O’Reilly Automotive posts record revenue, earnings in Q2 2016

O’Reilly Automotive announced record revenues and earnings for its second quarter ended June 30, 2016.

Second quarter financial results

Sales for the second quarter ended June 30, 2016, increased $141 million, or 7%, to $2.18 billion from $2.04 billion for the same period one year ago. Gross profit for the second quarter increased to $1.13 billion (or 51.8% of sales) from $1.06 billion (or 52.0% of sales) for the same period one year ago, representing an increase of 6%. Selling, general and administrative expenses (“SG&A”) for the second quarter increased to $702 million (or 32.3% of sales) from $673 million (or 33.1% of sales) for the same period one year ago, representing an increase of 4%. Operating income for the second quarter increased to $425 million (or 19.5% of sales) from $386 million (or 19.0% of sales) for the same period one year ago, representing an increase of 10%.

Net income for the second quarter ended June 30, 2016, increased $24 million, or 10%, to $258 million (or 11.8% of sales) from $234 million (or 11.5% of sales) for the same period one year ago. Diluted earnings per common share for the second quarter increased 16% to $2.65 on 97 million shares versus $2.29 on 102 million shares for the same period one year ago.

“We are proud to report another solid quarter, highlighted by an operating margin of 19.5% and a 16% increase in second quarter diluted earnings per share to $2.65, which exceeded the top of our guidance range and represents our 30th consecutive quarter of diluted earnings per share growth of greater than 15%,” commented Greg Henslee, O’Reilly’s President and CEO. “For the second quarter, our focus on customer service generated a 4.3% increase in comparable store sales, which was on top of a 7.2% increase from the second quarter of 2015 and was above the mid-point of our second quarter guidance range. This performance is the direct result of Team O’Reilly’s commitment to providing consistently excellent service to our customers, and I would like to thank our over 74,000 dedicated team members for their continued hard work and countless contributions to our ongoing success.”

Year-to-date financial results

Sales for the first six months of 2016 increased $335 million, or 9%, to $4.27 billion from $3.94 billion for the same period one year ago. Gross profit for the first six months of 2016 increased to $2.22 billion (or 52.1% of sales) from $2.05 billion (or 52.0% of sales) for the same period one year ago, representing an increase of 9%. SG&A for the first six months of 2016 increased to $1.38 billion (or 32.3% of sales) from $1.31 billion (or 33.3% of sales) for the same period one year ago, representing an increase of 5%. Operating income for the first six months of 2016 increased to $844 million (or 19.7% of sales) from $736 million (or 18.7% of sales) for the same period one year ago, representing an increase of 15%.

Net income for the first six months of 2016 increased $67 million, or 15%, to $513 million (or 12.0% of sales) from $446 million (or 11.3% of sales) for the same period one year ago. Diluted earnings per common share for the first six months of 2016 increased 20% to $5.24 on 98 million shares versus $4.35 on 103 million shares for the same period one year ago.

Henslee continued, “In the first half of 2016, we opened 89 net, new stores across 28 states and are on track to hit our target of 210 net, new stores by the end of the year. In May, we seamlessly opened our 27th distribution center in Selma, Texas, just outside of San Antonio. This new, 389,000 square foot, state-of-the-art facility allows our distribution Team to better support our stores in our robustly growing San Antonio and Austin metro markets and frees up capacity in our three existing Texas distribution centers, better positioning those facilities to support future store growth. Our ongoing investment in our distribution infrastructure creates capacity for future growth and reflects O’Reilly’s continued commitment to providing our customers unparalleled service with industry-leading parts availability.”

Share repurchase program

During the second quarter ended June 30, 2016, the company repurchased 2.1 million shares of its common stock, at an average price per share of $262.17, for a total investment of $544 million. During the first six months of 2016, the company repurchased 3.3 million shares of its common stock, at an average price per share of $259.14, for a total investment of $857 million. Subsequent to the end of the second quarter and through the date of this release, the company repurchased less than 0.1 million shares of its common stock, at an average price per share of $269.33, for a total investment of $4 million. The company has repurchased a total of 54.6 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 $113.94, for a total aggregate investment of $6.22 billion. As of the date of this release, the company had approximately $782 million remaining under its current share repurchase authorizations.

Second 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 six months ended June 30, 2016. Comparable store sales increased 4.3% for the second quarter ended June 30, 2016, on top of 7.2% for the same period one year ago. Comparable store sales increased 5.1% for the six months ended June 30, 2016, on top of 7.2% for the same period one year ago.

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