01—Abstract
Summary
Summary of the 10-K filed February 28, 2018. Cited figures are marked; the original filing is the authoritative source.
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%a 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 billionb 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 billionc 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.
02—Key points
Key Highlights
- Expansion of store network, opening 190 net new stores in 2017, bringing the total to 5,019 locations across 47 states.
- Dual-market strategy remains effective, with DIY customers accounting for 58% of sales and professional customers for 42%.
- Sales increased by 4% to $8.98 billion in 2017, supported by comparable store sales growth of 1.4% and contributions from new/acquired stores.
- Net income grew by 9% to $1.13 billion in 2017, demonstrating strong profitability.
- Significant share repurchase activity, with $2.2 billion invested in buybacks during 2017.
- Company emphasizes its competitive advantages: superior customer service, technically proficient staff, and a strong distribution network.
- Plans to open approximately 200 net new stores in 2018, continuing its aggressive expansion strategy.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, O Reilly Automotive Inc kept $0.13.
- Revenue$8.98B100.0%
- Cost of revenue−$4.26B47.4%
- Gross profit$4.72B52.6%
- Operating costs−$3.00B33.4%
- Operating income$1.73B19.2%
- Interest, other & tax−$591.6M6.6%
- Net income$1.13B12.6%
Where FY2017 revenue went
$8.98B- Cost of revenue: $4.26B, 47% of revenue
- SG&A: $3.00B, 33% of revenue
- Net income: $1.13B, 13% of revenue
- Interest, other & tax: $591.6M, 6.6% of revenue
Kept 13% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 28, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $8.98B$8.59B | +4.5% |
| Cost of Revenue | $4.26B$4.08B | +4.2% |
| Gross Profit | $4.72B$4.51B | +4.7% |
| SG&A Expenses | $3.00B$2.81B | +6.6% |
| Operating Income | $1.73B$1.70B | +1.5% |
| Interest Expense | $91.35M$70.93M | +28.8% |
| Net Income | $1.13B$1.04B | +9.3% |
| EPS (Basic) | $0.85$0.72 | +17.9% |
| EPS (Diluted) | $0.84$0.72 | +18.1% |
| Shares Outstanding (Basic) | 1.33B1.43B | −7.4% |
| Shares Outstanding (Diluted) | 1.34B1.45B | −7.5% |
05—Questions
Frequently Asked Questions
What is O'Reilly's primary strategy for growth?
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.
How did O'Reilly perform financially in 2017?
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.
What are O'Reilly's key competitive advantages?
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.
What are the main risks facing O'Reilly according to the filing?
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.
06—Continue