O’Reilly Automotive announced record revenues and earnings for its first quarter ended March 31, 2017.
First quarter financial results
Sales for the first quarter ended March 31, 2017, increased $60 million, or 3%, to $2.16 billion from $2.10 billion for the same period one year ago. Gross profit for the first quarter increased to $1.13 billion (or 52.5% of sales) from $1.10 billion (or 52.4% of sales) for the same period one year ago, representing an increase of 3%. Selling, general and administrative expenses for the first quarter increased to $728 million (or 33.8% of sales) from $679 million (or 32.4% of sales) for the same period one year ago, representing an increase of 7%. Operating income for the first quarter decreased to $403 million (or 18.7% of sales) from $419 million (or 20.0% of sales) for the same period one year ago, representing a decrease of 4%. The Company’s results for the prior period ended March 31, 2016, included a benefit from one additional day due to Leap Day in February 2016.
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Net income for the first quarter ended March 31, 2017, increased $10 million, or 4%, to $265 million (or 12.3% of sales) from $255 million (or 12.2% of sales) for the same period one year ago. Diluted earnings per common share for the first quarter increased 9% to $2.83 on 93 million shares versus $2.59 on 99 million shares for the same period one year ago. The Company adopted a new share-based compensation accounting standard during the first quarter ended March 31, 2017, which requires excess tax benefits from share-based compensation payments to be recorded in the income statement, and the Company’s first quarter diluted earnings per common share of $2.83 includes a $0.23 benefit from the adoption of this new accounting standard.
“On our February 7, 2017 conference call, we discussed the volatility weather brings to our first quarter results. Based on mild January temperatures and the headwind that created in our business, we reduced our quarterly comparable store sales guidance for the first quarter to 2% to 4%. The unseasonal weather continued in February, and the absence of typical spring weather in many of our markets in March, combined with the dislocation of tax refunds, continued to create headwinds for the remainder of the quarter. We believe these headwinds were the primary drivers of our below expectation comparable store sales of 0.8%.” commented Greg Henslee, O’Reilly’s CEO. “With these transient headwinds behind us and the onset of our spring selling season, we are establishing our second quarter comparable store sales guidance of 3% to 5% and maintaining our full-year comparable store sales guidance of 3% to 5%. We continue to strongly believe our Team’s strength and ability to consistently execute our business model, along with the positive industry factors of an aging vehicle fleet, increasing number of vehicles on the road, relatively low gas prices and low unemployment rates, will continue to underpin our solid, long-term profitable growth.”
“Excluding the benefit of the change in accounting for stock option gains, our earnings per share fell well short of our guidance range of $2.78 to $2.88, as the shortfall in sales created leverage pressure on all areas of our business. The unseasonal weather created mix headwinds to our gross margin and the soft sales resulted in deleverage of fixed costs in our gross margin and our SG&A, although our Team did a good job of controlling expenses during this slower than anticipated demand environment. Despite the specific challenges of the first quarter, our Team was able to generate a very respectable 18.7% operating profit.” Mr. Henslee continued, “Looking forward to the remainder of the year, we continue to expect our business to be solid and are reiterating our full-year operating profit guidance range of 20.1% to 20.5% of sales.”
Share repurchase program
During the first quarter ended March 31, 2017, the Company repurchased 1.8 million shares of its common stock, at an average price per share of $268.09, for a total investment of $490 million. Subsequent to the end of the first 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 $259.18, for a total investment of $76 million. The Company has repurchased a total of 59.1 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 $125.75, for a total aggregate investment of $7.43 billion. As of the date of this release, the Company had approximately $322 million remaining under its current share repurchase authorization.
First quarter comparable store sales results
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 three months ended March 31, 2016. Comparable store sales increased 0.8% for the first quarter ended March 31, 2017, on top of 6.1% for the same period one year ago.
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