O’Reilly Reports 10% Top-Line, 6.9% Comp Sales Growth For Q1
By Gary Molinaro | May 7th, 2010 | Category: Greensheet News | No Comments »Springfield, MO-based O’Reilly Automotive had a good first quarter. Sales increased 10 percent to a record $1.28 billion, with comparable-store sales up 6.9 percent on top of a strong 5.7-percent increase from the first quarter of 2009. Both ticket average and ticket count contributed to the company’s comparable-store sales increase.
Management attributed the quarter’s strong sales performance to pent-up demand. “It is clear that we understand the amount of demand that was pent up as a result of the relatively soft sales our industry experienced for most of the winter. … We attributed the softness in the fourth quarter to the continued strain the economic conditions in the U.S. had placed on consumers’ budgets,” explained Greg Henslee, CEO and co-president. “We believe this was amplified during the holiday season as many spent their discretionary cash on gifts and holiday activities and deferred spending on auto repairs that didn’t need absolute immediate attention”
As it turned out, Henslee told analysts on a recent conference call, early spring weather arrived in many markets and sales in the last half of the quarter accelerated dramatically. “The stronger trends we saw in the last half of the quarter were present in the majority of our markets across the country,” he said. “We saw retail traffic in our stores, and our installer business picked up significantly.”
Gross profit increased from $542.67 million, or 46.6 percent of sales, to $618.35 million, or 48.3 percent of sales, representing an increase of 14 percent year-over-year. The improvement was driven by acquisition buying synergies, which were not in the comparable 2009 period. That’s because the majority of the new vendor deals were signed at the end of the first quarter/beginning of the second quarter in 2009. As a result, this will be the last significant non-comparable quarter for buying synergies.
Earnings rose 55 percent to a record $97.48 million, with diluted earnings per share (EPS) up 52 percent to $0.70. This was well ahead of both the company’s guidance calling for EPS of $0.56 to $0.60 and analysts’ consensus of $0.60.
“It would be difficult for us to forecast the expectation that sales will continue for the full second quarter at the strong pace we saw in the last half of the first quarter. However, we do anticipate continued solid business trends,” Henslee told analysts. “We’re off to a good start to the quarter in April and, as a result, are providing guidance for comparable-store sales in the range of 4 percent to 6 percent for both the second quarter and for the year.”
Management estimates diluted EPS for the second quarter of 2010 to range from $0.70 to $0.74 and gross profit, as a percent of sales, to range from 48.1 percent to 48.4 percent. “Where we end up in this range will be driven largely by how successful we are at adding commercial sales in the acquired stores, as commercial sales carry a lower gross profit percentage,” said CFO Tom McFall. “Based on our performance in the first quarter, we would anticipate being in the lower end of this range.”
O’Reilly also has raised its full-year EPS guidance from $2.50 to $2.56 up to $2.65 to $2.75.
During the first quarter, the company opened 49 new stores. Texas led the way with seven new stores, followed by Ohio, North Carolina and South Carolina with five each. The company also moved five older stores to new locations and had 12 major store renovation projects going on.
“We see a lot of opportunity for continued growth as our industry continues to consolidate,” Henslee said. “At the end of this year, we will have opened 150 net new stores but will still have the distribution capacity in existing facilities to add approximately 500 stores using our existing distribution methods. So, we won’t need to add any additional distribution capacity to support our new store growth until approximately late 2013 or 2014.”
As the result of a slower economy, O’Reilly is finding good sites for future expansion at reasonable rates.
“In regard to the CSK stores, we have completed individual store and market assessments and have a ‘stay’ or ‘relocation’ strategy for all stores,” said Ted Wise, co-president and chief operating officer. “We have also identified potential expansion opportunities in the underdeveloped markets and growth in new markets. Opening stores with our dual-market plan with the expanded product offering and daily distribution service to the store opened up new markets that would not have fit the CSK retail sales plan.” — Marc Vincent
