Q3 2022 O'Reilly Automotive Inc Earnings Call

October 27, 2022

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[music].

Welcome to the O'Reilly Automotive Incorporated third quarter 2022 earnings call. My name is Vanessa and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct our question and answer session. During the question and answer session, if you have a question, please press zero then one on your touch tone phone.

Welcome to the O'reilly automotive incorporated third quarter 2022 earnings call My.

My name is Vanessa and I will be your operator for today's call. At this time all participants are in a listen only mode. Later, we will conduct our question and answer session.

The question and answer session. If you have a question. Please press zero then one on your Touchtone phone.

I will now turn the call over to Jeremy Fletcher. You may begin.

I will now turn the call over to Jeremy Fletcher you may begin.

Thank you, Vanessa. Good morning, everyone, and thank you for joining us. During today's call, we will discuss our third quarter 2022 results and our outlook for the remainder of the year. After our prepared comments, we will host a question and answer period. Before we begin this morning, I would like to remind everyone that our comments today contain forward-looking statements, and we intend to be covered by and we claim the protection under the Safe Harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Thank you Vanessa.

Morning, everyone and thank you for joining us during today's call, we will discuss our third quarter 2022 results and our outlook for the remainder of the year.

After our prepared comments, we will host a question and answer period before we begin this morning, I would like to remind everyone that our comments today contain forward looking statements and we intend to be covered by and we claim the protection under the Safe Harbor provisions for forward looking statements contained in the private Securities Litigation Reform Act.

1995.

You can identify these statements by forward-looking words such as estimate, may, could, will, believe, expect, would, consider, should, anticipate, project, plan, intend, or similar words.

You can identify these statements by forward looking words, such as estimate may could will believe expect.

Would consider should anticipate project plan intend or similar words.

The company's actual results could differ materially from any forward-looking statements due to several important factors described in the company's latest annual report on Form 10-K for the year ended December 31, 2021 and other recent SEC filings.

The company's actual results could differ materially from any forward looking statements due to several important factors described in the Companys latest annual report on Form 10-K for the year ended December 31, 2021, and other recent SEC filings.

The company assumes no obligation to update any forward-looking statements made during this call. At this time, I would like to introduce Greg Johnson.

The company assumes no obligation to update any forward looking statements made during this call at this time I would like to introduce Greg Johnson.

Thanks Jeremy. Good morning everyone and welcome to the O'Reilly Auto Parts third quarter conference call.

Thanks, Jeremy.

Good morning, everyone and welcome to the O'reilly auto parts third quarter conference call.

Participating on the call with me this morning are Brad Beckham, our Chief Operating Officer, and Jeremy Fletcher, our Chief Financial Officer.

Depending on the call with me. This morning are Brad Burke, our Chief operating officer, and Jeremy Fletcher, Our Chief Financial Officer.

Brent Kirby, our Chief Supply Chain Officer, Greg Hensley, our Executive Chairman, and David O'Reilly, our Executive Vice Chairman, are also present on the call.

Kirby, our chief supply chain Officer, Greg Henslee, our executive Chairman and David O'reilly, Our executive Vice Chairman are also present on the call.

I'd like to begin our call today by thanking Team O'Reilly for your hard work and commitment to providing excellent customer service which drove our strong results in the third quarter.

I'd like to begin our call today by thanking team O'reilly for your hard work and commitment to providing excellent customer service, which drove our strong results in the third quarter.

Our quarterly results were highlighted by a 7.6% increase in comparable store sales.

Our quarterly results were highlighted by a seven 6% increase in comparable store sales, resulting in an impressive two and three year comp sales tax of $14, three and 31, 2% respectively.

resulting in impressive two and three-year comp sales tax of 14.3 and 31.2 percent respectively.

Before we walk through the details of our performance and our prepared comments,.

Before we walk through the details of our performance in our prepared comments.

I want to begin the call today by acknowledging all those affected by Hurricane Ian.

To begin the call today by acknowledging all of those affected by hurricane in.

On behalf of all of Team O'Reilly, I wanted to express our greatest sympathies.

On behalf of all of team O'reilly I wanted to express our greatest sympathies for the devastation and loss being felt by so many families in the regions impacted by the hurricane.

for the devastation and loss being felt by so many families in the region impacted by the hurricane.

As a company, we were very fortunate to have incurred only limited damage, and our teams were simply incredible in their rapid response to the recovery from the storm.

As a company we were very fortunate to have incurred only limited damage and our teams were simply incredible and their rapid response to the recovery from the storm.

I am always extremely proud of the way Team O'Reilly shines during these challenging times, and we are all incredibly appreciative of how our team members once again stepped up in the aftermath of Hurricane Anne to serve their communities with critical supplies necessary in the recovery efforts.

I am always extremely proud of the way team O'reilly shines during these challenging times and we are all incredibly appreciative of how our team members. Once again stepped up in the aftermath of hurricane and to serve their communities with critical supplies necessary and the recovery efforts.

Thank you to each of our over 84,000 team members.

Thank you to each of our over 84000 team members for living our culture of excellent customer service, so well for truly being the friendliest parts store in town.

for living our culture of excellent customer service so well, for truly being the friendliest parts store in town.

and producing the outstanding results we will discuss today.

And producing the outstanding results, we will discuss today.

Now I'd like to turn to our comparable store sales performance and provide some color on what we saw on both sides of our business as we move through the quarter.

We started the quarter in July with improving volume trends driven in part by warm weather across many of our markets and we're pleased to see these trends continue through the quarter with positive comparable store sales growth on both the DIY and professional side of the business each month of the quarter. For more information on the DIY and professional side of the quarter, visit www.fema.gov.

Our sales volumes accelerated as we moved through the quarter and exceeded the guidance we communicated on our second quarter call.

Our sales volumes accelerated as we moved through the quarter and exceeded the guidance, we communicated on our second quarter call.

On a three-year stack basis, our comparable store sales are strong each month, with September finishing as the strongest month of the quarter.

On a three year stack basis, our comparable store sales were strong each month with September finishing as the strongest month of the quarter.

Our professional business again outperformed in the third quarter, producing double-digit comparable store sales growth on robust growth in both ticket counts and average ticket size.

Our professional business again outperformed in the third quarter, producing double digit comparable store sales growth on robust growth in both ticket counts and average ticket size.

Our third quarter professional comparable source sales growth was a continuation of the strength we saw in the second quarter, with a continued benefit from average ticket growth supplemented by accelerating ticket count gains, and we're very pleased to see the strong, durable nature of our professional sales volume.

Our third quarter professional comparable store sales growth was a continuation of the strength we saw in the second quarter with a continued benefit from average ticket growth supplemented by accelerating ticket count gains and we're very pleased to see the strong durable nature of our professional sales volume.

We are very excited about the momentum we've seen in our professional business and remain highly competent in our competitive advantages in customer service and inventory availability on this side of our business.

We're very excited about the momentum we've seen in our professional business and remain highly confident in our competitive advantages and customer service and inventory availability on this side of our business.

We expect to continue to consolidate the industry and grow our professional share and our team is highly motivated to outperform the competition in all of our market areas.

Shifting to the DIY business, we were pleased to generate positive results in the third quarter against extremely difficult two and three year comparisons.

Shifting to the DIY business, we were pleased to generate positive results in the third quarter against extremely difficult two and three year comparisons reversing the trend of pressure to DIY sales in the first half of the year and outperforming our guidance forecast.

reversing the trend of pressure to DIY cells in the first half of the year, and outperforming our guidance forecast.

As I previously noted, our DIY business was positive each month of the quarter, with comparable store sales increases driven by growth in average ticket being partially offset by anticipated traffic pressures.

As I previously noted our DIY business was positive each month of the quarter with comparable store sales increases driven by growth in average ticket being partially offset by anticipated traffic pressures with both metrics outperforming our expectations for the quarter.

with both metrics outperforming our expectations for the quarter.

We saw improvement in ticket counts on the DIY side as we progressed through the quarter, while calendaring very challenging prior year comparisons, and we are pleased to see the resilience in our DIY customer base.

We saw improvement in ticket counts on the DIY side as we progressed through the quarter, while calendaring very challenging prior year comparisons and we're pleased to see the resilience in our DIY customer base. In spite of continued pressure from broad based inflation.

in spite of continued pressure from broad-based inflation.

Although the professional side of our business continues to be the stronger performer, the improvement in our DIY business was the larger driver in surpassing our expectations for the third quarter.

Although the professional side of our business continues to be the stronger performer.

Movement in our DIY business was the larger driver and surpassing our expectations for the third quarter.

In total, our combined DIY and professional comparables to our sales growth was again driven by strength in average ticket, which was approximately 10 percent on both sides of the business and consistent with what we saw in the second quarter.

In total our combined DIY and professional comparable store sales growth was again driven by strength in average ticket, which was approximately 10% on both sides of the business and consistent with what we saw in the second quarter.

Same-skew inflation benefit in the third quarter were also consistent with the second quarter levels, coming in at similar levels to our average ticket increases.

Same SKU inflation benefit in the third quarter were also consistent with the second quarter levels coming in at similar levels to our average ticket increases which was above our expectations.

which was above our expectations.

In the third quarter, we began the anniversary of the acceleration of higher inflation in 2021.

In the third quarter, we began to anniversary the acceleration of higher inflation in 2021.

However, we did not see as much moderation as originally expected in this benefit on a year-over-year basis.

However, we did not see as much moderation as originally expected and this benefit on a year over year basis.

We have continued to experience increases in product acquisition and operating costs that we are passing through in selling price increases.

We have continued to experience increases in product acquisition and operating cost that we're passing through and selling price increases.

Pricing in our industry remains rational and we continue to be pleased with our ability to pass through cost increases.

but also maintain an element of caution as our consumers face persistent inflation across the economy that could result in traffic headwinds for our business.

But also maintain an element of caution as our consumers face persistent inflation across the economy that could result in traffic headwinds for our business.

From a category standpoint, we saw broad-based support across our business, including strength in the categories that normally benefit from summer heat as we experienced warm temperatures at the beginning of a quarter.

From a category standpoint, we saw broad based support across our business, including strength in the categories that normally benefit from summer heat as we experienced warm temperatures at the beginning of the quarter.

However, the benefit in weather related categories was modest in relationship to our total business.

However, the benefit in weather related categories was modest in relationship to our total business and as such we do not view weather is a significant contributor to our outperformance in the quarter.

and as such, we do not view weather as a significant contributor to our outperformance in the quarter.

From a regional perspective, our performance was fairly consistent across our market areas with widespread outperformance versus our expectations as we move through the quarter.

Now I'd like to turn to our updated sales guidance and industry outlook.

Now I would like to turn to our updated sales guidance and industry outlook.

As noted in our press release yesterday, we have updated our full year comparable store sales guidance to a range to 4.5% to 5.5%.

As noticed as noted in our press release yesterday, we have updated our full year comparable store sales guidance to a range to four 5% to five 5%.

This increase in our expectations for the full year is primarily a result of updating for third quarter performance.

Looking ahead to the fourth quarter, we are pleased to see the volume trends we have experienced thus far in October , which have been in line with our third quarter results.

Looking ahead to the fourth quarter, we were pleased to see the volume trends, we've experienced thus far in October which have been in line with our third quarter results.

We have seen sustained resilience in consumer demand, but remain cautious as we face continued broad-based inflation, the upcoming holiday season and spending pressures that places on consumers, and weather dynamics that can vary significantly for the remainder of the year.

We have seen sustained resilience and consumer demand, but remain cautious as we face continued broad based inflation the upcoming holiday season spending pressures that places on consumers and weather dynamics that can vary significantly for the remainder of the year.

While gas prices have retreated from the peaks we experienced in June , providing some level of relief to many consumers, we recognize that current fuel prices remain very volatile and well above where we started the year as well as this time last year.

While gas prices have received retreated from the peaks we experienced in June providing some level of relief to many consumers. We recognize the current fuel prices remain very volatile and well above where we started the year as well as this time last year.

It is important to note that these factors can influence demand in the short term, such as fuel price spikes, weather, and economic uncertainty, can be distinguished from the long term fundamental drivers of demand in our industry.

It is important to note that the fact these factors can influence demand in the short term such as fuel price spikes, whether an economic uncertainty can be distinguished from a long term fundamental drivers of demand in our industry.

We continue to be confident in the health of the automotive aftermarket, supported by steady recovery in miles driven and very favorable US vehicle fleet dynamics.

We continue to be confident in the health of the automotive aftermarket supported by steady recovery in miles driven and very favorable U S vehicle fleet dynamics.

We still view our customer base as healthy and believe consumers are in a stronger position now than in recent periods of economic uncertainty with continued support from strong employment and wage growth.

We still view our customer base is healthy and believe consumers are in a stronger position now than in recent periods of economic uncertainty with continued support from strong employment and wage growth.

Consumers continue to be able to capitalize on the strong value proposition of investing in their existing vehicles at higher and higher mileage as a result of the increasing quality of manufacturing and engineering of vehicles on the road.

Consumers continue to be able to capitalize on the strong value proposition of investing in their existing vehicles at higher and higher mileages as a result of the increasing quality of manufacturing and engineering vehicles on the road.

We expect for demand in our industry to remain resilient as consumers who are facing high inflation and economic uncertainty prioritize the maintenance of their existing vehicles in order to avoid taking on a payment for a higher price than your vehicle.

We expect for demand in our industry to remain resilient as consumers, who are facing high inflation and economic uncertainty prioritize the maintenance of their existing vehicles in order to avoid taking on a payment for a higher priced the newer vehicle.

Now turning to gross margin.

Now turning to gross margin for the third quarter. Our gross margin of 59% was 132 basis point decrease from the third quarter 2021 gross margin, but in line with our guidance expectations.

For the third quarter, our gross margin of 50.9% was a 132 basis point decrease from the third quarter 2021 gross margin, but in line with our guidance expectations.

Our year-over-year margin continues to be primarily impacted by the rollout of our professional price initiative, combined with pressures from a reduced LIFO benefit, which Jeremy will discuss in more detail in his prepared comments, and a faster growth of our professional business.

Our year over year margin continues to be primarily impacted by the rollout of our professional price initiative combined with pressures from a reduced LIFO benefit, which Jeremy will discuss in more details in his prepared comments and a faster growth of our professional business.

After incorporating our third quarter results, we continue to expect full year gross margin to be in the range of 50.8 to 51.3 percent.

After incorporating our third quarter results. We continue to expect full year gross margin to be in the range of 58 to 51, 3%.

Our team worked relentlessly to translate the strong top line results into outstanding earnings per share growth, with third quarter diluted EPS increasing to $9.17.

Our team worked relentlessly to translate the strong topline results into outstanding earnings per share growth with third quarter diluted EPS, increasing to $9 17.

a 14% increase over a strong comparison in 2021.

A 14% increase over a strong comparison in the 2021.

While the year-over-year increase is impressive alone, on a three-year compounded basis compared to 2019, our third quarter EPS increased by a quarter of a quarter of a quarter of a quarter.

While the year over year increase is impressive alone on a three year compounded basis compared to 2019, our third quarter EPS increased 22% per year, highlighting our team's ability to deliver consistent profitable growth through executing our business model regardless of the tough comparisons we have faced.

22% per year, highlighting our team's ability to deliver consistent, profitable growth through executing our business model regardless of the tough comparisons we have faced.

We are increasing our full year 2022 EPS guidance to $32.35 to $32.85, reflecting our year-to-date results and fourth quarter expectations.

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We are increasing our full year 2022, EPS guidance to $32 35 to $32 85.

Reflecting our year to date results and fourth quarter expectations.

As a reminder, our EPS guidance includes the impact of shares repurchased through this call but does not include any additional shares.

As a reminder, our EPS guidance includes the impact of shares repurchased through this call, but does not include any additional shares.

To wrap up my comments, I want to again thank Team O'Reilly for never backing down from a challenge and providing consistent, excellent customer service to our customers each and every day.

To wrap up my comments on want to again, thank team O'reilly for never backing down from a challenge and providing consistent excellent customer service to our customers each and every day.

It is your commitment to our culture, your fellow team members, and our customers.

It is your commitment to our culture your fellow team members and our customers that drives our success and makes you the best team in the business.

that drives our success and makes you the best team in the business.

I'll now turn the call over to Brad Beckham. Brad?

I'll now turn the call over to Brad Beckham, perhaps.

Thanks, Greg, and good morning, everyone. I would also like to personally thank Team O'Reilly for their commitment to our continued success and dedication to delivering excellent customer service by out-hustling and out-servicing our competition.

Thanks, Greg and good morning, everyone. I would also like to personally thank team O'reilly for their commitment to our continued success and dedication to delivering excellent customer service.

Hustling and out servicing our competition.

Our top line results for the quarter are a testament to our team's ability to compete.

Our topline results for the quarter are a testament to our team's ability to compete and I am proud of the way our team members in our stores and distribution centers go to market each and every day to win.

And I am proud of the way our team members in our stores and distribution centers go to market each and every day to win.

Our team has repeatedly proven they are up to any challenge and I want to join Greg in showing my appreciation for the way our supply chain teams as well as our store operations and DC leadership in the southeast took care of our teams and our customers in the aftermath of Hurricane N.

Our team has repeatedly proven they are up to any challenge and I wanted to join drag and showing my appreciation for the way our supply chain teams as well as our store operations in DC leadership in the southeast took care of our teams and our customers in the aftermath of hurricane in.

Since safety has always been a critical culture value for Team O'Reilly, our primary focus during a weather event like N.

Since safety has always been a critical culture value for team O'reilly our primary focus during the weather event like in is ensuring our team members and their families are safe.

is ensuring our team members and their families are safe.

Then, as soon as we can safely make our way back to our store locations, our leaders and teams waste no time getting their stores back up and running, often on generator power with no communication systems.

Then as soon as we can safely move make our way back to our store locations are leaders and teams waste no time getting their stores back up and running often on generator power with no communication systems. This incredible hard work and sacrifice creates tremendous goodwill with our customers.

This incredible hard work and sacrifice creates tremendous goodwill with our customers.

who often have limited options to source the critical parts and supplies they need.

Who often have limited options to source the critical parts and supplies they need to meet the basic needs not only with their vehicles, but at home with their families to start recovering from the storm.

to meet the basic needs not only with their vehicles, but at home with their families to start recovering from the storm.

Now, I'd like to give some additional color on our professional sales performance for the quarter.

Now I'd like to give some additional color on our professional sales performance for the quarter.

As Greg previously discussed, strength in our professional business underpinned our comparable store sales growth for the quarter and we are extremely pleased to have you here today.

As Greg previously discussed strengthen our professional business underpinned our comparable store sales growth for the quarter and we are extremely pleased to continue to see robust growth in both ticket and traffic on this side of our business.

to continue to see robust growth in both ticket and traffic on this side of our business.

Our commitment to the professional customer has been ingrained in our company's DNA since our founding in 1957.

Our commitment to the professional customer has been ingrained in our company's DNA since our founding and $19 57.

The momentum we've generated on this side of our business is the result of solid fundamental execution of the same core competitive advantages that have driven our business for 65 years.

Our professional customers rely on us to be an integral partner in the success of their business.

We focus on developing long-lasting, durable relationships with our customers by providing exceptional service from highly qualified, knowledgeable, professional parts people who are committed to overcoming any obstacle.

We focus on developing long lasting durable relationships with our customers by providing exceptional service from highly qualified knowledgeable professional parts people, who are committed to overcoming any obstacle to take care of our customers.

to take care of our customers.

Our team's sense of urgency, professionalism, and dedication to our customers allows us to leverage the significant investments we've made in distribution,.

Our team sense of urgency professionalism and dedication to our customers allows us to leverage the significant investments we've made in distribution.

hub infrastructure, and inventory to provide industry-leading inventory availability, which is absolutely vital.

Hub infrastructure and inventory to provide industry, leading inventory availability, which is absolutely vital to the success of our customers.

to the success of our customers.

Our partnerships with our professional customers go even deeper as we support all aspects of their operations through our investments in technology platforms, shop management systems,.

Our partnerships with our professional customers go even deeper as we support all aspects of their operations through our investments in technology platforms shop management systems, as well as technical and business management training.

as well as technical and business management training.

Above and beyond technical training for technicians, this training includes things like how to grow and manage a profitable business, effectively write service, and how to manage and manage.

Above and beyond technical training for technicians. This training includes things like how to grow and manage a profitable business effectively right service how.

how to market and advertise, and effective strategies to retain the best technicians.

How to market and advertise and effective strategies to retain the best technicians.

It's our execution on these foundational priorities that not only earn the retention of existing business, but also the creation of existing business.

It's our execution on these foundational priorities that have not.

Not only are the retention of existing business that gives us the opportunity to earn new professional customers business.

that give us the opportunity to earn new professional customers business all aided by a competitive pricing strategy that all equals the best overall value in the automotive aftermarket.

All aided by our competitive pricing strategy that all equals the best overall value in the automotive aftermarket.

We've discussed our professional pricing initiative at LEAK this year and we remain very pleased with the results we've seen from our competitive positioning within the broader aftermarket.

We've discussed our professional pricing initiatives at least this year and we remain very pleased with the results we've seen from our competitive positioning within the broader aftermarket.

We are confident that this was the right time to invest in professional pricing and we continue to see a rational, overall pricing environment in normal competitive dynamics.

We are confident that this was the right time to invest in professional pricing and we continue to see a rational overall pricing environment and normal competitive dynamics.

Our sales teams know we provide a premium service delivered by the best teams in the industry.

Our sales teams now we provide a premium service delivered by the best teams in the industry and we go to market with the confidence that our value proposition is an attractive one for both our existing and future new professional customers alike.

And we go to market with the confidence that our value proposition is an attractive one for both our existing and future new professional customers alike.

Next, I'd like to discuss our DIY business as well as the opportunities we see in the.

Next I'd like to discuss our DIY business as well as the opportunities we see to grow share on the retail side of the business.

to grow share on the retail side of the business.

While the DIY market is much more consolidated than the professional business,.

While the DIY market is much more consolidated than the professional business, we see tremendous share growth opportunity.

we see tremendous share growth opportunity.

The key value components of parts availability, excellent customer service provided by professional parts people, and strong relationships that drive our professional business are also critical to our DIY business.

The key value components or parts availability excellent customer service provided by professional parts people and strong relationships that drive our professional business are also critical to our DIY business.

Our DIY customers heavily rely on the service we provide, and you can really see this play out in the highly consulted nature of a DIY customer's visit to one of our stores.

Our DIY customers heavily rely on the service we provide and you can really see this play out in the highly consultant nature of a DIY customers visit to one of our stores.

The professionalism of our team is on display during a typical customer encounter.

greeting a DIY customer when they walk in the door or pull in our parking lot, and providing technical information and advice to walk them through the total job.

Greeting a DIY customer when they walk in the door are pulling our parking lot and providing technical information and advice to walk them through the total job.

This often includes standing side by side with a customer at their vehicle to test an existing part or read a trouble code.

This often includes standing side by side with the customer at their vehicle to test an existing park a reader trouble code.

Our professional parts people are committed to ensuring our customers have identified the right solution for their problem and have all the parts, tools, and knowledge necessary to complete the job correctly the first time.

Our professional parts people are committed to ensuring our customers have identified the right solution for their problem and have all the parts tools and knowledge necessary to complete the job correctly. The first time.

When this work is beyond our DIY customers' ability, our professional customers in each market come into play.

When this work is beyond our DIY customers' ability our professional customers in each market come into play.

with our shop referral program that we established many decades ago.

With our shop referral program that we established many decades ago simply put the growth of our DIY and <unk> business go hand in hand.

Simply put, the growth of our DIY and DIFM business go hand in hand.

We believe it was our team's intense focus on fundamental execution of our business model and excellent customer service, coupled with continued improvements in fill rates and store in-stock inventory position that drove our results above our expectations in the third quarter.

We believe it was our team's intense focus on fundamental execution of our business model and excellent customer service, coupled with continued improvements in fill rates and store in stock inventory position that drove our results above our expectations in the third quarter.

The DIY environment continues to be challenging with the pressures these customers are facing on a broad scale in terms placing pressure on our DIY ticket counts.

The DIY environment continues to be challenging with the pressures. These customers are facing on a broad scale in term, placing pressure on our DIY ticket counts. We have also faced extremely difficult comparisons from the surge in DIY transaction counts, we've generated over the past two and a half years and are pleased with our team.

We have also faced extremely difficult comparisons from the surge in DIY transaction counts we've generated over the past two and a half years, and are pleased with our team's ability to grow our DIY share and earn our customers repeat business.

<unk> ability to grow our DIY share and earn our customers' repeat business.

The professional parts people we have standing ready at every green counter in every one of our stores across the country are ingrained with the understanding that our never say no philosophy is so very important.

The professional parts people, we have standing ready at every dream counter and every one of our stores across the country are ingrained with the understanding that are never say no philosophy is so very important.

It means not only putting a part in a customer's hands for a sale today to solve their immediate need.

It means not only putting a part in our customers' hands for a sell today to solve their immediate need that earning their business. The next time, they are taking on in automotive repair or maintenance job.

but earning their business the next time they are taking on an automotive repair or maintenance job.

Now, I'll turn to our SG&A and operating profit results for the third quarter and our updated expectations for the full year.

Now I'll turn to our SG&A and operating profit results for the third quarter and our updated expectations for the full year SG&A as a percentage of sales was 29, 8% leverage of 80 basis points from the third quarter of 2021.

SG&A as a percentage of sales was 29.8%, a leverage of 80 basis points from the third quarter of 2021.

Total SG&A spend for the quarter came largely in line with the expectations given the better than expected sales volumes.

Total SG&A spend for the quarter came largely in line with expectations given the better than expected sales volumes on an average per store basis. Our SG&A was up three 2% for the quarter for the full year, we now expect SG&A per store to grow between three and three 5%.

On an average per store basis, our SG&A was up 3.2% for the quarter. For the full year, we now expect SG&A per store to grow between three and 3.5%.

with the increase reflecting incremental variable operating expenses.

With the increase reflecting incremental variable operating expenses on better than expected sales volumes in the third quarter as well as ongoing cost inflation.

on better than expected sales volumes in the third quarter, as well as ongoing cost inflation.

Our teams continue to be very prudent in managing expenses in the face of significant inflationary impacts, while also being appropriately responsive to current sales trends to ensure we are able to optimize both our service levels and our operating margins.

Our teams continue to be very prudent in managing expenses in the face of significant inflationary impacts while also being appropriately responsive to current sales trends to ensure we were we are able to optimize both our service levels and our operating margins.

We are raising our full year operating profit guidance and now expect to be in the range of 20.3 to 20.6 percent, which is reflective of both our adjustment to SG&A per store growth and our increased comparable store sales range.

We are raising our full year operating profit guidance and now expect to be in the range of 23% to 26%, which is reflective of both our adjustment to SG&A per store growth and our increased comparable store sales range.

Now I'll provide an update to our store growth during the third quarter.

We open 37 net new stores across 20 states in the US and one new store in Mexico, bringing our year-to-date total to 154 net new store openings.

Open 37, net new stores across 20 states in the U S and one new store in Mexico, bringing our year to date total to 154 net new store openings.

This puts us on track to achieve our target of approximately 180 net new store openings for 2022.

As we noted in our press release yesterday, we are pleased to announce our 2023 new store opening target of 180-190 net new stores, providing us the opportunity to expand our footprint across the US and Mexico.

As we noted in our press release yesterday, we are pleased to announce our 2023, new store opening target of 180 to 190, net new stores, providing us the opportunity to expand our footprint across the U S and Mexico.

We continue to be pleased with our new store performance.

We continue to be pleased with our new store performance and C store and distribution growth is an attractive deployment of capital.

and see store and distribution growth as an attractive deployment of capital.

These new store openings will again be spread across new and existing markets supported by our industry leading distribution network.

This allows us to continue to build on the superior parts availability our existing and future customers value and expect.

This allows us to continue to build on the superior parts availability, our existing and future customers value and expect.

Having the right part at the right place at the right time for each one of our DIY and professional customers in every single one of our markets is more important than ever. And we are fully committed to continue to build on our world-class supply chain.

Having the right part at the right place at the right time for each one of our DIY and professional customers. In every single one of our markets is more important than ever and we are fully committed to continue to build on our world class supply chain.

While we make further investments to enhance our distribution network, we are also making investments in our local inventory position to improve overall inventory availability.

While we made further investments to enhance our distribution network. We are also making investments in our local inventory position to improve overall inventory availability.

We finished the quarter with an average inventory per store of $697,000, which was up 10% from this time last year and 9% from the beginning of the year.

We finished the quarter with an average inventory per store of $697000, which was up 10% from this time last year and 9% from the beginning of the year.

Our plan when we entered 2022 was to...

Our plan when we entered 2022 was to aggressively add incremental dollars to our store level inventories throughout the year with a target to finish the year with the average per store inventory up over 8%.

aggressively add incremental dollars to our store level inventories throughout the year with a target to finish the year with the average first-door inventory up over 8%.

We are now looking to finish 2022 with average per store inventory at levels consistent with our current position.

We are now looking to finish 2022 with average per store inventory at levels consistent with our current position. This would have us, finishing with a slightly higher inventory increase than originally expected due to cost inflation above our expectations pushing up unit price. While overall units are in line with expectations.

This would have us finishing with a slightly higher inventory increase than originally expected due to cost inflation above our expectations pushing up unit price, while overall units are in line with expectations.

These continued strategic investments into our inventory position focused around having the right local combination of common and hard-to-find parts for every single market, store, and customer are a critical component of our success.

These continued strategic investments into our inventory position focused around having the right local combination of common and hard to find parts for every single market store and customer are a critical component of our success deploying additional.

Deploying additional inventory dollars into and incrementally enhancing our hub network, now at approximately 380 hubs strong.

Additional inventory dollars into an.

And incrementally enhancing our hub network now at approximately 380 hubs strong.

has also supported growth on both sides of our business.

As also supported growth on both sides of our business, particularly with our professional customers. We're turning their base keeping their technicians productive and in turn keeping there in <unk> customer truly happy is Paramount <unk>.

particularly with our professional customers where turning their bays, keeping their technicians productive, and in turn keeping their end DIFM customer truly happy is paramount.

You've heard us say it repeatedly, time is money for our professional customers. So the quicker we can put the right part in their hands, the faster they can turn their base, get their customers back on the road, and in turn, the more profitable we become together.

<unk> heard us say repeatedly time is money for our professional customers. So the quicker we can put the right part in their hands the faster they can turn their base get their customers back on the road and in turn the more profitable we become together.

To close my comments, I want to once again thank Team O'Reilly for their hard work and dedication to our customers. Excellent customer service is who we are, but that doesn't mean it comes easy. It takes hustle, hard work, commitment, and dedication to every single customer every single day in each of our 5,900 plus stores, and I am thankful to work with a team who is truly dedicated to make this happen.

To close my comments I want to once again, thank team O'reilly for their hard work and dedication to our customers excellent customer service is who we are but that doesn't mean it comes easy.

Takes hustle hard work commitment and dedication to every single customer every single day in each of our 5900 plus stores and I'm thankful to work with a team who has truly dedicated to make this happen now.

Now, I will turn the call over to Jeremy.

Now I will turn the call over to Jeremy.

Thanks Brad. I would also like to add my thanks to all of Team O'Reilly for your performance in the third quarter and continued dedication to our company's long-term success. Now we will cover some additional details on our quarterly results and updated guidance for the remainder of 2022.

Thanks, Brad I would also like to add my thanks to all of team O'reilly for your performance in the third quarter and continued dedication to our company's long term success now we will cover some additional details on our quarterly results and updated guidance for the remainder of 2022 for.

For the quarter, sales increased $319 million, comprised of a $257 million increase in comp store sales, a $60 million increase in non-comp store sales, and a $2.5 million increase in.

For the quarter sales increased $319 million comprised of a $257 million increase in comp store sales a $60 million increase in non comp store sales a $4 million increase in non comp non store sales and a $2 million decrease from closed stores for 2012.

a $4 million increase in non-comp non-store sales, and a $2 million decrease from closed stores.

For 2022, we now expect our total revenues to be $14.1 to $14.3 billion, which is an increase from our previous range of $14.0 to $14.3 billion and is in line with the updated comparable store sales guidance range Greg discussed earlier.

Two we now expect our total revenues to be $14, one to $14 3 billion.

Which is an increase from our previous range of 14.0 to $14 3 billion.

And is in line with the updated comparable store sales guidance range, Greg discussed earlier.

Greg covered our gross profit performance earlier, noting that gross margin for the third quarter was in line with our expectations, with anticipated year-over-year pressure from the rollout of the Pro Pricing Initiative, LIFO comparisons, and accelerated professional sales mix headwind.

Greg covered our gross profit performance earlier, noting that gross margin for the third quarter was in line with our expectations with anticipated year over year pressure from the rollout of the pro pricing initiative, LIFO comparisons and accelerated professional sales mix headwind.

Since I'm sure you are all anxiously awaiting a detailed accounting discussion, I want to provide some additional details on the LIFO comparison and how we view the flow-through of acquisition costs and inflation in our gross margin results.

Since I'm sure you were all anxiously awaiting a detailed accounting discussion I want to provide some additional details on the LIFO comparison, and how we view the flow through of acquisition cost inflation and our gross margin results.

We think it is helpful to contrast the impact of our earlier LIFO reporting prior to 2022, when we were still in a debit LIFO position, versus the current situation where we have returned to a traditional LIFO credit balance.

We think it is helpful to contrast, the impact of our earlier LIFO reporting prior to 2022, when we were still in a debit LIFO position versus the current situation, where we have returned to a traditional LIFO credit balance.

As we discussed throughout 2021, the application of LIFO accounting meant that as acquisition costs and selling prices went up, we realized the benefit from the sell-through of existing on-hand inventory that we carried at a lower historical cost due to our debit LIFO position.

As we discussed throughout 2021, the application of LIFO accounting MIT that as acquisition costs and selling prices went up we realize that benefit from the sell through of existing on hand inventory that we carried at a lower historical cost due to our debit LIFO position.

This non-recurring benefit is a comparison headwind for 2022, which we anticipated in our gross margin guidance and we've seen results in line with those expectations.

This nonrecurring benefit as a comparison headwind for 2022, which we anticipated in our gross margin guidance and we've seen results in line with those expectations.

Since our LIFO reserve flipped back to a credit balance in the third quarter of 2021, we are now back to typical LIFO accounting. And I think it is useful to clarify how we view the application of LIFO and the treatment of inventory acquisition costs in our gross margin results.

Since our LIFO reserve flip back to a credit balance in the third quarter of 2021, we are now back to typical LIFO accounting and I think it is useful to clarify how we view the application of LIFO in the treatment of inventory acquisition costs in our gross margin results.

Under last in, first out accounting, the cost of goods sold that runs through our reported gross margin results most closely reflects our current acquisition costs. And we believe this is the best picture of our gross margin performance.

Under last in first out accounting the cost of goods sold the runs through our reported gross margin results. Most closely reflects our current acquisition costs and we believe this is the best picture of our gross margin performance. This.

This reporting aligns with how we manage our process of evaluating and adjusting prices based on changes in inventory costs.

Our teams diligently work to pass along cost increases in a timely manner, consistent with or ahead of our actual receipt of cost increases from suppliers.

Our team is diligently work to pass along cost increases in a timely manner consistent with or ahead of our actual receipt of cost increases from suppliers.

From a balance sheet perspective, in periods when costs are rising, we see an increase in our LIFO inventory credit balance, which reflects the application of the LIFO calculation. However, because we evaluate gross margin performance on the basis of current acquisition costs and selling prices, we do not view the normal application of LIFO as a discrete charge store gross margin results.

From a balance sheet perspective in periods when costs are rising we see an increase in our LIFO inventory credit balance, which reflects the application of the LIFO calculation. However, because we evaluate gross margin performance on the basis of current acquisition costs and selling prices, we do not view the normal application of LIFO as a discrete charge.

Store gross margin results.

Since we take this approach, we can see some temporary impact in our gross margin results to the extent that the timing of cost changes and corresponding pricing movements do not align perfectly. Some functions won't compare toizers thatAND.

Since we take this approach we can see some temporary impact in our gross margin results to the extent that the timing of cost changes and corresponding pricing movements did not align perfectly well.

The last several years have created volatility in our reported results, driven by the exhaustion of our debit LIFO balance, as well as significant inflation in acquisition costs and disruptions in supply chains. But ultimately, we expect to see a much more muted impact from LIFO moving forward as our reported results reflect a more consistent, relevant picture of gross margin performance.

For the last several years have created volatility in our reported results.

Driven by the exhaustion of our debit LIFO balance as well as significant inflation in acquisition costs and disruptions in supply chains, but ultimately we expect to see a much more muted impact from LIFO moving forward as our reported results reflect a more consistent relevant picture of gross margin performance.

Our third quarter effective tax rate was 23.2% of pre-tax income, comprised of a base rate of 24.3%, reduced by a 1.1% benefit for share-based compensation.

Our third quarter effective tax rate was 23, 2% of pretax income comprised of a base rate of 24, 3% reduced by a one 1% benefit for share based compensation.

This compares to the third quarter of 2021 rate of 22.5 percent of pre-tax income, comprised of a base rate of 24.2 percent reduced by a one point seven percent benefit for share-based compensation.

This compares to the third quarter of 2021 rate of 22, 5% of pretax income comprised of a base rate of 24, 2% reduced by a one 7% benefit for share based compensation.

The third quarter of 2022 base rate was in line with our expectations.

Third quarter of 2022 base rate was in line with our expectations.

For the full year of 2022, we continue to expect an effective tax rate of 23.0%, comprised of a base rate of 23.5, reduced by a benefit of 0.5% for share-based compensation.

For the full year of 2022, we continue to expect an effective tax rate of 23.0%.

Price of a base rate of 23, 5% reduced by a benefit of 0.5% for share based compensation.

Our fourth quarter and full year expected tax rate is expected to be below our year-to-date rate of 23.6 percent due to anticipated benefits in the fourth quarter from our continued commitment to renewable energy investments and a tolling of certain tax periods.

Our fourth quarter and full year expected tax rate is expected to be below our year to date rate of 23, 6% due to anticipated benefits in the fourth quarter from our continued commitment to renewable energy investments and the <unk>.

<unk> of certain tax periods.

Also, variations in the tax benefit from share-based compensation can create fluctuations in our quarterly tax rate.

Also variations in the tax benefit from share based compensation can create fluctuations in our quarterly tax rate.

Now we will move on to free cash flow and the components that drove our results. Free cash flow for the first nine months of 2022 was $1.9 billion versus $2.2 billion for the first nine months of 2021, with the decrease driven by higher capital expenditures in 2022 versus 2021 and differences in accrued compensation.

Now, we will move on to free cash flow and the components that drove our results free cash flow for the first nine months of 2022 was $1 9 billion.

Versus $2 2 billion for the first nine months of 2021 with the decrease driven by higher capital expenditures in 2022 versus 2021 and differences in accrued compensation.

capital expenditures.

Capital expenditures.

For the first nine months of 2022 were $389 million versus $341 million for the first nine months of 2021. We now expect CapEx to come in between $550 to $650 million for the full year. With the balance of the spend for the remainder of the year continuing to support new store and DC development projects.

For the first nine months of 2022 were $389 million versus $341 million for the first nine months of 2021.

We now expect capex to come in between $550 million to $650 million for the full year with the balance of this spend for the remainder of the year continuing to support new store and DC development projects.

initiatives to enhance the image, appearance, and convenience of our stores, and strategic investments in information technology projects.

Initiatives to enhance the image appearance and convenience of our stores.

And strategic investments in information technology projects.

The reduction in our expected capex from our previous guidance range of $650 to $750 million is primarily the result of ongoing supply chain challenges to acquire new fleet vehicles and complete various store in DC projects.

The reduction in our expected capex from our previous guidance range of $6 $50 million to $750 million is primarily.

The result of ongoing supply chain challenges to acquire new fleet vehicles, when complete various store and DC projects.

Our AP to inventory ratio at the end of the third quarter was 135%, which once again has set an all-time high for our company and was heavily influenced by the extremely strong sales volumes and inventory turns, along with the impact from increased inflation and product acquisition costs.

Our AP to inventory ratio at the end of the third quarter was 135%, which once again has set an all time high for our company and was heavily influenced by the extremely strong sales volumes and inventory turns along with the impact from increased inflation in product acquisition costs. We.

We do not anticipate our AP to inventory ratio to moderate off of this historic high as we complete additional inventory investments.

We do not anticipate our AP to inventory ratio to moderate off of this im sorry, we do anticipate our AP to inventory ratio to moderate off of this historic high as we complete our inventory additional inventory investments.

but we now expect to finish the year slightly below our third quarter ratio.

But we now expect to finish the year slightly below our third quarter ratio.

After generating $1.9 billion in year-to-date free cash flow, and based on our updated net inventory and CapEx spend expectations for the remainder of the year, we are increasing our expected full-year free cash flow guidance to a range of $1.8 to $2.1 billion, an increase of half a billion dollars from our previous guidance of $1.3 to $1.6 billion.

After generating $1 9 billion in year to date free cash flow and based on our updated net inventory and capex spend expectations for the remainder of the year. We are increasing our expected full year free cash flow guidance to a range of one eight to $2 1 billion.

An increase of half a billion dollars from our previous guidance of one three to $1 6 billion.

Moving on to debt, in September we retired $300 million of maturing 10-year senior notes using available cash on hand.

Moving on to debt in September we retired $300 million of maturing 10 year senior notes using available cash on hand.

As a result of the maturity, we finished the third quarter with an adjusted debt-to-EBITDA ratio of one point eight four times, which is down from our second quarter ratio of one point nine five times, but above our end of 2021 ratio of one point six nine times.

As a result of the maturity we finished the third quarter with an adjusted debt to EBITDAR ratio.

184 times, which is down from our second quarter ratio.

195 times, but above our end of 2021 ratio of 169 times.

We continue to be below our leverage target at two point five times, and we'll approach that number when appropriate.

We continued to be below our leverage target at two five times and we'll approach that number when appropriate.

We continue to be pleased with the execution of our share repurchase program.

And during the third quarter, we repurchased one million shares at an average share price of $683.09 for a total investment of $710 million.

And during the third quarter, we repurchased 1 million shares and an average share price of $683 90.

For a total investment of $710 million.

Year to date through our press release yesterday, we repurchased four point six million shares at an average share price of $650.43.

Year to date through our press release yesterday, we repurchased four 6 million shares at an average share price of $650 43.

for a total investment of $3 billion.

For a total investment of $3 billion.

We remain very confident that the average repurchase price is supported by the expected future discounted cash flows of our business.

We remain very confident that the average repurchase price is supported by the expected future discounted cash flows of our business and we continue to view our buyback program as an effective means of returning excess capital to our shareholders.

and we continue to view our buyback program as an effective means of returning excess capital to our shareholders.

Finally, before I open up our call to your questions, I would like to again thank the entire O'Reilly team for their commitment to our customers and our company.

Finally, before I open up our call to your questions I would like to again, thank the entire O'reilly team for their commitment to our customers and our company.

This concludes our prepared comments.

At this time, I would like to ask Vanessa, the operator, to return to the line and we will be happy to answer your questions.

At this time I would like to ask Vanessa the operator to return to the line and we will be happy to answer your questions.

Thank you. We will now begin the question and answer session. If you have a question, please press zero then one on your touch tone phone.

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We also ask that you please limit your questions to one question and one follow-up question.

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We have our first question from Greg Melick with Evercore ISI.

Thanks. Just to kick it off on the current trends into the quarter, when you say that it's as strong as it was in the third quarter, is that on a three-year view or year-over-year, or how are you measuring that?

Hi, Thanks, just to kick it off on the current trends in other quarter.

When you say that it's as strong as it was in the third quarter or is that on a three year view or year over year or how are you measuring that.

Okay.

you.

Yeah, Greg, thanks for the question. I think really when we think about that, it's versus our expectations as we've kind of moved through the year, and those factor in the comparisons we're up against. So we've just been in this unique environment where you really do have to look at kind of two-year, three-year performance. So what we'd say is it's up kind of on that basis.

Great. Thanks for the question.

Really when we think about that it's versus our expectations.

As we kind of move through the year and those factor in the comparisons we're up against so.

We've just been in this unique environment, where you really do have to look at it.

Kind of two year three year performance. So what we would say is it's up kind of on that basis. The nominal comps do move around just based on the comparisons.

Got it. And then second, could you give us a little more color on inflation and average ticket size between pro and DIY? It seems like it would be a little higher in DIY and a little less in pro because of PPI, but any color there would be great.

Got it and then second could.

Could you give us a little more color on inflation and average ticket size between.

ROE and DIY it seems like.

It would be a little higher in DIY and little less than pro because of PPI, but any color there would be great.

Yeah, Greg, I think you're thinking about it the right way. We're seeing similar inflation benefits when we think about skew level year over year when you exclude the specific strategic moves that we've made on the professional side of our business.

Yes, Greg I think youre thinking about it.

Right way, we're seeing similar inflation benefits. So when we think about SKU level year over year. When you exclude the specific strategic moves that we've made on the professional side of our business.

You know, that's the largest driver of the strength that we've seen in average ticket. Average ticket always has other components to it as well. We think on the professional side, just because of the success of what we've seen in the pro-pricing initiative, we've...

That that's the largest driver of the strength that we've seen in average ticket average ticket always has other components to it as well when we think on the professional side just because of the success of what we've seen in the pro pricing initiative.

We've benefited from growing our average ticket beyond just the price that we've seen. So that's probably a little bit of a helper, but we continue to view both sides very favorably given the ability to pass through cost increases.

We benefited from.

Our average ticket beyond just the price that we've seen but so that's probably a little bit of a help but we continue to view both both sides very favorably given.

Given the.

The ability to pass through cost increases really very effectively all year long.

really very effectively all year long.

And then last is trade down.

And then last is trade down have you seen anything through the box on either side of the business.

Have you seen anything through the box on...

either side of the business.

You know, Greg, we really haven't seen anything material that stands out. We look at this very closely, both on a consolidated basis and category by category.

Greg we really haven't seen anything material that stands we look at this very closely both <unk>.

Consolidated basis and category by category, and where we have seen movement, either up or down it's really been more result of supplier performance and inventory availability.

And where we have seen movement, either up or down, it's really been more a result of supplier performance and inventory availability. Trading across brands of oil, for example, or up and down the value perspective for both our proprietary brands and national brands.

Trading across brands of oil for example are up and down the value perspective for <unk>.

Both our proprietary brands and national brands.

That's great. Thanks guys and good luck.

That's great Thanks, guys and good luck.

Thanks, Craig.

Thanks, Craig its Greg.

We have our next question from Christopher Hovers with J.P. Morgan.

We have our next question from Christopher <unk> with JP Morgan.

Thanks. Good morning, guys. So following up on the question about cadence, so it was the best month on a three-year basis. So basically, it's September , sort of an eight-handle comp. And then as we look in the fourth quarter, we degrade that by a few hundred basis points for the inflation comparison. And then you're basically some plus or minus around the consumer in the holidays and weather uncertainty versus accelerated pro-pricing gains.

Thanks, Good morning, guys. So maybe following up on the question about cadence so.

It was the best month on a three year basis. So basically is it September or sort of an eight handle comp and then as we look in the fourth quarter, we degrade that by a few hundred basis points for the inflation comparison, and then youre basically some plus or minus around the consumer and the holidays and weather uncertainty.

T versus accelerated pro pricing gains.

Yeah, Chris, I think you're thinking about this right. As we called out, you know, we were pleased with our third quarter performance. We're pleased with quarter to date through October without a doubt. The challenge we have is the unknowns and the volatility and frankly the challenges that we may very well experience in the back half of the quarter.

Yeah, Yeah, Chris I think Youre thinking about this right as we called out we were pleased with our with our third quarter performance. We're pleased with quarter to date through October without a doubt. The challenge. We have is the unknowns in the volatility and frankly the challenges that.

We may very well experienced in the back half of the quarter. When you look at fourth quarter, we always worry about weather volatility.

You layer on the volatility in fuel prices you layer on beef.

Beyond the weather just the uncertainty of the consumer and what they're going to do and frankly, Chris We just haven't seen an inflationary environment around the holidays in many many years and the holidays are always a wildcard in the fourth quarter as well you layer on the inflation component those are all the reasons we're cautious.

And our outlook for the fourth quarter.

Got it. And then maybe gross margin and open up LIFO a little bit, which everybody loves. So basically, as you go forward, your expectation is product acquisition costs go lower, so there should be really no – and you've lapped through all the LIFO headwind from last year substantially. Maybe there's a little bit left in the fourth quarter. And so then as you go forward, if you expect lower product acquisition costs –.

Got it and then maybe gross margin then open up the LIFO, a little bit which everybody loves so basically.

As you go forward your expectation is product acquisition costs go lower so there should be really no and you've lapped through.

The LIFO headwind from last year substantially maybe theres, a little bit left in the fourth quarter and so then as you go forward, if you expect lower product acquisition costs.

Getting into 23, does that mean that you could start to see actually some gross margin tailwinds on the product acquisition side?

Getting into 23 does that mean that you could start to see actually some gross margin tailwind.

On the product acquisition side.

Yeah, yeah, Chris, I don't know that we really would view it.

Yes, Chris I don't know that we really we view it.

that optimistically, you know, we're always going to work with our supplier base to ensure that.

That optimistically, we're always going to work with our supplier base to ensure that.

We're walking a lockstep with.

We are walking in lockstep with.

any relief from pressure that they've seen.

Any relief from pressure that <unk> seen from an input cost perspective.

from an input cost perspective.

a lot of what we've seen so far over the course of the last year plus.

A lot of what we've seen so far over the course of the last year plus has been driven by several factors including.

has been driven by several factors including.

raw materials, costs, wage rates, pressures, obviously from freight that our suppliers have seen. And we're always going to work to...

Raw materials costs wage rate pressures.

From Craig that our suppliers have seen in work, we're always going to work to.

to be sure that we're realizing appropriate reductions in.

To be sure that we're realizing appropriate reductions in in.

Rolling back, cost increases where we can, but we're pretty cautious in building any expectation that that's going to be a significant helper for us as we move forward. Obviously, we'll see and we'll see that play out. We do feel very confident that to whatever degree that we do see any relief on the cost side that the industry will be able to maintain those selling prices.

Rolling back cost increases where we can.

But we're we're pretty cautious in building any expectation that that team to be a significant help for for us as we move forward. Obviously, we will see you will see that play out.

We do feel very confident that.

Whatever degree that we we do see any relief on the cost side that.

<unk>.

The industry will be able to maintain those selling prices thats certainly our intent.

Obviously see how that plays out as well but.

Some of these cost increases are probably around this day.

some of these cost increases are probably around to stay.

Got it. And then just one quick one, Jeremy, on the LIFO side. I mean, can you maybe give us some numbers in terms of how many base points that was in the third quarter? I mean, we're around 120, and does that go down to really the minimus amount in the fourth quarter?

Got it and then just one quick one Jeremy on the LIFO side I mean can you maybe give us some numbers in terms of how many basis points that was in the third quarter.

We're around 120 and does that go down to really a de minimis amount in the fourth quarter.

Yeah, Chris, I think the best way to look at that is just really kind of what we called out as positive good guys last year. We still have a headwind in the fourth quarter. It softens up a little bit. For us now, it's really more a function of as the cost environment moves around, how quickly in sync can you be sure to adjust prices? Sometimes we're out ahead.

Yeah, Chris I think the best way to look at that is just really kind of what we'd call that is positive. Good guys last year, we still have headwind in the fourth quarter.

<unk> is up a little bit.

For US now, it's really more a function of.

As the cost environment moves around how quickly can you be sure to adjust prices, sometimes we're out ahead there.

Other times, we're just in line, but.

But the more significant comparison headwinds for how.

We would have look prior to when our LIFO credit flip back or will largely be behind us after after fourth quarter little bit less in fourth quarter and then <unk>.

First quarter of next year, a little bit less than that.

Great. Thanks so much. Best of luck.

Great. Thanks, so much best of luck.

Thanks, Chris.

We have our next question from Brett Jordan with Jefferies.

We have our next question from Bret Jordan with Jefferies.

Good morning guys.

Hey, good morning, guys.

Question around fill rates, I guess, my usual. Are you guys back to where you'd like to be from an inventory standpoint versus pre-COVID? And I guess how do you see your fill rates versus the broader market? Are the WDs and some of the other competitors in the space relatively in stock as well, or is that still helping your market share?

A question around fill rates I guess my usual.

Are you guys back to where you'd like to be from an inventory standpoint versus pre COVID-19 and I guess, how do you see your fill rates versus the broader market or the or the wds and some of the other competitors in this space relatively in stock as well or is that still helping your market share.

Yeah, Brent, do you want to start that and then maybe Brad can talk about the competitive situation? Yeah, sure, Brett. Great question. Yeah, fill rates have improved sequentially from suppliers. We've got some suppliers that are really back to healthy fill rates. We've got a few that still are making sequential improvements but aren't fully back to where they were pre-COVID.

Brian do you want to start that and then maybe Brian to talk about the competitive situations, yes sure Brett.

Great question, yes fill rates have improved sequentially from suppliers. We've got some suppliers that are really back to healthy fill rates. We've got a few that still.

Our making sequential improvements, but arent fully back to where they were pre COVID-19.

Our supply chain team a lot of credit for the work with our suppliers to make sure. We've got the parts available that our customers need both DIY and professional so we feel good with our availability position given the market backdrop that we're operating in but yes sequentially were continuing to get better, but still a little work to do in <unk>.

Some areas.

Okay, another question on it. Okay, go ahead please.

Okay, and then a question on <unk>.

Okay.

Go ahead please.

Hey, sorry, Brett. Just real quick, I'll just back up what Brent said. You know, maybe from the street and from the sales and store operations standpoint, you know, Brent hit it pretty good. But, you know, we're basically, we're pleased, especially in some categories that we needed to get better, we got better, we have a few that we still have some work to do.

Hey, sorry, Brad just real quick I'll, just back up what Brent said, maybe from the street and from the sales and store operation standpoint.

Brent had a pretty good but we're basically we're pleased especially in some categories that we needed to get better we got better we have a few that we still have some work to do but really just from a.

Competitive landscape, Brett we feel like our large competitors, they're great competitors.

You know, we always say we have tremendous respect for they've done a good job. We hope we've done as good or better but we are feeling like there's some share gains maybe against some of the smaller players for sure.

We always say, we have tremendous respect for they've done a good job, we hope we've done as good or better but.

We are feeling like there is some share gains maybe against some of the <unk>.

Smaller players for sure.

Okay, great. Thank you. And then a question on the supplier cost or pricing side. I mean, obviously the rates are hitting factoring expenses. Do you see a step up in pricing again to offset that or some of the other expenses like shipping that have come down and offset that.

Great. Thank you and then a question on the supplier cost or pricing side I mean, obviously the rates are hitting factoring in expenses do you see.

A step up in pricing again to offset that or some of the other expenses like shipping that have come down and offset that.

Yeah, I think Brett, maybe to add a little to Jeremy's color around that on the previous question.

Yes, I think Brett maybe to add a little to jeremy's color around that on the previous question.

You know, while we've seen, you know, costs certainly can't go up forever, and we are seeing some of that begin to normalize with suppliers and in the market, but, you know, if you think about wage inflation, it is pretty much baked into some of the cost of goods now. Yeah, we've seen ocean rates go down some, but we've seen rail rates come up. We've seen some domestic lanes come up.

While we have seen.

Certainly can't go up forever, and we are seeing some of that begin to normalize with suppliers and in the market, but if you think about wage inflation.

Is pretty much baked into some of the cost of goods now, yes, we've seen ocean rates go down some but we've seen rail rates come up we've seen some domestic lanes come up so trans is still high.

Hi, elevated versus historical and probably is going to remain that way so.

Jeremy's point earlier, we remain cautious there and we remain confident in our ability to be able to pass those increases on in the event we see.

see any more of those.

See any more of those.

I guess specifically around rates though, since most of the suppliers are saying they're going to ask for pricing to offset the factory expense. Is that a near term incremental inflation or do you not see that necessarily the case?

Specifically around rates since most of the suppliers are saying theyre going to ask for pricing to offset the factoring expense is that a near term incremental inflation or do you not see that necessarily the case.

Right, there's the potential that it could work out that way. It's I think going to be determined a little bit by more broadly in the market where it hits. Those rates have ended up being Saturday.

Brian there's a potential that it could it could work out that way I think going to be.

To be determined a little bit by more broadly in the market, where it hits those rates have.

have more of a relative impact supplier to supplier than maybe some of the other things that go into the cost of providing the products that we buy and some won't have the same pressure that others may have. So I think competitively you'll see.

Have more of a relative impact supplier to supplier than maybe some of the other things that go into the cost of.

So any of the products that we buy in some.

Won't have the same pressure that others may have so I think competitively youll see.

some ability to push back on some of those and in other instances that they will flow through. We.

Some ability to push back on some of those and in other instances they will flow through.

We're obviously active in those conversations and it will work. There'll probably be some equilibrium that gets struck at some point But in the grander scheme of things I think it's it is a part of how we think about acquisition costs some of the other things that Brent identified are obviously the bigger drivers in.

We're obviously active in those conversations and we'll work there'll probably be some equilibrium that gets shocked at some point.

But in the Grand scheme of things I think it's it is a part of how we think about acquisition costs. Some of the other things that Bryan identified or obviously the bigger drivers.

We you know our views on that is that that we do expect it to continue to stay around for a while.

Our views on that is that.

We do expect it to continue to stay around for a while.

Great, thank you.

Great. Thank you.

Thanks, Brett.

Our next question is from Simeon Gutman with Morgan Stanley .

Good morning, everyone. First topic is on pricing and inflation and maybe the outlook. Trying to think about how you're thinking about the cadence, we're about to lap some heavier price increases or inflation from a year ago. Does it, and I think based on the prior answer, it seems like we're not going to have any material stick down in the rate of inflation.

Good morning, everyone.

First topic is on pricing and inflation and maybe the outlook.

Trying to think about how youre thinking about the cadence.

We're about to lap some heavier price increases or inflation from a year ago.

Does it.

Based on the prior answer it seems like we're not going to have any material step down in the rate of inflation. It feels like it's structural.

And if it if it subsides it doesn't feel like there will be a shock, where we really lose five points is that a fair.

Fair way.

To think about it and then I have a follow up.

Yes, I mean, I think that's fair. You know, as we came into this year, just from a purely comparison standpoint, we had expected moderation really in third quarter and fourth quarter from that year-over-year benefit. As we move through the year, we've had continued incremental cost increases. We've passed them through. As you know, it's benefited our top line.

Yes, I mean, I think Thats fair as we can.

Came into this year just from a purely competitive comparison standpoint.

We had expected moderation really in third quarter or fourth quarter from that year over year benefit as we move through the year. We've had continued incremental cost increases we pass them through.

As you know its benefited our topline I.

I think thats been pretty rational and because of that we ended up with.

More of a positive for that then we would have expected and we will see where the rest of the year plays out I think versus where we would have thought at the beginning of the year that year over year pressure won't be as significant in the fourth quarter.

There is still some extent to where it's there moving forward, we'll see I think our caution is on an expectation that we're going to see dramatic rollbacks that match. Some some level of the volume or magnitude that we've seen since really the middle of 2021, we don't anticipate that hopefully will.

Work to get some of the.

Cost improvements moved down but from a from a pricing to the street perspective, we continue to expect that to be resilient to market to be rational and for that not to change.

we would continue to expect that to be resilient, for the market to be rational, and for that not to change.

And maybe the follow up, thinking about gross margin, this is directionally, obviously not in magnitude. It does feel like maybe some headwinds go away. I wouldn't jump to say they're tailwinds. And I wanted to hear the reaction to it. Greg Johnson mentioned, you know, some of the pricing may hold, industry's been rational, so that in theory should be a good guide to the margin if pricing holds and there are some cost pullbacks.

And maybe the follow up.

Thinking about gross margin. This is directionally obviously not.

Magnitude.

It does feel like maybe.

Some headwinds go away I wouldn't jump to say Theyre tailwind.

Wanted to hear the reaction to it Greg Johnson mentioned.

Some of the pricing may hold industry's been rational so that in theory should be a good a good guide to the margin pricing hold and there are some cost pullbacks youre lapping PPI it doesn't become an incremental headwind and then to whatever extent freight and even some raw material cost moderate.

That could be favorable for you. So is it fair to say that some of the headwinds maybe go away maybe not flip the tailwind per se I think you've been hesitant to acknowledge that but at least that the removal of headwinds.

Yeah, the one thing maybe I would I would caution on that, Simeon, is as you think about those being headwinds, we, you know, we've worked, I think, appropriately and aggressively to stay out in front of those pressures.

Yes the.

One thing maybe I would I would caution on that Simeon as you think about those being headwinds.

We worked I think appropriately and aggressively to stay out in front of those pressures.

as we pass along pricing really said.

As we pass along the pricing really sets.

the middle of last year.

In the middle of last year.

You know, our approach has always been from a pricing perspective to highly scrutinize anything we see from our suppliers to make sure that we're making them provide the right justification for taking, for sending a cost increase through to us. And then often we've got some ability to hold off the impact of that through the course of the negotiations that we've had and not see it for a month or two.

Our approach has always been from.

Our pricing perspective.

Highly scrutinize anything we see from our suppliers to make sure that that we're making them provide the right justification for taking preceding our cost increase through to US and then often we've got some ability to to hold off the impact of that.

Through the course of the negotiations that we've had and not see it for.

With the two.

And a couple of that with you.

Really during the tail end of last year. We also had some supply supply chain delays that.

Push those costs back further so that's given us ample opportunity, we feel like to to be sure that by the time, we will see the impact of that we've already started to flip those prices to the street. So I think for us. They maybe have not created the same level of headwinds.

Because it just our approach in doing that that you might otherwise expect.

Yeah, and Simi and one other thing maybe to add on that topic, you know, as you think about growth in our proprietary brands and our offering across good, better, best in those brands, we're able to further diversify that supplier base than we are a national supplier base. So, we're going to be looking at the next slide.

And Simeon one other thing maybe to add on that topic.

As you think about growth in our proprietary brands and our offering across good better best in those brands, we were able to further diversify that supplier base and we are a national supplier base. So that kind of speaks to some of the point Jeremy just made as well if you think about it that way.

So that kind of speaks to some of the point Jeremy just made as well.

about it that way. Thanks guys. Good luck.

Thanks, guys. Good luck.

Okay.

Thanks.

Our next question is from Michael Lasser with UBS.

Good morning. Thanks a lot for taking my question. One of the key debates on O'Reilly and the auto part retail sector more broadly is whether or not it can generate growth in 2023 in the absence of passing along all these price increases that have been the principal driver of growth up until now. So A, do you think that there is elasticity within the category where as the pricing pressure abates, there will be elasticity of demand so volumes will improve?

Good morning, Thanks, a lot for taking my question one of it.

Good morning, one of the key debates on O'reilly auto part retail sector more broadly is whether or not it can generate growth in 2023 in the absence of.

Passing along all these price increases that has been the principal driver of growth up until now.

So Amy.

Think that there is elasticity within the category, where as the pricing pressure abates, there will be elasticity of demand so volumes will improve.

Even if the industry doesn't pick up and see elasticity next year can O'reilly share continued to grow at what seemed like an accelerating rate in the third quarter likely in response to a delayed reaction to the pro pricing initiatives that you implemented earlier this year.

Michael, it's Jeremy, thanks. There are a lot of questions within that question.

Michael It's Jeremy Thanks, a lot of questions within that question. So just.

you know, maybe you want to take a little bit of a step back. You know, we haven't, I actually haven't guided it 2023 yet, but we're in a unique situation where there continue to be...

Maybe you want to take a little bit of a step back we have actually havent guided that 2023 yet.

We're in a unique situation, where there continues to be.

cost inflation impacts pricing inflation that are being passed through. I think what we would tell you is, we'll see where that could come and turn it into offer options where they or.

Cost impacts cost inflation impacts pricing inflation that are being pass through.

I think what we would tell you is we will see where that where that.

whether that flattens out or what it does. I think for us.

Where that flattens out or what it does I think for us.

our expectation is if we see modest inflation or we see more elevated inflation that we will continue to be able to effectively pass that through to our customers and that that becomes very rational and relatively stable.

Our expectation is if we see modest inflation or we see more elevated inflation that we will continue to be able to effectively pass that through to our customers that that becomes.

Very rational relatively.

inelastic, to whatever degree that we see that.

In elastic.

To whatever degree that we see that.

any relief from that type of pressure, you know, I don't know that we would say that we think it bounces back. For us, from a broader perspective, we think that the automotive aftermarket's in, just from an industry perspective, in pretty good shape, and have an expectation that the prospects for our industry in general grow, and for all the things that Greg talked about within his prepared comments, the vehicle fleet dynamics, the miles driven, I think continue to recover and be positive, the incredible value proposition for consumers to invest in their existing vehicles.

Any relief from that type of pressure.

Would say that we think it bounces back for us from a broader perspective, we think.

The automotive aftermarkets in just from an industry perspective in pretty good shape and it has.

An expectation that that the prospects for our industry in general to grow and for all the things that Greg talked about within his prepared comments the vehicle.

Fleet dynamics.

Miles driven I think continuing to recover and be positive.

The incredible value proposition for a consumer.

Consumers to invest in their existing vehicles those things, we all feel like will be a positive and where that shakes out for the pieces that would drive the cup. We think that that's helpful. And then we continue to think that.

that we have the ability to grow our share. That's always been our approach in.

That we have the ability to grow our share. That's that's always been our approach in and we will aggressively pursue them, yes, Michael just to add to that we remain very bullish on both the industry as a whole as I said in my prepared comments and our ability to continue to take market share I don't want.

and we will aggressively pursue that.

Yeah, Michael, just to add to that, you know, we remain very bullish on both the industry as a whole, as I said in my prepared comments, and our ability to continue to take market share. I don't want anyone to think that our growth this year has been purely the result of inflation or price inflation.

Anyone to think that our growth. This year has been purely the result of inflation and price inflation, we feel very confident that we're taking market share on both sides of the business and we will continue to do so into 2023.

We feel very confident that we're taking market share on both sides of the business, and will continue to do so into 2023.

Just to follow up on that one, Greg, you're not going to quantify what you think the impact has been from the return on investment in the pro-pricing initiative, but could you qualify it to say that you think the impact was greater in the third quarter than it was in the second quarter? And is it reasonable, just given the lag that it might take for your commercial customers to recognize some of these pricing changes that the impact could grow in the fourth quarter and into the beginning of next year?

Just to follow up on that one Greg Youre not going to quantify what you think the impact has been from the return on investment in the pulp pricing initiative.

Could you qualify it to say that you think the impact was greater in the third quarter than it was in the second quarter and is it reasonable just given the lag that it might take for your commercial customers to recognize some of these pricing changes.

But the impact could grow in the fourth quarter and into the beginning of next year.

Yeah, Michael, I'll generally answer your question and then kick it across to Brad. He's obviously living the...

Yes, Michael I'll generally answer your question and then kick it across to Brad.

Obviously living these these professional pricing programs day in day out and dealing with our competitors out in the marketplace. We said from the very beginning that it was going to take time to gain traction that this was not as easy as flipping a switch and everybody realizes our pricing is better and all of a sudden morale.

these professional pricing programs day in and day out, and dealing with our competitors out in the marketplace. You know, we said from the very beginning that it was gonna take time to gain traction, that this was not as easy as flipping a switch, and everybody realizes our pricing's better, and all of a sudden, miraculously, our sales grow. We knew it was gonna take time, and I think it did compound in the third quarter, and will continue to grow over a reasonable period of time.

Lastly, our sales grow we knew it was going to take time.

It did compound in the third quarter, and we will continue to grow over a reasonable period of time at some point it will stabilize but we do expect to see continued benefit from that Brad you want to talk to any specifics or anything you've seen yeah, Hey, Michael Greg said, it pretty well.

specifics or anything you've seen? Yeah. Hey, Michael. Greg said it pretty well. You know, really what we saw in our testing is we mentioned, I think, uh, both, uh, after we rolled it out in last quarter is.

Really what we saw in our testing as we mentioned I think.

Both.

After we rolled it out in last quarter is we saw some immediate impact, but we also saw a delayed impact and to answer. Your question directly is Greg did yes, we do feel like there is a <unk>.

We saw some immediate impact, but we also saw a delayed impact. And to answer your question directly, as Greg did, yes, we do feel like there's a building effect for sure. Kind of what we see, Michael, just maybe at the street level is.

Building effect for sure.

Kind of what we see Michael just maybe at the street level is if you have a really big repair shop in a particular market that is bought from an independent may be on the traditional side of the business for a couple of decades, and maybe were second or third or fourth call, even just because we lower our <unk>.

if you have a really big repair shop in a particular market that...

It is bought from an independent maybe on the traditional side of the business for a couple of decades. And maybe we're second or third or fourth call even. You're absolutely right.

just because we...

lower our price to be a lot more competitive with that two-step independent competitor, that doesn't mean that they just start buying from us you know the day after we call on them. It means that what what may happen.

Price to be a lot more competitive with that two step independent competitor that doesn't mean that they just start buying from us the day. After we call on them. It means that what may happen, if we combine our pricing with the best team in town, the best service divestiture availability and sense of urgency and everything that goes along with the relationship.

If we combine our pricing with the best team in town, the best service, the best availability, and sense of urgency and everything that goes along with the relationship, then what happens is, is we may just move up the call list. We may move from fourth to third or third to second, and then it could be a month later, it could be six months later, it could be a year later.

Then what happens is as we made this move up the call. This we may move from fourth to third or third to second and then it could be a month later it could be six months later it could be a year later, if one of our independent competitors for example drops the ball that could be the time that we moved from second to first so there are some immediate impact but there is.

Also that ability effect.

Awesome. Thank you so much.

Thanks Mark.

Thanks, Mark Thanks, Michael Myeloma.

The next question comes from Scott Ciccarelli with Truist Security.

Our next question comes from Scot Ciccarelli with Tory security.

Thanks, guys. I guess I have a follow up on Michael's question. Basically, it sounds like there's a, let's call it almost a new store maturity curve that occurs with these pricing changes. Is that fair? But I mean, a typical store is going to kind of mature that pro business over what, a five, six kind of year timeframe. Are we talking about that kind of waterfall or is it something presumably much shorter than that?

Thanks Scott.

I guess I have a follow up on Michael's question basically it sounds like there is a let's call. It on with the new store maturity curve that occurs with these pricing changes.

Is that fair, but I mean, a typical store is going to kind of mature that pro business over what a five six year timeframe like are we talking about that kind of waterfall or is it something presumably much shorter than that.

Yes, Scott, I think that's a hard comparison to draw. The dynamics are just different. It's definitely a ramp. I think.

Yes, Scott I think Thats, a hard comparison to draw.

The dynamics.

Or just different it's definitely a ramp but.

I think the <unk>.

The best way to guide you on that from our perspective is those are harder in gain to their incremental improvements that build over time. They're not hugely level steps up. So to Brad's point, we think that we'll continue to get a little bit better as we move through that. And then at some point, I think we'll have realized the benefit of it. But to try to...

Best way to guide you on that from from our perspective as those are harder and gain their incremental improvements that build over time, they're not huge level steps up so.

So to Brad's point, we think that that will continue to get a little bit better as we move through that and then at some point I think we will have realized the benefit of it.

But to try to to me.

You know make the same analogy. I think it's a little bit tough. Yes Scott I I want to add to that you know let's keep in mind that Pricing is only one component of market share growth, and it's a smaller component than execution of service level inventory availability.

Make the same analogy I think is a little bit tough, yes, Scott I want to add to that let's keep in mind that <unk>.

<unk> is only one component of market share growth.

Smaller component in execution service level inventory availability and we continue to focus on those items as well to ensure market share growth. That's a lot more than just the pricing piece.

and we continue to focus on those items as well, you know, to ensure market share growth. It's a lot more than just the pricing piece.

So as you guys have gained share with some of those customers that maybe you weren't doing business with or as much business with, are there any other changes outside of the pricing initiative that you know we're all familiar with that you guys have started to make where you know maybe there was a reluctance on Riley's kind of game plan for one piece or another.

So as you guys have gained share within those customers that maybe you weren't doing business with are as much business with are there any other changes outside of the pricing initiatives that we're all familiar with that you got to start to make where maybe there was a reluctance on Riley.

What kind of game plan for one piece or another.

No, Scott, I don't know the...

No Scott I don't know that.

we've pointed out any real fundamental differences to what we do.

We pointed out any real fundamental differences to what we do Brian .

Brad talked about it earlier, the keys to success, and it was in a prepared comment, the keys to success on the professional side of our business.

Talked about it earlier.

The keys to success and was in our prepared comments. The cases success on the professional side of our business are helping our customer partners brought to a more profitable business. So the things that we do.

are helping our customer partners run a more profitable business.

So the things that we do.

to be sure that we're the best partner with our customers are the same things we've talked about for a long time. I think for us, continuing to push inventory availability, the investments that Brad talked about in the script in terms of what we've added stores this year, continue improvements in supply chain, I think those have helped us reap some of the benefit too, but this is a blocking and tackling business.

To be sure that we're the best best partner with our customers are the same things we've talked about for a long time.

I think I think for us continuing to push inventory availability the investments that I talked about in the script in terms of what we've added stores. This year can be improvements in supply chain I think those have helped us reach some of the benefit to but this is a blocking and tackling business. Yes. It is.

Scott the only thing I might add to that is we've been able to get back to a lot of our in person relationship type things with supplier customers. Our training programs are back fully in place some of the things that we haven't been able to do because of the pandemic. We're back to doing day in day out and that's probably helped from a relation.

And ship and strengthening.

Yeah, Scott, this is Brad. I just want to real quick add, nothing new. Jeremy said it best, blocking the tackling. We work in a simple business. It's not easy, but it's simple. You know, really, we had our regional managers from the field in Springfield last month.

Perspective, yes, Scott this is Brad I, just wanted to real quick add nothing new.

Jeremy said, it best blocking and tackling we work in a simple business is not easy, but it's simple and really.

We had our regional managers from the field in the Springfield last month.

And our focus was on our fundamental execution. That didn't start in that meeting. But really all year our battle cry from our EVP of stores, Doug Bragg, has been we're gonna get out of the COVID funk and not accept where we may have high turnover in stores, high team member turnover, high store manager turnover. That's just not acceptable with the way we built our business.

Our focus was on our fundamental execution that didn't start in that meeting, but really all year, our battle cry from our EVP of stores, Doug Bragg has been we're going to get out of the Covid bunk and not accept where we may have.

High turnover in stores high team member turnover high store manager turnover.

Not acceptable with the way, we built our business getting out seeing more customers not having that excuse that unfortunately, we've made for ourselves for the last couple of years that we're just getting back to the execution that built our company and making sure that we don't have that hangover from Covid and everything we do.

that unfortunately we've made for ourselves the last couple of years. That we're just getting back to the execution that built our company and making sure that we don't have that hangover from COVID and everything we do. We're just getting back to the execution that built our company and.

Thanks, guys.

Understood. Thanks, guys.

Thanks Scott.

We have reached our allotted time for questions. I will now turn the call back over to Greg Johnston for closing remarks.

We have reached our allotted time for questions I will now turn the call back over to Greg Johnson for closing remarks.

Thank you Vanessa. We'd like to conclude our call today by thanking the entire O'Reilly team for your continued hard work in the third quarter. I'd like to thank everyone for joining our call today and we look forward to reporting our fourth quarter and full year results in February . Thank you.

Thank you Vanessa we'd like to conclude our call today by thanking the entire O'reilly team for their continued hard work in the third quarter I'd like to thank everyone for joining our call today, and we look forward to reporting our fourth quarter and full year results in February . Thank you.

And thank you ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.

Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.

Thank you.

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Welcome to the O'reilly automotive incorporated third quarter 2022 earnings call.

My name is Vanessa and I will be your operator for today's call. At this time all participants are in a listen only mode. Later, we will conduct our question and answer session.

The question and answer session. If you have a question. Please press <unk> then one on your Touchtone phone.

I will now turn the call over to Jeremy Fletcher. You may begin.

I will now turn the call over to Jeremy Fletcher you may begin.

Thank you Vanessa good morning, everyone and thank you for joining us during today's call. We will discuss our third quarter 2022 results and our outlook for the remainder of the year.

1995.

You can identify these statements by forward-looking words such as estimate, may, could, will, believe, expect, would, consider, should, anticipate, project, plan, intend, or similar words.

You can identify these statements by forward looking words, such as estimate may could will believe expect.

Would consider should anticipate project plan intend or similar words.

The company assumes no obligation to update any forward-looking statements made during this call. At this time, I would like to introduce Greg Johnson.

The company assumes no obligation to update any forward looking statements made during this call at this time I would like to introduce Greg Johnson.

Thanks Jeremy. Good morning everyone and welcome to the O'Reilly Auto Parts third quarter conference call.

Thanks, Jeremy Good morning, everyone and welcome to the O'reilly auto parts third quarter Conference call.

Participating on the call with me this morning are Brad Beckham, our Chief Operating Officer, and Jeremy Fletcher, our Chief Financial Officer.

Depending on the call with me. This morning are Brad Beckham, our Chief operating officer, and Jeremy Fletcher, Our Chief Financial Officer.

Brent Kirby, our Chief Supply Chain Officer, Greg Hensley, our Executive Chairman, and David O'Reilly, our Executive Vice Chairman, are also present on the call.

Rent Kirby, our chief supply chain Officer, Greg Henslee, our executive Chairman and David O'reilly, Our executive Vice Chairman are also present on the call.