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Mild Winter Weather, Late Tax Refunds Crimp O’Reilly’s Q1 Growth

O’Reilly Automotive reported a 3 percent increase in first-quarter 2017 revenue and profit, but other metrics fell short of the company’s expectations.

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SPRINGFIELD, Mo. – O’Reilly Automotive reported a 3 percent increase in first-quarter 2017 revenue and profit, but other metrics fell short of the company’s expectations.

Growth in comparable store sales – a measurement of the change in sales for stores open at least one year – slowed to 0.8 percent, down from 6.1 percent in first-quarter 2016 and below O’Reilly’s already lowered guidance of 2 percent to 4 percent.

Although diluted earnings per share (EPS) were up 9 percent to $2.83, the increase ended O’Reilly’s streak of 32 consecutive quarters of 15 percent or greater EPS growth.

In the company’s Q1 earnings call, O’Reilly CEO Greg Henslee said mild winter weather in January and February, and delays in tax refunds for early filers, hurt the company’s results.

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“We saw business improved markedly toward the end of February as our customers began to receive these income tax refunds,” Henslee added. “However, this positive trend was halted at the beginning of March as a result of cold wet weather, including late winter storms in many of our markets. This type of weather would have been a positive in January or February, but was a significant headwind to our business in much of March as customers awaited spring weather. When we look at our by-category sales, this unusual weather drove softness in weather-sensitive categories like engine cooling, rotating electrical and anti-freeze.”

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Despite the challenges, Henslee praised the company’s “expense-control culture” for generating a nearly 19 percent operating profit.

“While we are obviously not pleased with our comparable store sales performance in the first quarter, we remain extremely confident in not only our business model and industry-leading supply chain but also our team of outstanding parts professionals and the Team O’Reilly culture they live every day across our company,” Henslee said. “As we move past the short-term pressures we faced in the first quarter, we believe we are very well-positioned to grow our market share by continuing to leverage our industry-leading distribution model and providing the unsurpassed levels of customer service that has put us in the industry-leading position we’ve maintained the past several years.”

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Sales increased from $2.10 billion in Q1 2016 to to $2.16 billion in Q1 2017, while gross profit increased from $1.10 billion to $1.13 billion.

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