During today's conference call, we will discuss our first quarter 2026 results and our updated outlook for 2026. Their hard work and absolute dedication to excellent customer service produced a strong start to 2026 for O'Reilly, with an 8.1% increase in comparable store sales. Our team successfully translated these robust sales results into an impressive 14% increase in operating profit through our focus on profitable growth and expense control. We coupled this strong operating performance with the return of excess capital through our share repurchase program to deliver a 16% increase in diluted earnings per share in the quarter.

Our comp growth of 8.1% solidly surpassed our expectations, and we were pleased to see above-plan contributions from both sides of our business in the quarter. This outperformance was driven by better-than-expected growth in ticket counts on both sides of the business. Today, I will further discuss our first quarter gross margin and SG&A results and provide an update on the progress toward our expansion and capital investment plans for 2026. Our first quarter gross margin of 51.5% was a 19 basis point increase from the first quarter of 2025, which was in line with our expectations.

The acquisition cost environment remains stable and the pricing environment continues to be rational across our industry. Additionally, at this point, neither our first quarter results nor our outlook include any benefit from tariff refunds. However, we did not see a material impact in the first quarter and have not adjusted our full year outlook assumptions for these factors. At this stage, we believe we have the ability to manage the current dynamics surrounding product acquisition cost and freight within our full-year guidance range.

What went well
  • O'Reilly delivered a strong start to 2026 with an 8.1% increase in comparable store sales, above expectations, with above-plan contributions from both professional and DIY sides of the business.
  • Total sales grew 10.2% to a double-digit increase, with the professional business posting its third straight quarter of double-digit comps and DIY generating a mid-single-digit comp.
  • Operating profit rose 14% through a focus on profitable growth and expense control, and the company generated 34 basis points of SG&A leverage despite elevated sales volumes.
  • Diluted EPS increased 16%, aided by the share repurchase program; the company repurchased 10 million shares at an average price of $92.45 for $923 million in the quarter.
  • Gross margin rose 19 basis points year-over-year to 51.5%, in line with expectations, as acquisition cost reductions and improved distribution-cost leverage offset seasonal product mix pressure.
  • Free cash flow was $785 million versus $455 million a year earlier, driven by operating income growth, lower net inventory, and CapEx timing; private label penetration climbed above 50% of total revenue and 59 net new stores opened across the U.S., Mexico, and Canada.
What went wrong
  • Total SG&A dollar spend came in at the higher end of expectations due to incremental spend to support elevated sales volumes, producing average SG&A per store growth of 5.5%, which was more pressured year-over-year given comparisons.
  • Year-over-year SG&A growth continued to reflect heightened insurance and other liability exposure that has been a pressure for several quarters.
  • Management noted potential disruption to certain categories, particularly motor oil, and possible freight cost pressure from the conflict in Iran and constrained global oil supply, though no material impact was seen in Q1.
  • April sales moderated somewhat off the strength seen in March.

Guidance Changes

MetricPeriodCurrent guidance
Total revenuesFY2026$18.7B-$19.0B (unchanged) (steady)
Gross marginFY202651.5%-52.0% (maintained) (steady)
Operating profit marginFY202619.3%-19.8% (raised 10 bps) (higher)
SG&A per store growthFY2026approximately 3%-4%
Effective tax rateFY202622.6% (unchanged) (steady)
Free cash flowFY2026$1.8B-$2.1B (unchanged) (steady)
Same-SKU inflationFY2026approximately 3% (unchanged) (steady)
Inventory per store growthFY2026approximately 5% by year-end
AP to inventory ratioFY2026approximately 122% by year-end

Performance Breakdown

MetricYoYNote
Comparable store sales +8.1% Above-plan growth on both sides of the business driven by better-than-expected ticket counts, aided by tax refunds and favorable weather plus share gains.
Total sales +10.2% Comp growth of 8.1% plus a $91 million non-comp contribution from newer stores and international, an increase of $424 million.
Operating profit +14% Strong sales translated through a focus on profitable growth and expense control.
Diluted EPS +16% Strong operating performance plus the return of excess capital through share repurchases.
Gross margin +19 bps to 51.5% Acquisition cost reductions and improved distribution-cost leverage offset seasonal product mix pressure.
Free cash flow up to $785M from $455M Robust operating income growth, a reduction in net inventory, and timing of CapEx spend.
Average SG&A per store +5.5% Incremental spend to support elevated sales volumes plus year-over-year pressure from insurance and other liabilities; expected to moderate through the year.

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
Market share gainsStrong share gains in prior couple of yearsManagement agrees the spread versus the industry is accelerating, with broad-based share gains on both DIY and professional, largely from smaller and weaker independent players.Rising
Tax refunds and weather tailwinds—Larger average and total refund dollars coincided with favorable, warm dry weather to support Q1 demand; management views it as catch-up of pent-up demand rather than pull-forward.Rising
Private label penetration—Climbed above 50% of total revenue, improving margins, brand loyalty, and sourcing flexibility, with no stated penetration target and consistent adoption in mature and new markets.Rising
Fuel price and oil shock impactSustained price over $4/gallon as threshold for miles drivenPotential SG&A pressure from the large delivery fleet and motor oil cost risk from the Iran conflict, but no material Q1 impact and no change to full-year assumptions.Steady
Tariff environment—Net tariff exposure remained relatively stable with no material Q1 impact; no benefit from tariff refunds included in results or outlook.Steady
SG&A and labor managementCost overruns flagged in Q4Per-store SG&A growth driven mainly by wage rates plus liability costs; improved retention and productivity, with growth expected to moderate as the year progresses.Improving

Q&A Summary

Is the market share spread versus the industry accelerating, and where is it coming from?
Management agrees the data shows accelerating, broad-based share gains on both sides of the business beyond the last couple of years, attributed to strong execution across store operations, sales, and supply chain teams.
How should we think about same-SKU inflation through the year given input costs and gasoline?
The roughly 3% same-SKU assumption is unchanged; year-over-year tailwind continues into Q2 before tougher back-half compares, with muted inflation expected unless fuel prices pass through in a sustained way.
Was there a couple hundred basis points of extra tax-refund demand versus February expectations, and how does the cadence look?
Management was careful not to quantify the split between tax refunds and weather, but said both were helpers; the business strengthened through the quarter and they tend not to overreact to volatile Q1 results.
Do you pass along commodity and freight inflation but absorb higher domestic fuel costs for deliveries?
Inbound product freight is treated as part of product cost and passed through in pricing, often covered by suppliers, while domestic operating fuel sits in distribution and SG&A; sustained, broad-based cost increases can be passed through industry-wide.
What drove the 5.5% SG&A per store growth, wages or hours?
Principally wage rates, with flexibility to manage full-time and part-time mix; employee per-store counts reflect productivity gains and the ability to support higher transaction volumes, plus year-over-year liability pressure.
Is there a risk of motor oil supply shortage versus just higher prices from the Middle East conflict?
Some consumer motor oils are sourced from the Far East and there is pricing pressure across the supplier base; merchandise teams are working with oil suppliers and feel confident in their ability to manage it depending on the conflict's duration.

More on O Reilly Automotive Inc

Reported 2026-04-30 · figures from the O Reilly Automotive Inc Q1 2026 earnings call.

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