Tariffs Aren't O'Reilly's Biggest Problem, This Is

Company Overview - O'Reilly Automotive is a fast-growing auto parts retailer, with a stock price increase of over 41% in the past 12 months, significantly outperforming the S&P 500's 13% gain [1] - The company operates by selling parts to both professional and public customers, emphasizing its role as a retailer [2] Growth Metrics - O'Reilly Automotive's growth can be tracked through same-store sales and the opening of new locations, with same-store sales up 3.6% in the first quarter and 38 new locations opened [4] - The company's top line revenue increased by 4%, but net income fell year over year, despite earnings per share rising due to a stock repurchase program [5] Cost Challenges - A significant challenge for O'Reilly is rising costs, particularly related to employee expenses, which have increased faster than expected [6][7] - The company had approximately 90,600 employees in Q1 2024, increasing to 93,400 in Q1 2025, indicating a growing workforce that contributes to rising costs [8] Management Strategies - O'Reilly is currently managing rising costs by implementing a share buyback program, which has temporarily masked the impact of increased expenses on net income [10] - The company is aware that reducing employee numbers could negatively affect customer service and same-store sales, making it essential to manage employee-related costs while continuing to grow [9]