O’Reilly Automotive(ORLY) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Comparable store sales increased by 2.9% for the full year 2024, with a diluted earnings per share (EPS) increase of 5.7% [8][75] - Fourth-quarter comparable store sales grew by 4.4%, driven by both professional and DIY segments [11][78] - The company faced a headwind of approximately 5% to fourth-quarter EPS growth due to a $35 million charge related to auto claims self-insurance liabilities [9][76] Business Line Data and Key Metrics Changes - The professional business delivered mid-single-digit comparable sales growth, while DIY grew just over 3%, marking the best quarterly result for DIY in 2024 [11][80] - Maintenance categories saw strong demand, while discretionary categories like tools and accessories experienced continued softness [12][81] - Average ticket values contributed positively to comparable sales growth, with same SKU inflation of just under 1% [17][85] Market Data and Key Metrics Changes - The automotive aftermarket faced broad-based pressure on consumers throughout 2024, impacting overall demand [12][80] - The company noted that the U.S. car park is growing, characterized by an increased average vehicle age, supporting durable demand in the automotive aftermarket [88][89] Company Strategy and Development Direction - The company plans to open 200 to 210 net new stores in 2025, reflecting confidence in balancing organic growth with greenfield growth [29][96] - Capital expenditures for 2024 were just over$ 1 billion, with guidance for 2025 set at $1.2 billion, focusing on store and distribution expansion [29][95] - The company aims to maintain a mix of 60% owned versus 40% leased stores in its new store openings [100][101] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about long-term fundamentals in the automotive aftermarket, despite caution regarding potential short-term economic shocks [90][91] - The company expects comparable store sales growth in 2025 to be in the range of 2% to 4% [87][92] - Management highlighted the importance of exceptional customer service and effective execution of the business model to drive results [91][92] Other Important Information - The fourth-quarter gross margin was 51.3%, consistent with the previous year, while the full-year gross margin was 51.2%, down six basis points from the prior year [37][105] - Free cash flow for 2024 was$ 2 billion, unchanged from 2023, with expectations for 2025 to be in the range of $1.6 billion to$ 1.9 billion [63][64] - The company repurchased 1.9 million shares in 2024 at an average price of $1,072, totaling an investment of$ 2.1 billion [66] Q&A Session Summary Question: What is the outlook for comparable store sales growth in 2025? - The company has established a guidance range for comparable store sales growth in 2025 at 2% to 4% [87][92] Question: How does the company plan to manage expenses in 2025? - The company anticipates prudent actions to manage expenses effectively in response to market conditions, while also investing in key capabilities [56][92] Question: What impact do tariffs have on the company's outlook? - The company has not incorporated any impact from potential tariff changes into its sales assumptions, as it remains too early to project the effects [93][94]