During today's conference call, we will discuss our third quarter 2025 results and our outlook for the remainder of the year. Team O'Reilly continues to win in each of our markets, and our team's dedication to excellent customer service drove the solid comparable store sales increase of 5.6% we generated in the third quarter. The combination of our strong sales results with a 9% increase in operating income and a 12% increase in diluted earnings per share demonstrate our team's focus on driving profitable growth. Our professional business continues to be the more significant driver of our sales results with an increase in comparable store sales of just over 10%.

We continue to be pleased with the strength in our pro-ticket count growth, which was the primary driver of our professional comp increase and the biggest contributor to our outperformance relative to our expectations. We remain confident that the professional sales growth our teams are delivering is the result of share gains, and as we continue to be the supplier of choice for our professional customers. As we've anticipated coming into the third quarter, we saw a significant ramp in tariff-driven acquisition cost increases and made appropriate adjustments to selling prices. When looking at category dynamics on the professional side of our business, we are seeing very strong performance across both failure and maintenance-related categories and are pleased with the resiliency of customer demand.

Now I would like to provide some color on our updated full-year comparable store sales guidance. As noted in yesterday's press release, we updated our guidance from the previous range of 3%-4.5% to a range of 4%-5%. At the midpoint, our full-year range reflects our outlook when factoring in current sales volumes as we progress through September and thus far into October. Today, I will start by discussing our third quarter gross margin and SG&A results, as well as provide an update on capital expansion and our updated outlook on these items.

What went well
  • O'Reilly generated a comparable store sales increase of 5.6% in the third quarter, at the high end of expectations, with positive comps on both sides of the business in each month.
  • The professional business grew comparable store sales just over 10%, driven primarily by pro-ticket count growth, which management attributes to broad-based market share gains.
  • Operating income increased 9% and diluted earnings per share increased 12%, demonstrating profitable growth.
  • Gross margin of 51.9% rose 27 basis points year-over-year, in line with expectations, with the customer-mix headwind offset by supply chain management and distribution productivity.
  • The company opened 55 net new stores in Q3 across the U.S. and Mexico (160 year-to-date), remains on track for 200-210 net new stores in 2025, and is beginning to service stores from its new Stafford, Virginia distribution center in Q4.
  • Management characterized the supply chain as at its healthiest point since the pandemic, with robust in-stock availability and a diversified supplier base.
What went wrong
  • DIY comparable store sales grew only low single digits, driven by average ticket benefits but partially offset by pressure to ticket counts.
  • Modest pressure to DIY transaction counts emerged midway through the quarter, reflecting an initial short-term consumer reaction to rising price levels, with some deferral seen in larger-ticket jobs.
  • SG&A per store growth was 4%, at the top end of expectations, driven by sales-related expenses and inflationary pressures centered on medical and casualty insurance programs.
  • Full-year SG&A per store growth is now expected to come in at or slightly above the top end of the 3.5% full-year guide due to inflation.

Guidance Changes

MetricPeriodCurrent guidance
Comparable store salesFY20254%-5% (Raised)
Same-skew inflation benefitQ4 2025Mid-single-digit (New)
Gross marginFY202551.2%-51.7% (Maintained)
SG&A per store growthFY2025At or slightly above the top end of 3.5% (Raised)
Operating marginFY202519.2%-19.7% (Maintained)
Net new store openingsFY2025200-210 (Reaffirmed)
Net new store openingsFY2026225-235 (including U.S., Mexico, Puerto Rico, and Canada) (New)

Performance Breakdown

MetricYoYNote
Comparable store sales +5.6% Professional comps just over 10% on ticket-count-driven share gains, plus average ticket benefits from same-skew inflation, partially offset by DIY ticket-count pressure.
Operating income +9% Strong sales performance with disciplined expense management.
Diluted EPS +12% Operating income growth combined with share repurchase benefit.
Gross margin +27 bps to 51.9% Prudent supply chain management and distribution productivity offsetting the professional customer-mix headwind.
Professional comparable store sales + just over 10% Pro-ticket count growth and broad-based share gains across market areas.
Same-skew inflation just over 4% Significant ramp in tariff-driven acquisition cost increases with corresponding selling price adjustments, felt evenly on both sides of the business.

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
Tariff-driven inflation—Just over 4% same-skew inflation in Q3 with a significant tariff-driven cost ramp; mid-single-digit benefit expected in Q4; management believes the lion's share of cost impacts is now reflectedPeaking
DIY consumer / price elasticityDIY in line with expectations in July after June pressureModest mid-quarter pressure to DIY ticket counts and deferral of larger-ticket jobs, viewed as early short-term reaction; no trade-down observedSoftening
Professional business strength—Very strong across failure and maintenance categories; professional customers less economically constrained and less reactive to inflationResilient
Store expansion / international2025 target of 200-210 stores2026 target of 225-235 net new stores, with Canada expansion starting in 2026 and continued measured growth in MexicoAccelerating
Supplier health / First Brands—Industry supplier health described as best since the pandemic; First Brands is a bit more than 3% of COGS, mitigated by dual/triple/quadruple sourcing and over 50% proprietary brand revenueStable
SG&A / cost inflationElevated SG&A per store for roughly two yearsQ3 SG&A per store up 4% on medical and casualty insurance inflation; full-year now at or slightly above top end of 3.5% guideElevated

Q&A Summary

On the 4% same-skew inflation, does seeing the lion's share mean none remains, or are there residuals over the next couple of quarters?
Fletcher said a same-skew tailwind should continue into Q4 and Q1 in the mid-single-digit range; most of the cost from current tariff regimes has flowed through and the major pricing adjustments are behind them, with no expectation of the same level of substantial incremental changes seen earlier in 2025.
What has historical price elasticity looked like on the DIY side?
Beckham said past economic shocks have produced some deferral, particularly in larger-ticket jobs like chassis work that can be put off for weeks or months, while metal-on-metal brake jobs must be done; Q3 showed modest deferral of larger-ticket DIY jobs for the first time this year, but maintenance categories like oil, filters, and fluids remained strong.
Why isn't the Q4 comp higher than the mid-single-digit inflation you expect, given the elasticity trend?
Kirby said many factors feed the implied Q4 guide, including the most difficult comparison of the year and a cautious consumer view; the same-skew benefit was net incremental in Q3 and nothing about the start of Q4 indicates a changing environment, so they remain cautious but feel good about overall trends.
What are the latest thoughts on U.S. store potential and whether international could bend the unit growth rate higher?
Beckham said the company keeps raising its view of U.S. store potential as industry consolidation continues, and sees Mexico as a large mid-to-long-term opportunity and Canada as an untapped market beginning in 2026; new store cohorts are performing well, anchored by the ability to staff stores with strong teams.
Is there exposure to the First Brands situation, and any geographic performance differences?
Beckham said there were no material regional differences in Q3. Kirby said First Brands is a bit more than 3% of COGS and not material given dual/triple/quadruple sourcing and over 50% proprietary-brand revenue, with long-standing relationships with the underlying brands and backfill options, so no material disruption is expected.
With mid-single-digit Q4 inflation likely the peak, is a mid-single-digit comp as good as it gets for O'Reilly?
Kirby said most of the expected benefit would be in Q4 under the current tariff environment, but inflation has not historically driven the business; O'Reilly remains bullish on consolidating the industry and gaining share with only ~10% North American share, noting prior years produced similar results in line with its long-term grind-it-out growth rate.

More on O Reilly Automotive Inc

Reported 2025-10-23 · figures from the O Reilly Automotive Inc Q3 2025 earnings call.

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