O REILLY AUTOMOTIVE INC Q4 FY2024 earnings call

• Comparable store sales: Fourth quarter 2024 grew 4.4%, full-year 2024 increased 2.9%. • EPS: Diluted earnings per share increased 5.7% in 2024 despite a $0.46 headwind from a fourth-quarter charge to adjust auto claims self-insurance liabilities. • Gross margin: Fourth-quarter gross margin was 51.3%, in line with Q4 2023. Full-year gross margin was 51.2%, down six basis points from prior year. • Capital expenditures: 2024 capital expenditures were just over $1 billion, with 2025 guidance at $1.2 billion, focused on store and distribution expansion. • Store network: Target of 200 to 210 net new store openings in 2025, with spread across over 35 states in the U.S. and growth in Mexico. • Supply chain: Investments in distribution centers, including new facilities in Atlanta and Stafford, Virginia, with ongoing efforts to enhance parts availability and distribution efficiencies.

In the fourth quarter of 2024, comparable store sales grew 4.4%. For the full year 2024, comparable store sales increased by 2.9%. The professional business delivered mid-single-digit comp growth, while DIY grew just over 3% in the fourth quarter, which was the best quarterly result for 2024. Average ticket and traffic dynamics contributed to sales growth, with ticket count growth being a larger contributor, led by the professional side, and DIY ticket counts also growing in the fourth quarter.

• Comparable store sales: 2025 guidance range 2% to 4%. • Gross margin: 2025 guidance range 51.2% to 51.7%. • EPS: 2025 earnings per share guidance $42.60 to $43.10, reflecting a 5.4% increase at midpoint. • Free cash flow: 2025 expected range $1.6 billion to $1.9 billion. • Quarterly comps: Expected relatively even throughout 2025 with minor differences due to headwinds in first and fourth quarters.

• Economic shocks: Potential short-term economic shocks like sustained high consumer prices, rapidly increasing interest rates, or energy cost spikes could impact results. • Tariffs: Uncertainty around potential tariffs on the supply chain, with current guidance excluding any impact as timing and magnitude are unclear. • Self-insurance liabilities: Adverse claim development from historic auto liability claims led to a significant charge in Q4 2024, which could continue to impact results if claim resolution costs remain high.

Q: Could you help us understand better sourcing exposure to China and Mexico, percent of COGS basis, and vendor price increase expectations?

A: Sourcing from China is in the mid-twenties percent, Mexico in the high teens. Vendors are being worked with to negotiate tariff impacts, and the company has diversified supply chain to reduce dependency on hotspots.

Q: What drove the decision to guide comp to 2-4% in 2025 versus often guiding 3-5% at the start of the year?

A: Cautious consumer sentiment, choppiness in business, and continued pressure on discretionary categories led to the revised guidance. The company remains confident in long-term fundamentals but is cautious about short-term economic factors.

Q: How does automation in distribution centers impact top line and labor savings?

A: Distribution centers have included goods to person automation, which helps with parts availability and accuracy. Benefits include improved efficiency and labor savings, but the impact varies by distribution center based on market and needs.

Q: What is the impact of gas and diesel prices on operating expenses?

A: Gas and diesel prices have a minor impact on operating expenses, typically not moving the needle significantly for the company-wide perspective unless they move substantially.