O'Reilly Automotive, Inc. 2026 Q3 Earnings Call

Thank you, Tom. Good morning, everyone, and thank you for joining us. During today's conference call, we will discuss our third quarter 2026 results and our updated outlook for the remainder of 2026. Before we begin this morning, I would like to remind everyone that our comments today contain certain forward-looking statements, and we intend to be covered by and we claim the protection under the Safe Harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You can identify these statements by forward-looking words such as estimate, may, could, will, believe, expect, would, consider, should, anticipate, project, plan, intend, or similar words.

The company's actual results could differ materially from any forward-looking statements due to several important factors described in the company's latest annual report on Form 10-K for the year ended December 31, 2025, and other recent SEC filings. The company assumes no obligation to update any forward-looking statements made during this call. At this time, I would like to introduce Brad Beckham.

Thanks, Jeremy. Good morning, everyone, and welcome to the O'Reilly Auto Parts third quarter conference call. Participating on the call with me this morning are Brent Kirby, our President, and Jeremy Fletcher, our Chief Financial Officer. Greg Henslee, our Executive Chairman, and David O'Reilly, our Executive Vice Chairman, are also present on the call. I'm excited to begin our call by thanking our outstanding team of professional parts people for their hard work and commitment to producing industry-leading results. We have over 96,000 team members across North America living our culture of excellent customer service, and I'm excited by the momentum our team has sustained. Our comparable store sales growth of 7.2% in the third quarter and 7.1% year-to-date demonstrate our team's ability to generate strong results even against very difficult comparisons.

Our third quarter 2026 results represent comparable store sales growth on a two-year stack basis of 12.8%, which is an acceleration to the growth we generated in the first half of the year. Our team's focus on profitable growth translated this strong top-line performance into a 14% increase in diluted EPS, on top of the 12% we delivered in the third quarter of last year. While we are pleased by these results, we are even more excited about the opportunities we have ahead of us and firmly believe that our focus on consistently strong execution will allow us to continue to compound these results. I'd like to start the discussion of our performance in the third quarter by walking through the details of our comparable store sales increase.

Our comp growth of 7.2% significantly surpassed our expectations for the quarter, and we were pleased to see contributions to our outperformance from both sides of our business. As we noted on our last call, we were pleased with the strong step-up in sales results in July as summer heat began to set in. This benefit was sustained throughout the quarter, and we generated consistently strong results against a supportive backdrop with the robust sales growth spread fairly evenly for each month of the quarter. We are also pleased with continued strength across our business thus far in October. Our performance in hot weather-related categories was very strong in the third quarter, which we attribute to both a favorable weather dynamic across our markets as well as a strong performance from our team to capture market share in these key categories.

However, these categories were not the sole driver of our outperformance, as we were able to capitalize on supportive demand and strong performance across the breadth of our business. Our professional business was the larger driver of our overall comparable store sales growth with a third quarter professional comp of slightly over 10%. However, both our professional and retail businesses contributed fairly evenly to our outperformance against our expectations. Our professional comp growth was split evenly between an increase in average ticket and increased transaction counts. Our team's ability to once again generate mid-single-digit growth in professional customer ticket counts is evidence of broad-based share gains in our professional business. We will always pursue market share with a disciplined mindset that ensures we appropriately prioritize industry-leading service and availability our teams work so hard to provide.

Our retail business also had a strong quarter with a mid-single-digit comparable store sales increase. While we did experience a low single-digit headwind in DIY transaction counts that we believe is evidence of some pressure on the overall consumer, we were pleased to see a continued prioritization of maintenance spend by our customers as well as strong demand in key hot weather categories. The pressure to DIY transaction counts were more than offset by increases in average ticket. Our average ticket in the third quarter included a benefit from same-SKU inflation of slightly over 4% in our combined DIY and professional businesses. This tailwind came in above our expectations, with the primary driver being petroleum-based products such as oil and lubricants.

Since these categories are a greater portion of sales on the DIY side of our business, we have a slightly higher inflationary benefit in DIY than we did for our professional business. We also want to highlight that our overall growth and average ticket exceeded the benefit from same-SKU inflation we realized in the third quarter, which reflects a continued benefit from parts complexity as well as positive dynamics in the composition of our customer tickets. Now I'd like to provide some color on our updated full-year comparable store sales guidance. We raised our full-year guidance from a range of 4%-6% to a range of 5.5%-6.5%. The primary driver for the increase was our outperformance in the third quarter.

We expect same-SKU inflation will continue to benefit our results in the fourth quarter but still anticipate a moderation in this benefit as we lap our largest same-SKU comparison in the fourth quarter of 2025. We consider pricing to be rational within the industry and could see some continued upside to our same-SKU expectations. However, the primary driver of our step-up in same-SKU inflation in the third quarter was tied to some of our more commodity-based categories that can have more fluid price changes. We are cognizant that our pricing benefits could subside as we finish out 2026 and remain cautious that the pressures consumers are facing could intensify. Aside from the short-term volatility these dynamics could cause, we still expect resilient demand within the industry and have confidence that the consistent execution of our team will drive share gains on both sides of the business.

Stepping back a bit to look at the overall backdrop in our fundamental drivers of demand, we have seen stable growth in vehicle miles driven, and the car park within the U.S. continues to grow and age. Keeping vehicles in safe and reliable operating condition is critical to the daily commuting needs of the majority of the population across our markets. Consumers simply don't have a choice when it comes to the repair and maintenance of their vehicles as the sole mode of transportation, whether they depend on our professional parts people to help diagnose their problem and get them the right parts for a job, or they rely on their trusted local professional service provider who is supported by our unmatched parts availability and unwavering customer service.

Either way, when it comes to maintenance or repair, our customers, both professional and DIY alike, need access to a broad range of parts and may need those parts quickly. Our execution in store and across our entire supply chain puts us in the best position to fill these needs quickly, reliably, and with the quality products our customers trust. Our ability to close out the year strong and generate industry-leading top-line results beyond the fourth quarter will be primarily driven by our ability to meet these needs and do so while providing excellent customer service. Before I turn the call over to Brent, I would like to take a moment to highlight our updated diluted earnings per share guidance. As noted in our press release, we have updated our EPS guidance to a range of $3.25-$3.35.

This incorporates our year-to-date performance and sales outlook, along with our gross margin and SG&A expectations for the fourth quarter, which Brent will discuss next. Brent will also provide some color on the tariff refunds we have received in the third quarter. At the midpoint, our current EPS guidance is an increase of approximately 2% from the midpoint of our previous guidance and a year-over-year increase of 11%. We are pleased our team continues to generate strong returns for our shareholders through executing on our long-held operating fundamentals. As I wrap up my prepared comments, I would like to once again thank the entire O’Reilly team across North America for their continued dedication to our company, our customers, and the strong performance in the third quarter. Now, I will turn the call over to Brent.

Thanks, Brad. I would also like to join Brad in congratulating Team O’Reilly on a strong performance in the third quarter and thank them for their commitment to our culture and our customers.