O’Reilly Automotive(US:ORLY)2022-07-28 18:47Financial Data and Key Metrics Changes - In Q2 2022, diluted earnings per share (EPS) was $8.78, a 5% increase compared to Q2 2021, and a compounded annual growth rate of 25% compared to 2019 [10][38] - Gross margin for Q2 2022 was 51.3%, a decrease of 136 basis points from Q2 2021, primarily due to the rollout of the professional pricing initiative and higher mix of professional business [35][36] - The company revised its full-year EPS guidance to a range of $31.25 to $31.75, reflecting a 1% increase compared to 2021 [38] Business Line Data and Key Metrics Changes - Comparable store sales increased by 4.3% in Q2 2022, following increases of 9.9% and 16.2% in Q2 2021 and Q2 2020, respectively, resulting in a three-year stack increase of 30.4% [8][9] - The DIY segment faced pressures with ticket counts declining due to high fuel prices and inflation, leading to slightly negative comparable store sales for the quarter [14][17] - The professional segment saw low double-digit comparable store sales growth, driven by increases in both ticket counts and average ticket size [18][19] Market Data and Key Metrics Changes - The company noted a stabilization in business as the quarter progressed, despite initial headwinds from delayed spring and rising fuel prices [12][14] - The average inventory per store was $679,000, up 7% from the beginning of 2022 and the same time last year [61] - The company opened 62 new stores in Q2 2022, bringing the year-to-date total to 116 new store openings [64] Company Strategy and Development Direction - The company aims to continue growing its professional customer business, which is expected to be a larger driver of growth in 2022 [19][30] - The professional pricing initiative is seen as a key factor in driving sales growth and enhancing competitive advantages [50][51] - The company remains focused on maintaining high standards of customer service to build long-term relationships and reinforce its market position [44][60] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the fundamental strength of the industry despite short-term demand impacts due to economic challenges [23][24] - The company anticipates that necessary vehicle maintenance and repairs will remain a priority for consumers, even in tough economic conditions [24][26] - The revised comparable store sales guidance for the year is set at 3% to 5%, reflecting solid growth over 2021 [32][33] Other Important Information - Free cash flow for the first half of 2022 was $1.2 billion, down from $1.5 billion in the same period of 2021 [74] - The company executed a successful debt transaction, issuing $850 million of 10-year senior notes at a rate of 4.7% [78] - The company repurchased 2.2 million shares in Q2 2022, totaling $1.4 billion, and has repurchased 3.8 million shares year-to-date for a total investment of $2.4 billion [79] Q&A Session Summary Question: Impact of same-SKU inflation on transactions - Management indicated that while same-SKU inflation is moderating, they do not expect a corresponding increase in transactions to drive steady growth [82][84] Question: Expectations for DIY business in the second half - Management expects the DIFM business to outperform DIY, with uncertainty on whether DIY will improve depending on macroeconomic conditions [88] Question: July performance compared to Q2 - Management noted that July sales trends have improved relative to expectations, but they remain cautious about overreacting to short-term data [92][94] Question: Geographic performance differences - Management reported consistency across regions, with minor softness noted in Northern California and the Pacific Northwest due to fuel prices [117] Question: Shift towards private label products - Management confirmed that private label products now account for about 50% of overall volume, with a significant increase in the hard parts category [119]