O’Reilly Automotive announced record revenues and earnings for its fourth quarter and full year ended December 31, 2016. The results represent 24 consecutive years of comparable store sales growth and record revenue and operating income for O’Reilly since becoming a public company in April 1993.
Fourth quarter financial results
Sales for the fourth quarter ended December 31, 2016, increased $150 million, or 8%, to $2.10 billion from $1.95 billion for the same period one year ago. Gross profit for the fourth quarter increased to $1.11 billion (or 53.1% of sales) from $1.03 billion (or 52.7% of sales) for the same period one year ago, representing an increase of 8%. Selling, general and administrative expenses (“SG&A”) for the fourth quarter increased to $707 million (or 33.7% of sales) from $665 million (or 34.1% of sales) for the same period one year ago, representing an increase of 6%. Operating income for the fourth quarter increased to $408 million (or 19.4% of sales) from $363 million (or 18.6% of sales) for the same period one year ago, representing an increase of 12%.
Net income for the fourth quarter ended December 31, 2016, increased $27 million, or 13%, to $246 million (or 11.7% of sales) from $219 million (or 11.2% of sales) for the same period one year ago. Diluted earnings per common share for the fourth quarter increased 18% to $2.59 on 95 million shares versus $2.19 on 100 million shares for the same period one year ago.
“We are very pleased to once again report another profitable quarter and a solid finish to 2016,” said Greg Henslee, O’Reilly’s CEO. “Our team’s dedication to providing consistent, unsurpassed levels of customer service drove our comparable store sales growth of 4.8% for the quarter, which is on top of a very strong increase of 7.7% in 2015. Our relentless focus on profitable growth translated this strong top-line performance into a fourth quarter record operating margin of 19.4%, and generated an 18% increase in fourth quarter diluted earnings per share to $2.59, which exceeded the top end of our guidance range for the quarter. I would like to thank our over 74,000 team members for their continued hard work and unrelenting focus on providing consistently excellent service to our customers.”
Full-year financial results
Sales for the year ended December 31, 2016, increased $626 million, or 8%, to $8.59 billion from $7.97 billion for the same period one year ago. Gross profit for the year ended December 31, 2016, increased to $4.51 billion (or 52.5% of sales) from $4.16 billion (or 52.3% of sales) for the same period one year ago, representing an increase of 8%. SG&A for the year ended December 31, 2016, increased to $2.81 billion (or 32.7% of sales) from $2.65 billion (or 33.2% of sales) for the same period one year ago, representing an increase of 6%. Operating income for the year ended December 31, 2016, increased to $1.70 billion (or 19.8% of sales) from $1.51 billion (or 19.0% of sales) for the same period one year ago, representing an increase of 12%.
Net income for the year ended December 31, 2016, increased $106 million, or 11%, to $1.04 billion (or 12.1% of sales) from $931 million (or 11.7% of sales) for the same period one year ago. Diluted earnings per common share for the year ended December 31, 2016, increased 17% to $10.73 on 97 million shares versus $9.17 on 102 million shares for the same period one year ago.
Henslee commented on O’Reilly’s full-year 2016 results stating, “For the full year, we delivered a solid comparable store sales increase of 4.8%, which is on top of a 7.5% increase in 2015 and a 6.0% increase in 2014, and we translated this industry leading top-line performance into a record 19.8% operating margin, and a 17% increase in diluted earnings per share to $10.73, representing our eighth consecutive year of diluted earnings per share growth greater than 15%. During 2016, we successfully opened 210 net, new stores, and as previously announced, we plan to expand our store count by 190 net, new stores in 2017, which puts us on track to surpass the 5,000 store mark during 2017, only four years after achieving 4,000 stores in 2013.”
The company also announced today that Greg Johnson and Jeff Shaw have been promoted to Co-Presidents of O’Reilly. “O’Reilly’s promote from within philosophy is a pillar of our culture and a key driver to our long-term success,” said Henslee, “and I’m very pleased to have such excellent leaders as Greg and Jeff to take on these new roles as Co-Presidents of the company.”
Johnson will be responsible for Merchandise, Logistics, Purchasing, Inventory Management, Pricing, Advertising, Information Technology, Legal, Risk Management, Loss Prevention, Human Resources and Finance. Shaw’s areas of responsibility will include Store Operations, Sales, Distribution Operations, Real Estate, Jobber Sales and Acquisitions. Johnson and Shaw will continue to report to Henslee, who will remain CEO but pass on the title of President.
Share repurchase program
During the fourth quarter ended December 31, 2016, the company repurchased 2.0 million shares of its common stock at an average price per share of $269.45, for a total investment of $546 million. During the year ended December 31, 2016, the company repurchased 5.7 million shares of its common stock at an average price per share of $264.21, for a total investment of $1.51 billion. Subsequent to the end of the fourth quarter and through the date of this release, the company repurchased an additional 0.9 million shares of its common stock, at an average price per share of $268.33, for a total investment of $254 million. The company has repurchased a total of 57.9 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 $122.91, for a total aggregate investment of $7.12 billion. As of the date of this release, the company had approximately $634 million remaining under its current share repurchase authorization.
Fourth quarter and full-year 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 sales from Leap Day for the year ended December 31, 2016. Comparable store sales increased 4.8% for the fourth quarter ended December 31, 2016, on top of 7.7% for the same period one year ago. Comparable store sales increased 4.8% for the year ended December 31, 2016, on top of 7.5% for the same period one year ago.
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