Q4 2024 O'Reilly Automotive Inc Earnings Call
Yes.
Speaker Change: Welcome to the O'reilly Automotive, Inc, fourth quarter and full year 2024 earnings call.
Matthew: My name is Matthew and I'll be your operator for today's call.
Speaker Change: At this time, all participants are on a listen only mode.
Matthew: Later, we will conduct a question and answer session.
Matthew: During the question and answer session did you have a question. Please press star one on your Touchtone phone.
Speaker Change: I will now turn the call over to Jeremy Fletcher Mr. Fletcher you may begin.
Jeremy Fletcher: Thank you Matt Good morning, everyone and thank you for joining us during today's conference call, we will discuss our fourth quarter and full year 2024 results and our outlook for 2025.
Jeremy Fletcher: After our prepared comments, we will host a question and answer period before we begin this morning, I would like to remind everyone that our comments today contain forward looking statements and we intend to be covered by and we claim the protection under the Safe Harbor provisions for forward looking statements contained in the private Securities Litigation Reform Act of 1995, you can add.
Jeremy Fletcher: 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 Companys latest annual report on form 10.
For the year ended December 31, 2023, and other recent SEC filings.
Jeremy Fletcher: Company assumes no obligation to update any forward looking statements made during this call.
Speaker Change: At this time I would like to introduce spread back.
Speaker Change: Thanks, Jeremy.
Speaker Change: Everyone and welcome to the O'reilly auto parts fourth quarter conference call participating on the call with me. This morning are Brent 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.
Speaker Change: To begin today's call I'd like to recognize the hard work and commitment demonstrated by our team of over 93000 professional parts people throughout 2024. It is their commitment to our company and our customers that enabled us to deliver a solid year highlighted by an increase in comparable store sales up two 9% and.
Speaker Change: An increase in diluted earnings per share of five 7%.
Speaker Change: 2024 was a challenging year across the automotive aftermarket in our financial results reflected the headwinds our industry faced finishing below the expectations, we set for our business entering 2024.
Speaker Change: Our team has established a long track record of robust growth and profitability. So we are never fully satisfied when we fall short of that high bar.
Speaker Change: However, we are pleased with our team's ability to navigate the challenging environment and still deliver increases in comparable store sales and earnings per share representing our 30 <unk> consecutive year of growth in these metrics since becoming a public company.
Speaker Change: We are very pleased to have delivered record earnings despite a 46% headwind to EPS, resulting from a fourth quarter charge of $35 million to adjust our auto claims self insurance liabilities, which Brent will discuss in more detail during his prepared comments.
Speaker Change: This charge was a headwind of over 1%. So the full year EPS growth, we reported for 2020 for.
Speaker Change: The charge was even more impactful to the fourth quarter, representing a headwind of approximately 5% to the two 6% EPS growth we reported for the quarter.
Speaker Change: Now I'd like to take a few minutes to provide some color on our fourth quarter sales results, our comparable store sales for the fourth quarter grew four 4%, which was at the high end of our expectations. Our sales growth was driven by solid results in both professional and DIY the.
Speaker Change: The relative performance between the two sides of our business was more balanced in the fourth quarter than we experienced in the first nine months of 2024.
Speaker Change: Our professional business again delivered mid single digit comp growth, while DIY grew just over 3% the best quarterly result in 2024.
Speaker Change: To some degree our fourth quarter results were consistent with the pressured demand environment. We've experienced throughout 2024. The headwinds we have seen from broad based pressure on consumers persisted in the fourth quarter and were reflected in continued softness in discretionary categories, such as tools accessories and performance parts.
Speaker Change: However, we saw continued strong demand and maintenance categories in the fourth quarter. We also benefited from strong performance in winter weather related categories, as we calendar easier comparisons to the mild start of winter in the fourth quarter of 2023.
Speaker Change: Harsh inclement winter weather creates a tailwind to our business and the timing of when we have experienced this type of weather has created some variability over the last few years.
Speaker Change: As a reminder, last year, we really did not see severe winter weather in the fourth quarter of 2023 with more of the harsh conditions that support our business arriving in January of 2024.
Speaker Change: So far this season has been more typical as we have seen the impact of winter weather spread out a little more evenly as a result from a cadence perspective, our business in the quarter was steady month to month when viewed relative to the normal sales volume trends in our business.
Speaker Change: Our comps in October benefited from 2020 for having one less Sunday than the prior year and our December comps reflected the easier weather comparisons.
Speaker Change: Again, these monthly variances were driven by prior year comparisons and not by variability in our business within the fourth quarter of the current year.
Speaker Change: Next I'll discuss average ticket and traffic dynamics underpinning our sales growth for the fourth quarter ticket count growth was the larger contributor to our comparable store sales increase in the quarter again led by the professional side of our business in line with the consistent strength, we saw throughout 2024.
Speaker Change: DIY ticket counts also grew in the fourth quarter, representing our best quarterly performance for the year as this side benefited from solid performance and maintenance categories and the favorable winter weather comparisons.
Speaker Change: On a two year stack basis, which smoothes out the effect of the timing of impact of weather fourth quarter DIY traffic was down slightly in line with full year 2024 trends, we believe our customer transaction count results lead the industry on both sides of our business, reflecting continued market share gains in.
Speaker Change: In a tough environment.
Speaker Change: Average ticket values were also a positive contributor to our comp growth in the fourth quarter and included a benefit from same SKU inflation of just under 1%.
Speaker Change: For the full year of 2024 or two 9% comparable store sales increase was at the high end of the revised guidance range. We provided on last quarter's call, but just below the 3% to 5% guidance, we set at the beginning of the year.
Speaker Change: The sales growth achieved in 2024 was on top of the robust increases our team delivered in 2023, and 2022 of seven 9% and six 4% respectively.
Speaker Change: Against the tougher industry backdrop, our team has worked diligently to double down on our efforts to provide the best customer service in our industry, allowing us to both sustain the business. We have earned from our customers over the last few years and further grow our market share.
Speaker Change: Next I want to transition to a discussion of our guidance for 2025, starting with our sales outlook as.
Speaker Change: As we disclosed in our earnings release yesterday, we are establishing our annual comparable store sales guidance for 2025 at a range of 2% to 4% and we want to provide a snapshot of how we view both industry and macroeconomic conditions in our prospects for the coming year.
Speaker Change: If we as we've discussed over the last few quarters. The current environment in the automotive aftermarket has been challenging but it is not unlike other cycles, we've seen over our decades of experience in our industry.
Speaker Change: We operate in an extremely stable sector of retail and our customers are very resilient in periods of economic uncertainty.
The dynamics of the car park also contribute to stability in our industry.
Speaker Change: <unk> are engineered and manufactured to be reliably driven at higher mileages.
Speaker Change: This reliability, coupled with the substantial cost of replacement creates a compelling value proposition for our customers to invest in the repair and maintenance necessary to keep their existing vehicles on the road.
Speaker Change: The result has been a growing U S car park characterized by an increased average vehicle age, which combined with steady growth in total miles driven supports durable demand in the automotive aftermarket.
Speaker Change: Against this stable backdrop, our industry has encountered year similar to 2024, where industry wide growth is hard to come by and positive sales momentum is only available through market share gains and industry consolidation.
Speaker Change: We remain confident these periods are short lived and that our industry consistently rebounds due to the core strength of the demand drivers underpinned by the vehicle population.
Speaker Change: As such we are optimistic in the long term fundamentals of our industry and the prospects for conditions to improve as we move through 2025.
Speaker Change: However, we remain cautious regarding the potential for worsening economic conditions or the possibility of short term economic shocks, particularly pressure to the consumer from sustained high price levels.
Speaker Change: <unk>, increasing interest rates, our energy cost spikes in gas prices or other adverse circumstances. These.
Speaker Change: These considerations are built into our 2025 outlook and full year guidance, but are particularly relevant as we entered the year on a similar trajectory to our 2024 exited and faced challenging comparisons in the first quarter on a multiyear basis.
Speaker Change: Our focus as a company is to control our own destiny and drive our industry, leading results in any market condition and our performance. This year will ultimately depend on our effectiveness in executing our business model and providing exceptional customer service.
Speaker Change: To that end, we expect both our DIY and professional businesses to be positive contributors to our comparable store sales growth in 2025.
Speaker Change: We anticipate stronger growth in professional from increased ticket counts driven by an expected higher industry growth rate on this side of the business and by our ability to continue to capture market share.
Speaker Change: We also expect to be a DIY share gainer, but expect these gains to be offset by the long term industry dynamic of pressure to ticket counts, resulting from increased parts quality in corresponding extended service and repair intervals.
Speaker Change: As a result, we anticipate DIY traffic will be down slightly in 2025, but at a higher ticket value associated with the increasing complexity and quality of parts will drive comparable store sales growth in DIY similar to our experience in 2024.
Speaker Change: Our projected outlook for average ticket growth in 2025 assumes a benefit from same SKU inflation of approximately 1%.
Speaker Change: Consistent with our historical practice, we are assuming only modest increases in price levels from this point forward in 2025.
Brent Kirby: In a few moments Brent will discuss how we view the potential for increased tariffs on our supply chain and margin outlook for now I will just highlight that our sales assumptions exclude any changes in tariffs as it remains too early to project the impact to our business.
Brent Kirby: Before I move on from our sales guidance I would like to highlight our expectations for the quarterly cadence of our sales growth in 2025.
Brent Kirby: We expect our quarterly comparable store sales growth to be relatively even throughout 2025 with relatively minor differences driven by.
Brent Kirby: By more challenging headwinds in the first and fourth quarter and easier compares in the second and third quarters.
Brent Kirby: Thus far in the first quarter, our sales volumes are tracking in line with our expectations against the tough comparison to favorable winter weather in January of last year.
Brent Kirby: Now I'd like to move on to discuss our capital investment and expansion plans our capital expenditures for 2024 were just over $1 billion.
Brent Kirby: In line with 2023 and marginally above our full year guidance range driven by the timing of spend on distribution infrastructure projects.
Brent Kirby: For 2025, we are setting our capital expenditure guidance at one two to $1 3 billion.
Brent Kirby: The increased level of projected investment is centered around our plans to accelerate our store and distribution expansion.
Brent Kirby: Starting with our store network, we disclosed on last quarter's call our target of 200 to 210 net new store openings for 2025 the.
The increase in new store openings reflects our continued strong new store performance and our confidence in our ability to successfully balance our organic growth.
Brent Kirby: With greenfield growth across our North American footprint.
Brent Kirby: For domestic U S store growth are projected new store openings are spread across over 35 different states balance between expansion and newer markets in the northeast the mid Atlantic in Puerto Rico, as well as backfill in existing markets coast to coast.
Brent Kirby: Our plans also include continued growth in Mexico in 2024, we opened 25, new stores in Mexico, bringing our store count to 87 stores and expect to open a similar number of stores in 2025.
Brent Kirby: We are still in the early innings of our expansion in Mexico, but but we are gaining momentum and capitalizing on the opportunity to spread new store growth over several market areas. While at the same time also beginning to increase density in markets outside of our core historical base in Guadalajara.
Brent Kirby: We are also building the development muscle necessary for Greenfield new store growth in Canada.
Brent Kirby: Our 2025 target does not yet include a substantial number of new stores in Canada, but the coming year will be an important one to build out the organic capabilities and advanced the development of the new store pipeline that will fuel our growth in the coming years.
Brent Kirby: Beyond the increase in our new store targets. We are also expected to increase our growth capital spend as a result of two additional factors.
Brent Kirby: Our continuing shift to owned new store growth versus lease stores and incremental investments in our hub store network our ability.
Brent Kirby: To successfully open stores that increasingly generate higher sales volumes and stronger cash flows is driving enhanced returns on capital invested in our new store growth.
Brent Kirby: In light of the strong returns we are planning 2025, new store openings to include a projected 60%, 40% mix of owned versus leased stores.
Brent Kirby: We are also pleased with the returns we have generated through our ongoing ongoing expansion and enhancement of our hub store network, our ability to support our stores with quick quick access to broad localized SKU availability is an important factor in our ability to effectively compete and take market share on both sides of the biz.
Brent Kirby: <unk>.
Brent Kirby: We have executed our hub strategy for decades, one of the strengths of this strategy is our flexibility to adjust the number location and size of our hub stores to ensure our network provides our customers with the best access to inventory in each of our markets.
As such our capital investment projections for 2025 include planned increases in the number and size of our hub stores.
Brent Kirby: The second major driver of our 2025 Capex outlook is our continued investment in distribution capabilities. The.
Brent Kirby: The competitive advantage, we maintain in an industry, leading inventory availability is fueled by our substantial investment in our distribution network and Brent will provide an update on our current distribution projects and expectations for 2025 during his supply chain update.
Brent Kirby: Our store hub and distribution expansion represents the lion's share of the planned growth in Capex for 2025, but also included in our outlook. Our continued ongoing investments to maintain and refresh the image and appearance of our store fleet as well as continued strategic investments in technology.
Brent Kirby: As I wrap up my prepared comments I would like to once again, thank team O'reilly for your unwavering commitment to providing excellent customer service every day in each of our over 6300 stores.
Brent Kirby: Now I will turn the call over to Brent.
Brent Kirby: Thanks, Brad I would also like to begin my comments. This morning by congratulating team O'reilly on a solid finish to 2024.
Brent Kirby: Today, I will further discuss our fourth quarter and full year operational results and provide some additional color on our outlook for 2025 star.
Brent Kirby: Starting with gross margin our fourth quarter gross margin of 51, 3% was in line with the fourth quarter 2023, which was within our range of expectations.
Brent Kirby: Our full year gross margin came in at 51, 2%, which was down six basis points from the prior year and in line with our expectations.
Brent Kirby: The year over year comparison includes the headwind from the inclusion of our acquired Canadian business, which finished the year at the expected 30 basis point impact.
Brent Kirby: Our 2020 for gross margin also was also impacted by a mix headwind of approximately 11 basis points from the outsized strong performance in our professional business.
Brent Kirby: These pressures were offset by incremental improvements in acquisition cost achieved through the efforts of our supply chain and operations teams with outstanding support from our supplier partners.
Brent Kirby: We have been pleased with our consistent solid gross margin results and expect to see further expansion of gross margin in 2025, as we lap our 2024 gains and anticipate additional opportunities to reduce acquisition cost.
Brent Kirby: We also expect to continue to incrementally drive distribution efficiencies.
Brent Kirby: Based on these expectations, we have established a guidance range for 2025 of $51 two to 51, 7% representing an increase of 25 basis points over 2024 at the midpoint.
Brent Kirby: We remain very bullish on our prospect to generate gross profit dollar growth driven by the premium value proposition that our supply chain store operations and sales teams create for our customers.
Brent Kirby: Our outlook for gross profit assumes a stable inflation environment and the expectation that our industry will remain rational from a pricing perspective as Brad previously mentioned, we have not incorporated any impact from changes to tariffs at this time it is difficult to assess the exact timing duration and magnitude.
Brent Kirby: <unk> of any tariff revisions that will occur and the way that suppliers competitors and customers will respond to any changes.
Brent Kirby: While it isn't prudent to adjust our forecast to quantify the different possible past. These developments could take we remain very confident in our ability to manage effectively in a changing environment.
Brent Kirby: Our experienced during the last round of significant tariffs in 2018, and 2019 is a clear demonstration that our industry behaves rationally in response to increased acquisition cost.
Brent Kirby: This rationality was further demonstrated during the period of heightened inflation from 2021 to 2023.
Brent Kirby: We fully expect this dynamic to continue and anticipate our industry will have both the ability and the resolve to appropriately pass through any increased tariff costs.
Brent Kirby: Yeah.
Brent Kirby: From a cadence perspective, our quarterly gross margin remained relatively consistent throughout 2024, and we expect a similar quarterly cadence as we move through 2025.
Brent Kirby: Next I want to provide an update on some supply chain and distribution initiatives.
Brent Kirby: Our unwavering commitment to providing the best possible parts availability in the industry is a critical component of our business model.
Brent Kirby: And a primary contributor to our long term success.
Brent Kirby: This commitment is reflected in the continued investments we make in our supply chain distribution network hub store network and inventory position.
Brent Kirby: In 2024 was a very successful year for team O'reilly in these areas.
Brent Kirby: On the distribution side, we successfully completed the relocation of our distribution centers in Springfield, Missouri, and Atlanta, Georgia to larger more efficient facilities.
Brent Kirby: Since our last earnings call the New Atlanta distribution Center began servicing stores in the fourth quarter and we are extremely pleased with the seamless opening of this new facility.
Brent Kirby: This 690000 square foot facility will have the ability to service 350 stores with direct import processing capabilities and will further fuel our growth in our core market area for our company.
Brent Kirby: We are also nearing the completion of our new Greenfield distribution center in Stafford, Virginia, and expect to start providing exceptional service to stores in the mid Atlantic region out of this facility in the back half of 2025.
Brent Kirby: As we've discussed earlier. The addition of this DC opens up a new section of the map and we are excited to lean into growth in these new markets.
Brent Kirby: We're also making great progress on the expansion of our existing distribution center in Lakeland, Florida and are eager to improve the efficiency of this building and unlock additional capacity. When this project is complete at the end of 2025.
Brent Kirby: Finally, our capital investment outlook for 2025 includes dollars allocated to future expansion and development of our distribution infrastructure.
Brent Kirby: We do not currently have specific details on the next slate of projects, but we continue to proactively align our distribution strategy to the store growth opportunities that Brad outlined earlier.
Brent Kirby: In line with physical expansion of our distribution and hub networks, we're targeting inventory investments in 2025 is another key component of planned enhancement to our industry leading parts availability.
Brent Kirby: Our inventory per store at the end of 2024 was $799000, which was up five 5% from the end of last year, driven by our continued opportunistic investment to support our sales momentum.
Brent Kirby: In 2025, we are projecting an additional per store inventory of 5% with a little over half of that increase driven by the investments in our expanded distribution center and hub store inventory layers.
Brent Kirby: The remainder of the increase is geared to capitalize on targeted additions to our stores to ensure that we're offering the best possible local assortment and inventory availability.
Brent Kirby: Now I want to spend some time covering our SG&A and operating profit performance for 2024, and our outlook for 2025.
Brent Kirby: Fourth quarter SG&A expense as a percent of sales was 33, 3% up 68 basis points from the fourth quarter of 2023.
Brent Kirby: This significant increase was driven by a $35 million charge, representing 85 basis points to adjust reserves relating to our self insurance liabilities for historic auto liability claims.
Brent Kirby: As we noted in our press release yesterday, the adjustment relates to claims that occurred prior to 2024 and reflects adverse claim development spanning multiple years of exposure to losses from accidents incurred and the operation of our store delivery fleet.
Brent Kirby: Unfortunately, we have realized significant inflation in the cost to resolve these claims.
Brent Kirby: This pressure coupled with slower development timelines resulted in the need to make the significant adjustment we recorded in the fourth quarter.
Brent Kirby: The adjustment was driven both by our experience in administering and resolving these claims and also from revised assumptions that we used to estimate future liabilities.
Brent Kirby: While the charge was driven by significant increases in cost on an average claim basis, rather than an increased frequency of accidents. We are taking all steps possible to improve safety reduce accident rates and limit future loss exposure.
Brent Kirby: Average per store SG&A expenses for the full year of 2024 were up four 6% with 7% of that growth, reflecting the fourth quarter charge.
Brent Kirby: Excluding the adjustment for the pre 2020 for auto claims our per store SG&A growth was in line with our revised expectations of three 5% to 4% and below the guidance range that we set at the beginning of the year of four 5% to 5% growth.
While we are certainly disappointed by the negative impact of the charge to our fourth quarter results. We are otherwise pleased in how we finished out 2024 and the productivity of the rest of our SG&A spend in the quarter, which generated 18 basis points of leverage over the prior year on a 3% increase in SG&A.
Brent Kirby: Per store.
Brent Kirby: As we look forward to 2025, we are planning to grow average SG&A per store by two to two 5%, which equates to two 5% to 3% growth excluding the impact of lapping the fourth quarter 2024 charge.
Brent Kirby: Based on our SG&A expectations and projected gross margin range, we are setting our operating profit guidance range at $19 two to 19, 7%.
Brent Kirby: Which at the midpoint is in line with our full year 2024 results.
Brent Kirby: Since our guidance range implicitly assumes a year over year benefit of approximately 20 basis points from Calendaring, the fourth quarter 2024 charge.
Brent Kirby: We are also expecting an offsetting pressure to operating margin.
Brent Kirby: Our SG&A outlook for 2025 anticipates the prudent actions our team will take to manage expenses to effectively execute our business appropriately in response to market conditions in a similar fashion to the steps that we took to adjusted operating expenses down as we move through 2024.
Brent Kirby: However, these expense measures are limited by our expectation of modest pressure to wage rates as well as investments in key capabilities, including the hub store in technology initiatives that Brad outlined earlier.
Brent Kirby: We remain committed to investing in our business to grow market share and drive industry, leading results. We have been pleased with our ability to capitalize on our strong competitive positioning and sustain our industry, leading growth momentum and will continue to judiciously manage our capital and operating investments to drive long term.
Brent Kirby: Both and high returns.
Brent Kirby: As I conclude my comments I would like to thank the entire O'reilly team for their hard work and dedication in 2024.
Jeremy Fletcher: And now I'd like to turn the call over to Jeremy.
Jeremy Fletcher: Thanks, Brad I would also like to thank all of team O'reilly for their continued commitment to our company and our customers now.
Jeremy Fletcher: Now we will fill in some additional details on our fourth quarter results and guidance for 2025.
Jeremy Fletcher: For the fourth quarter sales increased $264 million.
Jeremy Fletcher: Driven by a four 4% increase in comparable store sales and a $66 million non comp contribution from stores opened in 2023, and 2024 that have not yet entered the comp base.
Jeremy Fletcher: For 2025, we expect our total revenues to be between 17, 4% and $17 7 billion.
Jeremy Fletcher: Our fourth quarter effective tax rate was 19, 6% of pretax income comprised of a base rate of 24% reduced by a 0.7% benefit for share based compensation.
Jeremy Fletcher: This compares to the fourth quarter of 2023 rate of 17, 7% of pretax income.
Jeremy Fletcher: Apprised of a base tax rate of 18, 9% reduced by a one 2% benefit for share based compensation.
Jeremy Fletcher: The fourth quarter of 2020 for base rate as compared to 2023 with higher as a result of the timing of recognition of certain tax credits.
Jeremy Fletcher: For the full year, our effective tax rate was 21, 6% of pretax income comprised of a base rate of 22, 9% reduced by one 3% for share based compensation.
Jeremy Fletcher: For the full year of 2025, we expect an effective tax rate of 22, 6% comprised of a base rate of 23% reduced by a benefit of <unk>, 4% for share based compensation.
Jeremy Fletcher: We expect the quarterly rate to.
Jeremy Fletcher: To fluctuate due to variations in the tax benefit from share based compensation and the tolling of certain tax periods in the fourth quarter.
Jeremy Fletcher: As we outlined in our press release yesterday, we have established our earnings per share guidance for 2025 at $42 60.
Jeremy Fletcher: To $43 10.
Which reflects an increase over 2024 EPS of five 4% at the midpoint.
Jeremy Fletcher: The year over year increase reflected in our guidance range includes both the benefit of Calendaring, the fourth quarter 2020 for self insurance charge as.
Jeremy Fletcher: As well as the headwind from the increase in our expected effective tax rate with the impacts from these items roughly offsetting.
Jeremy Fletcher: Now, we will move on to free cash flow and the components that drove our results in 2024 and our expectations for 2025.
Jeremy Fletcher: Free cash flow for 2024 was $2 billion, which was unchanged from 2023 pressure.
Jeremy Fletcher: Pressure to a free cash flow in 2024 from the timing of tax payments and purchases of renewable energy tax credits, which we were able to defer in 2023 was offset by growth in net income and a decrease in net inventory in 2024 versus an investment at investment and net inventory in 2023.
Jeremy Fletcher: For 2025, we expect free cash flow to be in the range of one six to $1 9 billion.
Jeremy Fletcher: The expected reduction in free cash flow is driven by the incremental capital expenditures and inventory investments, Brad and Brent outlined in their prepared comments, partially offset by growth in operating income.
Jeremy Fletcher: I also want to touch briefly on our AP to inventory ratio. We finished the fourth quarter were 128%, which was down from 131% at the end of 2023, but marginally better than our expectations for the end of 2024.
Jeremy Fletcher: For 2025, we expect to see continued moderation, resulting from our planned incremental inventory investment across our store and distribution network and currently expect to finish the year at a ratio of approximately 125%.
Jeremy Fletcher: Moving on to debt, we finished the fourth quarter with an adjusted debt to EBITDAR ratio of 199 times as compared to our end of 2023 ratio of 2.03 times with a modest increase in adjusted that more than offset by EBITDAR growth.
Jeremy Fletcher: We continue to be below our leverage target of two five times and plan to prudently approach that number over time.
Jeremy Fletcher: We continue to be pleased with the execution of our share repurchase program.
Jeremy Fletcher: For 2024, we repurchased one 9 million shares at an average share price of $1072 for a total investment of $2 $1 billion since the inception of our share repurchase program. In 2011, we have repurchased 96 million shares at an average share price of $264 for a total <unk>.
Jeremy Fletcher: <unk> at $25 4 billion.
Jeremy Fletcher: 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.
Jeremy Fletcher: As a reminder, our EPS guidance includes the impact of shares repurchased through this call, but does not include any additional share repurchases.
Before I open up our call for your questions I would like to thank our team for their hard work and the commitment to excellent customer service that drives our success.
Jeremy Fletcher: This concludes our prepared comments at this time I would like to ask Matt the operator to return to the line and we will be happy to answer your questions.
Matt: Thank you we will now begin the question and answer session. Please press star one on your phone.
Speaker Change: If you wish to be removed from the queue. Please press star two.
Speaker Change: We do ask that we're posing your question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality.
Speaker Change: Please limit your questions to one question and one follow up question. Once again, if you have a question. Please press star one on your phone.
Speaker Change: Your first question is coming from Scot Ciccarelli from Truest. Your line is live.
Speaker Change: Hey, good morning, guys, Josh on for Scott.
Speaker Change: Just help us understand better good morning.
Speaker Change: Your sourcing exposure to China, and Mexico, Canada on a percent of Cogs basis.
Speaker Change: And then what are you guys hearing at this point from your vendors on price increase to expectations and how much would that proposed tariffs change that alright.
Brian: Yeah, Hey, Hey, good morning, Josh This is Brian I can start on that and these guys can add in.
Speaker Change: We go through it.
Speaker Change: Yes in terms of sourcing obviously, the big the Big question Nobody's got a crystal ball like we said in the guidance.
Speaker Change: I don't anticipate tariffs, but we all know that there is some looming threat of that so.
Speaker Change: China.
Speaker Change: In the 25 ish range sourced from China, 'twenty five 'twenty six mid Twenty's percent.
Speaker Change: Mexico, we're in the high teens at this point, so we will see how things go there Canada.
Speaker Change: Low single digit not a real impact there so.
Speaker Change: But the thing to remember is.
Speaker Change: As it relates to those things.
Speaker Change: In many cases, we're not the importer of record so.
Speaker Change: We work with our suppliers as those tariffs if they get enacted if they get passed on we're going to work with our suppliers to negotiate.
Speaker Change: What that true impact would be to us in those in those situations.
Speaker Change: Several things that I would give our sourcing and our merchandising team a ton of credit for you know over the last several years through Covid and some of the challenges we faced and really even going back to 2018 2019, when the first round of China tariffs went into effect.
Speaker Change: Our team has done a great job continuing to diversify our global supply chain.
Speaker Change: And reduce dependency on some of the hotspots, we know about.
Speaker Change: And with our proprietary brands.
Speaker Change: And the growth that we continue to see in our proprietary brands, which are over 50% of our revenue now.
Speaker Change: Just managing net portfolio gives us the ability to source from multiple suppliers multiple countries of origin and to evolve as we need to.
Speaker Change: In changing conditions so.
Speaker Change: I think everybody is facing some of the challenges obviously anybody in retail is facing a lot of the tariff questions right now and the challenges right now I really feel like we're as well positioned as anyone to two <unk>.
Speaker Change: <unk> deal with those.
Speaker Change: Challenges and.
Speaker Change: To work with our supplier partners to be able to.
Speaker Change: Pass along anything in a very rational industry.
Speaker Change: That may come our way.
Speaker Change: Yeah, Josh maybe the only thing that I would I would add to that explanation is unfortunately, we're just kind of in a situation where.
It's been a little bit of a moving target.
Speaker Change: This is a challenge for us.
Speaker Change: At this stage to give you just a.
Brent Kirby: Complete picture on exactly how that's going to look for lot of the reasons that Brent talked about.
Brent Kirby: So keeping in mind that when we think about how our Cogs is comprised of <unk> and other pieces of that like our distribution that the that arent impacted so when we talk about those percentages, we're really talking about how we think about the sourcing impacts that come from that.
Brent Kirby: I think for us the.
Brent Kirby: The confidence that we have having been through a couple of cycles of more dynamic changes in how costs have run through our supply chain that Brent called out within his prepared comments puts.
Brent Kirby: Puts us in a position where we're at it's it's going to be hard to anticipate exactly where some of this will settle for sure. We've seen the first round in those changes.
Brent Kirby: And some threatened and we'll see where that goes.
Brent Kirby: As we move through the year, but our industry is just showing the.
Brent Kirby: The ability to.
Brent Kirby: To leverage pricing power.
Brent Kirby: Put us in a position where those those costs can be passed through.
Brent Kirby: Got it very helpful. Thanks, guys.
Speaker Change: Yes, Thanks, Josh Josh.
Speaker Change: Your next question is coming from Michael Lasser from UBS. Your line is live.
Speaker Change: Good morning. Thank you so much for taking my question.
Speaker Change: <unk>.
Speaker Change: Your guide your comp to Q4, this year versus often guiding 3% to 5%.
Speaker Change: The year and should we interpret this as any signal that O'reilly expects it grew three to be lower in the future than it has been in the past.
Speaker Change: Yeah, Hey, good morning, Michael Great question, Thanks for it.
Yeah. So you know I think the biggest thing we put a lot into our guidance a lot of thought a lot a lot of science and then there's an art to knowing what's going on in the streets and our opportunities versus our competitors to continue to take market share I think the obviously the biggest thing that we want you to keep in mind Michael is that.
Speaker Change: Yeah.
Speaker Change: As excited as we are that our team was able to put up.
Speaker Change: Four 4% comp in Q4, we had softer comparisons and while the cadence of our months building into 25 was pretty consistent the week to week. When you look at it week to week and you look at it kind of day to day. There is still just some choppiness in what we're seeing in the business and we.
Speaker Change: We still feel like there's a cautious consumer.
Speaker Change: We contemplated the fact that discretionary categories like like we talked about earlier, we're still seeing pressure to discretionary even though we're pleased overall with kind of the maintenance and repair factors.
Speaker Change: We just we're heading into 25, just continuing to be cautious in terms of that lowering consumer DIY consumer even though we have a lot of confidence in our ability to continue to take market share. So you know.
Speaker Change: Michael It's hard to think about exactly how we think about that in longer terms, what we do know thinking about 25 26 and beyond to the second part of your question is that.
Speaker Change: 16, $17 billion company operating in a $168 billion industry in North America and so.
Speaker Change: While we do feel like we need to have some caution here.
Speaker Change: Know that our team has plenty of opportunity over the next many years to continue to play from a position of strength and really drive and control our own destiny, both DIY and <unk>.
Speaker Change: Thank you for that my follow up question is if we do assume that O'reilly outperforms.
Speaker Change: Initial range.
Speaker Change: The tablets, especially given the weather that happened so far this year, along with the opportunity to gain here in a week of.
Speaker Change: For clothing across the industry, how should we expect the flow through on the upside to the comp guidance.
Speaker Change: Hit the P&L. Thank you very much.
Speaker Change: Yeah. Thanks, Mike I appreciate the question at this point.
We're really in a position, where we would need to lean back on our guidance and how we think about how that approaches our range and and just understand as we move forward that if circumstances.
Speaker Change: Play out for us differently in in 2025, and you know sometimes they do.
Speaker Change: Certainly did last year.
Speaker Change: You have to evaluate what that looks like and what that means for our business as we move forward because that can take it.
Speaker Change: Any of a number of different different forms for sure.
Speaker Change: The Big question is is there going to be some level of pricing benefit that you get that we haven't baked in just because of the.
Speaker Change: The tariffs that roll through and the persistence of that what does that have from a broader impact in the economy and what does that do from inflation levels price levels. How does the consumer responded that there are lots of different I think factors that when you start to speculate as to how the year might go differently.
Speaker Change: Play in differently to how we think about.
Speaker Change: The income statement looks like up or down we would tell you that within the guided range of where we've talked about how we think we spend this year that is always first and foremost focused on.
Speaker Change: What do we think is prudent and appropriate to take care of our customers with a high level of service and that's the reason why that number we don't swing around substantially in lots of different rates because.
Speaker Change: We're not focused on what what the short term results are we got to make sure that we take care of our customers for the long term.
Speaker Change: But we've also included some investments that we feel really good about as we move through the year. So so the long and short of it is that we will see.
Speaker Change: Our business has given us the opportunity to continue to be able to lean into growth and be successful and how that flows down through this year.
Speaker Change: Is there still some unknowns.
Speaker Change: We're going to.
Speaker Change: Managed to an appropriately as we go through the year, Yeah, I think Michael just add to that real quick this is Brad.
Jeremy Fletcher: To wrap up Jeremy said, it very well, but as you know.
Jeremy Fletcher: Comparable store sales can come in more than one form meaning that you know if.
Jeremy Fletcher: If we end up seeing additional inflation, then we have contemplated today.
Jeremy Fletcher: In that case just for an example.
Jeremy Fletcher: As you could see more leverage or easier leveraged from that standpoint versus if we see an outsized share gain you know we could continue to see leverage in that in that scenario as well, but we also reserve the right to it.
Jeremy Fletcher: If we see us controlling our own destiny, well with share gains in that driving our top line above and beyond we also want to continue to look for opportunities to to lean in and really lean into that customer service and make sure that pays off not just this year, but for the next many years.
Jeremy Fletcher: That's super helpful. Thank you so much and good luck.
Michael Lasser: Thank you Michael.
Speaker Change: Thank you. Your next question is coming from Gregory <unk> from Evercore ISI. Your line is live.
Speaker Change: Hi, Thanks.
Speaker Change: My first question is just looking at the quarter and when you think about this year you mentioned that inflation same SKU with I think 9% in the fourth quarter.
Speaker Change: What did you see from mix and complexity in the fourth quarter and how is that trending as we think into 'twenty five.
Speaker Change: Yeah. Greg appreciate the question, we did see same SKU that that was just under 1% for us in the quarter.
Speaker Change: As the top line benefit as we think about just the.
Speaker Change: The impact us too.
Speaker Change: Our gross margin rate from.
Speaker Change: A year to year perspective for sure there was.
Speaker Change: There was some degree of that that was that was driven by just the inclusion of vas.
Speaker Change: Canadian business and our results and then.
Speaker Change: And then the mix from a customer perspective also saw some some more kind of.
Speaker Change: Kind of temporary pressures and things like product mix, just just the seasonality of business.
Speaker Change: Little bit of the categories that performed better.
Speaker Change: A little bit of pressure in things like.
Speaker Change: Our distribution cost side as we're working through a couple of facilities. There that we relocated it had some exit costs in the Atlanta facility, some transportation pressures that happened there.
Speaker Change: But by and large what we've been pleased with is the ability to.
Speaker Change: To see.
Speaker Change: Just kind of steady incremental acquisition cost improvements as we move through.
Speaker Change: The year, just as a result of the ability with our with our supplier base to create value and find good opportunities there.
Speaker Change: Okay.
Greg Henslee: Yeah, and Greg the only thing I would add David.
Greg Henslee: Hey, Greg This is Brent the only thing I'd add to what Jeremy said Theres some of the elements. He talked about in the quarter that were factors with gross margin in Q4, we felt some of it was transitory and timing in some respect some of the things that he mentioned and feel very good about our proposition on the cost side as we move into <unk>.
Greg Henslee: Five.
Speaker Change: So that's what drives that normal increase I guess my follow up then would be would be talking about the margin already what does it mean for top line I know in the past you said that inflation in AUR expansion average unit retail or mixed complexity put together could be a normal two to three points of comp do you think is that what we ended up doing lab.
Greg Henslee: Last year for the full year.
Greg Henslee: Yeah. Thanks, Thanks, Greg for the follow up question I realized I, probably answered the second question first and I'll answer the first question second here.
Greg Henslee: Yeah, I think our trends as we work through 2024, and while we expect 25 are pretty similar there is a lift above above the.
Greg Henslee: The inflation number the same SKU number within our average ticket value that.
Greg Henslee: That is a helper it was probably a little bit more compressed in 2020 for some part of that is is when we think about that ticket size is just a consumer that's a little bit more pressured than might not add that that extra item to their to their job.
Greg Henslee: They may be able to do around with R. R.
Greg Henslee: Not a lot of growth trade down we've talked about that a lot through the year.
Greg Henslee: But sometimes that can kind of squeezed the benefit that you get from the complexity a little bit.
Greg Henslee: We think that that largely is pretty normalized within within our results, we think that will be.
Greg Henslee: In decent shape next year to have a.
Greg Henslee: A contribution if you kind of think about it in in a few pieces. Both from just modest same skew a little bit of complexity benefit and the ticket and then.
Greg Henslee: We do expect that with the professional growth that ticket counts will be a contributor as well.
Speaker Change: Got it that's great thanks, and good luck.
Greg Henslee: Thanks, Greg This is Greg.
Thank you. Your next question is coming from Bret Jordan from Jefferies. Your line is live.
Bret Jordan: Hey, good morning, guys.
Speaker Change: We're talking about regional performance and did you see any disruption in the west given the store closures that one of your peers is executing out there.
Speaker Change: Yeah, Hey, good morning, Brett.
Speaker Change: <unk> talked out about regional performance and then the second part of your question next.
Speaker Change: Yeah overall, when we look at kind of the quarterly and we look at regional one division performance versus our internal plans and kind of what we're seeing from a weather standpoint, we really didn't have any major standouts in the fourth quarter.
Speaker Change: Brett in terms of regional performance you know what you would kind of expect.
Speaker Change: From from weather benefits in some markets over others, but we were actually really pretty consistent.
Speaker Change: In terms of regional performance and no no standouts, one way or the other.
Speaker Change: Talking about the west coast, a little bit on on the competition front.
Speaker Change: I think it's still a little bit too early to kind of gauge, how that's going or sales and operations team anytime there is disruption in store closures, obviously, it's their job and they take a lot of pride in making sure. If there is a jump ball that.
Speaker Change: You know that we're the first to that.
Speaker Change: In any case, we possibly can I think we're I would kind of temper a little bit of that expectation in terms of any windfall from competitor closures in the fact that.
Speaker Change: What we look at more so than just a share.
Speaker Change: Automatic share gain is it's not just a jump ball necessarily between us and one other competitor those markets are extremely competitive theres, a lot of independents and a lot of different players, especially on the professional side and with the volumes. We know are being fairly low in those instances one thing to keep in mind is that we are.
Speaker Change: Going to kind of take a look as we see those happening and make sure that it's actually quality sales that's up for grabs there may be some business that was being done that isn't the sustainable profitable business that we want and there could be some independents and things like that that are willing to take that or we may have some opportunities. So that's a little bit more of our type business.
Speaker Change: On our terms and so again opportunity for sure, but we want to temper that with just seeing how the remainder of the closures kind of play out and just manage those expectations that we're going to work smartly through that and make sure that what's available is our type business.
Speaker Change: Great I guess my follow ups competitive landscape as well, there's a lot of chatter in the fourth quarter about non traditional retail competition.
Speaker Change: Are you seeing anything changing around the DIY market with it.
Speaker Change: Down in Arkansas, pushing in the space or is that pretty much status quo.
Speaker Change: No I you know Brad good question.
Speaker Change: We really haven't.
Speaker Change: We.
Speaker Change: Really what I think about our best barometer.
Brent Kirby: Special and Brent and I are looking at category performance in sector performance as you know what we're seeing in maintenance is a good kind of a bellwether for us not that we don't take any.
Speaker Change: Anything that.
Speaker Change: Non traditional competitor does for granted we always want to be monitoring those type things, but really what we're seeing and what we look at and maintenance categories like oil and filters.
Speaker Change: This is extremely encouraging and so we don't feel like there's any issues there that we're aware of.
Bret Jordan: Yes, Brad this is bret.
Bret Jordan: Brett maybe maybe just add one thing to brad's comment.
Bret Jordan: And in those categories that he talked about filters and oil some of those maintenance categories. We continue to see strength and just a reminder to the I think the primary competitor you're referring to they go to market on price and we go to market on service and availability in.
Bret Jordan: We continue to see a lot of strength in demand for what we how we go to market versus maybe just price alone.
Speaker Change: To your point Ryan I appreciate it.
Bret Jordan: Thanks, Brett Thanks, Brett.
Thank you. Your next question is coming from David Bellinger from Mizuho. Your line is live.
David Bellinger: Hey, good morning, Thanks for the time here, maybe a couple of bigger picture questions, but we've noticed in more automation going into your distribution centers lately marvell modernized approach to it.
David Bellinger: Should we expect any new buildings that come online teased those type of features and is there any way you can quantify those benefits whether it's in terms of saving delivery times replenishing more stores or some type of labor savings if anything there to help frame that up would be helpful.
David Bellinger: Yes, Hey, David Good morning. Thanks for the question. This is Brent I can start on that yes. We are you know obviously the two projects that we successfully completed this year the relocations and Springfield in Atlanta. We did include some goods to person automation.
David Bellinger: You know I think the way, we really look at that is we.
David Bellinger: Obviously, our distribution networks extremely important to our business model and parts availability in that time definite promise and delivering on that time definite promise with accuracy and consistency so.
David Bellinger: What we added I would just call kind of the evolution of distribution technology and in when you think about the marketplace. I mean, we've been using we're always looking at <unk>. We're always looking at how do we be how can we be more efficient more effective in our buildings and that goes whether that sortation conveyors.
David Bellinger: Things like that so I would couch, maybe the investment in some of the things we've done more recently in that regard in terms of just the ongoing evolution, obviously, we see a cost benefit or we wouldn't be doing those things as it relates to just labor overall efficiency.
David Bellinger: And accuracy.
David Bellinger: The thing I would tell you, though and.
David Bellinger: I think it's important to not get too overly fixated on one capability or technology that we may have deployed in one of our 30 plus distribution centers.
David Bellinger: We're never going to have the same suite of of.
David Bellinger: <unk> person in every DC and the network, that's not where we're going we're always look we look at every distribution center as we.
David Bellinger: We look at the market. It serves we look at the amount of Skus, we need and at the capability, we need to serve those stores and how do we do that most effectively and most efficiently.
David Bellinger: And Thats really what youre seeing in some of the recent investments we've made and some of that technology. So that's how we're looking at it and we're going to continue to always challenge that as we look at every DC project.
Speaker Change: Great. Thanks for that and then just.
Speaker Change: My follow up I'm curious if you could talk about your exposure to gas and diesel prices and in the context of operating expenses.
Speaker Change: If there is a period, where we do go into a lower energy price environment and materially lower.
Speaker Change: What type of benefit could you have on the G&A side is there a way to size that up.
Speaker Change: That would be on top of the benefits you'd see also on the demand side does that I'm talking about more internally, though is there a way that you could help frame that for us.
Speaker Change: Yeah.
Speaker Change: It's not an item that typically David we quantified or that we've drilled down into I would tell you just from an order of magnitude. It's it's not a huge mover we've had periods of time, when when gas prices and those types of.
Speaker Change: Cost of have fluctuated and it can be it can be maybe a.
Speaker Change: A smaller order of magnitude helper or challenge if you see spikes there from an operating cost perspective.
Speaker Change: But our teams have been able to manage that as a as a kind of a component piece of the overall spend but it's.
Speaker Change: It's an item that it has to move up pretty substantially for it to move the needle from a companywide perspective, and we maybe had an instance, or two of that in the past, but it's not is that usually something thats meaningful over a longer period of time.
Speaker Change: Got it thank you both.
David: Yes, Thanks, David.
Speaker Change: Thank you. Your next question is coming from Michael Baker from D. A Davidson your line is live.
Michael Baker: Thank you.
Speaker Change: Couple of follow up one.
Michael Baker: I'm just a little confused on the trend.
Michael Baker: This quarter, we know there is a more difficult comparison in the expectation I think then as for the first quarter comp to be.
Michael Baker: Yes.
Michael Baker: Said that January was running at the exit rate of 'twenty, 'twenty, four which would be like 5% or 4%.
Michael Baker: I don't know if that's right, but I don't know could you help clarify that thank you.
Speaker Change: Yeah no. Thanks for the question absolutely want to be able to clarify there.
Speaker Change: When we talk about about the cadence of our business, especially when we think about.
Speaker Change: Really a short period of time here in 2025.
Speaker Change: Our focus is always on how we think about the day to day week to week volumes of the business and how that.
Speaker Change: That relates to the trends that happen from just normal seasonality. So so when we say our business has been somewhat consistent that that has on that on that basis to the extent that that was not the situation in the prior year, where where December of now going back to <unk>.
Speaker Change: 'twenty, three which was very light because they know whether but January volumes stepped up pretty substantially then how the <unk> is going to be different and I would I just explicitly tell you that the January comps are below where the December contract. It's just.
Speaker Change: The mass that pushes through I think our point was that as we think about what our guidance for the full year should be in the considerations that go into that that Brad talked about earlier.
Speaker Change: One of the places where we sit as we just think about the volume of our business as we start the year it looks similar to how last year looked with.
Speaker Change: I'm, sorry, with how we exited December understanding that that December to January type of timeframe had similar weather there werent some of the the.
Speaker Change: The swings in that I think we had some favorable weather.
Speaker Change: For both of those I think it's also appropriate to remind everybody that that first quarter is kind of a.
Speaker Change: It's kind of a quarter or two weather seasons.
Speaker Change: How does it start off with with winter weather and then it's always very dependent upon that that beginning this spring is as tax refunds head as we start to see the initial spring weather and when that hits. So there's a lot of variability as we move through.
Speaker Change: Yeah fair enough, Okay that really does help clarify one more just to follow up on the inflation, we're starting to see some inflation in general come back in and as I look at some of the CPI data for auto parts related sectors is starting to pick up yes, you didn't really see that you are below 1%.
Speaker Change: Slightly below 1% I think it was actually even less than the 1% inflation on a like for like basis in the third quarter and you don't expect any pick up in 2025 outside of potential tariffs.
Speaker Change: Any reason why you're not seeing that that increase in inflation that we're seeing generally in the economy.
Speaker Change: Yes, I think at this point that the broader move is still somewhat.
Speaker Change: A minor I know, it's starting to tick up broadly and so just the timing of when those things start to happen you can see a little bit of dislocation.
Speaker Change: We're not an industry that.
Speaker Change: That's going out and repricing, a carton of eggs a week to week or anything like that we still we still largely sell a lot of products that have a slower turn and so I think you see adjustments more gradually over the course of time and there's nothing that we would call out and maybe the broader landscape that that tells us that we.
Speaker Change: We're back on on a spike.
Speaker Change: A new trend I think some of what we've talked about as we think about the next year is that is still to be determined exactly where we think that that broader price level.
Speaker Change: The story is going to go from a from an economy standpoint in semi convinced that we will we won't see.
Speaker Change: Some ability to hold off inflation.
Speaker Change: And the impact that that might have on our business to be able to pass it through.
Speaker Change: Largely the reason why we tend to.
Speaker Change: To not be too speculative and how we think about our guide our future inflation that we haven't seen yet.
Speaker Change: Awesome. Thanks.
Speaker Change: Very helpful.
Speaker Change: Thanks, Mike Thanks, Mike mine.
Speaker Change: Thank you. Your next question is coming from Steven Forbes from Guggenheim Securities. Your line is live.
Steven Forbes: Good morning, guys.
Steven Forbes: Good morning, I was wondering.
Steven Forbes: I was maybe hoping to follow up on the self insurance reserve adjustment.
Steven Forbes: And really as it pertains to go forward implications around servicing costs within the industry.
Speaker Change: Starting on a high level views on on how we should think about this cost factor for for not only yourself, but other participants and weather.
Steven Forbes: Rising insurance costs in a broader sense.
Steven Forbes: Could drive more more accelerated consolidation efforts right or maybe a rise in attrition rates just like how is that insurance cost dynamic impacting.
Steven Forbes: Impacting the industry.
Steven Forbes: Yes, no. Thanks. Thanks for the question I think it would be interesting to see kind of how it plays out as we move forward for sure.
Steven Forbes: But what we are.
Steven Forbes: So in our experience. We don't think is wholly unique to what's happening from a from a broader perspective.
Steven Forbes: I think we are somewhat unique or they started industry is in the types of fleets that we run and the degree to which our professionals business is supported by.
Steven Forbes: By that level.
But that's also kind of a core fundamental part of how we provide value and take care of our customers. So I think it continues to be.
Steven Forbes: An item that that is important both for how we go to market, but then also important.
Steven Forbes: Cost for us to be able to mitigate to manage and to move through.
Steven Forbes: I would tell you over a course of time, we've had periods, where we're the the rate of change here has been more accelerated this is certainly one where theres more pressure than there is normally been.
But.
Steven Forbes: But there's nothing in what we've seen that would tell you that we're not going to be in a position operator business and into operated in a in.
Steven Forbes: In a safe manner that that helps us to control. This moving forward, we will see that the cost of of of resolving these types of accidents is what's really creating the pressure.
Steven Forbes: But it's.
Steven Forbes: It's a component of the cost it takes for us to go to market and we'll have to manage through the way that might change in the same way that we would any other part of our of our operating cost structure.
Steven Forbes: And then maybe just a quick follow up given the own versus lease store mix.
Steven Forbes: 425 store cohort can you remind us of the capital cost difference between the two build types and and then comment on on what the four wall EBITDA margin benefit is to those owned stores as we recalibrate models.
Steven Forbes: Yes, so from from a standpoint of just what the cost spend looks like you know typically we're going to be.
Steven Forbes: And that three to maybe.
Steven Forbes: Maybe 333 $4 million range for known store and that's inclusive of the cost of construction development of the site and then how do you put equipment and computer systems vehicles those types of things.
Steven Forbes: Depending upon the type of a lease that's that substantially reduce it.
Steven Forbes: It's typically going to be somewhere between four to $600000 just depending upon.
Steven Forbes: The.
Steven Forbes: <unk> building in the condition that you get it in.
Steven Forbes: When it's delivered.
Steven Forbes: So pretty substantial difference, we don't we don't get down into the weeds too much on the specific store models as it relates to how we think about about our growth there, but feel feel very good that that.
Steven Forbes: They are both owned and leased provide.
Steven Forbes: A very important and primary use of capital is the best place over the long course of time, we've been able to invest our shareholders' dollars and we will continue to be.
Steven Forbes: For sure as we've improved.
Steven Forbes: We improved.
Steven Forbes: The performance of our new stores and those returns have been enhanced it.
Steven Forbes: It does it does make.
Steven Forbes: Stores that much more of an <unk> and an attractive investment for us.
Thank you.
Steven Forbes: Thanks Steven.
Speaker Change: Thank you we've reached our allotted time for questions I'll now turn the call back to Mr. Brad Burke for closing remarks.
Brad Burke: Thank you, Matt we would like to conclude our call today by thanking the entire O'reilly team for your continued dedication to our customers I would like to thank everyone for joining us on our call today, and we look forward to reporting our first quarter results in April. Thank you.
Brad Burke: 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.