O’Reilly Automotive announced record revenues and earnings for its third quarter ended September 30, 2017.
Third quarter financial results
Sales for the third quarter ended September 30, 2017, increased $119 million, or 5%, to $2.34 billion from $2.22 billion for the same period one year ago. Gross profit for the third quarter increased to $1.23 billion (or 52.6% of sales) from $1.17 billion (or 52.7% of sales) for the same period one year ago, representing an increase of 5%. Selling, general and administrative expenses (“SG&A”) for the third quarter increased to $768 million (or 32.8% of sales) from $722 million (or 32.5% of sales) for the same period one year ago, representing an increase of 6%. Operating income for the third quarter increased to $462 million (or 19.7% of sales) from $448 million (or 20.2% of sales) for the same period one year ago, representing an increase of 3%.
Net income for the third quarter ended September 30, 2017, increased $5 million, or 2%, to $284 million (or 12.1% of sales) from $278 million (or 12.5% of sales) for the same period one year ago. Diluted earnings per common share for the third quarter increased 11% to $3.22 on 88 million shares versus $2.90 on 96 million shares for the same period one year ago. The Company adopted a new share-based compensation accounting standard during the first quarter of this year, which requires excess tax benefits from share-based compensation payments to be recorded in the income statement. The Company’s diluted earnings per common share of $3.22 for the third quarter ended September 30, 2017, includes a $0.02 benefit from the adoption of the new accounting standard.
Greg Henslee, O’Reilly’s CEO commented, “Our comparable store sales results of 1.8% were solidly in our guidance range of one to three percent for the quarter, as we continued to face a challenging demand environment and experienced severe weather in various parts of the country. Despite the challenges, Team O’Reilly delivered an 11% increase in third quarter diluted earnings per share to $3.22, and I would like to thank our Team Members for their unwavering commitment to our long-term success and for their dedication to providing exceptional service to every customer who depends on O’Reilly for their automotive needs.”
“The long-term demand drivers for our industry remain intact and positive, including increasing annual miles driven and a growing and aging vehicle fleet, and we remain very confident in our Team’s ability to take market share by executing our dual market strategy and providing consistently excellent customer service, regardless of the demand environment. During the fourth quarter, we will face headwinds from an additional Sunday, which is our lowest volume day, and from a calendar shift of the Christmas holiday from a Sunday to a Monday. Based on an expected continuation of the business trends we experienced in the first nine months of this year and these calendar headwinds, we are setting our fourth quarter comparable store sales guidance at a range of 0% to 2%.”
Year-to-date financial results
Sales for the first nine months of 2017 increased $293 million, or 5%, to $6.79 billion from $6.49 billion for the same period one year ago. Gross profit for the first nine months of 2017 increased to $3.56 billion (or 52.5% of sales) from $3.39 billion (or 52.3% of sales) for the same period one year ago, representing an increase of 5%. SG&A for the first nine months of 2017 increased to $2.24 billion (or 33.0% of sales) from $2.10 billion (or 32.4% of sales) for the same period one year ago, representing an increase of 6%. Operating income for the first nine months of 2017 increased to $1.32 billion (or 19.5% of sales) from $1.29 billion (or 19.9% of sales) for the same period one year ago, representing an increase of 2%. As previously reported, the Company’s operating income for the first nine months of 2017 includes a $9 million reduction in its legal accruals following the expiration of the statute of limitations related to a legacy claim. The Company’s results for the nine months ended September 30, 2016, includes a benefit from one additional day due to Leap Day in February 2016.
Net income for the first nine months of 2017 increased $40 million, or 5%, to $831 million from $792 million for the same period one year ago. Diluted earnings per common share for the first nine months of 2017 increased 12% to $9.15 on 91 million shares versus $8.14 on 97 million shares for the same period one year ago. The Company’s diluted earnings per common share of $9.15 for the first nine months of 2017 includes a $0.35 benefit from the adoption of the new accounting standard.
Henslee continued, “On October 20th, I had the honor of attending the ribbon cutting ceremony for the opening of our 5,000th store. This is a landmark achievement for O’Reilly and we are especially proud that we have more than doubled our store count over the last 10 years through profitable, organic growth and accretive, strategic acquisitions. Year to date, we opened 171 net, new stores across 34 states, with Texas, Florida and the Northeast still leading as our strongest growth markets, and we will reach our target of 190 net, new stores by the end of the year. We continue to be very pleased with the success of our new stores, supported by highly-trained and technically proficient store Teams, and we plan to continue our long track record of profitable growth with a target of 200 net, new store openings in 2018.”
Share repurchase program
During the third quarter ended September 30, 2017, the Company repurchased 2.7 million shares of its common stock, at an average price per share of $200.70, for a total investment of $551 million. During the first nine months of 2017, the Company repurchased 8.0 million shares of its common stock, at an average price per share of $235.26, for a total investment of $1.89 billion. Subsequent to the end of the third quarter and through the date of this release, the Company repurchased an additional 0.3 million shares of its common stock, at an average price per share of $210.95, for a total investment of $54 million. The Company has repurchased a total of 65.3 million shares of its common stock under its share repurchase program since the inception of the program in January of 2011 and through the date of this release, at an average price of $135.01, for a total aggregate investment of $8.81 billion. As of the date of this release, the Company had approximately $941 million remaining under its current share repurchase authorization.
Comparable store sales are calculated based on the change in sales for stores open at least one year and exclude sales of specialty machinery, sales to independent parts stores and sales to Team Members, as well as the sales from Leap Day in the nine months ended September 30, 2016. Comparable store sales increased 1.8% for the third quarter ended September 30, 2017, on top of 4.2% for the same period one year ago. Comparable store sales increased 1.5% for the nine months ended September 30, 2017, on top of 4.8% for the same period one year ago.
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