, compensation. of XX.X% comprised second from rate rate X.X% to second of This from of benefit XX.X% comprised quarter benefit rate reduced pretax a was of effective share-based of XX.X% income, tax a base which XXXX rate by compensation. reduced X.X% was XX.X%, of

share-based rate in the expectations higher-than-planned effective our line our expectations base the with quarter second compensation. benefits rate tax due Our to tax total below was with from

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

due fluctuations quarters of create tax share-based benefit the can in from in tax our quarter to is periods. fourth totaling rate other effective than compensation certain expected be tax Our quarterly the X Variation tax lower the rate. to

to tax timing prior disbursements $X.X a on net by first and half year reduction for move in free cash components capital income in line and renewable versus will Free the a results. XXXX, benefit offset drove increased with versus of of XXXX that and billion, in energy for XXXX. growth the payments we from a flow the with favorable credits, inventory months flow from benefit year first cash and tax lower XXXX this Now of in expenditures X the was our

on at year. flow $X.X of of $XXX half free from range a in range up expect the previous million performance now flow $X.X we XXXX, cash to the first based For our billion cash guidance billion, operating

of the finished credit driven the of adjusted X.XXx debt. by which on borrowings of ratio is our to increase end to Moving facility. debt-to-EBITDA ratio on We X.XXx, with an up XXXX with quarter compared our second revolving

We target plan be and approach our prudently time. number to below continue to that over leverage X.Xx of

with the buyback future our shares during execution returning for a $X.X press we the effective pleased $XXX program. total at expected of million. the of current be $XXX.XX average view capital $XXX.XX an by program inclusive average investment means flows to million of total our at cash shares price remain investment of repurchased cost, share billion. repurchase supported price second an price, We average we that for through X.X to our the repurchased release of And discounted excess of our our we repurchase as quarter, a very million shareholders. the tax confident excise X.X is continue business, and continue yesterday, an share Year-to-date, We of of share to

by through any include outlined does a shares repurchased share of reminder, As additional impact call not includes repurchases. guidance the Greg updated the this but EPS earlier

operator, Finally, the team our O'Reilly this I I for your thank your continued like will up concludes I the to answer their we to questions, like would to call comments. Matthew, questions. company's to open before the to our At the be and to prepared ask time, entire return long-term happy line, dedication would again to success. This

Gutman from Your Instructions] Stanley. Simeon is first from coming Morgan [Operator question

you it could only My and what to with Brent this at attribute to Congratulations put looks It's do a spread is finger like first accelerating, we our the is that as in PPI It the calendar has share. thing market Simeon year. O'Reilly Brad, year is initiative. on question ago, A Gutman. industry Greg. least in it. question The the

investments rue. for maybe took those So it year a to just

share curious So is on what acceleration the take due market to. you're

into Yes. Simeon, and kind who the to I some terms us team teams because corporate everybody company. providing. our first looks maybe human store and tangible PPI we and COVID build, Yes, just to is But little subpar Brad. thanks. I little think of in stabilize point feel more the a it's we great, distribution a to our offices to are like bit for It's of team, culture. with is our standpoint operators done starting bit foremost, do our biggest things the rebound would thing from what say hangover we've service what we a every for the with teams a opportunity huge from that just talk service our our we're our capital of our turnover if seeing was The about we're is that our the to teams, day, easy the really you and doing

thing Second first from about a the operations to chain say market, the the is what position we're sales, supply we from talk is point them in in that, we're to Simeon, would I and standpoint. they when especially seeing thing

As of you immediacy the part our about nondiscretionary it's business, all about of the time. business, right anybody, sides right need -- has right at the know as the good at in all both on place as it's who

And our us with we're still day making we position distribution customers better from with have just with feel did merchant than couldn't we're everything pleased I about and time. field the the be been the the out PPI. good store of a management side playing And we we team team, and inventory are the in then just doing all obviously, strength every from doing like got feel that teams long supply in calls. They chain side, sales the professional the for a And we've in work and job more from operators. our our Brent a purchasing position team

the all, confidence if first the of chain service level his supply I thanks expressing be to and are outstanding to add making And have be. Yes. And industry. what competitive there, we've position. again, highest said job team price we inventory our be over an got and the continue Brad a did inventory to of of field nice in for in price, of provide will availability and is job the maybe just outweighs to But over level. what done in Brad Obviously, teams and congrats. which and we've on Simeon, we're sure continue to as service and could positioned Brad said the

competitors? it given that the into And flow-through that have sounds that thought it just that it. lean that the stores investing as to how a should Is there investment Service at that strong should was little more get the experience like part on little in Might may year, at a case is? a lean transitions given Is especially a to point, of mode you continue? this continue the weaker, happening we Yes. improved. business maybe you follow-up you see you're be

up, Yes. Simeon. think I And Great I behind the think, picked question, you've key this. thesis

business As that invest a We've we've our within to year, areas really seen. really felt talked from us XXXX. we they're perspective really just momentum down identified about and the to all coming continue it, on into long-term that allow double we've

to spending expectations I a a ways think finish that's long And -- year. the And think about are, we in long-term funny, a that that closer. think halfway strong here out we'll provide culture forward. where for us from sit later we focused on expense and towards organization substantial and such we move as get those XXXX a we've targeted through dollars a we're return has year, we've that, I given and it think, about really very that and until don't a we undertaking within July perspective. We time, around guidance in. we've And those sustained thought have, we period to of clear been control absolutely, done to For such in our on for

it's I premature about I think, us too for little So bit specifically a that. to, talk think

our us. of we've how For I'm course it's we'll the same your and returns our productivity spend expectation we how sure, the our long business, forward, to see move say improvements that, time, with to so we for an feel continue aggressively we not at to we manage that. for invest that in on We're diligent expense about said control is seen long-term consistent what the business. focus. we that basis over think and a of in do levels XXXX that as the continue operating we And on us question, cost to a year like to to our that's going other high we'll But been in find has where won't opportunities have appropriate. Having

done. second Well Good luck half. in the

Simeon. Thanks,

Thanks, Simeon.

Evercore is Melich coming from Your from ISI. next Greg question

is question on first of rate the same-SKU disinflation. My

update actually quarter said in in half? just you I it that what it's think planned. you the was Could to you expect coming the as us on and what back be in

from I that of time We as kind are historical to rates in -- get year. the year, stage, exit of you're was I'm mentioned -- mentioned But what digits mid-single quarter. back year-over-year won't said we've a kind we It would had year the -- about to by kind think or to half kind We in more all seen think sorry, really what his in of in at perspective. And we kind flat. moderates that it that just the Greg there. Brent the we've the way expect Greg. this we've we as -- the of of Yes, current talking long-term comments, it think normalized in we of

-- would that the anticipated year. would all really, puts But Brent we in So what as that low that's -- have almost kind mentioned, with in line range. this for single-digit of falling you directly

those are some about the of or how Got maybe of these sounded in the seeing sides a with it. in categories on of you're category mix stuff of a like It got DIY. softer, little you some the little competitors talk some bigger-ticket doing house. some pro And things then trade-out happening batteries, both your bit and maybe both that

for is. And the product high from of historically at always -- and similar Yes, normal are best Well, where to of this the in consumer any we where across looking good a trade-down, categories there. level. actually I'll what call stayed on of good, quarter saw at a baseline best depending to a We're there we lines little ago, little bit is we I we question looking, on quarter we a mean the offerings. have better, complete better how that of Greg. the trade-across, kind always speak trade-up a and seen saw trade-up, -- in first bit terms to answered that we've

radiators the in like with comparable quarter that point. I would where on seeing seen we strength, we some those versus we're have terms lot were ago a consumer and, to basis of in I mean a components trade-down on case, or attribute where categories. this strength categories in even categories brake at a some of year where in were first So position of we better in-stock not

talked our as prepared we about improve. our we share position in-stock store in our believe really that's gains. So see And to contributor comments, we huge continue a to

Yes, Greg, might this one is just there. Greg. comment add I

our sales over strength also addition continue In growth to our half make as and we what in well. proprietary up They currently see overall. Brent brands said, to of

and That's good it. great Got luck.

Yes. Thanks, it. Appreciate Greg.

next question Horvers from Chris is JPMorgan. coming Your from

helpful then how to it be you maybe business. on is seeing accounts businesses? the sounds can you seeing overall those accounts And any Are contribute no. you Congratulations to Is talk what if the about would I versus and down differential national much from like of everybody X as think "up could It relative the perspective? business their street" My size -- updates. you're question first is you a strength? national lastly, the one in pricing answer

want and may Brad. I'll others it's a question. in. great one, start to couple jump of Chris, But this

We down expansion. and as the a the know, on growing few your you book have from sizable strategic accounts, the center grown everything you greenfield larger the coast the of made we've accounts. us company that shade beginnings then larger you small part players over out -- footprint. the obviously, call that's of garages here our that, growing well country as the toward up independent company the of compete and street" our "up then in over And founded garage, tree do business your of is players. Part from last midsized have think, the very independent the you decades accounts, obviously, as humble both mechanic to acquisition and through we the we have and with I players. And Chris, in national a still know, small time, account regional gap have that you what

those markets into We have the upper in players. doesn't going some always with biggest national in York New the kind match that up Mid-Atlantic up of and of

of that seeing. And exact out the would we've So I larger that's accounts, that to our between independent gains seeing from what strategic that garage splits business for you an of of in our quantified seeing direct is our street, shops, all small out opportunity what business in consistent that and momentum business. our relates the question on and is bit strategic we're seen your from the grow the that and our in U.S. we But garages, that very -- about the the our as still pricing build of we're by But very from the what we've foundation really our from book the share how kind never us far, professional other how we're built up. we way consistently tell independent the every ground

business for caused to a to that us significantly a our thing of very not with that that different broader need an significant well account, of us. from But grown those we to may huge business. the overall others and it, part that, into about Brad they're the be one I'd are it's It's in just so is that Chris, size rest add it's They're regional But not business. important, important Yes. -- relative along of customers results important the in base consistently performance. It's maybe as move than mentioned. the question. your to business. talked respect to of dynamic our size national our Brad has differ our

business. like inflation you yes, about margin or look normal. for you, the Got And periods talked year, it. mean, you to My the I sorry, have if Jeremy. is where seasonality over back or gross you I'm follow-up flattish getting in -- is things -- pretty historically, question deflation disinflation ex back inflation

the that of does upper half level? is the of that year-to-date maybe would guess, of back I -- that sort the the consistent year in half So with sort suggest your the guide of

periods be that us to grow and gross generally half cautious guidance been our to going But margin Yes the had forward gross sales speaking, as to seen to comfortable But impacted impact the well. Brent when the half appropriate right in other of and There's of long can a the in quarter-to-quarter itself the way, saying say have the they're question. than -- to back we've The those It's guidance wasn't seen. I'd of no. has be top think, the year has in And timing much script. business with in of be, think, we've impact we'd around the our would margin it really strength range that larger we story it those in range and I I some for a in and any history. well. And less be seen you moving give be seasonality, tell you're important for mix some gross that really back continue able the perform and or the by the long to the the half Thanks, with, called our feel be reason go our noisy of those of we a on time could reason. we've Product back the muted variances year you've results. of professional of accelerate we've steadiness think is results. you, for Chris. some successful. a identify range margin as pricing, the going seen But some business degree volatility items. mix been quarter story than of some we've the no to our the with that, around I out for in I LIFO to appreciate our guidance -- product

is Scot Ciccarelli from question from coming Truist. next Your

slower hearing from stem seeing tire field increased from sales. are economic would that Ciccarelli. facilities services the It's We're pressures. Presumably, Scot that

guys brought then, you tires, sell even So hearing from b, you are, a, parts the don't you though questions a for presumably on customers? sell are being in would And car your service. similar

So standpoint? to how just from such a could O'Reilly a customer much have exposure trend

Brad. it's Scot,

DIFM we And sell see not of they're tires, speak tires. doing our generally have wheels and for looking I they off, But -- what is good want customer they're then you careful good, lot professional As base. -- if at to selling be we a they are said, the have they're meaning to if bit don't installer lot shops a time at of jobs. parts, kind potentially bit of brake spend different the ahead of looking with to customers on selling looking more little at a then a they're they're inspections, some the tires, have their more chassis, and of little things. But looking get at not time diagnose they they're hands and better

So way too population. careful haven't I softer that comes on haven't But the sales just we us. anything seen business that pointed that to with We want be front. answer really really versus tire to to seen anything

Yes.

investment. I value be from of transportation think so we the the broadly, know, little tend and our -- being be demand to resilient maybe and of key that We and you just the interact industry to healthy. in and high we a continues nature and with always engage the a cognizant immediacy return of as in see good more of benefit that just interact as periods need customer consumer Scot, the that we we lagging in others have there. We're cars bit to to with see There that lot -- that their our valuing on could reactions. of still the short we But road. what keeping we a start see you confidence proposition time, They're on the pressure it's customers.

we to we'll we that the -- think point, that haven't cycles. any But customer customers or see would those types as at would our this things seen past that suffering. indicate continue have of point I you of in economic to

add maybe getting categories that see rack. Interestingly and Brad already just control, those car the to continued point when Scot, chassis, to of looked other the are maybe in one enough, a points the we've up And made. strength is lot Jeremy to ride undercar, at on have that

that So for in as color. throw just well

like that the pace just I XXX%-, to should should is then elevated. is year-end? the just reason see stays ratio? it appreciate payable we quickie accounts shift Jeremy, we continue of by And and kind hit pretty Or on any time a inventory there if that. accelerated sales XXX%-type

stay there. would would it at expect elevated reasonably would Yes, we it levels

productivity how can half little moderate built the on expectations. investment is as just maintain last We've that to in through to out things helps in. of added of seasonality negative inventory it flow some But a we have. our that of back us existing the see year ability that Sometimes flow a that cash and over bit inventory got within the bit continue free year still even strong to the nice to we've of the course of net turn

coming is from Brian next from Oppenheimer. Nagel Your question

add I the promotions all around. congratulations to would like to my

benefits of, back have costs? about So as question, a I respect gross just the first -- But we -- to guess, sales looking the sort about side benefits -- that we least at waning I you then, margin should the more potentially easing inflation I from the year, other of say, the the for with talked perspective. question on also with expect and think on the potential of the front potentially half guess sourcing

increased and Yes. raw I start can tell from that. cost. that. on increased suppliers lot materials, it increased still I script, pressure capital, labor mentioned are of some would I mean in the you, see Brian, we cost just of a I under do mean I

side. But the -- lot strength on under a is brands. we in they're an bit which you, and little That a with and cost certainly strength the opportunity general, strategic of brands we our doing cost multiple for goods you, in would tell drive suppliers tell the Greg our cost to and still looking be in and of suppliers would proprietary gives multi-sourced us an us I them you many in like opportunity earlier But through in growth categories, pressure, about as we're in mitigate feel We those those that and purchase expect very continued good shop can that see best to have we that done to cases. report proprietary cost this and we also, period at everything price aggressively a to though, are can. talked a would that. always position of and out goods

helpful. it. Got That's

with to just respect question, So follow-up June. my

your others sounds talk heard in June, it business weaker June. pretty mean talk in and I about about a sector was steady. others we've like retail weaker So your

there explanation the than So month? guess performed suggest is you June in is, didn't, so why And others I anything -- can of the month to weakness? I question of O'Reilly see an you in much better you if that mean, did

question our they the in are didn't answer To tight were directly, relative the were results pleased for really weakness as The within as higher. it right, month. all compares our to expectations, with performed a actual see obviously We actually the But month-to-month. comp, June. other little The a different band. bit strongly we months, in

versus evaluate see. feel categories individual a across to drivers of in our we tough month-to-month think it's we positive. We see quarter. out obviously marketplace And others solid demand we too all I But what throughout able of across period such to might the what So parse business. regions, time the in week-to-week, saw much really be the

I appreciate it. again. Congrats

Brian. Thanks,

Brian. Thanks,

McShane Kate Sachs. Goldman from from coming is question next Your

aside the that sure the driving inflation make comp moderating for to lower year. ticket challenging compares, anything count wanted some was just from of the the else We the if half sequentially outlook there and second of

our the the we really we've Kate. pushes comp, in No, as beginning talked quarter-to-quarter relates throughout XXXX it volumes established move actual out identified of mean, that in, math at differences the to what Most the you've guidance the XXXX. flowed I in think way our about I we of since year. cadence

economy balance unique So different our transaction the we the strong. the first professional when overall our DIY, year about side, then consistent a we standpoint. changed the see in for half on that as trends ramp front in us, expect the business. The pressure of both the where than has for growth year, perspective, be week-to-week transaction some on a would in reasons. sequential a business We're excited half produced is of for also dollar a business stronger from continued a we've then nothing volume about to a to the and from volatility responded we on better. about think anticipating of macro year from the there We're really And sides we've faced perspective. Really, waning for benefit. 'XX was sure, the basis there's remain same-SKU where back just we last to overall think and half

coming Mike Your is from next question Baker from Davidson. D.A.

weather. continuing the I -- heat your the seeing put July -- you saw X throughout June can term, this the talk in think incremental And but just from strength about country you and specifically, to quick, business? that that you hate you impacts that to the Real said with said was have how benefit we're I short

So that mean was that June? does than better July actually

It's Mike. Brad. Yes. Thanks,

you extremes, heat hot is One the heat fails like weather we As like we batteries, know, winter. something thing to really weather where a we of it then the -- in kills be markets, in time, like failure heat, enough and especially immediate. work heat lot to and about a remember battery, but contributes

that the where we excited we really we're overall, really about to ended it. with a weather we're business how relating be we're bit everything always little good bit So us, we're We're a quarter, is the our July. we heat doubt started little that to can where cautious. But excited and on We're the a careful no want seeing about market excited X-week period, minds we is. capitalize our and for what and to -- in but there's in doing

we we've periods that that expect I had. is, weather weather to you that Yes, Mike. it Brad's for that's is would prepared as But said overreact in yes, to seen surprise, think, the time. we've And no you don't benefit would, of frame how the We know right. see us. outside, walk comments the comments come around hot should it good that, with X-week ever Brad you

models. talked more trying do if about, to our but of $X that's about that think guidance, I the the how that about does that second The continue it in presume Great. to follow-up. we the and Excellent. third deferred or that think in impact One terms does shift, million doesn't, quarter quarter? fourth into just compensation -- you quick in

We it's of we the create it not accounts. that just guide other a And Yes. it within know depends noise. that really of noise but -- talk to periods, expense It does you don't the even income lot and line. quarter those coincide We a on our on forecasting there. just don't about but do it it, mover, market broader happened that to kind normal impacts needle second in activity in creates hate

Understood.

to the the I with, in It during price presume, do words, wasn't the catch-up a increase quarter. So it in the stock has second quarter. other in

the market When perfectly recovers, the just offsets, noise. It's Yes. the creates go nothing. it up, we see literally a liability it go assets It -- up. net

looks that Right. to it's though, because just your beat the It's I think a earnings like of it's higher than is makes geography. important, important is understand because you only But expected reason it -- and change SG&A so below-the-line items. in why the

agreed. Yes,

question coming Seth Seth from Wedbush is next (sic) Bashman Securities. Your Basham from [ ]

in wages calculation. Sales second, productivity can strong, benefits then on see to going expect on provide a sustainable? do forward and a mean, my basis and on very more the you per And basis? as how employee color trend was year-over-year this you by new reaching growth them I you on a first, record quarter

Yes.

can we start what tell and others there from none the on within question know answer talked chime in, from invest. that basis we've I SG&A were Brad felt throughout top see expectations. I year in comparison line we've to to a in team We guide inflation it's had that Those have line as about you, the member rate the with driven the And the Seth, that first. we're anticipate largely Overall, start I we were that a on workforce the opportunities perspective I'd all But by we've a as that rates. at wage positive seen then very of benefit an continuing can our had. maybe seen second and talked Those we've line. we'll seeing executing. with our So spend opportunities about probably for perspective, standpoint about original to from with in there. pressure outside our was our moderate experience where those. been of the those we wage just expected. And length. enhancements things to investment continue move of

seeing winning In top length that we from really on the we're member, We're team our help value think it team of very sales absolutely. And really the of it based to upon us a line. strength terms and our on believe to improve that's that the at that driven move perspective about that to we in robust strength the where is and a going productivity per sense us business the Brad that of service our ability as and continue they're down sustain team forward. providing. And we talked double

and Greg, Brad to Brent. Congrats Got it.

Seth. Thanks,

Seth. Thanks,

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

look for to entire results Matthew. quarter today, conclude XXXX. our great the we to October. results you. in like third generated team We'd O'Reilly you, joining our half thanking like Thank unwavering and call to forward reporting you've I'd of the the call in by dedication thank and the Thank your first today everyone for

This you. event. today's Thank concludes

at you time, Thank your day. participation. disconnect a and this have wonderful may for You