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    ORLY
    Earnings call· Mar 2026(Q1 FY26)

    O REILLY AUTOMOTIVE Q1 FY26 earnings call ORLY

    Apr 30, 2026 Source

    Executive summary

    O'Reilly Automotive, Inc. Q1 FY26 — Strong Comp Sales and EPS Growth Driven by Professional and DIY Segments

    O'Reilly Automotive delivered a strong Q1 FY26, surpassing expectations with robust comparable store sales growth driven by both professional and DIY segments. The company successfully translated this sales momentum into significant operating profit and diluted EPS increases. While maintaining a cautious outlook for the consumer due to potential fuel price impacts, management remains confident in its market share gains and ability to execute its business model.

    Highlights

    5

    • Comparable store sales increased 8.1%, exceeding expectations.

    • Total sales grew 10.2% to $424 million, driven by comp sales and new store contributions.

    • Operating profit increased 14%, leading to a 16% increase in diluted EPS.

    • Professional business posted double-digit comps for the third consecutive quarter.

    • Gross margin increased 19 basis points to 51.5%, driven by acquisition cost reductions and distribution cost leverage.

    Concerns

    3

    • Full-year comparable store sales guidance maintained at 3% to 5% due to caution on consumer outlook and potential impact of rapid fuel cost increases.

    • SG&A dollar spend was at the higher end of expectations due to incremental spend supporting elevated sales volumes, with per store growth of 5.5%.

    • Potential for sustained inflation pressure on consumers or future shocks to create demand volatility.

    Guidance & targets

    12
    CategoryTargetConfidence
    Full-year comparable store sales
    3% to 5%
    high materiality
    Medium
    Full-year diluted EPS
    $3.15 to $3.25
    high materiality
    High
    Full-year total revenues
    $18.7 billion to $19 billion
    high materiality
    Medium
    Full-year effective tax rate
    22.6%
    medium materiality
    Medium
    Full-year free cash flow
    $1.8 billion to $2.1 billion
    high materiality
    Medium
    Full-year gross margin
    51.5% to 52%
    high materiality
    Medium
    Full-year SG&A per store growth
    Approximately 3% to 4%
    medium materiality
    Medium
    Full-year operating profit guidance
    19.3% to 19.8%
    high materiality
    High
    Full-year inventory growth per store
    5%
    medium materiality
    Medium
    Full-year store openings
    225 to 235 net new stores
    medium materiality
    High
    Full-year capital expenditures
    $1.3 billion to $1.4 billion
    high materiality
    High
    AP to inventory ratio
    Approximately 122%
    low materiality
    Medium

    Operational metrics

    11
    Total sales increase
    $424 millionYoY
    Q1 FY26

    Driven by an 8.1% increase in comparable store sales and a $91 million noncomp contribution.

    Noncomp contribution from new stores
    $91 million
    Q1 FY26

    From stores opened in 2025 and 2026 that have not yet entered the comp base.

    Effective tax rate
    22.5%vs 21.3% in Q1 FY25
    Q1 FY26

    Compared to Q1 FY25 base rate of 23.2% reduced by 1.9% benefit for share-based compensation.

    AP to inventory ratio
    125%Up from 124% at end of 2025
    Q1 FY26 end

    Above expectations. Expected to moderate to approximately 122% by year-end due to planned incremental inventory investments.

    Adjusted debt-to-EBITDA ratio
    2.03xFlat to end of 2025
    Q1 FY26 end

    Below target leverage of 2.5x.

    Shares repurchased
    10 million
    Q1 FY26

    Company remains confident that the average repurchase price is supported by expected discounted future cash flows.

    Capital expenditures
    $244 million
    Q1 FY26

    Major projects driving the full-year expected spend of $1.3 billion to $1.4 billion are on schedule.

    Operating profit increase
    14%YoY
    Q1 FY26

    Resulted from focus on profitable growth and expense control.

    Diluted EPS increase
    16%YoY
    Q1 FY26

    Driven by strong operating performance and share repurchase program.

    Operating margin expansion
    9 bpsvs FY25
    FY26 midpoint

    Projected at the midpoint of the updated full-year operating profit guidance range of 19.3% to 19.8%.

    Private label penetration
    Over 50%
    Q1 FY26

    Continued development of private label brand portfolio provides benefits including improved margins, customer brand loyalty, and sourcing capabilities.

    Industry KPIs

    9
    MetricValueDetails
    Sg a OPEX ratio5.5%%
    Comparable sales8.1%%
    Store count growth59stores
    Gross margin drivers51.5%%
    Tariff refund claimsNo material impact
    Pro vs diy performanceProfessional: double-digit; DIY: mid-single-digit%
    Inventory position markdown risk$874,000USD
    Same sku like for like inflation6%%
    Distribution supply chain cost economicsImproved leverage

    Risks & headwinds

    4
    Consumer caution and potential demand volatilityNear-term to mid-term

    Discretionary categories not as pressured due to soft comparisons, but outlook assumes continuation of uncertain consumer stance.

    Mitigation: Maintaining cautious outlook, focusing on service and availability to grow business and take market share.

    Impact of rapid fuel cost increases on consumer spendingNear-term

    Potential to impact consumer spending even in predominantly nondiscretionary sectors. So far, Q1 results and April trends have not indicated a pullback.

    Mitigation: Monitoring situation, cognizant that sustained inflation or shocks could create volatility. Historically, sustained levels well over $4/gallon are needed to impact miles driven.

    Disruption to certain categories and supply chain costs from Iran conflictOngoing

    Potential impact on motor oil supply and supply chain costs such as freight. No material impact in Q1.

    Mitigation: Strong supplier relationships, proactive sourcing, leveraging scale, and private label portfolio to ensure availability and mitigate cost increases.

    SG&A pressure from rising fuel pricesOngoing

    Potential for some level of impact to SG&A, heavily dependent on extent and duration of fuel price increases.

    Mitigation: Considered potential for modest pressure within unchanged SG&A and margin guidance, with opportunities to manage within overall cost structure.

    Q&A highlights

    8

    Is O'Reilly's market share accelerating relative to the industry, and is this corroborated by internal data? What are the drivers?

    Brad Beckham confirmed that both internal and external data indicate O'Reilly is driving solid market share gains, potentially beyond what has been seen in recent years, across both retail and professional segments. He attributed this to high-level execution by all teams (store operations, sales, supply chain) and a focus on continuous improvement and customer service.

    “Yes, I think directionally, when we look at the data that we see both internally and externally, we do agree with you that our team continues to drive solid share gains beyond maybe even what we've seen in the last couple of years and on both sides of the business.”

    asked by Simeon Gutman · answered by Brad Beckham

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Q1 Performance Drivers

    O'Reilly's Q1 FY26 comparable store sales growth of 8.1% exceeded expectations, driven by above-plan contributions from both professional (double-digit comps) and DIY (mid-single-digit comps) segments. This outperformance was primarily due to better-than-expected growth in ticket counts, aided by favorable winter weather and increased average and total income tax refunds. The company believes this reflects both favorable industry tailwinds and market share gains.

    02

    Inflation and Pricing Environment

    Same SKU inflation contributed approximately 6% to average ticket growth in Q1, aligning with expectations. The company anticipates a larger benefit from same SKU inflation in the front half of 2026 before comparing against more significant cost increases from 2025 in Q3. The acquisition cost environment remains stable, and the pricing environment is rational across the industry, with no material impact from the Iran conflict in Q1.

    03

    Gross Margin Expansion

    Gross margin improved by 19 basis points to 51.5% in Q1 FY26, offsetting pressure from seasonal product mix with acquisition cost reductions and improved distribution cost leverage. The company's net tariff exposure has remained stable, and Q1 results did not include any benefit from tariff refunds. Management is confident in its ability to navigate the current dynamics within its full-year gross margin guidance.

    04

    SG&A Management and Productivity

    Despite SG&A dollar spend being at the higher end of expectations due to elevated sales volumes, the company achieved 34 basis points of SG&A leverage. SG&A per store growth was 5.5% in Q1, with expectations for moderation throughout the year as comparisons against 2025's SG&A ramp normalize. Investments in wages and efforts to reduce store-level turnover have led to solid productivity gains, allowing the company to manage cost pressures within its guidance.

    05

    Inventory and Supply Chain Strategy

    Inventory per store was $874,000 at quarter-end, up 8.5% YoY, slightly below plan due to strong sales and timing of📎 additions. The company targets 5% growth per store by year-end, with turns remaining strong at 1.6x. Private label penetration has climbed to over 50% of total revenue, providing improved margins, customer loyalty, and sourcing flexibility to mitigate supply chain constraints and maintain strong in-stock positions.

    06

    Capital Allocation and Share Repurchases

    The company repurchased 10 million shares for $923 million at an average price of $92.45 in Q1, reflecting confidence in discounted future cash flows and an effective means of returning excess capital to shareholders. The adjusted debt-to-EBITDA ratio remained flat at 2.03x, below the target of 2.5x, indicating continued financial flexibility.

    AI-generated summary of the company’s earnings call. Not investment advice.