01—Abstract
Summary
Summary of the 10-K filed February 27, 2019. Cited figures are marked; the original filing is the authoritative source.
O'Reilly Automotive, Inc. (ORLY) reported solid performance for the fiscal year ending December 31, 2018, demonstrating continued growth and market expansion.
The company maintained its position as a leading specialty retailer in the automotive aftermarket by executing its "dual market strategy," effectively serving both do-it-yourself (DIY) and professional service provider customers. This strategy, coupled with a focus on superior customer service, technically proficient staff, and a robust distribution network, fueled sales growth and operational efficiency. The company also continued its aggressive store opening strategy, expanding its footprint across 47 states and investing in store enhancements and digital capabilities to improve the customer experience.
Financially, O'Reilly reported increased sales and net income, supported by positive comparable store sales growth and effective cost management. The company also actively engaged in share repurchases, returning value to shareholders.
While facing a competitive market and economic sensitivities, O'Reilly's experienced management team and strong competitive advantages position it well for continued success. The report highlights ongoing investments in infrastructure, including distribution centers, and a commitment to a "promote from within" culture for its employees, underscoring the company's long-term growth strategy and operational resilience.
02—Key points
Key Highlights
- O'Reilly Automotive operates a "dual market strategy," serving both DIY and professional service provider customers, with DIY customers representing approximately 57% of sales and professional service providers accounting for 43% in 2018.
- The company expanded its store network significantly, opening 200 net new stores in 2018, bringing the total to 5,219 stores across 47 states.
- Sales increased by 6% to $9.54 billion in 2018, driven by a 3.8% increase in comparable store sales.
- Net income rose by 17% to $1.32 billion in 2018, with diluted earnings per share increasing by 27% to $16.10.
- O'Reilly continued its share repurchase program, investing $1.7 billion in 2018 and repurchasing 6.1 million shares.
- The company's growth strategy includes aggressive new store openings, growing sales in existing stores, strategic acquisitions, enhancing store design, and improving the omnichannel customer experience.
- The automotive aftermarket industry is substantial, estimated at $296 billion, with O'Reilly's addressable market being approximately $93 billion.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, O Reilly Automotive Inc kept $0.14.
- Revenue$9.54B100.0%
- Cost of revenue−$4.50B47.2%
- Gross profit$5.04B52.8%
- Operating costs−$3.22B33.8%
- Operating income$1.82B19.0%
- Interest, other & tax−$490.7M5.1%
- Net income$1.32B13.9%
Where FY2018 revenue went
$9.54B- Cost of revenue: $4.50B, 47% of revenue
- SG&A: $3.22B, 34% of revenue
- Net income: $1.32B, 14% of revenue
- Interest, other & tax: $490.7M, 5.1% of revenue
Kept 14% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 27, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $9.54B$8.98B | +6.2% |
| Cost of Revenue | $4.50B$4.26B | +5.6% |
| Gross Profit | $5.04B$4.72B | +6.8% |
| SG&A Expenses | $3.22B$3.00B | +7.7% |
| Operating Income | $1.82B$1.73B | +5.2% |
| Interest Expense | $122.13M$91.35M | +33.7% |
| Net Income | $1.32B$1.13B | +16.8% |
| EPS (Basic) | $1.08$0.85 | +26.9% |
| EPS (Diluted) | $1.07$0.84 | +27.1% |
| Shares Outstanding (Basic) | 1.22B1.33B | −7.9% |
| Shares Outstanding (Diluted) | 1.23B1.34B | −8.1% |
05—Questions
Frequently Asked Questions
What is O'Reilly's core business strategy?
O'Reilly's core business strategy is a "dual market strategy" focused on serving both do-it-yourself (DIY) customers and professional service provider customers. This strategy is supported by a commitment to superior customer service, technically proficient store personnel, and a robust, tiered distribution network.
How did O'Reilly perform financially in 2018?
In 2018, O'Reilly reported a 6% increase in sales to $9.54 billion and a 17% increase in net income to $1.32 billion. Comparable store sales grew by 3.8%, and diluted earnings per share increased by 27% to $16.10, indicating strong financial performance.
What are O'Reilly's main growth drivers?
O'Reilly's growth is driven by several key strategies: aggressively opening new stores to consolidate the market, growing sales within existing stores through enhanced customer service, selectively pursuing strategic acquisitions, continually enhancing store design and location, and improving the omnichannel customer experience.
How does O'Reilly manage its inventory and distribution?
O'Reilly utilizes a strategic, regional, tiered distribution network that includes distribution centers (DCs) and Hub stores. This network allows for efficient inventory control and provides stores with same-day or overnight access to a broad selection of SKUs, ensuring high product availability for customers.
06—Continue