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O REILLY AUTOMOTIVE INC

ORLY
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Business Summary

O'Reilly Automotive, Inc. operates as a specialty retailer of automotive aftermarket parts, tools, supplies, equipment, and accessories across North America, selling products to both do-it-yourself (DIY) and professional service provider customers through its dual market strategy. The U.S. automotive aftermarket industry is estimated to be approximately $435 billion according to the Auto Care Association, and the company estimates its U.S. addressable market within this industry is approximately $165 billion to $175 billion , which includes the auto parts share of professional service provider sales at wholesale and DIY sales at retail. The company does not sell tires or perform for-fee automotive repairs or installations.

The sale of automotive aftermarket items is highly competitive, and O'Reilly competes primarily with national retail and wholesale automotive parts chains such as AutoZone, Inc., Advance Auto Parts, CARQUEST, and NAPA, as well as regional chains, wholesalers or jobber stores, automobile dealers, and mass merchandisers and online retailers like Wal-Mart Stores, Inc. and Amazon.com, Inc. The company believes its effective dual market strategy, superior customer service, technically proficient store personnel, strategic distribution network, and experienced management team make up its key competitive advantages that cannot be easily duplicated. In 2025, the company derived approximately 50% of its sales from DIY customers and approximately 50% of its sales from professional service provider customers.

The company generates revenue through the sale of automotive aftermarket parts, tools, supplies, equipment, and accessories to DIY and professional service provider customers. Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied, generally when the customer takes possession of the merchandise. The company maintains a retail loyalty program named O'Reilly O'Rewards, which represents a performance obligation, and records a deferred revenue liability based on a breakage adjusted, estimated redemption rate. Product sales of automotive aftermarket parts are the only material source of revenue for the company.

The company's stores carry an extensive product line including new and remanufactured automotive hard parts and maintenance items such as alternators, batteries, brake system components, belts, chassis parts, driveline parts, engine parts, fuel pumps, hoses, starters, temperature control, water pumps, antifreeze, appearance products, engine additives, filters, fluids, lighting, oil, and wiper blades, as well as accessories like floor mats, seat covers, and truck accessories. The merchandise generally consists of nationally recognized name brand products such as AC Delco, Armor All, Bosch, Castrol, Denso, Dorman, Fel-Pro, Gates Rubber, Lucas Oil, Mobil1, Monroe, NGK, Pennzoil, Prestone, Standard, STP, Turtle Wax, Valvoline, and Wix, and a wide selection of proprietary private label products under brands including BesTest, BrakeBest, Cartek, Import Direct, MasterPro, MicroGard, Murray, Omnispark, O'Reilly Auto Parts, Precision, Power-Torque, Super-Start, Syntec, and Ultima. The company's proprietary private label products are produced by respected automotive manufacturers and meet or exceed original equipment manufacturer specifications.

The company offers many enhanced services and programs to customers, including battery diagnostic testing, battery, wiper, and bulb replacement, check engine light code extraction through VeriScan technology, referrals to trusted local repair shops, custom hydraulic hoses, drum and rotor resurfacing, electrical and module testing, a loaner tool program, professional paint shop mixing and related materials, and used oil, oil filter, and battery recycling. The company operates 32 distribution centers (DCs) that typically provide stores with same-day or overnight access to over 156,000 stock keeping units (SKUs), and 399 Hub stores that provide delivery service and same-day access to an average of 63,000 SKUs, with Hubs in select markets carrying up to approximately 115,000 SKUs. More than 95% of the company's stores receive multiple same-day deliveries and deliveries on weekends of hard to find parts from its DCs and Hub stores.

During 2025, the company opened 207 net, new stores, relocated 35 stores, and performed minor to major updates or renovations to approximately 700 additional stores. The company also opened a new DC in Stafford, Virginia during 2025. On June 10, 2025, the company completed a 15-for-1 forward stock split of its common stock. During the year ended December 31, 2025, the company repurchased 22,728 shares of common stock for $2,096,962,000 , including fees, and paid $18,720,000 in excise tax on share repurchases. The company also had net borrowings on its commercial paper program of $488,786,000 during the year.

For the fiscal year ended December 31, 2025, total sales increased $1.07 billion, or 6%, to $17,781,992,000 from $16,708,479,000 in 2024. Comparable store sales increased 4.7% in 2025 compared to 2.9% in 2024. Gross profit increased 7% to $9,174,141,000 (or 51.6% of sales) from $8,554,489,000 (or 51.2% of sales) in 2024. Operating income increased 6% to $3,460,612,000 (or 19.5% of sales) from $3,251,157,000 (or 19.5% of sales) in 2024. Net income increased to $2,538,209,000 (or 14.3% of sales) from $2,386,680,000 (or 14.3% of sales) in 2024. Diluted earnings per share increased 10% to $2.97 on 855,919,000 shares from $2.71 on 880,572,000 shares in 2024.

Business Outlook

The company plans to open 225 to 235 net, new stores in 2026. The costs associated with the expected openings of owned store locations in 2026, including the cost of land acquisition, building construction, fixtures, vehicles, net inventory investment, and computer equipment, are estimated to average approximately $3.2 million to $3.5 million per store. The company also plans to expand its Lakeland, Florida, DC in 2026 and open a new DC in the Fort Worth, Texas area in 2028.

The company intends to continue to consolidate the fragmented automotive aftermarket by aggressively opening new stores, growing sales in existing stores, and selectively pursuing strategic acquisitions that will strengthen its position as a leading automotive aftermarket parts supplier in existing markets and provide a springboard for expansion into new domestic and international markets. The company's Omnichannel growth strategies are focused on offering customers an enhanced and seamless research and buying experience through digital platforms including www.OReillyAuto.com, www.OReillyPro.com, and the O'Reilly Pro mobile application. The company also plans to continue to enhance its distribution network through the engineering, design, expansion, or relocation of new or current DCs, continue to utilize routing software to enhance logistics efficiencies, continue to enhance labor management software to improve DC productivity, and continue to refine best practices in all DCs.

The increase in gross profit as a percentage of sales for the year ended December 31, 2025, was due to improved acquisition costs and distribution operating efficiencies, partially offset by a greater percentage of total sales mix being generated from professional service provider customers, which carry a lower gross margin percentage than DIY sales. The increase in SG&A as a percentage of sales for the year ended December 31, 2025, was principally due to broad inflationary pressure in costs, primarily relating to medical and casualty insurance programs, and enhancements to store-level compensation and benefits.

As part of continuing efforts to enhance the distribution network in 2026, the company plans to make proven, return-on-investment based capital enhancements to material handling equipment in DCs, including conveyor systems, picking modules, lift equipment, and computer hardware, and continue to augment its robust distribution network through the use of strategically located Hubs. The company also plans to invest in its people to continue providing a safe working environment. The company's DC network provides a growth capacity of approximately 400 to 550 domestic stores.

Capital expenditures for the year ended December 31, 2025, were $1,168,815,000 , compared to $1,023,387,000 in 2024. The increase in capital expenditures was primarily due to distribution enhancement and expansion projects and an increase in investments in new store growth. The company's share repurchase program authorizations that currently have capacity are scheduled to expire on November 22, 2027 , and November 18, 2028 . As of December 31, 2025, the maximum dollar value of shares that may yet be purchased under the programs was $2,398,851,000 .

The decrease in net cash provided by operating activities in 2025 compared to 2024 was primarily due to the timing of payment for transferrable federal renewable energy tax credits, partially offset by an increase in operating income. The increase in total other expense for the year ended December 31, 2025, was the result of increased interest expense on higher average outstanding borrowings. The company's provision for income taxes for the year ended December 31, 2025, increased 7% to $701,962,000 (21.7% effective tax rate) from $658,384,000 (21.6% effective tax rate) in 2024, primarily due to higher taxable income and lower excess tax benefits from share-based compensation.

The company faces headwinds from deteriorating economic conditions that may adversely impact demand for its products, reduce access to credit, and cause financial hardship for customers and others with which it does business. The automotive aftermarket business is highly competitive, and the company may have to risk its capital to remain competitive. The company's business is sensitive to global, national, and regional economic and weather conditions and natural disasters that could impact its costs and sales. Changes in vehicle technology used by original equipment manufacturers on future vehicles, including but not limited to electric, hybrid, and internal combustion engines, may result in less frequent repairs, parts lasting longer, or elimination of certain repairs.

A change in the relationship with any of the company's key suppliers, the limited supply or unavailability of key products, supply chain disruptions, or changes in trade policies could affect the company's financial health. The company purchases automotive products in substantial quantities from over 655 suppliers, the five largest of which accounted for approximately 23% of total purchases in 2025. The largest supplier in 2025 accounted for approximately 8% of total purchases and the next four largest suppliers each accounted for approximately 3% to 5% of total purchases. The company has no long-term contracts with material purchase commitments with any of its suppliers.

Risk Factors

Deteriorating economic conditions may adversely impact demand for products, reduce access to credit, and cause financial hardship for customers, which could adversely impact business, results of operations, financial condition, and cash flows. The automotive aftermarket business is highly competitive, and some competitors are larger with greater financial resources, while online competitors may have a lower cost structure, creating pricing pressure. A change in the relationship with any of the company's key suppliers, the limited supply or unavailability of key products, supply chain disruptions, or changes in trade policies could affect financial health, as the five largest suppliers accounted for approximately 23% of total purchases in 2025. The company's debt levels could adversely affect cash flow and prevent it from fulfilling its obligations, with total debt of $6,016,904,000 as of December 31, 2025. A downgrade in the company's credit rating would impact its cost of capital and could limit access to attractive supplier financing programs. Damage, failure, or interruptions of information technology systems, including from cyber-attacks, could adversely affect business operations and results.

Management Priorities

Management's message emphasizes confidence in the company's ability to continue to gain market share in existing markets and grow the business in new markets by focusing on the dual market strategy and core O'Reilly values, including hard work, superior customer service, and expense control. The company's mission is to be the dominant auto parts provider in all the markets it serves by providing a higher level of customer service and a better value position than competitors to both DIY and professional service provider customers. Management highlights the company's 33 consecutive years of record revenues and earnings and positive comparable store sales results since becoming a public company in April of 1993. The strategic priorities emphasized for the period ahead include aggressively opening 225 to 235 net, new stores in 2026, growing sales in existing stores, selectively pursuing strategic acquisitions, continually enhancing store design and location, and executing Omnichannel growth strategies. Management also notes the company's plan to expand its Lakeland, Florida, DC in 2026 and open a new DC in the Fort Worth, Texas area in 2028.

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — Industry Environment
  2. [2] Item 1, Business — Industry Environment
  3. [3] Item 1, Business — Competitive Advantages
  4. [4] Item 1, Business — Competitive Advantages
  5. [5] Item 1, Business — Distribution Systems
  6. [6] Item 1, Business — Competitive Advantages
  7. [7] Item 1, Business — Competitive Advantages
  8. [8] Item 1, Business — Competitive Advantages
  9. [9] Item 1, Business — Competitive Advantages
  10. [10] Item 1, Business — Competitive Advantages
  11. [11] Item 1, Business — Growth Strategy
  12. [12] Item 1, Business — Growth Strategy
  13. [13] Item 1, Business — Growth Strategy
  14. [14] Item 1, Business — General Information
  15. [15] Item 8, Note 11 — Share Repurchase Program
  16. [16] Item 8, Consolidated Statements of Shareholders' Equity
  17. [17] Item 8, Consolidated Statements of Shareholders' Equity
  18. [18] Item 8, Consolidated Statements of Cash Flows
  19. [19] Item 7, MD&A — Results of Operations
  20. [20] Item 7, MD&A — Results of Operations
  21. [21] Item 7, MD&A — Results of Operations
  22. [22] Item 7, MD&A — Results of Operations
  23. [23] Item 7, MD&A — Results of Operations
  24. [24] Item 7, MD&A — Results of Operations
  25. [25] Item 7, MD&A — Results of Operations
  26. [26] Item 7, MD&A — Results of Operations
  27. [27] Item 7, MD&A — Results of Operations
  28. [28] Item 7, MD&A — Results of Operations
  29. [29] Item 7, MD&A — Results of Operations
  30. [30] Item 7, MD&A — Results of Operations
  31. [31] Item 7, MD&A — Results of Operations
  32. [32] Item 7, MD&A — Results of Operations
  33. [33] Item 7, MD&A — Results of Operations
  34. [34] Item 7, MD&A — Results of Operations
  35. [35] Item 7, MD&A — Results of Operations
  36. [36] Item 8, Consolidated Statements of Income
  37. [37] Item 7, MD&A — Results of Operations
  38. [38] Item 8, Consolidated Statements of Income
  39. [39] Item 1, Business — Growth Strategy
  40. [40] Item 7, MD&A — Liquidity and Capital Resources
  41. [41] Item 2, Properties
  42. [42] Item 7, MD&A — Liquidity and Capital Resources
  43. [43] Item 7, MD&A — Liquidity and Capital Resources
  44. [44] Item 5, Issuer Purchases of Equity Securities
  45. [45] Item 5, Issuer Purchases of Equity Securities
  46. [46] Item 5, Issuer Purchases of Equity Securities
  47. [47] Item 7, MD&A — Results of Operations
  48. [48] Item 7, MD&A — Results of Operations
  49. [49] Item 7, MD&A — Results of Operations
  50. [50] Item 7, MD&A — Results of Operations
  51. [51] Item 1, Business — Products and Purchasing
  52. [52] Item 1, Business — Products and Purchasing
  53. [53] Item 1, Business — Products and Purchasing
  54. [54] Item 1, Business — Products and Purchasing
  55. [55] Item 1, Business — Products and Purchasing
  56. [56] Item 8, Consolidated Balance Sheets
  57. [57] Item 1, Business — Growth Strategy
  58. [58] Item 8, Consolidated Statements of Income
  59. [59] Item 8, Consolidated Statements of Income
  60. [60] Item 8, Consolidated Statements of Income
  61. [61] Item 8, Consolidated Statements of Income
  62. [62] Item 8, Consolidated Statements of Income
  63. [63] Item 8, Consolidated Statements of Income
  64. [64] Item 8, Consolidated Statements of Income
  65. [65] Item 8, Consolidated Statements of Income
  66. [66] Item 8, Consolidated Statements of Income
  67. [67] Item 7, MD&A — Results of Operations
  68. [68] Item 8, Consolidated Statements of Income
  69. [69] Item 7, MD&A — Results of Operations
  70. [70] Item 8, Consolidated Statements of Income
  71. [71] Item 7, MD&A — Results of Operations
  72. [72] Item 8, Consolidated Statements of Income
  73. [73] Item 7, MD&A — Results of Operations
  74. [74] Item 7, MD&A — Liquidity and Capital Resources
  75. [75] Item 7, MD&A — Liquidity and Capital Resources
  76. [76] Item 8, Consolidated Balance Sheets
  77. [77] Item 8, Consolidated Balance Sheets
  78. [78] Item 8, Consolidated Balance Sheets
  79. [79] Item 8, Consolidated Balance Sheets
  80. [80] Item 7, MD&A — Results of Operations
  81. [81] Item 7, MD&A — Results of Operations
  82. [82] Item 7, MD&A — Results of Operations
  83. [83] Item 7, MD&A — Results of Operations

Analysis on 6/21/2026