For O’Reilly Automotive, the second quarter of 2020 was a tough act to follow.
Passage of the CARES Act on March 27, 2020 – and the stimulus checks that soon began hitting consumers’ bank accounts – sparked a DIY spending boom, setting the stage for a second quarter of 2020 that ended with record revenue and earnings for O’Reilly.
Even with those tough “comps,” O’Reilly reported year-over-year sales growth of 12% for the second quarter of 2021, which ended June 30. Sales increased $374 million, from $3.09 billion in Q2 2020 to $3.47 billion in Q2 2021.
Comparable-store sales for the quarter grew nearly 10% on a year-over-year basis. That’s an impressive stat, considering that comparable-store sales grew 16.2% in O’Reilly’s monster Q2 2020.
“We faced tougher comparisons on the DIY side, but we’re very pleased with the performance in our DIY business as we calendar the exceptional sales volumes from last year,” O’Reilly CEO Greg Johnson said during the company’s July 29 conference call. “While both sides of our business exceeded our expectations for the quarter, our DIY business was responsible for producing the greater outperformance as compared to our expectations.”
On March 11, President Biden signed into law the American Rescue Plan, which includes a third round of stimulus payments. As those checks started going out in mid-March, “sales volumes accelerated meaningfully,” according to Johnson.
“This growth continued in April before moderating at the end of April to a level of consistently strong sales volumes that carried through May and June, which was well-above our expectations,” Johnson said. “These volumes translated into positive comps every month of the quarter, which was impressive in light of the extremely strong compares we faced in May and June of 2020. These better-than-expected sales volumes have continued thus far in July, and we have been pleased with the durable nature of strong sales volumes we have been able to achieve.”
While DIY and DIFM both contributed to the comparable-store sales growth, DIFM “was the larger contributor to the comparable store sales increase for the quarter, having faced softer comparisons on this side of the business resulting from a more gradual recovery last year from the initial pandemic impact,” Johnson added.
Sales for the first six months of 2021 increased 18% to $6.56 billion, from $5.57 billion in the first six months of 2020. Net income for the first six months of 2021 increased 31% to $1.09 billion.
“Our team’s unwavering commitment to our customers in the first half of 2021 drove a 16.5% increase in comparable-store sales, a 28% increase in operating-profit dollars and a 39% increase in diluted earnings per share,” Johnson said in a news release. “Our continued strong sales results in 2021 are the product of strong execution of our dual-market strategy, combined with a beneficial industry backdrop, augmented by favorable weather trends and the significant positive impact from the last round of government stimulus starting at the end of our first quarter.
“Even as the tailwind from the stimulus benefits moderated in May and June, we have remained very pleased with our team’s ability to sustain year-over-year increases in sales volumes despite the very difficult comparisons to the prior year. Our better-than-expected sales volumes in May and June have continued thus far in July. As a result of our second quarter performance and strong start to our third quarter, coupled
with our confidence in Team O’Reilly’s ability to provide industry-leading customer service, we are raising our full-year 2021 guidance for comparable-store sales from a range of 1% to 3% to a range of 5% to 7%. We are also increasing our full-year diluted earnings-per-share guidance to a range of $26.80 to $27, which represents an increase of $2.05 at the midpoint from our previously provided guidance.”
COO Jeff Shaw to Retire
O’Reilly also announced that COO Jeff Shaw has decided to retire in early 2022, after more than 33 years with the company.
“Jeff is an incredible leader and mentor and passionate about providing consistent, excellent customer service,” Johnson noted during the conference call. “His career track is a prime example of our company’s promote-from-within philosophy. Having begun his O’Reilly tenure as a parts specialist on the counter, he has grown his career by being a key contributor to our company’s tremendous growth. Throughout his career progression to chief operating officer and co-president, he has consistently championed our promote from within philosophy and has served as a mentor to many of O’Reilly’s current senior leadership team. Jeff has earned the gratitude of all of Team O’Reilly for his incredible contributions to our company’s success, and we wish him a very happy and well-deserved retirement.”
Brad Beckham, O’Reilly’s executive vice president of store operations and sales, will step into the COO role when Shaw retires.
“Brad is an exceptional leader who shares Jeff’s passion for providing excellent customer service and investing in our team members, and I’m confident he will continue to lead our company to success well into the future,” Johnson said.