Q1 2024 O'Reilly Automotive Inc Earnings Call

Welcome to the O'reilly Automotive, Inc. First quarter 2024 earnings call. My name is Matthew and I'll be your operator for today's call.

Matthew: Welcome to the O'Reilly Automotive Inc. first quarter 2024 earnings call. My name is Matthew, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we'll conduct the question and answer session. During the question and answer session, if you have a question, please press star 1 on your touchtone phone. I'll now turn the call over to Jeremy Fletcher. Mr. Fletcher, you may begin.

Speaker Change: At this time all participants are in a listen only mode.

Speaker Change: Later, we will conduct a question and answer session during.

Matthew: During the question and answer session. If you have a question. Please press star one on your Touchtone phone.

Matthew: I'll now turn the call over to Jeremy Fletcher Mr. Fletcher you may begin.

Jeremy Adam Fletcher: Thank you Matthew good morning, everyone and thank you for joining us during today's conference call. We will discuss our first quarter 2024 results and our outlook for the remainder of the year.

Jeremy Adam Fletcher: Thank you, Matthew. Good morning, everyone, and thank you for joining us. During today's conference call, we will discuss our first quarter 2024 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 protection under, the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Jeremy Adam Fletcher: After our prepared comments, we will host a question and answer period.

Jeremy Adam Fletcher: Before we begin this morning, I would like to remind everyone that our comments today contain forward looking statements.

Jeremy Adam Fletcher: 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.

Jeremy Adam Fletcher: 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.

Jeremy Adam Fletcher: 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, 2023, and other recent SEC filings. The company assumes no obligation to update any forward-looking statements made during this call.

Jeremy Adam Fletcher: Important factors described in the Companys latest annual report on Form 10-K for the year ended December 31, 2023, and other recent SEC filings.

Jeremy Adam Fletcher: The company assumes no obligation to update any forward looking statements made during this call.

Jeremy Adam Fletcher: At this time, I would like to introduce Brad Beckham.

Jeremy Adam Fletcher: At this time I would like to introduce Brad Becker.

Brad W. Beckham: Thanks, Jeremy Good morning, everyone and welcome to the O'reilly Auto parts first quarter conference call participating on the call with me. This morning are break Kirby, our president and Jeremy Fletcher, Our Chief Financial Officer, Greg Henslee, Our executive Chairman and David O'reilly, Our executive Vice Chairman are also present on the call.

Brad W. Beckham: Thanks, Jeremy. Good morning everyone, and welcome to the O'Reilly Auto Parts first quarter conference call. Participating on the call with me this morning are Brent Kirby, our President, and Jeremy Fletcher, our Chief Financial Officer. Greg Hensley, our Executive Chairman, and David O'Reilly, our Executive Vice Chairman, are also present on the call.

Brad W. Beckham: I'll begin our call today by thanking our over 90,000 team members for their relentless dedication to providing the knowledge and expertise our customers have come to expect and rely on from the professional parts people at O'Reilly Auto Parts. We are truly in a people business where relationships and customer service are paramount, and Team O'Reilly continues to demonstrate their ability to out-hustle, out-serve, and, in turn, outperform our competition. We finished the first quarter with a 3.4% comparable store sales growth on top of 10.8% in the prior year.

Speaker Change: I'll begin our call today by thanking our over 90000 team members for their relentless dedication to providing the knowledge and expertise our customers have come to expect and rely on from the professional parts people at O'reilly auto parts. We are truly in a people business where relationships and customer service are paramount in Tmall.

Speaker Change: Raleigh continues to demonstrate their ability to out hustle out service and in turn outperform our competition.

Speaker Change: We finished the first quarter with a three 4% comparable store sales growth on top of a 10, 8% in the prior year.

Brad W. Beckham: Our continued strong top-line sales results are dependent on and driven by consistent daily execution across all of our 6,200-plus stores in the U.S., Mexico, Puerto Rico, and now Canada. Driving continued growth in our store volumes does not get easier as our company gets bigger, especially as we build on the significant market share gains we have captured over the last few years. Our single greatest challenge as a company and the driving factor for our success is our ability to build and develop teams and leaders who will be the standard bearers of our culture far into the future.

Speaker Change: Our continued strong topline sales results are dependent on and driven by consistent daily execution across all of our 6200 plus stores in the U S, Mexico, Puerto Rico and now Canada.

Jeremy Adam Fletcher: Driving continued growth in our store volumes does not get easier as our company gets bigger, especially as we build on the significant market share gains we have captured over the last few years.

Jeremy Adam Fletcher: Our single greatest challenge as a company and the driving factor to our success is our ability to build and develop teams and leaders who will be the standard bearers of our culture far into the future.

Brad W. Beckham: Our leaders across our stores, distribution centers, and corporate offices are relentlessly dedicated to perpetuating our culture and investing in our people. Thank you, Team O'Reilly, for your commitment to our customers, our company, and to your fellow team members.

Jeremy Adam Fletcher: Our leaders across our stores distribution centers and corporate offices are relentlessly dedicated to perpetuating our culture and investing in our people. Thank you team O'reilly for your commitment to our customers our company and your fellow team members.

Jeremy Adam Fletcher: Now I would like to start our discussion of the first quarter by walking through the details of our sales performance, starting with comparable store sales or growth of three 4% in the quarter was within within our full year guidance range, but slightly below our expectations as we saw some volatility I will discuss in more detail in a moment.

Brad W. Beckham: Now I'd like to start our discussion of the first quarter by walking through the details of our sales performance. Starting with comparable store sales, our growth of 3.4% in the quarter was within our full year guidance range but slightly below our expectations as we saw some volatility I will discuss in more detail in a moment. We drove solid performance and positive comps in both our DIY and professional businesses in the quarter, with the mid-single-digit comps in Professional being the larger driver of our results, consistent with our expectation and ongoing trend. Increases in average ticket values and ticket counts were both contributors to comp growth on both sides of our business, with inflation at about 1% in line with our full year expectations.

Jeremy Adam Fletcher: We drove solid performance and positive comps in both our DIY and professional businesses in the quarter with the mid single digit comps in professional being the larger driver of our results consistent with our expectation and ongoing trends.

Jeremy Adam Fletcher: Increases in average ticket values and ticket counts were both contributors to comp growth on both sides of our business with inflation at about 1% in line with our full year expectations.

Jeremy Adam Fletcher: Next I want to provide some color on the cadence of our sales results in the first quarter as we have discussed in the past our first quarter can be volatile as we see variability in our business from both the type and severity of winter weather and from the timing of the onset of spring.

Brad W. Beckham: Next, I want to provide some color on the cadence of our sales results in the first quarter. As we have discussed in the past, our first quarter can be volatile as we see variability in our business from both the type and severity of winter weather and from the timing of the onset of spring. We were pleased to generate positive comparable store sales results in each month of the quarter. However, we did experience the choppiness that can be characteristic of the first quarter, especially as we exited with a slow start to spring.

Jeremy Adam Fletcher: We were pleased to generate positive comparable store sales results in each month of the quarter. However, we did experience the choppiness that can be characteristic of first quarter, especially as we exited with a slow start to spring.

Jeremy Adam Fletcher: As we reported on last quarter's earnings call. We produced solid results in January which benefited from harsh winter weather in many of our markets moving past the winter weather in January our business was negatively impacted through much of February by the timing of individual income tax refunds.

Brad W. Beckham: As we reported on last quarter's earnings call, we produced solid results in January, which benefited from harsh winter weather in many of our markets. Moving past the winter weather in January, our business was negatively impacted through much of February by the timing of individual income tax refunds. Typically, we see a benefit starting early in February and ramping up through the month that coincides with the distribution of tax returns. However, there was a noticeable delay in the processing of refunds this year that pressured both sides of our business.

Jeremy Adam Fletcher: Typically we see a benefit starting early in February and ramping through the month. It coincides with the distribution of tax refunds. However, there was a noticeable delay in the processing of refunds. This year that pressured both sides of our business.

Jeremy Adam Fletcher: These pressures moderated as the cumulative amount of refunds began to catch up to the prior year and we saw improved trends at the end of February in the first half of March.

Brad W. Beckham: These pressures moderated as the cumulative amount of refunds began to catch up to the prior year, and we saw improved trends at the end of February and the first half of March. However, we also experienced unseasonably cool, wet weather throughout March across many of our markets.

Jeremy Adam Fletcher: However, we also experienced unseasonably cool wet weather throughout March across many of our markets. As a result March in the full quarter finished slightly below our expectations.

Brad W. Beckham: As a result, March for the full quarter finished slightly below our expectations. The trends we saw as we exited the first quarter have continued into April as we still really haven't seen the uptick in our business that typically accompanies sustained favorable spring weather. The choppiness we saw in the first quarter more significantly impacted DIY business, which is in line with what we've seen historically. Our DIY customers are often working on their vehicles in their driveways, so weather conditions can impact their ability and willingness to perform repair, maintenance, and tune-up items that may have been on hold during the winter.

Jeremy Adam Fletcher: The trends we saw as we exited the first quarter have continued into April as we still really haven't seen the uptick in our business that typically accompanies sustained favorable spring weather.

Jeremy Adam Fletcher: The Choppiness, we saw in the first quarter more significantly impacted DIY business, which is in line with what we've seen historically, our DIY customers are often working on their vehicles and their driveways. So weather conditions can impact their ability and willingness to perform repair maintenance and tuned up items that may have been on hold during the <unk>.

Jeremy Adam Fletcher: <unk>.

Jeremy Adam Fletcher: While our <unk> business was also impacted by the delayed timing of tax refunds, our professional customers tend to be more insulated from weather pressures and the volatility on this side of our business was more muted during the quarter.

Brad W. Beckham: While our DIFM business was also impacted by the delayed timing of tax refunds, our professional customers tend to be more insulated from weather pressures, and the volatility on this side of our business was more muted during the quarter. We continue to be pleased with the performance of our professional business, even as we face very challenging comparisons. As we outlined in our full-year guidance on last quarter's earnings call, we are seeing an expected moderation in professional comps as we calendar significant share gains that drove a professional comp performance that exceeded 20% in the first quarter of last year.

Jeremy Adam Fletcher: We continue to be pleased with the performance of our professional business, even as we face very challenging comparisons.

Jeremy Adam Fletcher: As we outlined in our full year guidance on last quarter's earnings call. We are seeing and expected moderation in professional comps as we calendar significant share gains that drove up professional comp performance that exceeded 20% in the first quarter of last year.

Jeremy Adam Fletcher: Against these challenging comparisons we believe our professional results in the first quarter of this year reflect continued share gains.

Brad W. Beckham: Against these challenging comparisons, we believe our professional results in the first quarter of this year reflect continued share gains. We are excited by our team's ability to leverage the momentum we have created in our professional business and continue to grow our share of what remains a highly fragmented professional market across all of North America. Now I'd like to provide some comments as to how we are thinking about the sales outlook for the balance of the year. As I noted previously, the volatility we have seen so far in 2024 is not uncommon for our business in the first quarter.

Jeremy Adam Fletcher: We are excited by our team's ability to leverage the momentum we have created in our professional business and continue to grow our share of what remains a highly fragmented professional market across all of North America.

Speaker Change: Now I would like to provide some comments as to how we're thinking about the sales outlook for the balance of the year.

Jeremy Adam Fletcher: As I noted previously the volatility we have seen so far in 2024 is not uncommon for our business in the first quarter.

Brad W. Beckham: As many of you listening today have heard us say before, we are cautious not to overreact to choppiness at this point in the year. As we move forward, we expect any weather-driven variability will moderate, and business will normalize into the summer selling season.

Jeremy Adam Fletcher: As many of you listening today have heard us say before we are cautious not to overreact to choppiness at this point in the year.

Jeremy Adam Fletcher: As we move forward, we expect any weather driven variability will moderate in business will normalize into the summer selling season. Given this outlook, we are maintaining our full year comparable store sales guidance of 3% to 5% and would also expect our quarterly comp results to fall within the same range.

Brad W. Beckham: Given this outlook, we are maintaining our full-year comparable store sales guidance of 3 to 5 percent and would also expect our quarterly comp results to fall within the same range. Inherent in our guidance expectations is our belief that demand for our industry is resilient and our end consumer continues to be reasonably healthy. In situations of heightened economic pressures, we believe consumers will continue to prioritize investing to maintain their vehicles, particularly given the significant cost and monthly payment burden of a new or replacement vehicle.

Jeremy Adam Fletcher: Inherent in our guidance expectations as our belief that demand for our industry is resilient and are in consumer continues to be reasonably healthy.

Jeremy Adam Fletcher: In situations of heightened economic pressures, we believe consumers will continue to prioritize investing to maintain their vehicles, particularly given the significant cost and monthly payment burden of a new or replacement vehicle we.

Brad W. Beckham: We believe the composition of our sales results supports this view of the consumer in the current environment. We are encouraged to see broad-based performance across our category mix, with continued strength in categories such as oil and filters, as consumers continue to prioritize recurring maintenance jobs. Additionally, we are not seeing notable evidence of trade down within our categories; rather, better and best-level value spectrum products continue to perform well as consumers prioritize higher quality products that carry extended warranties and, in turn, provide long-term value to their investment in transportation. However, we still remain cautious of the potential deterioration in the broader macro environment that could push consumers to begin more carefully considering where and how they spend their money.

Jeremy Adam Fletcher: We believe the composition of our sales results support this view of the consumer in the current environment. We are encouraged to see broad based performance across our category mix with continued strength in categories, such as oil and filters as consumers continue to prioritize recurring maintenance jobs.

Jeremy Adam Fletcher: Additionally, we are not seeing notable evidence of trade down within our categories, rather, we're seeing better and best level value spectrum products continued to perform well as consumers prioritize higher quality products that carry extended warranties and in turn provide long term value to their investment in transportation.

Jeremy Adam Fletcher: However, we still remain cautious of the potential deterioration in the broader macro environment. They could push consumers to begin more carefully considering where and how they spend their money.

Brad W. Beckham: Our experience gives us confidence that these demand headwinds are short-term, and over time, the consumer will continue to prioritize their transportation needs given the value proposition that is present. All of this being said, we will not settle for industry average growth or allow our teams to accept macroeconomic pressures as an impediment to growth. We know there is substantial opportunity to gain a bigger piece of the pie in our industry, and the mission we have set before our team is to be a leader in all of our markets and on both sides of our business.

Jeremy Adam Fletcher: Our experience gives us confidence that these demand headwinds are short term and over time, the consumer will continue to prioritize their transportation needs given the value proposition that is present.

Jeremy Adam Fletcher: All of this being said, we will not settle for industry average growth or allow our teams to accept macroeconomic pressures as an impediment to growth. We know there is substantial opportunity to gain a bigger piece of the pie in our industry and the mission. We have said before our team is to be the leader in all of our markets.

Jeremy Adam Fletcher: And on both sides of our business.

Jeremy Adam Fletcher: Before I move on from ourselves discussion there are a few items I would like to call out discrete impacts to our sales first the Easter holiday shifted into our first quarter. This year, which was built into our plan and met our expectations as a headwind of approximately 20 basis points to comparable store sales on the quarter.

Brad W. Beckham: Before I move on from our sales discussion, there are a few items I would like to call out as discrete impacts on our sales. First, the Easter holiday shifted into our first quarter this year, which was built into our plan and met our expectations as a headwind of approximately 20 basis points to comparable store sales for the quarter. Next, we received the benefit of an additional selling day as a result of leap day in the first quarter of 2024.

Jeremy Adam Fletcher: Next we received the benefit of an additional selling day as a result of leap day in the first quarter of 2024.

Brad W. Beckham: We exclude the impact of Leap Day from our comparable store sales calculation, but this benefit was included in our total sales guidance and came in as expected, representing 125 basis points of our total sales increase of 7.2% for the quarter. Last, we closed on the acquisition of Group Del Vasto on January 22nd, and their operating results from that point forward are included in our reported numbers. The first quarter total sales increase benefited by approximately 70 basis points from the inclusion of vast auto sales results, which are also excluded from our comparable store sales like in Mexico.

Jeremy Adam Fletcher: We exclude the impact of leap day from our comparable store sales calculation, but this benefit was included in our total sales guidance and came in as expected representing 125 basis points of our total sales increase of seven 2% on the quarter.

Jeremy Adam Fletcher: Last we closed on the acquisition of <unk> on January 22nd and their operating results from that point forward are included in our reported numbers.

Jeremy Adam Fletcher: The first quarter total sales increased benefited by approximately 70 basis points from the inclusion of vast auto sales results, which are also excluded from our comparable store sales like Mexico.

Jeremy Adam Fletcher: Moving on to diluted earnings per share, we are increasing our full year EPS guidance to a range of $41 35.

Brad W. Beckham: Moving on to diluted earnings per share, we are increasing our full-year EPS guidance to a range of $41.35 to $41.85. Our lift in EPS guidance is driven by the gross margin and SG&A results that Brent will cover next, as well as a lower-than-planned tax rate and the impact of shares repurchased through the date of our earnings release today. As Brent will share with you here in a moment, we have been pleased with our team's ability to manage costs while still making steady progress on the numerous initiatives and projects we have in motion to further enhance our competitive position. As I wrap up my prepared comments, I would like once again to thank Team O'Reilly for their hard work and dedication to Start 2024. Now, I'll turn the call over to Brent.

Jeremy Adam Fletcher: The $41 85.

Jeremy Adam Fletcher: Our lift in EPS guidance is driven by the gross margin and SG&A results that Britt will cover next as well as a lower than planned tax rate and the impacts of shares repurchased through the date of our earnings release today.

Jeremy Adam Fletcher: As Brent will share with you here in a moment, we have been pleased with our team's ability to manage costs, while still making steady progress on the numerous initiatives and projects we have in motion to further enhance our competitive position.

Jeremy Adam Fletcher: As I wrap up my prepared comments I would like to once again, thank team O'reilly for their hard work and dedication to start 2024, and now I'll turn the call over to Brent.

Brent: Thanks, Brad I would also like to begin my comments. This morning by thanking team O'reilly for their incredible hard work to ensure a solid start to 2024.

Brent G. Kirby: Thanks, Brad. I would also like to begin my comments this morning by thanking Team O'Reilly for their incredible hard work to ensure a solid start to 2024. We are proud to say that Team O'Reilly now extends across the United States, Mexico, Puerto Rico, and Canada. Regardless of the market we operate in, we know that the absolute key to our success is a team of professional parts people dedicated to the O'Reilly culture of excellent customer service.

Brent: We are proud to say that T. Mo rally now extends across the United States, Mexico, Puerto Rico and Canada.

Brent: Regardless of the market we operate in we know that the absolute key to our success as a team of professional parts people dedicated to the O'reilly culture of excellent customer service.

Jeremy Adam Fletcher: Today, I will cover our first quarter gross margin and SG&A results and provide a quick update on our expansion and capital investments thus far in 2024.

Brent G. Kirby: Today, I will cover our first quarter gross margin and SG&A results and provide a quick update on our expansion in capital investments thus far in 2024. Starting with gross margin. Our first quarter gross margin of 51.2% was an 18 basis point increase from the first quarter of 2023 and slightly better than our expectations for the quarter. As Brad previously noted, this was the first quarter to include the operating results from the acquisition of the vast auto business.

Jeremy Adam Fletcher: Starting with gross margin our first quarter gross margin of 51, 2% was an 18 basis point increase from the first quarter of 2023 and slightly better than our expectations for the quarter.

Jeremy Adam Fletcher: As Brad previously noted this was the first quarter to include the operating results from the acquisition of the vast auto business.

Brent G. Kirby: And the incremental dilution to our first quarter gross margin was in line with the full year 25 basis points we guided to at the beginning of the year. We have continued to see a stable supplier and supply chain environment and experienced the anticipated mix of acquisition costs, puts, and takes in the first quarter. On a net basis, improved acquisition costs benefited gross margins driven by incremental buying improvements, as well as market-driven reductions in freight costs. To the extent that we have seen modest inflation pressure in certain categories, we have been successful in passing those cost increases along in a continued rational pricing environment.

Jeremy Adam Fletcher: And the incremental dilution to our first quarter gross margin was in line with the full year 25 basis points, we guided to at the beginning of the year.

Jeremy Adam Fletcher: We have continued to see a stable supplier and supply chain environment and experienced the anticipated mix of acquisition cost puts and takes in the first quarter.

Jeremy Adam Fletcher: On a net basis improved acquisition costs.

Jeremy Adam Fletcher: Benefited gross margins driven by incremental buying improvements as well as market driven reductions in freight cost.

Jeremy Adam Fletcher: To the extent that we have seen modest inflation pressure in certain categories. We have been successful in passing those cost increases along and a continued rational pricing environment.

Jeremy Adam Fletcher: Given our solid performance in the first quarter, we continued to expect our quarterly gross margin performance to land within our full year gross margin range of 51% to 51, 5%.

Brent G. Kirby: Given our solid performance in the first quarter, we continue to expect our quarterly gross margin performance to land within our full-year gross margin range of 51% to 51.5%. Turning to SG&A, we are pleased with our SG&A management in the first quarter results, in line with expectations as a percentage of sales. Our first quarter average SG&A per store growth of 5.7% included an anticipated 100 basis point increase from the additional business day as a result of leap day.

Jeremy Adam Fletcher: Turning to SG&A, we are pleased with our SG&A management in the first quarter results in line with expectations as a percentage of sales.

Jeremy Adam Fletcher: Our first quarter average SG&A per store growth of five 7% included an anticipated 100 basis point increase from the additional business day as a result of leap day. Additionally.

Brent G. Kirby: Additionally, the SG&A per store growth includes a 15 basis point increment on the quarter from the inclusion of Canada's operating results, which was in line with our expectations based on the portion of the quarter since we have owned that business. Our spin in the first quarter keeps us on pace for our full year plan of growing average SG&A per store by 4.5 to 5 percent. As we noted on our last call, the pace of growth in average SG&A per store will moderate as we move throughout the year.

Jeremy Adam Fletcher: Additionally, the SG&A per store growth includes a 15 basis point increment on the quarter from the inclusion of Canada's operating results, which was in line with our expectations based on the portion of the quarter since we have owned that business.

Jeremy Adam Fletcher: Our spin in the first quarter keeps us on pace for our full year plan of growing average SG&A per store by four 5% to 5%.

Jeremy Adam Fletcher: As we noted on our last call the cadence of growth in average SG&A per store will moderate as we move throughout the year.

Brent G. Kirby: As a result of beginning to compare the impact of the 2023 investments that we made in the business. While we continue to move forward, as planned, on our growth initiatives, some of the investments we have been making in technology capabilities, as well as enhancements to our vehicle fleet, and the image and appearance of our stores, will begin to layer into our SG&A comparison as we incur ramping incremental expenses throughout 2023 in these areas. The impact of these comparison headwinds in our first quarter SG&A spin drove the planned deleverage of SG&A, which we also anticipate to moderate throughout the balance of this year.

Jeremy Adam Fletcher: As a result, the beginning to compare against the impact of 2023 investments that we made in the business.

Jeremy Adam Fletcher: While we continue to move forward as planned on our growth initiatives. Some of the investments we've been making in technology capabilities as well as enhancements to our vehicle fleet and the image and appearance of our store will begin to layer into our SG&A comparisons as we incurred ramping incremental expenses throughout 2000.

Jeremy Adam Fletcher: 'twenty three in these areas.

Jeremy Adam Fletcher: The impact of these comparison headwinds in our first quarter SG&A spin drove the planned deleverage of SG&A, which we also anticipate to moderate throughout the balance of this year.

Jeremy Adam Fletcher: Given the topline choppiness, we experienced during the first course of the first quarter. We believe our teams effectively balanced the incremental investments we are deploying in our business with prudent expense control.

Brent G. Kirby: Given the top-line choppiness we experienced during the first quarter, we believe our teams effectively balanced the incremental investments we are deploying in our business with prudent expense control. The decisions we make concerning the staffing levels within our stores remain the most significant driver of our SG&A spend in total. Our team is focused on judiciously managing our expenses as appropriate for the current conditions in our business while also ensuring that we are delivering excellent customer service that develops and maintains long-term customer relationships.

Jeremy Adam Fletcher: The decisions, we made concerning the staffing levels within our stores remain the most significant driver of our SG&A spend in total.

Jeremy Adam Fletcher: Our team is focused on judiciously, managing our expenses as appropriate for the current conditions in our business. While also ensuring that we are delivering excellent customer service that develops and maintains long term customer relationships.

Brent G. Kirby: We feel that our consistency in delivering excellent customer service in all market conditions has been critical to our long-term success and reflects the high level of professionalism demonstrated by our team. We are confident that the investments we have made and are continuing to make position Timo Raleigh to provide industry-leading customer service at high levels of productivity. With the solid gross margin and SG&A performance we saw in the first quarter, our operating margin outlook is unchanged, and we continue to expect the full year to come in within the range of 19.7% to 20.2%, which includes the anticipated dilution of 15 basis points from the inclusion of vast autos results.

Jeremy Adam Fletcher: We feel that our consistency in delivering excellent customer service in all market conditions has been critical to our long term success and reflects the high level of professionalism demonstrated by our team.

Jeremy Adam Fletcher: We are confident that the investments we have made and are continuing to make physician TMO rally to provide industry, leading customer service at high levels of productivity.

Jeremy Adam Fletcher: With the solid gross margin and SG&A performance, we saw in the first quarter. Our operating margin outlook is unchanged and we continue to expect the full year to come in within the range of $19, 7% to 22%, which includes the anticipated dilution of <unk> 15.

Jeremy Adam Fletcher: <unk> points from the inclusion of vast autos results.

Jeremy Adam Fletcher: Inventory per store finished the quarter at $773000, which was up two 5% from this time last year and two 2% from the end of 2023.

Brent G. Kirby: Inventory per store finished the quarter at $773,000, which was up 2.5% from this time last year and 2.2% from the end of 2023. The addition of Vast Auto's inventory and store count provided the 1% incremental increase we had anticipated, and we continue to target a range of 4% growth within our existing chain by the end of 2024. Inventory turnover has remained at 1.7 times, and we are pleased to see strong inventory productivity as we have continually enhanced and refined the inventory deployment in each of our stores while also expanding hub and DC level inventories.

Jeremy Adam Fletcher: The addition of vast autos inventory and store count provided the 1% incremental increase we had anticipated and we continue to target a range of 4% growth within our existing chain by the end of 2024.

Jeremy Adam Fletcher: Inventory turnover has remained at one seven times and we are pleased to see strong inventory productivity as we have continually enhanced and refine the inventory deployment in each of our stores, while also expanding hub and D C level inventories.

Jeremy Adam Fletcher: Our store in stock position remains strong and our teams are working hard to ensure a rally auto parts offers the best inventory availability in all of our markets.

Brent G. Kirby: Our store in stock position remains strong, and our teams are working hard to ensure O'Reilly Auto Parts offers the best inventory availability in all of our markets. Now, turning to our progress on store growth and capital investment. We opened a total of 37 stores across the U.S. and Mexico during the first quarter. Additionally, we were pleased to officially bring 23 Canadian stores into the fold. Our annual net new store opening guidance of 190 to 200 excludes the addition of the 23 Canadian stores. Capital expenditures for the quarter were $249 million, and we are on track for our annual goal of $900 million to $1 billion.

Jeremy Adam Fletcher: Turning to our progress on store growth and capital investments, we opened a total of 37 stores across the U S and Mexico. During the first quarter. Additionally, we were pleased to officially bring the 23 Canadian stores into the fold.

Jeremy Adam Fletcher: Our annual net new store opening guidance of 190 to 200 excludes the addition of the 23 Canadian stores.

Jeremy Adam Fletcher: Capital expenditures for the quarter were $249 million and we are on track for our annual goal of $900 million to $1 billion.

Brent G. Kirby: Our D.C. relocation projects in Springfield, Missouri, and Atlanta, Georgia, are making great progress, and we are excited to bring those new, larger, and more efficient facilities online later this year to further enhance service levels within those markets. We are also excited about the progress made so far on our Mid-Atlantic, D.C., and Stafford, Virginia, that is slated to be operational in the middle of 2025. As I finish my comments, I would like to thank Team O'Reilly for their commitment to delivering excellent customer service, one customer at a time. I look forward to the opportunities we have ahead and taking on that challenge as a team. Now, I will turn the call over to Jeremy.

Jeremy Adam Fletcher: Our DC relocation projects in Springfield, Missouri, and Atlanta, Georgia are making great progress and we're excited to bring those new larger and more efficient facilities online later this year to further enhance service levels within those markets.

Jeremy Adam Fletcher: We are also excited about the progress made so far on our mid Atlantic DC in Stafford, Virginia that is slated to be operational in the middle of 2025.

Speaker Change: As I finish my comments I would like to thank team O'reilly for their commitment to delivering excellent customer service one customer at a time.

Speaker Change: I look forward to the opportunities we have ahead and taking on that challenge as a team now I will turn the call over to Jeremy.

Jeremy Adam Fletcher: Thanks, Brent. I would also like to congratulate team O'Reilly on a solid start to the year. Now, we will fill in some additional details on our first quarter results and outlook for the remainder of 2024. For the quarter, sales increased $268 million, driven by a 3.4% increase in comparable store sales and a $73 million non-comp contribution from stores opened in 2023 and in 2024 that have not yet entered the comp phase.

Jeremy Adam Fletcher: Thanks Brent.

Jeremy Adam Fletcher: I'd also like to congratulate team O'reilly on a solid start to the year now we will fill in some additional details on our first quarter results and outlook for the remainder of 2024.

Jeremy Adam Fletcher: For the quarter sales increased $268 million driven by a three 4% increase in comparable store sales and a $73 million non comp contribution from stores opened in 2023, and 2024 that have not yet entered the comp base.

Jeremy Adam Fletcher: For 2024, we expect our total revenues to be between $16 eight and $17 1 billion.

Jeremy Adam Fletcher: For 2024, we expect our total revenues to be between $16.8 and $17.1 billion. Our first quarter effective tax rate was 21.9% of pre-tax income, comprised of a base rate of 24.2%, reduced by a 2.3% benefit for share-based compensation. This compares to the first quarter of 2023 rate of 23.7% of free tax income, which was comprised of a base tax rate of 24.3% reduced by a 0.6 benefit for share-based compensation. Our first quarter effective tax rate was below our expectations as a result of the timing and amount of benefit we realized from share-based compensation.

Jeremy Adam Fletcher: Our first quarter effective tax rate was 21, 9% of pretax income.

Jeremy Adam Fletcher: Comprised of a base rate of 24, 2% reduced by a two 3% benefit for share based compensation.

Jeremy Adam Fletcher: This compares to the first quarter of 2023 rate of 23, 7% of pretax income, which was comprised of a base tax rate of 24, 3% reduced by a 0.6 benefit for share based compensation.

Jeremy Adam Fletcher: Our first quarter effective tax rate was below our expectations as a result of the timing and amount of benefit we realized from share based compensation.

Jeremy Adam Fletcher: For the full year of 2024, we now expect an effective tax rate of 22, 4% comprised of a base rate of 23, 1% reduced by a benefit of 0.7% for share based compensation.

Jeremy Adam Fletcher: For the full year of 2024, we now expect an effective tax rate of 22.4%, comprised of a base rate of 23.1%, reduced by a benefit of 0.7% for share-based compensation. We expect the fourth-quarter rate to be lower than the other three quarters due to the tolling of certain tax periods. Also, variations in the tax benefit from share-based compensation can create fluctuations in our quarterly tax rate, as we saw in the first quarter.

Jeremy Adam Fletcher: We expect the fourth quarter rate to be lower than the other three quarters due to the tolling of certain tax periods.

Jeremy Adam Fletcher: Also variations in the tax benefit from share based compensation can create fluctuations in our quarterly tax rate as we saw in the first quarter.

Jeremy Adam Fletcher: Now we will move on to free cash flow and the components that drove our results. Free cash flow for the first quarter of 2024 was $439 million versus $486 million in 2023. The decrease of $47 million was the result of a larger increase in net inventory in 2024, partially offset by an increase in earnings. For 2024, our expected free cash flow guidance remains unchanged at a range of $1.8 to $2.1 billion.

Speaker Change: Now, we will move on to free cash flow and the components that drove our results.

Speaker Change: Free cash flow for the first quarter of 2024 was $439 million versus $486 million in 2023.

Speaker Change: The decrease of $47 million was the result of a larger increase in net inventory in 2024, partially offset by an increase in earnings.

Speaker Change: For 2024, our expected free cash flow guidance remains unchanged at a range of one eight to $2 1 billion.

Speaker Change: Okay.

Speaker Change: Our accounts payable as a percentage of inventory finished the first quarter at 127% down from 131% at the end of 2023.

Jeremy Adam Fletcher: Our accounts payable as a percentage of inventory finished the first quarter at 127%, down from 131% at the end of 2023. This moderation was in line with expectations, including the impact of our Canadian acquisition, and we would anticipate finishing the year in line with these levels. Moving on to debt, we finished the first quarter with an adjusted debt to EBITDA ratio of 1.95 times as compared to our end of 2023 ratio of 2.03 times, with a decrease driven by a reduction in borrowings under our commercial paper program. We continue to be below our leverage target of 2.5 times and plan to prudently approach that number over time.

Speaker Change: This moderation was in line with expectations, including the impact from our Canadian acquisition, and we would anticipate finishing the year in line with these levels.

Speaker Change: Moving on to debt. We finished the first quarter with an adjusted debt to EBITDAR ratio of 195 times as compared to our end of 2023 ratio of 2.03 times with the decrease driven by a reduction in borrowings under our commercial paper program.

Speaker Change: We continue to be below our leverage target of two five times and plan to prudently approach that number over time.

Speaker Change: We continue to be pleased with the execution of our share repurchase program and during the first quarter, we repurchased 262000 shares at an average share price of $1029 for a total investment of $270 million we've.

Jeremy Adam Fletcher: We continue to be pleased with the execution of our share repurchase program, and during the first quarter, we repurchased 262,000 shares at an average share price of $1,029, for a total investment of $270 million. We remain very confident that the average repurchase price is supported by the expected discounted future cash flows of our business. And we continue to view our buyback program as an effective means of returning excess capital to our shareholders.

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

Speaker Change: As a reminder, our EPS guidance Brett outlined earlier includes the impact of shares repurchased through this call, but does not include any additional share repurchases.

Jeremy Adam Fletcher: As a reminder, our UPS guidance Bret outlined earlier includes the impact of shares repurchased through this call but does not include any additional share repurchases. Before I open up our call to your questions, I would like to thank the entire O'Reilly team for their dedication to our company and our customers. Your hard work and commitment to excellent customer service continue to drive our outstanding performance. This concludes our prepared comments. At this time, I'd like to ask Matthew, the operator, to return to the line, and we will be happy to answer your questions.

Speaker Change: Before I open up our call to your questions I would like to thank the entire O'reilly team for their dedication to our company and our customers your hard work and commitment to excellent customer service continues to drive our outstanding performance.

Speaker Change: This concludes our prepared comments at this time I'd like to ask Matthew the operator to return to the line and we will be happy to answer your questions.

Matthew: Thank you we will now begin the 30 minute question and answer session. If you have a question. Please press star one on your phone.

Matthew: Thank you. We will now begin the 30-minute question-and-answer session. If you have a question, please press star 1 on your phone. If you wish to be removed from the queue, please press star 2. Why do we ask that you put... We do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. And please limit your questions to one question and one follow-up question. Once again, if you have any questions, please press star 1 on your phone. The first question comes from Chris Horvers from J.P. Morgan. Your line is live.

Matthew: If you wish to be removed from the queue. Please press star two.

Matthew: While we ask that you.

Matthew: We do have some are posing a question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality and please limit your questions to one question and one follow up question.

Matthew: Once again, if you have any questions. Please press star one on your phone.

Speaker Change: The first question comes from Chris <unk> from Jpmorgan. Your line is live.

Chris: Thanks, guys and good morning can you talk about.

Christopher Michael Horvers: Thanks guys and good morning. Can you talk about, you know, since the beginning of February, can you talk about the geographic performance that you've seen and how correlated has that been to the arrival of spring? So, you know, markets where you have seen spring arrive, what is the performance of the comps like versus, you know, markets that haven't?

Chris: Since the beginning of February can you talk about the geographic performance that you've seen and how how correlated has that been to the arrival of spring. So in markets, where you have seen spring arrived and what is the performance of the comps look like versus.

Chris: Markets that happened.

Speaker Change: Hey, good morning, Chris Thanks for the question.

Brad W. Beckham: Hey, good morning, Chris. Thanks for the question.

Brad W. Beckham: Well, there were a lot of moving pieces in the quarter, you know, really directly to your question there. And, you know, really what we saw just kind of walking through the quarter again is, you know, January. We were really pleased with January. And, you know, in a lot of the markets, you know, you're really in true winter markets where, you know, harsh weather really drives that demand.

Speaker Change: Well there was a lot of moving pieces in the quarter really directly to your question there and you know.

Speaker Change: Really what we saw just kind of walk us through the quarter again is January we're really pleased with January and a lot of the markets.

Speaker Change: Youre really true winter markets, where harsh weather really drives that demand we felt like that really exactly played out that way in January.

Brad W. Beckham: We felt like that, you know, really played out that way in January. As we got into February, you know, it definitely kind of normalized from a kind of a weather standpoint early on in the month. And then, you know, not too long after that, we felt like there was some, you know, a little bit of volatility, more from a lack of seeing some of the tax money rolling in, Chris. And then kind of what we saw is things started to kind of stay cool and get a little bit more wet in the market. You don't necessarily want to see it,

Speaker Change: We got into February.

Speaker Change: You know definitely kind of more normalized from a kind of a weather standpoint are early on in the month and then.

Speaker Change: Not too long after that we felt like there was some.

Speaker Change: A little bit of volatility more from lack of seeing some of the tax money Rolling Chris and then kind of what we saw as things started to kind of stay stay cool and get a little bit more wet in the market you don't necessarily want to see it at.

Brad W. Beckham: That kind of matched up with what we saw geographically in certain regions and certain divisions. And it really kind of made sense to us what was happening with some unfavorable weather, especially in the DIY business for people to get out and work on stuff. So there were a lot of moving pieces there. When we looked at our regional performance versus our plan by region, and you looked at the kind of comparisons from this time last year, everything was really fairly consistent. And it pretty much made sense based upon what I had heard.

Speaker Change: That kind of matched up with what we saw geographically in certain regions and certain divisions and it really kind of made sense to us.

Speaker Change: What was happening with some unfavorable weather, especially on the DIY business with people to get out and work on stuff. So there was a lot of moving pieces. There when we looked at our our regional performance versus our plan by region and you looked at the kind of the compares from this time last year.

Speaker Change: Everything was really fairly consistent and it pretty much made sense based upon what the weather was doing.

Brad W. Beckham: So does the, I guess in markets that, you know, where you've seen spring break, have the comps been consistent with the, you know, the three to five outlook for the quarter and quarters in the year?

Speaker Change: So does the I guess in end markets that where you are seeing spring break halves have the comp spend consistent with the three to five outlook for the quarter and quarters in the year.

Speaker Change: Yeah, I think one of the challenges this Chris this Jeremy Chris.

Jeremy Adam Fletcher: Yeah, I think one of the challenges we've had is that this Chris, or this Jeremy, Chris could talk to you. I think one of the challenges we've had is that we just haven't really seen consistency in how our business would perform on sustained, normalized spring business. I think, as Brad described it on the call, that the choppiness that we've seen has been exactly that. We'll see pockets of improved performance as we move through, but there's not anything that's been consistent and sustained.

Speaker Change: I think one of the challenges. We've had is we just haven't really seen consistency in how our business would perform on sustain normalized spring business.

Speaker Change: I think it is as Brad described it on the call that the Choppiness that we've seen has been exactly that you know we will see pockets of of improved performance as we move through but there's not anything thats been consistent and sustained.

Jeremy Adam Fletcher: And for sure, the areas that have been more volatile are the ones where we can see the impact of that. But at this stage, with a few of the different factors that we saw impact us during the quarter, especially as we move through that period of time when tax refund money shifted around, it's been harder to get a more consistent read just week to week on the underlying businesses. There's just been a lot of choppiness.

Speaker Change: And for sure the areas that have been more volatile or the ones, where we can see the impact of that.

Speaker Change: But at this stage with a few of the different factors that we saw.

Speaker Change: Impact us during the quarter, especially as we move through that period of time when tax refund money shifted around it's been it's been harder to get a more consistent REIT week to week on on the underlying businesses Theres just been a lot of the Choppiness that's characterized the quarter.

Christopher Michael Horvers: And I know you mentioned that you're seeing, as a follow-up question, I know that you mentioned that you're seeing consumers trade up, and you haven't seen trade down. And I also understand that you have a low mixed exposure to national accounts, and even within that, you're not selling to the A and B SKUs like brake pads or something like that. But, you know, in that channel or any other part of the business, are you seeing any evidence of deferral of some bigger ticket type repairs or even oil changes?

Speaker Change: Understood.

Speaker Change: And I know you mentioned that you're seeing as a final question I know that your you mentioned that you're seeing consumers trade up haven't seen trade down and I also understand that you have a low mix exposure to national accounts, and even within that youre not selling to the a and b skus like brake pads or something like that but you know in <unk>.

Speaker Change: And that channel or any other parts of the business are you seeing any evidence of deferral of some bigger ticket type repairs.

Speaker Change: Yes.

Speaker Change: Or even oil changes or anything else yes.

Brad W. Beckham: Yeah, no, great, great follow-up question, Chris. The answer is no.

Speaker Change: Yes, no great great follow up question, Chris The answer is no. When we look at kind of our book of business and you look at the general independent garage versus strategic accounts, whether it be a regional account or whether it be a national account.

Brad W. Beckham: You know, when we look at kind of our book of business and you look at the general independent garage versus strategic accounts, whether it be a regional account or whether it be a national account, you know, as you know, we have a smaller portion of our business that is the national account business and some of our competitors. But when we look at the mix of business, when you look at the category of customer, and then you really break it down to the last part of your question, we're not seeing that.

Speaker Change: As you know we have.

Speaker Change: A smaller portion of our business that is the national account business and some of our competitors and but when we look at the mix of business. When you look at the category of customer and then you really break it down to the last part of your question. We're just we're not seeing that especially when you look at.

Brad W. Beckham: You know, especially when you look at our non-discretionary categories, the needs-based categories, when Brent and I, when we look at our failure categories, when we look at our maintenance categories, we're extremely pleased with how those categories are performing. And kind of like we said earlier, that when we look at, you know, good, better, best, our better and best up the value spectrum have been very encouraging.

Speaker Change: Look at our non discretionary categories the needs based categories when Brenda I when we look at our failure categories. When we look at our maintenance categories were extremely pleased with how those categories are performing and kind of like we said earlier that when we look at good better best are our better and best.

Speaker Change: The value spectrum has been.

Speaker Change: <unk> been very encouraging the only area that I would say that we have seen some softness Chris would be more with our discretionary categories.

Brad W. Beckham: The only area that I would say that we have seen some softness, Chris, would be more with our discretionary categories. You know, when you think about things like truck and towing, accessories, maybe performance, or something like that, that's where we want to just be a little bit cautious because we saw some pressure in Q1. And, you know, we're going to watch that closely. But the thing that I would balance that with is some of those categories only perform really well when people can get out and do those things in their driveways.

Speaker Change: When you think about things like truck and towing accessories may be performance or something like that.

Speaker Change: That's where we want to just be a little bit cautious that we have seen some pressure.

Speaker Change: In Q1 and.

Speaker Change: We're going to watch that closely the thing that I would balance that with is is some of those categories only perform really well when people can get out and do those things in their driveway. So it is a little bit of a challenging to answer that we are seeing some pressure due to discretionary.

Brad W. Beckham: So it's a little bit of a challenging answer that we are seeing some pressure on discretionary. Some of that may have to do with some of the weather, but really, when you think about our failure and maintenance categories, non-discretionary, needs-based, we're extremely encouraged.

Speaker Change: Some of that May have to do with some of the weather, but really when you think about our failure and maintenance categories non discretionary needs based we're extremely encouraged.

Christopher Michael Horvers: Thanks so much. Have a great finish this spring.

Speaker Change: Thanks, So much have a great finish this spring.

Speaker Change: Thank you Chris Centrism.

Matthew: Thank you. Your next question is coming from Seth Basham from Wedbush Securities. Your line is live.

Speaker Change: Thank you. Your next question is coming from Seth Basham from Wedbush Securities. Your line is live.

Seth Mckain Basham: Thanks, a lot and good morning. My first question just on G&A per store growth you anticipate some moderation changed through the year here and that's despite the fact, you expect comps to likely accelerate a little bit from here is that simply due to the investment comparisons.

Seth Mckain Basham: Thanks a lot and good morning. My first question is just on SG&A per store growth. You anticipate some moderation through the year. And that's despite the fact you expect comps to likely accelerate a little bit from here. Is that simply due to the investment comparisons or anything?

Seth Mckain Basham: Or anything else.

Speaker Change: Yes, Chris This is Brent I'm, sorry, Seth This is Bryan I'll start and then Jeremy can jump in I'm sure on some of that on the back end of it but yet as I talked about in the script the biggest.

Brent G. Kirby: Yeah, Chris, this is Brent, or, I'm sorry, Seth, this is Brent. I'll start, and then Jeremy can jump in, I'm sure, on some of that on the back end of it. But yeah, as I talked about in the script, the biggest driver of our SG&A per store really is our store payroll. And our teams have been, you know, very focused on balancing that with the demand and the opportunity that they see in their markets, you know, and they managed through a period in Q1 where we did have some of that choppiness that we've talked about, but really proud of the job overall that the teams did there.

Speaker Change: Biggest driver of our SG&A per store really is our store payroll and our teams have been very focused on balancing that with the demand and the opportunity that they see in their markets and they manage through a period in Q1, where we did have some of that choppiness that we've talked about but really proud of the job overall that the teams did there and.

Brent G. Kirby: And, you know, we're obviously approaching any kind of choppiness with an eye to expense control. But we do have, you know, some of that investment depreciation pressure that I mentioned in my script that we're going to see as we move through the year. That's why our plan was not to do a peanut butter spread on SG&A for this year. So, and Jeremy, you may have a couple other thoughts on that. Yeah, no, I think, Brent. I think you said it well.

Speaker Change: We're obviously approaching any kind of choppiness with a nod to expense control, but we do have some of that.

Speaker Change: Investment depreciation pressure that I mentioned in my script that we're going to we're going to see as we move through the year. That's why our plan was not a peanut butter spread on SG&A for this year, So and Jeremy you may have a couple of other thoughts on that yes.

Jeremy Adam Fletcher: Brad I think you said it well.

Jeremy Adam Fletcher: You know, Seth, I think we previewed it a little bit on last quarter's call, but, you know, it's kind of hard to get the cane's quarter to quarter as we just think, like, in particular about the timing of the impact of some of last year's investments and not to get too far down the weeds here, but, you know, our depreciation headwind in the first quarter was, you know And that's a number that, through the balance of the year, starts to moderate as we move down.

Jeremy Adam Fletcher: Seth.

Jeremy Adam Fletcher: I think we previewed it a little bit are on last quarter's call, but you know, it's kind of hard to to get the cadence quarter to quarter. As we just think like in particular about the timing of the impact of some of last year's investments and not to get too far down in the weeds here, but our depreciation headwind in the first quarter was kind of.

Jeremy Adam Fletcher: High teens year over year growth, there and that's a number that through the balance of the year starts to moderate.

Jeremy Adam Fletcher: As we move down through.

Jeremy Adam Fletcher: Some more broadly speaking, especially as you think about the dollars, you also had impacts in the quarter with lead day. So it does create a little bit of noise in terms of the cadence, but against that broader backdrop, I feel solid about the management at SG&A. It's in line with where we would have expected it to be, and as we work through the balance of the year, I feel comfortable with how we think the teams are balancing both the investments that we continue to talk through and will execute on, while also just being responsive to what we're seeing in the business.

Jeremy Adam Fletcher: More broadly speaking, especially as you think about the dollars you also had impacts in the in the quarter with leap day. So it does create a little bit of noise in terms of the cadence, but but against that broader backdrop feel feel solid about the management of SG&A. It's in line with where we would have expected to be.

Jeremy Adam Fletcher: In <unk> as we work through the balance of the year, if youre comfortable with with how we think the teams are balancing both the investments that that will continue to talk through in and we will execute on while also just.

Jeremy Adam Fletcher: Being responsive to what we're seeing in the business.

Seth Mckain Basham: That's helpful. As my follow-up, just thinking about the DIY segment and the softness you called out in discretionary categories, recognizing that some of that might be weather-driven, is this a change in trend that you've seen with more pressure in discretionary categories in recent months?

Speaker Change: That's helpful. As my follow up just thinking about the DIY segment and the softness you called out a dysfunctional categories recognizing that some of that might be weather driven is this a change in trend that you've seen with more pressure in the discretionary categories in recent months.

Speaker Change: Yeah, I could probably talk to that in the first caution that I would say is we're still within a really relatively tight band of what we thought from expectations.

Jeremy Adam Fletcher: Yeah, I could probably talk about that. And maybe the first caution that I would say is, you know, we're still within a relatively tight band of what we thought from expectations. And I know, you know, Brad mentioned it within his response, you know, the confidence that we feel is just from the broader mix of our business, the ability to see solid performance really across the core categories that we know are indicative of how the consumer is thinking about the backdrop has been good.

Speaker Change: And I know you.

Speaker Change: No Brad mentioned it within his response the confidence in that we feel is just from the broader mix of our business the ability to see solid performance really across the core categories that we know are indicative of how the consumer is thinking about the backdrop has been good.

Jeremy Adam Fletcher: You know, the entry into the first quarter, both the tax refund money and with the weather backdrops, it tends to be a quarter that can be more volatile, just generally on discretionary categories. You know, often, we're in the position, like others within our industry, of hoping that we've got, you know, both good weather and tax refund money hitting at the same time. So, there are reasons why that can be volatility, but we wouldn't call it out as a sea change.

Speaker Change: The entry into first quarter, both the tax refund money and with the weather backdrop. It tends to be a quarter that can be more volatile just generally on discretionary categories.

Speaker Change: Often.

Speaker Change: We're in the position like others within our industry of a hoping that we've got both good weather Ian.

Speaker Change: Tax refund money hitting at the same time, so that there's reasons why that could be volatility we wouldn't call. It out as a as a sea change for sure in the broader sense of our business. It's a it's a smaller piece, but it is just one area that we pay attention to is we're trying to make sure. We've got a good read on what the consumer looks like.

Jeremy Adam Fletcher: And for sure, in the broader context of our business, it's a smaller piece. But it is just one area that we, you know, we pay attention to as we're trying to make sure we've got a good read on what the consumer looks like.

Speaker Change: Understood. Thank you very much.

Seth Mckain Basham: Understood. Thank you very much. Thank you, Seth. Thank you, Seth.

Speaker Change: Thank you Seth.

Speaker Change: Thank you. Your next question is coming from Michael Lasser from UBS. Your line is live.

Matthew: Thank you. Your next question is coming from Michael Lasser from UBS. Your line is live.

Michael Lasser: Good morning! Thank you so much for taking my question. While the indications are still coming in about the performance of the overall aftermarket, and it's still pretty early, it does seem like O'Reilly's outperformance versus the rest of the industry is moderating versus where it was. Why is that the case?

Michael Lasser: Good morning. Thank you so much for taking my question.

Michael Lasser: While the indications are.

Michael Lasser: Still coming in about the performance of the overall aftermarket.

Michael Lasser: It's still pretty early does seem like riley's outperformance versus the rest of the industry is moderating versus where it's been why is that the case.

Speaker Change: Yeah, Hey, good morning, Michael Thanks for the thanks for the question.

Brad W. Beckham: Yeah. Hey, good morning, Michael.

Brad W. Beckham: Thanks for the question. I don't see it that way. Number one, I've been in this business here at O'Reilly for 27 years this year and have been through challenging years, been through great years, and been through election years and years that we get off to a little bit of a choppy start. And I've learned every time not to necessarily overreact that we take any potential slowdown or anything like that very seriously. We want to make sure we control what we can control.

Speaker Change: I I don't see it that way you know number one.

Speaker Change: I've been in this business here.

Speaker Change: Here at O'reilly for 27 years, this year and been through challenging years been through great years.

Speaker Change: <unk> been through election years and years that we get off to a little bit of a choppy start and I've learned every time not to necessarily overreact, though we all we take any potential slowdown or anything like that very seriously we want to make sure we control what we can control but.

Brad W. Beckham: But it's always hard for us to base exactly where the share gains are coming from, and it's sure hard to base it here in the short term on just a competitor's reporting or something like that. We don't spend a lot of time internally trying to dissect that. What we do internally here is focus on our revenue versus the $147 billion we believe is being sold in the United States. And that just gets even bigger, obviously, now that we're expanding to the rest of North America.

Speaker Change: It's always hard for us to base exactly where the share gains are coming from and it's sure hard to base. It here short term on.

Speaker Change: Just a competitor reporting or something like that we don't spend a lot of time internally trying to dissect that what we do internally here as it is.

Speaker Change: As we focus on our revenue versus the you know.

Speaker Change: $147 billion, we believe is being.

Speaker Change: Sold in the United States and that just gets even bigger obviously now that we're expanding to the rest of North America. So we stay focused on that total addressable market versus what we do today and.

Brad W. Beckham: So we stay focused on that total addressable market versus what we do today. And Michael, I don't see anything that's materially changed in the way that we're competing. We have tough competitors out there. We have really great competitors that we have a ton of respect for, both the big close competitors that are public companies as well as the solid WD operators, the independent operators. And we still feel really good. I'm so proud of what our teams have accomplished in the last few years, but I believe our share gains will continue.

Speaker Change: Michael I I'd I don't see anything thats materially changed in the way that we're competing.

Speaker Change: We have we are tough competitors out there we have really great competitors that we have a ton of respect for both the big closer and competitors that are public companies as well as the solid WD operators the independent operators in and we still feel really good.

Speaker Change: We just I'm so proud of what our teams have accomplished last few years, but I believe our share gains continue.

Speaker Change: Got you.

Brad W. Beckham: Got you. Brad, you mentioned that you did see a bit of a slowdown in March, and that's continued into the first part of the quarter. Can you provide some framework of reference for that? And what does the P&L look like? How's the sensitivity of the P&L if this is just one of those years where it's a bit of a slower backdrop for the aftermarket, and the ultimate comp ends up at the low end or maybe even slightly below your guidance?

Speaker Change: Brad you mentioned that you.

Brad W. Beckham: You did see a bit of a slowdown in March and that continued into the first part of the quarter can you provide some frame of reference for that.

Brad W. Beckham: And what is the P&L look like.

Brad W. Beckham: <unk> of the P&L.

Brad W. Beckham: One of those years, where it's a bit of a.

Brad W. Beckham: Our slower backdrop for the aftermarket.

Brad W. Beckham: In the ultimate comp ends up at the low end or maybe even slightly below year.

Michael Lasser: Thank you very much.

Brad W. Beckham: Thank you, Michael. I'll start out and answer your question on just kind of the cadence, the exit, and kind of how we're feeling about the last few weeks, and then I'll let Jeremy talk to the the last part of your question there on SG&A. So, Michael, really, you know, the thing I want to be a little careful of is, you know, even though we have, you know, a few weeks, it is just three weeks, and we have a lot of quarter left, and I think the reason that we're trying to balance the choppiness with not knowing what the future holds, all with the fact that we have had some of this weather that just, you know, it's just not ideal.

Speaker Change: Your guidance. Thank you very much.

Speaker Change: Thank you Michael I'll start out nature of your question on just kind of the cadence of the exit and kind of how we're feeling about the last few weeks and then I'll, let Jeremy talk to the last part of your question. There on SG&A. So Michael really you know the thing I want to be a little careful of as you know even though we have a few weeks. It is just three weeks and we have a lot of <unk>.

Jeremy Adam Fletcher: <unk> left and I think the reason that we're trying to balance.

Jeremy Adam Fletcher: The choppiness with not knowing what the future holds all with the fact that we have had some of this weather that just.

Jeremy Adam Fletcher: Not ideal.

Brad W. Beckham: You know, it's a different weather story than, like, in January where, you know, we love harsh winters and we love hot, hot summers. The stuff that's in the middle can just be a little bit not conducive to what our DIY customers want and need to get out and work on their stuff. I'm sitting here in Springfield, Missouri, this morning looking out the window at 50-something degrees of weather, and it's raining out there, and our operational teams absolutely did not spend any time focusing on things that they can't control like weather, but we just, you know, we don't want to say too much about the choppiness because there has been some, but there's also just been this weather factor, and we feel like that.

Jeremy Adam Fletcher: A different weather story than like in January.

Jeremy Adam Fletcher: We love harsh winters, and we love Hot Hot summers the stuff that's in the middle can just be a little bit.

Jeremy Adam Fletcher: Not conducive to what our DIY customers.

Jeremy Adam Fletcher: What need to get out and work on their stuff I am sitting here in Springfield, Missouri. This morning, looking at the looking out the window to 50, some degree weather and its raining out there and our operational teams absolutely did not spend any time focusing on things that they can't control like weather, but we just.

Jeremy Adam Fletcher: We we don't want to say too much about the choppiness because there has been some but there is also just been this weather factor and we feel like that we got a lot of quarter left and we just want to see how that plays out.

Brad W. Beckham: We've got a lot of quarter left, and we just want to see how that plays out, but, you know, we just want to balance those things, and I'll let Jeremy take the SG&A. Yeah, just from the...

Speaker Change: We just want to balance those things and ill, let Jeremy take the SG&A, yes, just from the.

Jeremy Adam Fletcher: I guess further down the income statement, as we think through the balance of the year, Michael, I tell you, nothing really changes about our expectation of how and the degree to which we can respond to different market conditions than we really have had for a long time within our business. You know from our history that we really do truly manage the business from a long-term perspective and will not overreact in short periods of time to fluctuations. We are cognizant of the volatility we've seen in the first quarter, but also understanding that we're in an election year and, you know, there's just a little bit more uncertain backdrop that, you know, we could face some puts and takes as we move through the year.

Jeremy Adam Fletcher: I guess further down the income statement as we think through the balance of the year, Michael I would tell you nothing really changes about our expectation on how and the degree to which we can respond to different market conditions, and then really we've we've had for a long time within our business.

Jeremy Adam Fletcher: You know from our history that that we really do truly manage the business from a long term perspective in will not overreact in short periods of time to fluctuations and cognizant of the volatility we've seen in the first quarter, but also understanding that we're in an election year.

Speaker Change: There is just a little bit more uncertain backdrop that that.

Speaker Change: We could we could face some some puts and takes as we move through the year. It is important for us to maintain a high level of service and to prioritize that as we move through the business. While at the same time, we've got a we've got a pretty long standing expense control culture, and we will we will we will address how we manage the business we think appropriately.

Jeremy Adam Fletcher: You know it's important for us to maintain a high level of service and to prioritize that as we move through the business, while at the same time we've got a, you know, we've got a pretty long-standing expense control culture and we will address how we manage the business we think appropriately to the right market environments and feel good about how the teams have performed in that way, as Brent mentioned, you know, during the course of this year so far.

Speaker Change: To the right to the right market environments and feel feel good about how the teams have performed in that way as Brent mentioned during the course of this year so far.

Speaker Change: Thank you very much and good luck with the quarter.

Michael Lasser: Thank you very much and good luck with the quarter.

Speaker Change: Thanks, Michael.

Matthew: Thanks, Michael. Thanks, Michael. Your next question is coming from Greg Melich from Evercore ISI. Your line is live.

Speaker Change: Thank you. Your next question is coming from Greg Melick from Evercore ISI. Your line is live.

Gregory Scott Melich: Hi, thanks. I wanted to circle back on the inflation commentary and also the declining acquisition costs. Have we cycled through all the unusual parts of inflation, where we pretty much expect inflation to be steady, the cadence each quarter going forward? And on the cost side, can we still get some acquisition cost relief if interest rates start to back up? And how does that come into the equation?

Gregory Scott Melich: Hi, Thanks, I wanted to circle back on the inflation.

Gregory Scott Melich: Commentary and also the client acquisition costs. So.

Gregory Scott Melich: We cycled all the unusual parts of inflation, where that now we pretty much expect that to be steady cadence each quarter going forward and on the cost side can we still get some some acquisition costs relief if interest rates start to back up and how does that come into the equation.

Gregory Scott Melich: Yeah, Hey, Hey, Greg. Good morning. This is Brent I'll start and then let the other guys jump in but.

Brent G. Kirby: Yeah, hey, Greg, good morning. This is Brent. I'll start and then let the other guys jump in.

Brent G. Kirby: But, you know, in terms of the cost environment, as I mentioned in the script, we kind of saw what we'd expect, some typical puts and takes on cost. But I mean, in terms of inflation and what's out there, I think we kind of got it, felt like going into this year inflation is going to be around 1%. It's kind of what we saw in Q1, kind of what we expect for the rest of the year. So we don't really see that changing a whole lot.

Brent: In terms of the cost environment.

Brent: As I mentioned in the script, we kind of saw what wed expect some typical puts and takes on cost, but I mean in terms of inflation and what's out there I think we kind of got it felt like going into this year is going to be around 1% is kind of what we saw in Q1 kind of what we anticipate for the rest of the year. So we don't really see that changing a whole lot.

Brent G. Kirby: Now, you know, with that said, the good news is we continue to be able to diversify our supply chain. Our merchandise team's done a fantastic job with that. We've done a fantastic job with our proprietary brand portfolio and continue to grow that. It's responding with our customers. So that gives us an ability to control costs in some respects by dual sourcing and multi-sourcing different lines. And, you know, we continue to see that as a competitive strength of where we are and how we're positioned. But, you know, that's kind of the outlook we have in terms of cost and where we are going into this year.

Brent: Now.

Brent: With that said the good news is we continue to be able to diversify our supply chain. Our merchandise team has done a fantastic job with that we've done a fantastic job with our proprietary brand portfolio and continuing to grow that and it's resonating with our customers. So that gives us an eight ability to control cost in some respects.

Brent: Sourcing multi sourcing different lines.

Brent: We continue to see that as a competitive strength of where we are and how we're positioned.

Brent: But that's kind of the outlook, we have in terms of cost and where we are going into this year.

Speaker Change: Great and I'd love to just make sure I got the.

Gregory Scott Melich: Great. And I'd love to just make sure I got the comp trend correct there. The traffic in the first quarter, was that positive or negative, or kind of flat if you look at the whole quarter?

Speaker Change: Comp trend correct there the traffic in the first quarter was that was that positive or negative or kind of flat. If you look at the whole quarter.

Speaker Change: It was positive, but there was a contributor.

Brent G. Kirby: It was positive. It was a contributor.

Gregory Scott Melich: It was a contributor comp, and so presumably where that would have been negative in DIY by the exit rate, and that the gap between Do It For Me and DIY that happened through the quarter at the end was basically traffic and, therefore, weather driven. I just want to make sure I'm interpreting what you guys are saying.

Speaker Change: It was a contributor and so if presumably where that would have been negative in DIY by the exit rate.

Speaker Change: And that the gap between do it for me and DIY that happened through the quarter. The animal was basically traffic and therefore weather driven I'm just want to make sure I'm interpreting.

Speaker Change: What you guys are saying.

Brent G. Kirby: Yeah, yeah, I would tell you that the traffic, even on the DIY side of the business, was still positive for the quarter. You know, that was pretty significantly impacted by the strength that we saw in January, which we've talked about. That side of the business is more volatile around the refund and the, you know, and just the spring impact. But yeah, we were positive on both sides, in both traffic and ticket.

Speaker Change: Yes, yes, I would tell you.

Speaker Change: The traffic even on the DIY side of the business was still was still positive for the quarter.

Speaker Change: That was it.

Speaker Change: Significantly impacted by the strength that we saw in January which we've talked about.

Speaker Change: And that side of the business is more volatile around around the refund in the.

Speaker Change: And just the spring impacts.

Speaker Change: But.

Speaker Change: But yes, we were positive both sides of.

Speaker Change: Both traffic and ticket.

Brent G. Kirby: And so now, as DIYers come in, you mentioned I think there's no trade down, it's actually still a trade up, but I'm curious, are items in the basket under pressure? Is that a sign of any pressure on the consumer there? Yeah, again, volatility there, Greg, as we saw within the first quarter, some of that is similar to what we've seen from an accessory perspective. And, you know, and oftentimes those are the add-on type things that hit.

Speaker Change: And so now as consumers DIY has come in and you mentioned I think there is no trade down it's actually still a trade up but I'm curious are items in basket under pressure is that a sign of any pressure on the consumer there.

Speaker Change: Yes, again volatility there Greg as we as we saw within the first quarter.

Speaker Change: Some of that is similar to the to what we've seen from an accessory perspective.

Speaker Change: And oftentimes those are that on type things that that hit.

Brent G. Kirby: You know, hey, when somebody's coming in, you know, to change their brakes or to do that type of oil change, you know, not having a perfect read on how tax refund money flows through, that can also affect, you know, sizes to get in certain instances, but, you know, a little bit choppy there to be able to draw any really strong conclusions, but for sure, some of the, some of what we've seen is, you know, is that number not being a contributor, a little bit of a headwind for us in the quarter.

Speaker Change: When somebody is coming in.

Speaker Change: Our breakthrough to do that type of will change.

Speaker Change: Not having appropriate read on how tax refund money flows through that can also affect.

Speaker Change: Size of it to get in certain instances, but.

Speaker Change: A little bit choppy, there to be able to to draw any really strong conclusions, but for sure some of the.

Speaker Change: Some of what we've seen is.

Speaker Change: Is that number not being a contributor a little bit of a headwind for us in the quarter, Greg Greg maybe just to build on that basket question, a little bit kind of parse it out a little bit you know.

Brent G. Kirby: Greg, Greg, maybe just to build on that basket question a little bit, kind of parts it out a little bit, you know, an example of what we're not seeing is any issue with if somebody's doing a break job, we still feel with that, something they need to do, they're still, our teams are still able to work that customer from a DIY standpoint through having everything they need to do the job right. We don't see any basket issues in terms of not buying the hard parts they need to do the job and, normally, the things that go along with that.

Greg: An example of what we're we're not seeing is any issue with that if somebody is doing a great job, we still feel with that something they need to do there is still our teams are still able to work that customer from a DIY standpoint through having everything they need to do the job right. We don't see any basket issues in terms of not buying.

Greg: The hard parts they need to do the job and normally the things that go along with that an example, it may be what we're seeing a little bit with some of the discretionary is maybe like tools for example on the on the DIY side as a customer.

Brent G. Kirby: An example of maybe what we're seeing a little bit with some of the discretionary is maybe tools, for example, on the DIY side, where a customer would normally have bought that specialty tool they need to do that break job, they may be renting it from us, which they can do for free through our loaner tool program. So that would be an example of some of the things that we're seeing a little bit of pressure on, but not necessarily on the hard part side.

Greg: Where they normally may have bought that specialty tool they need to do that brake job. They may be renting it from us which they can do for free through our.

Speaker Change: Loaner tool program, so that would be an example of some of the things that we're seeing a little bit of pressure too, but not necessarily on the hard part side.

Gregory Scott Melich: That's a great color and good luck guys, and we'll be praying for some sunshine. We appreciate it, Greg.

Speaker Change: That's great color and good luck guys on will be praying for some sunshine.

Speaker Change: Yes.

Speaker Change: We appreciate it Greg.

Matthew: Thank you. Your next question is coming from Simeon Gutman from Morgan Stanley. Your line is live.

Speaker Change: Thank you. Your next question is coming from Simeon Gutman from Morgan Stanley. Your line is live.

Simeon Ari Gutman: Hey, good morning everyone. Brad and Jeremy, you mentioned that it's been choppy, and, you know, there isn't a clean weather and non-weather market spread. Can I ask, is that because of tax refund season or, you know, we're lapping used cars, there are consumers under pressure. Are you thinking it's possible there are other variables at play or, you know, how convinced is this weather when the weather turns, and we're in the clear?

Simeon Ari Gutman: Hey, good morning, everyone.

Simeon Ari Gutman: Brad and Jeremy you mentioned that it's been choppy and there isn't a clean.

Simeon Ari Gutman: Weather and non weather market spread can I ask is that because of tax refund season or we're <unk>.

Simeon Ari Gutman: Wrapping used cars their consumers under pressure are you thinking it's possible there are other variables at play or how convicted as this weather and weather turns and we're in the clear.

Speaker Change: Yes, Jimmy Great. Great question really is I would tell you where we're as confident in our read right now as we ever are after after first quarter.

Jeremy Adam Fletcher: Yeah, Timmy, a great, great question. It really is.

Jeremy Adam Fletcher: I would tell you, we're as confident in our read right now as we ever were after the first quarter. You know, Brad mentioned it within the context of his comments. We think it's appropriate not to overreact to the things that we see in the first quarter. You know, for certain, a couple of things we know, the range of our, the band of our performance has still been relatively... Relatively tight, even though we've seen choppiness move throughout.

Speaker Change: Brad mentioned it within the context of his comments we you.

Speaker Change: We think its appropriate tonight.

Speaker Change: To not overreact to the things that we see in first quarter for certainly a couple of things we know the ramp the range of our the band of our performance has still been relatively relatively tight even though we've seen choppiness move throughout so.

Jeremy Adam Fletcher: So we're not seeing the types of serious fluctuations in our business that come on where you do see things like oil changes being pushed back or breaks moving around more significantly. What we are seeing is what we often will see from a variability in business around the choppiness of tax refunds, whether those can be significant impacts as you just try to get a perfect read week to week on a business. As we step back from that, we remain cautious about consumers in our prepared comments, and that's the focus of our business.

Speaker Change: We're not seeing the types of serious fluctuations in our business that they come on where you do see things like.

Speaker Change: What changes is being pushed back or breaks moving around more significantly.

Speaker Change: What we are seeing is what what we often we will see from a variability in business around choppiness of tax refunds or weather and those are can be significant impact as you're just trying to get a perfect read.

Speaker Change: Two week on our business as we step back from that we remain cautious about the consumers in our prepared comments and it's a focus of our business often we get a much clearer read on that as we move forward past some of the volatility.

Jeremy Adam Fletcher: Often, we get a much clearer read on that as we move forward past some of the volatility. So we're cognizant of where that is. We understand some of the broader commentary that exists within broader retail. And often, we see the impacts of some of those things as they flow through more.

Speaker Change: So we're cognizant of where that is we we understand some of the broader commentary that that exists within within broader retail often we see the impacts of some of those things as they flow through more.

Jeremy Adam Fletcher: Simeon Gutman, Christopher Horvers, Elizabeth Suzuki, Michael Montani, Gregory Johnson, and Daniel

Speaker Change: Yeah.

Speaker Change: On a more delayed basis for our business understanding we're in an election year those thing.

Speaker Change: We're cautious about but as we sit here today, there's just not that clear indicators.

Speaker Change: That we're seeing that more sustained pressure that we would normally expect to see yes, assuming and what I would say, it's a fair question and I think maybe just on the tax refunds. For example, there is no doubt that the delay impact of this to some degree there in February I think the reason that we want to just be cautious with.

Brent G. Kirby: Yeah, Simeon, what I would say is that it's a fair question. And I think maybe just on the tax refunds, for example, there's no doubt that the delay impacted us to some degree, you know, in February. I think the reason that we want to just be cautious with, you know, how that'll play out is just the fact that we are in an election year, and there's a lot going on in the world. You know, we have this, we have this weather that no doubt has played a part to some extent. But we also know that the reality is, you know, when people get their tax refunds, it's normally pretty clear when we get

Speaker Change: How that will play out is just the fact that we are in an election year, there's a lot going on in the world. We have this we have this weather no doubt has played in to some extent.

Speaker Change: But we also know the reality is when people get their tax refunds, it's normally a pretty clear when we get.

Speaker Change: When we get that and how we get how much of that we get but we know our lower end consumer they're spending money first and foremost on groceries to their homes insurance rates personally things like that that are a pressure to them right now and we just want to we want to balance that we know that is some of it but we also know this whether some of it as well.

Speaker Change: Yes.

Speaker Change: And then.

Speaker Change: Alright.

Speaker Change: Just going to say, maybe just one other thing to add on your question. It is a good one but.

Brent G. Kirby: And then, oh, sorry.

Simeon Ari Gutman: Thanks, Brent. My follow-up question, if you take the PPI initiative and look at the products that were impacted, where prices were lowered, it looks like the payoff was especially strong last year. To that, maybe to that market share question, is, you know, are you still seeing growth in those PPI products? And are there any opportunities as you look across your pricing and your catalog where there may be some price differences where you can take advantage of that again?

Speaker Change: Just like the guys talked about when you think about maintenance categories, and obviously failure categories or have to replace maintenance categories. There is some discretion in those and even on the DIY side.

Speaker Change: Again, a lot of confidence still in the backdrop, knowing that we still saw strength in Motorola filters in the category.

Speaker Change: We didn't see any reason to believe that people were putting off the old change to pay for groceries that in when we looked at it at a product level. So so that was underlying in all of this too. So just wanted to mention that.

Speaker Change: Thanks Brent.

Brent: My follow up if you take the PPA initiative and you look at the products that were impacted where price was lowered.

Speaker Change: It looks like the pay off.

Brad W. Beckham: Yeah, thanks, Simeon. So yeah, when you talk about PPI, that's, you know, over, you know, two years old now, basically, we're lapping it, you know, 24 months in, we feel extremely good about that investment we made when you look at those categories, not only those categories, but kind of the halo categories that revolve around those key undercar, underhood categories, and it was very broad. It was a very rifle approach, but it was very broad, you know, skew by line. We feel really good about what we've done there.

Speaker Change: Especially strong last year to that maybe to that market share question.

Speaker Change: Is are you still seeing growth in those PPI products and are there any opportunities as you look across your your pricing and your catalog where there may be some.

Speaker Change: Differences, where you can take advantage of that again.

Speaker Change: Yeah. Thanks, Simeon so yes, I mean, when you talk about PPI.

Speaker Change: Over two years old now basically we are lapping it 24 months in we feel extremely good about that investment we made when you look at those categories not only those categories, but kind of the the halo categories that revolve around those key under car under Hood categories and it was very broad it was very <unk>.

Brent: <unk> approach, but it was very broad.

Brent: SKU by line.

Brent: We feel really good about what we've done there.

Brad W. Beckham: You know, we, you know, when I look at it, especially versus some of the WDs and the independent two, two stepper type players, we feel really good about what we've done. And we haven't seen, you know, really any other reactions to any large degree out of our big competitors, nor those other competitors. The reason that I feel like we have made those investments pay Simeon is because our team has gotten out there. And this just hasn't been a one-prong approach.

Brent: When I look at it especially versus some of the W. DS in the independent two separate type players.

Brent: We feel really good about what we've done and we haven't seen really any other reactions to any large degree out of our big competitors, nor those other competitors that the reason that I feel like.

Brent: That we have made those investments pay Simeon is because our team has gotten out there and is this just hasnt been a one pronged approach the investments were one thing, but we knew going into it the only way we're going to make that pay was to do what we already did well even better being out there calling on customers building relationships with those customers.

Brad W. Beckham: The investments were one thing, but we knew going into it, the only way we were going to make that pay was to do what we already did well, even better, being out there calling on customers, building relationships with those customers that had traditionally bought from some of the independents through relationships, through service, et cetera. And some of that being price. Our teams have got out there and done all the other things that matter more than price, calling on customers, building relationships, the most efficient delivery service in the aftermarket, right part, right place, right time. The work our supply chain teams have done in the last couple of years has all paid off.

Brent: Had traditionally bought from some of the independents through our relationship through service etcetera, and some of that being price. Our teams have got out there and done all of the other things that matter more than pricing, calling on customers building relationships the.

Brent: The most efficient delivery service in the aftermarket right part right place right time to work our supply chain teams have done in the last couple of years have all made that pay off but really to the last part of your question. We feel really good about where our pricing matrix is you know, we we moved it down to that level of you know we did on the professional side.

Brad W. Beckham: But really, to the last part of your question, we feel really good about where our pricing matrix is. You know, we moved it down to that level that we did on the professional side, but we're always within that new matrix. We're always, you know, tweaking and optimizing within that new matrix. But we feel like that matrix is where it needs to be for, for now, in the foreseeable future. And don't see anything competitively that would tell us we need to ever.

Brent: But we're always within that new matrix, we're always tweaking and optimizing within that new matrix, but we feel like that matrix is where it needs to be for for now in the foreseeable future and don't see anything competitively that would tell us we need to ever do that again.

Brent G. Kirby: And Simeon, maybe just, maybe to further add to what Brad said on that, on the professional side, I mean, when you look at the, by category, when you look at some of the categories, brakes, chassis, driveline, ride control, all the big categories, a lot of big categories, dollar categories, that we're not seeing that growth stagnate, which I think is kind of where your question's going, you know, is it We're not seeing that yet. We're seeing continued growth, even on top of the big comparisons year over year. End

Brent: And maybe just.

Speaker Change: Maybe to just further add to what Brad said on that on the professional side I mean, when you look at the.

Speaker Change: By category when you look at some of the categories brakes chassis driveline ride control all the big category a lot of big categories dollar categories that we're not seeing that growth stagnate, which I think is kind of where your questions going is.

Speaker Change: Is that petering out are we running out of gas in those categories. We're not seeing that we can see continued growth even on top of a big comparisons year over year.

Speaker Change: Thank you.

Brent G. Kirby: Thank you. Your next question is coming from Mike Baker from D.A. Davidson. Your line is live.

Speaker Change: Thank you Amy Thanks, Amy.

Brent: Thank you. Your next question is coming from Mike Baker from D. A Davidson your line is live.

Michael Allen Baker: Hi, two quick ones. One, with April, the end of March, April being a little bit slower because of the weather, do those sales go lost, or do those sales get made up if and when the weather turns better?

Michael Allen Baker: Hi, two quick ones one.

Michael Allen Baker:

Michael Allen Baker: With April end of March April being a little bit slower because of the weather does that are those sales lost or does that get made up if and when the weather turns or better.

Jeremy Adam Fletcher: Yeah, Michael. It's always a little bit of a tough question to answer. Often, that is the case with spring business, that it's just a shift in demand. But I think more broadly, the way that we view that is that none of the timing of what we're seeing or none of the impacts affect kind of core fundamental underlying demand within the industry. So, you know, it's always a little bit tough to know whether you will get it rebalanced or not. How much?

Michael Allen Baker: Yeah, Michael it's always it's always a little bit of a tough question to answer often that is the case with spring business that it's just a shift in demand I think I think more broadly the way that we view that as that.

Speaker Change: None of the timing of what we're seeing or or none of the impacts affect kind of core fundamental underlying demand within.

Speaker Change: The industry. So it's always a little bit tough to know where you get it rebound how much can you really measure it when you do more.

Brad W. Beckham: Can you really measure it when you do? But more broadly speaking, as we move further into the quarter, that becomes less of a dynamic. It's just the broader strength that our business will kind of prove out as we move into the balance of the quarter. Could it be one of those years that the lower end consumer is pressured, you know, very potentially, but, you know, as you know, Mike, when, you know, in tough years or when customers go through tough times, our industry is not immune to that, but it's more short-term.

Michael Allen Baker: More broadly speaking as we move further into the quarter that becomes less important or a dynamic.

Michael Allen Baker: It's just the broader broader strengthen our business what kind of what kind of prove out as we as we move into the balance of the quarter, Yes, Mike there could be some of the discretionary or there could be some of the short term stuff that could potentially be loss, but I think as we always say and we still believe this as much as we ever have that the underlying drivers of our.

Michael Allen Baker: Of our business are absolutely there when you look at vehicles miles miles driven you look at.

Michael Allen Baker: All the things that we look at to drive our business average age of vehicles not only in the U S, but in North America.

Brad W. Beckham: And then as things, you know, move on, people hold onto their cars longer, they're working on their cars more often, and in the mid to long-term, we couldn't feel better about, you know, how we're set up from a demand standpoint.

Michael Allen Baker: We still feel really good the demand is going to continue to be there could it be could it be one of those years that the lower end consumer is pressured.

Michael Allen Baker: Perfect, that makes sense. The other question I wanted to ask, much bigger picture, longer term. Have you ever, or could you ever talk about what you see as the potential size of your business down in Mexico? I think you have about 63 stores according to the press release here. What could that be over time? What are your competitors? I think I was close to 1,000.

Michael Allen Baker: Potentially but.

Michael Allen Baker: As you know Mike win.

Michael Allen Baker: In tough years or when customers go through tough times.

Michael Allen Baker: Our industry is not immune to that but it's more short term and then as things.

Michael Allen Baker: Move on people hold onto their cars longer theyre working on their cars more often and mid to long term, we couldnt feel better about how we're set up from a demand standpoint.

Michael Allen Baker: Perfect.

Michael Allen Baker: Makes sense.

Speaker Change: Other question I wanted to ask much more bigger picture longer term.

Michael Allen Baker: Have you ever or could you ever talk about what you see as the potential size of your business down in Mexico. I think you have about 63 stores. According to the press release here.

Brad W. Beckham: Any thoughts on where Mexico could be for you longer term? Sure, Mike, absolutely.

Brad W. Beckham: Sure, Mike. Absolutely.

Brad W. Beckham: Well, we're really excited about the Mexican market. You know, we acquired Mayasa back in 2019, and, you know, we have had our eyes on that market for a long time. And to your point, one of our, you know, toughest competitors has done an amazing job down there for several decades and, you know, has a tremendous business down there. That said, it is so fragmented down there, Mike.

Michael Allen Baker: What can that be over time, one of your competitors I think it was close to a thousand.

Michael Allen Baker: Any thoughts on where Mexico could be for you longer term.

Speaker Change: Sure sure Mike absolutely well, we're really excited about the Mexican market.

Speaker Change: We acquired <unk> back in 2019, and we had our eyes on that market for a long time and to your 0.1 of our.

Speaker Change: Toughest competitors has done an amazing job down there for several decades.

Michael Allen Baker: <unk>.

Michael Allen Baker: <unk> has a tremendous business down there.

Michael Allen Baker: That said it is so fragmented down there Mike when you look at the average age of vehicles in the U S. A 12 and a half but then you look at the Mexico market at over 16.

Brad W. Beckham: You know, when you look at the average age of vehicles in the U.S., at 12 and a half, but then you look at the Mexico market, at over 16 years of age on the average vehicle and how fragmented the independent market still is down there, we see a tremendous runway. I mean, that's why it was our first, you know, international venture. We have a great team down there. You know, the timing of when we acquired Mayasa back in 2019, we acquired a lot of great team members.

Michael Allen Baker: 16 years of age on the average vehicle.

Brad W. Beckham: We acquired a base of people in distribution. Since then, you know, we got our, we had our state-of-the-art O'Reilly prototype distribution center open last summer. And so, that enables that growth that you're asking about. I don't want to put a number on revenues or store count over time, but what I can tell you is that's going to be, you know, it has the opportunity to be a good portion of our growth over the next few years. And there's no reason that we can't get after Mexico no different than we have the U.S. from coast to coast.

Matthew: Thank you. We have reached the hour allotted time for questions. I'll now turn the call back over to Mr. Brad Beckham for closing remarks.

Brad W. Beckham: Thank you, Matthew. We would like to conclude our call today by thanking the entire O'Reilly team for your unwavering dedication to our customers and the outstanding results you produced in the first quarter. I would like to thank everyone for joining our call today, and we look forward to reporting our second quarter results in July. Thank you.

Matthew: Thank you. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.