O'Reilly Automotive, Inc. Q2 FY2025 earnings call

• Congratulated Team O'Reilly on second quarter performance with 4.1% comparable store sales increase and 11% earnings per share growth to $0.78.
• Professional business was the more significant driver of sales, with comparable store sales increase over 7%. DIY contributed with low single-digit comp, positive overall sales growth driven by average ticket size.
• Discussed gross margin: second quarter gross margin 51.4%, up 67 basis points from 2024; full year gross margin guidance unchanged at 51.2%-51.7%.
• SG&A: second quarter average SG&A per store growth 4.5% above expectations; revised full year guidance to 3%-3.5% growth.
• Opened 105 net new stores in first half of 2025; acquired a distribution center in Haslet, Texas, and nearing completion of Stafford, Virginia distribution center.

The professional business was a significant driver of sales results with comparable store sales increase exceeding 7%, fueled by strong ticket count growth. DIY contributed to sales growth with a low single-digit comp. There was pressure to DIY ticket counts in June but positive overall sales growth in DIY driven by average ticket size increase. Professional business revenue contribution was more significant, while DIY also played a role in sales growth.

• Revised comparable store sales guidance to 3%-4.5% from previous 2%-4%.
• EPS guidance updated to $2.85-$2.95.
• Full year gross margin guidance unchanged at 51.2%-51.7%.
• SG&A guidance revised to 3%-3.5% growth.
• Free cash flow guidance unchanged at $1.6B-$1.9B.

• Uncertainty in the timing, magnitude, and ultimate impact of changes in the pricing environment due to tariffs.
• Potential adverse impact to consumers leading to conservative spending.
• Inflation pressure affecting SG&A costs.

Q: Simeon Gutman asked about tariff pricing pressure, whether it's higher, lower, or same as when starting the tariff journey.

A: Brent and Brad responded that it's hard to say, but they're working to keep prices reasonable for consumers and fair with suppliers.

Q: Michael Lasser asked about SG&A and industry competition.

A: Jeremy and Brad discussed that SG&A could differ due to inflation, competition, and commitment to long-term share gains.

Q: Scot Ciccarelli asked about tariff pricing differences between DIY and commercial segments.

A: Jeremy said they actively manage it on a category-by-category basis, with a complex process but relatively consistent approach on both sides.

Q: Zack Fadem asked about consumer reaction to rising prices and Virginia DC opening.

A: Brad and Brent discussed consumer reaction being short-lived and excitement about the Virginia DC for share gains in the Mid-Atlantic.

Q: Steven Zaccone asked about accelerating share gains due to industry disruption.

A: Brad responded that there's opportunity but competitors are resilient, and they focus on running their playbook.

Q: Max Rakhlenko asked about price spreads and SG&A investments.

A: Jeremy and Brad said price spreads are consistent with historic levels and SG&A investments focus on customer service and inventory availability.

Q: Steven Forbes asked about medical casualty insurance pressures and Virginia DC capacity.

A: Jeremy discussed short-term inflation pressure on medical casualty and Brent explained the capacity of the Virginia DC serving 350 stores.