Auto parts and accessories retailer O’Reilly Automotive (NASDAQ:ORLY) missed Wall Street’s revenue expectations in Q1 CY2025 as sales rose 4% year on year to $4.14 billion. The company’s full-year revenue guidance of $17.55 billion at the midpoint came in 0.6% below analysts’ estimates. Its GAAP profit of $9.35 per share was 5.6% below analysts’ consensus estimates.
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Revenue: $4.14 billion vs analyst estimates of $4.17 billion (4% year-on-year growth, 0.9% miss)
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EPS (GAAP): $9.35 vs analyst expectations of $9.90 (5.6% miss)
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Adjusted EBITDA: $872.1 million vs analyst estimates of $908.5 million (21.1% margin, 4% miss)
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The company reconfirmed its revenue guidance for the full year of $17.55 billion at the midpoint
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EPS (GAAP) guidance for the full year is $43.15 at the midpoint, missing analyst estimates by 2.7%
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Operating Margin: 17.9%, down from 18.9% in the same quarter last year
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Free Cash Flow Margin: 11%, similar to the same quarter last year
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Locations: 6,416 at quarter end, up from 6,217 in the same quarter last year
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Same-Store Sales rose 3.6% year on year, in line with the same quarter last year
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Market Capitalization: $76.93 billion
O’Reilly’s first quarter results reflected a steady performance in its core auto parts business, with management highlighting the ongoing strength of its professional segment and a stable contribution from DIY customers. CEO Brad Beckham attributed comparable sales growth to increased ticket counts and persistent demand for maintenance and failure-related categories, while noting that discretionary spending remained under pressure amid economic uncertainty. He stressed the company’s ability to meet customer needs regardless of external volatility, stating that its industry-leading service and availability will take market share against any market backdrop.
Looking ahead, management reiterated its annual sales and margin guidance but expressed caution regarding the evolving tariff environment and broader macroeconomic factors. CFO Jeremy Fletcher explained that while the business is prepared to manage the impact of new trade developments, tariff-related cost changes remain difficult to quantify until further government decisions are finalized. Management reaffirmed its strategy to maintain competitive pricing and strong supplier relationships, aiming to balance cost pressures with market share gains.
O’Reilly’s management provided a detailed breakdown of the quarter’s underlying business trends and addressed the operational challenges posed by tariffs and supplier negotiations.
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Professional segment drives growth: The professional (commercial) customer base was the primary contributor to same-store sales gains, with management citing a mid-single-digit comp and consistent demand from repair shops and installers.
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DIY sales remain stable: The do-it-yourself segment (retail customers) also delivered positive results, supported by strong ticket counts and ongoing consumer focus on vehicle maintenance over discretionary purchases like accessories.
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Limited inflation impact so far: Same SKU (stock keeping unit) inflation contributed less than 0.5% to growth, with minimal effect from tariffs during the quarter. Management reported that most price changes were driven by product complexity, not external cost pressures.
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Tariff-related uncertainty: Leadership acknowledged the high degree of ambiguity around the timing and magnitude of potential tariff impacts, noting that ongoing negotiations with suppliers and evolving government decisions could influence future costs.
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SG&A expense above expectations: Store payroll and benefit costs, as well as maintenance and occupancy expenses, ran higher than anticipated. Management described these pressures as temporary and does not expect a material deviation from full-year expense guidance.
Management’s outlook for the year centers on balancing industry resilience with caution around external risks, particularly tariffs and consumer spending patterns.
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Tariff uncertainty persists: The potential for new or increased tariffs on imported auto parts—especially from China—remains a key risk factor, with the company actively monitoring government actions and supplier negotiations to mitigate cost impacts.
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Consumer maintenance trends: O’Reilly expects continued prioritization of vehicle maintenance and repair as consumers seek to avoid the expense of new vehicles, supporting demand for core product lines and professional services.
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Store expansion and supply chain: Plans to open new stores and maintain high parts availability in every market remain central to the growth strategy, with ongoing inventory investments and supply chain flexibility positioned as competitive advantages.
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Michael Lasser (UBS): Asked about the sales and earnings impact if current tariffs remain or escalate; management declined to quantify, citing fluid government policies and ongoing supplier negotiations.
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Simeon Gutman (Morgan Stanley): Inquired if O’Reilly would increase SG&A spending or adjust pricing to chase additional market share amid tariff-driven inflation; management emphasized maintaining discipline and does not plan major strategy changes in response.
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Gregory Melich (Evercore): Probed for updates on competitive dynamics and M&A opportunities; management noted some disruption among independent competitors but expects only modest tuck-in acquisitions near-term.
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Chris Bottiglieri (BNP): Sought detail on sourcing shifts away from China; management described gradual diversification to countries like India and Vietnam but is waiting for tariff clarity before accelerating changes.
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Kate McShane (Goldman Sachs): Questioned potential elasticity in maintenance and discretionary categories if prices rise sharply; management believes demand is historically resilient but acknowledged extreme inflation could test consumer behavior.
In the coming quarters, key factors to monitor include (1) the progression and impact of any new tariff policies on product costs and supplier negotiations, (2) O’Reilly’s ability to manage SG&A and maintain operating margins amid cost pressures, and (3) execution of new store openings and supply chain investments. Trends in consumer maintenance spending and any shifts in the competitive landscape will also be important indicators of future performance.
O’Reilly currently trades at a forward P/E ratio of 29.6×. Is the company at an inflection point that warrants a buy or sell? The answer lies in our free research report.
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