O’Reilly Automotive announced record revenues and earnings for its third quarter ended September 30, 2016, and that it has entered into a definitive agreement to purchase Bond Auto Parts. The purchase is expected to be completed before the end of this year.
Third quarter financial results
Sales for the third quarter ended September 30, 2016, increased $141 million, or 7%, to $2.22 billion from $2.08 billion for the same period one year ago. Gross profit for the third quarter increased to $1.17 billion (or 52.7% of sales) from $1.09 billion (or 52.4% of sales) for the same period one year ago, representing an increase of 7%. Selling, general and administrative expenses (“SG&A”) for the third quarter increased to $722 million (or 32.5% of sales) from $674 million (or 32.4% of sales) for the same period one year ago, representing an increase of 7%. Operating income for the third quarter increased to $448 million (or 20.2% of sales) from $415 million (or 20.0% of sales) for the same period one year ago, representing an increase of 8%.
Net income for the third quarter ended September 30, 2016, increased $12 million, or 5%, to $278 million (or 12.5% of sales) from $266 million (or 12.8% of sales) for the same period one year ago. Diluted earnings per common share for the third quarter increased 10% to $2.90 on 96 million shares versus $2.64 on 101 million shares for the same period one year ago.
O’Reilly’s President and CEO, Greg Henslee commented, “We are proud to report another very profitable quarter, highlighted by a record 20.2% operating margin and a comparable store sales increase of 4.2%, which was on top of our very strong 7.9% comparable store sales results from our third quarter last year. Team O’Reilly’s relentless focus on providing consistent, excellent customer service drove our top-line performance, and our unwavering commitment to profitable growth translated this growth into third quarter diluted earnings per share of $2.90, which exceeded the top end of our guidance for the quarter. As a reminder, our third quarter 2015 diluted earnings per share results of $2.64 included a larger than typical tax benefit of approximately $0.11 from the resolution of certain historical tax positions. I would like to take this opportunity to thank each of our over 74,000 Team Members for their continued hard work and dedication to providing unsurpassed levels of service to our customers and for their many contributions to our ongoing success.”
Henslee continued, “We are also very excited to announce we have entered into a definitive agreement to purchase substantially all of the assets of Bond Auto Parts, a privately held automotive parts supplier, which operates 48 stores in Vermont, New Hampshire, Massachusetts and New York. Over the past 60 years, the Bond family has built a very successful business based on a culture of providing excellent customer service, which makes their company a perfect fit with O’Reilly.
I would like to welcome the Bond team members to O’Reilly, and we look forward to the opportunities ahead of us as we continue our growth in the Northeast.”
Year-to-date financial results
Sales for the first nine months of 2016 increased $476 million, or 8%, to $6.49 billion from $6.02 billion for the same period one year ago. Gross profit for the first nine months of 2016 increased to $3.39 billion (or 52.3% of sales) from $3.14 billion (or 52.1% of sales) for the same period one year ago, representing an increase of 8%. SG&A for the first nine months of 2016 increased to $2.10 billion (or 32.4% of sales) from $1.98 billion (or 33.0% of sales) for the same period one year ago, representing an increase of 6%. Operating income for the first nine months of 2016 increased to $1.29 billion (or 19.9% of sales) from $1.15 billion (or 19.1% of sales) for the same period one year ago, representing an increase of 12%.
Net income for the first nine months of 2016 increased $79 million, or 11%, to $792 million (or 12.2% of sales) from $713 million (or 11.8% of sales) for the same period one year ago. Diluted earnings per common share for the first nine months of 2016 increased 17% to $8.14 on 97 million shares versus $6.98 on 102 million shares for the same period one year ago.
Henslee added, “During the third quarter, we opened 52 new stores, which brings our year-to-date store openings to 141 net, new stores across 35 different states, with a focus on our strong growth markets of Texas, Florida and the Northeast, and we are on pace to achieve our target of 210 net, new store openings in 2016. Additionally, I am pleased to announce that during the third quarter, we opened two stores in Rhode Island, which represents expansion into our 45th state. We plan to continue our profitable store growth in 2017, and we are establishing a target of 190 net, new store openings for next year, which is slightly below our typical new store target in light of the resources we will devote to converting the 48 Bond stores.”
Third 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 nine months ended September 30, 2016. Comparable store sales increased 4.2% for the third quarter ended September 30, 2016, on top of 7.9% for the same period one year ago. Comparable store sales increased 4.8% for the nine months ended September 30, 2016, on top of 7.4% for the same period one year ago.
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