10-KPeriod: FY2017

O REILLY AUTOMOTIVE INC Annual Report, Year Ended Dec 31, 2017

Filed February 28, 2018For Securities:ORLY

Summary

O'Reilly Automotive, Inc. (ORLY) reported strong performance in its 2017 10-K filing, demonstrating resilience and continued growth in the automotive aftermarket industry. The company successfully expanded its store footprint, opening 190 net new stores to reach a total of 5,019 locations across 47 states, underscoring its aggressive growth strategy to consolidate a fragmented market. ORLY's dual-market strategy, catering to both do-it-yourself (DIY) and professional service provider customers, continues to be a key differentiator, with DIY customers contributing approximately 58% of sales and professional customers 42%. The company highlighted its competitive advantages, including superior customer service, technically proficient store personnel, and a robust, tiered distribution network, all contributing to consistent revenue and earnings growth. Financially, O'Reilly reported an increase in sales to $8.98 billion for 2017, up 4% from the previous year, driven by comparable store sales growth and contributions from new and acquired stores. Net income also saw a healthy increase of 9% to $1.13 billion. The company continued its commitment to shareholder returns through significant share repurchases, investing $2.2 billion in 2017. Despite challenges such as unseasonably mild weather impacting sales in certain periods, O'Reilly remains confident in its ability to gain market share and deliver value to its shareholders.

Financial Highlights

46 data points
Beta

Revenue

$8.98B

52.6% Gross Margin

Net Income

$1.13B

12.6% Net Margin

EPS (Diluted)

$0.84

Total Assets

$7.57B

Cash & Equivalents

$46.35M

Free Cash Flow

$937.75M

Financial Statements
Beta
Revenue$8.98B
Cost of Revenue$4.26B
Gross Profit$4.72B
SG&A Expenses$3.00B
Operating Income$1.73B
Interest Expense$91.35M
Net Income$1.13B
EPS (Basic)$0.85
EPS (Diluted)$0.84
Shares Outstanding (Basic)1.33B
Shares Outstanding (Diluted)1.34B

Key Highlights

  • 1Expansion of store network, opening 190 net new stores in 2017, bringing the total to 5,019 locations across 47 states.
  • 2Dual-market strategy remains effective, with DIY customers accounting for 58% of sales and professional customers for 42%.
  • 3Sales increased by 4% to $8.98 billion in 2017, supported by comparable store sales growth of 1.4% and contributions from new/acquired stores.
  • 4Net income grew by 9% to $1.13 billion in 2017, demonstrating strong profitability.
  • 5Significant share repurchase activity, with $2.2 billion invested in buybacks during 2017.
  • 6Company emphasizes its competitive advantages: superior customer service, technically proficient staff, and a strong distribution network.
  • 7Plans to open approximately 200 net new stores in 2018, continuing its aggressive expansion strategy.

Frequently Asked Questions

O'Reilly's primary growth strategy is centered on its 'dual market strategy,' serving both do-it-yourself (DIY) and professional service provider customers. This is complemented by aggressively opening new stores to consolidate the fragmented automotive aftermarket, selectively pursuing strategic acquisitions, and continually enhancing store design and customer experience. The company aims to be the dominant auto parts provider in its markets by offering superior customer service and value.

In 2017, O'Reilly reported a 4% increase in sales, reaching $8.98 billion, and a 9% increase in net income to $1.13 billion. Comparable store sales saw a modest increase of 1.4%. The company also continued its robust share repurchase program, investing $2.2 billion in repurchasing its own stock.

O'Reilly identifies several key competitive advantages: its proven ability to execute its dual market strategy, superior customer service delivered by technically proficient 'Professional Parts People,' a strategic regional tiered distribution network ensuring product availability, and an experienced management team. These factors are considered difficult for competitors to duplicate.

The company outlines several risks, including deteriorating economic conditions impacting customer demand, intense competition within the automotive aftermarket, sensitivity to regional economic and weather conditions, potential failure to achieve future growth targets, dependence on key personnel and suppliers, risks associated with acquisitions, and increased debt levels. Data security and environmental regulations are also mentioned as potential concerns.