O'Reilly Automotive Q4 2025 O'Reilly Automotive Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 O'Reilly Automotive Inc Earnings Call
Speaker #1: Welcome to the O'Reilly Automotive Inc. fourth quarter and full year 2020 earnings call. My name is Matthew, and I'll be your operator for today's call.
Speaker #1: At this time , all participants are on a listen only mode . Later , we'll conduct a question and answer session . During the question and answer session , if you have a question , please press star one on your touch tone phone .
Jeremy Fletcher: Thank you, Matthew. Good morning, everyone, and thank you for joining us. During today's conference call, we will discuss our fourth quarter and full year 2025 results and our outlook for 2026. 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 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.
Speaker #1: I'll now turn the call over to Jeremy Fletcher. Mr. Fletcher, you may begin.
Speaker #2: Thank you . Matthew . Good morning , everyone , for and thank you joining us during today's call . We will conference discuss our fourth quarter and full year 2025 results outlook and our for 2026 .
David Brown: 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 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, 2024, and other recent SEC filings. The company assumes no obligation to update any forward-looking statements made during this call. At this time, I would like to introduce Brad Beckham. Thanks, Jeremy.
Speaker #2: After our prepared comments , we will question host a and answer Before period . we begin this morning , I would like to remind everyone that our comments today contain forward looking statements and we intend to be covered and we by claim , the protection under the safe harbor for forward looking statements contained in the private Litigation Securities Reform Act of 1995 .
Speaker #2: You can identify these as such statements by forward looking words estimate may , could , believe will , , expect , would , consider , should , anticipate , project , plan , intend or similar words .
Jeremy Fletcher: 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, 2024, and other recent SEC filings. The company assumes no obligation to update any forward-looking statements made during this call. At this time, I would like to introduce Brad Beckham.
Speaker #2: company's The 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 31st , 2024 , and other recent SEC filings .
Brad Beckham: Thanks, Jeremy. Good morning, everyone, and welcome to the O'Reilly Automotive 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. I am once again pleased to begin our call today by congratulating Team O'Reilly on another strong year in 2025. We finished the year with a comparable store sales increase of 5.6% in the fourth quarter, which brought our full year comp for 2025 to 4.7%. The 4.7% was at the high end of our revised guidance range of 4% to 5% and above the expectations we set in our initial guidance coming into 2025.
Speaker #2: The company assumes no obligation to update any forward looking statements made during this call . At this time , I would like to introduce Brad Beckham .
David Brown: Good morning, everyone, and welcome to the O'Reilly Automotive 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. I am once again pleased to begin our call today by congratulating Team O'Reilly on another strong year in 2025. We finished the year with a comparable store sales increase of 5.6% in the fourth quarter, which brought our full year comp for 2025 to 4.7%. The 4.7% was at the high end of our revised guidance range of 4% to 5% and above the expectations we set in our initial guidance coming into 2025.
Speaker #2: Jeremy Thanks , . Good morning , everyone , and to the O'Reilly welcome Parts Auto fourth Quarter Conference call . Participating on the call with me this morning are Brent Kirby , our president and Jeremy Fletcher our Financial chief officer , Greg Henslee .
Speaker #2: Our executive chairman . And David O'Reilly , our executive vice chairman , are also present on the call . I am once again pleased to begin our call today congratulating strong year Tim in 2025 .
Speaker #2: another the year with a comparable store sales We finished increase of 5.6% in the fourth quarter , which brought our full year comp for 2025 to 4.7% .
Speaker #2: The 4.7% was at the high end of our revised guidance range of 4 to 5% and above the expectations we set in our initial guidance coming into 2025 .
David Brown: Our strong comparable store sales performance, coupled with the continued successful execution of our new store expansion, drove a total sales increase of 6.4% to $17.8 billion. To provide some perspective, our 2025 sales reflect an increase of over 50% in total sales volume over the last five years, representing growth of over $6 billion since 2020. Our ability to continue to grow our business and capture market share year in and year out is a testament to our team's commitment to providing excellent customer service. I want to thank each member of Team O'Reilly for their daily commitment to our customers and our company. To touch on the rest of our results as we finish out the year, I want to briefly highlight both areas of strength and some headwinds we faced in 2025 before Brent provides more color in his remarks.
Brad Beckham: Our strong comparable store sales performance, coupled with the continued successful execution of our new store expansion, drove a total sales increase of 6.4% to $17.8 billion. To provide some perspective, our 2025 sales reflect an increase of over 50% in total sales volume over the last five years, representing growth of over $6 billion since 2020. Our ability to continue to grow our business and capture market share year in and year out is a testament to our team's commitment to providing excellent customer service.
Speaker #2: Our strong comparable store sales performance , coupled with the continued successful execution of our new store expansion , drove a total sales increase of 6.4% to $17.8 billion .
Speaker #2: To provide some perspective , 2025 sales reflect an our increase of over 50% in total sales volume over the last five years , representing growth of over $6 billion since 2020 .
Speaker #2: Our to continue to ability grow our business and capture market share year in and year testament to a out is our team's commitment to providing excellent service customer each .
Brad Beckham: I want to thank each member of Team O'Reilly for their daily commitment to our customers and our company. To touch on the rest of our results as we finish out the year, I want to briefly highlight both areas of strength and some headwinds we faced in 2025 before Brent provides more color in his remarks. For the full year, we generated operating profit of $3.5 billion, a 6.4% increase over 2024. On a percentage of sales basis, our 2025 operating profit of 19.5% was flat to the prior year and right at the midpoint of the guidance range we maintained throughout 2025. We are pleased with our team's ability to drive robust gross margin results in an environment of rising costs and prices by ensuring that we are providing exceptional value to our customers to earn their business.
Speaker #2: to thank of team O'Reilly member for their daily commitment to our customers and our company . To touch on the rest of our results as we finish out the year , I want to briefly highlight both areas of strength and some headwinds we faced in 2025 .
David Brown: For the full year, we generated operating profit of $3.5 billion, a 6.4% increase over 2024. On a percentage of sales basis, our 2025 operating profit of 19.5% was flat to the prior year and right at the midpoint of the guidance range we maintained throughout 2025. We are pleased with our team's ability to drive robust gross margin results in an environment of rising costs and prices by ensuring that we are providing exceptional value to our customers to earn their business. We are also pleased that our team continues to capitalize on the investments we have made in our business, including enhancements to our distribution and hub store network, expanded inventory assortments, and strategic technology investments. We believe our continued sales growth trends reflect share gains won by consistently executing our proven business model while also delivering incremental improvements to further differentiate our service from the competition.
Speaker #2: Before Brent provides more color in his remarks for the full year, we generated operating profit of $3.5 billion, a 6.4% increase over 2024 on a percentage of sales basis.
Speaker #2: Are 2025 operating profit of 19.5% was flat to the prior year , and right at the midpoint of the guidance range . We maintained throughout 2025 .
Speaker #2: We are pleased with our team's ability to drive robust gross margin results in an environment of rising costs and prices by ensuring that we are providing value to exceptional our customers to earn their business .
Brad Beckham: We are also pleased that our team continues to capitalize on the investments we have made in our business, including enhancements to our distribution and hub store network, expanded inventory assortments, and strategic technology investments. We believe our continued sales growth trends reflect share gains won by consistently executing our proven business model while also delivering incremental improvements to further differentiate our service from the competition.
Speaker #2: We are also pleased that our team continues to capitalize on the investments we have made in the business, including enhancements to our distribution and hub store network, expanded inventory assortments, and strategic technology investments.
Speaker #2: We believe our continued sales growth trends reflect share gains won by consistently executing our proven business model , while also delivering incremental improvements to further differentiate our service from the competition .
David Brown: We will continue to prioritize these initiatives to lean into our business to sustain our growth momentum. However, we unfortunately also faced substantial cost pressures in 2025, including headwinds reflected in our Q4 results, primarily from rising costs related to our team member healthcare and self-insurance programs. We are certainly not pleased that these headwinds dampened an otherwise strong finish for our company in 2025, but we remain intensely focused on managing our business effectively to deliver the excellent customer service that drives long-term growth and profitability. During the Q4, we generated diluted earnings per share of $0.71, which represents an increase of 13% over the prior year. For the full year, we generated EPS of $2.97, which was an increase of 10% over 2024.
Brad Beckham: We will continue to prioritize these initiatives to lean into our business to sustain our growth momentum. However, we unfortunately also faced substantial cost pressures in 2025, including headwinds reflected in our Q4 results, primarily from rising costs related to our team member healthcare and self-insurance programs. We are certainly not pleased that these headwinds dampened an otherwise strong finish for our company in 2025, but we remain intensely focused on managing our business effectively to deliver the excellent customer service that drives long-term growth and profitability. During the Q4, we generated diluted earnings per share of $0.71, which represents an increase of 13% over the prior year. For the full year, we generated EPS of $2.97, which was an increase of 10% over 2024.
Speaker #2: We will continue to prioritize these initiatives to lean into our business , to sustain our growth momentum . However , we unfortunately also faced substantial cost pressures in 2025 , including headwinds reflected in our fourth quarter results , primarily from rising costs related to our team member health care and self .
Speaker #2: We are programs pleased that these headwinds dampened and otherwise strong finish for our company in 2025 , but we remain intensely focused on managing our business effectively to deliver the excellent customer service that drives long term growth and profitability .
Speaker #2: During the fourth quarter , we generated diluted earnings per share of $0.71 , which represents an increase of 13% over the prior year .
Speaker #2: For the full year , we generated EPs of $2.97 , which was an increase of 10% over 2020 . For , as we noted in yesterday's press release , our 2025 results represent our 33rd consecutive year of annual comparable store sales increases and record levels of revenue .
David Brown: As we noted in yesterday's press release, our 2025 results represent our 33rd consecutive year of annual comparable store sales increases and record levels of revenue, operating income, and EPS. This remarkable track record of strong, consistent earnings growth is a reflection of the effectiveness of Team O'Reilly's customer service-oriented culture and our focus on profitable, sustainable growth. 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 5.6%, which was at the high end of our expectations. Similar to the third quarter, growth in our professional business was the stronger driver of our sales results, with an increase in comparable store sales of over 10% for the second consecutive quarter.
Brad Beckham: As we noted in yesterday's press release, our 2025 results represent our 33rd consecutive year of annual comparable store sales increases and record levels of revenue, operating income, and EPS. This remarkable track record of strong, consistent earnings growth is a reflection of the effectiveness of Team O'Reilly's customer service-oriented culture and our focus on profitable, sustainable growth. 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 5.6%, which was at the high end of our expectations. Similar to the third quarter, growth in our professional business was the stronger driver of our sales results, with an increase in comparable store sales of over 10% for the second consecutive quarter.
Speaker #2: Operating income and EPs . This remarkable track record of strong , consistent earnings growth is a reflection of the effectiveness of Timo O'Reilly's customer service oriented culture and our focus on profitable , sustainable growth .
Speaker #2: 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 5.6% , which was at end of our expectations .
Speaker #2: Similar to the growth in our professional business was the stronger driver of the high third quarter results with an increase in comparable store sales over 10% of for the second consecutive quarter .
David Brown: We're also pleased to generate a positive DIY comp in the low single digits, as this side of our business also performed largely in line with the trends we saw in the third quarter. Our comparable store sales increase in the fourth quarter reflected growth in both transaction volume and average ticket value, with the average ticket growth representing the stronger of the two drivers. Average ticket grew in the mid-single digits on both sides of our business, driven by a contribution from same-SKU inflation of approximately 6%, partially offset by a headwind from the composition of our product mix. As we have noted throughout 2025, the pricing environment has remained rational in response to tariff-induced product cost pressures.
Brad Beckham: We're also pleased to generate a positive DIY comp in the low single digits, as this side of our business also performed largely in line with the trends we saw in the third quarter. Our comparable store sales increase in the fourth quarter reflected growth in both transaction volume and average ticket value, with the average ticket growth representing the stronger of the two drivers. Average ticket grew in the mid-single digits on both sides of our business, driven by a contribution from same-SKU inflation of approximately 6%, partially offset by a headwind from the composition of our product mix. As we have noted throughout 2025, the pricing environment has remained rational in response to tariff-induced product cost pressures.
Speaker #2: We're pleased to also generate a positive DIY low single comp in the digits , as this side of our business also performed largely in line with the trends we saw in the third quarter .
Speaker #2: Our comparable store sales increase in the fourth quarter reflected growth in both transaction volume and average ticket value, with the average ticket growth representing the stronger of the two drivers.
Speaker #2: Average of the ticket the mid-single digits on both sides grew in of our driven business , by a contribution from same skew inflation of approximately 6% , partially offset headwind by a from the composition of our product mix .
Speaker #2: As we have noted throughout 2025 , the pricing has environment remained rational . In response to tariff induced product cost pressures . After a significant ramp in these cost pressures and corresponding price changes in the third quarter , the fourth quarter leveled out and the inflation benefit was realized in a very consistent was very consistent month to month .
David Brown: After a significant ramp in these cost pressures and corresponding price changes in Q3, Q4 leveled out, and the inflation benefit was realized in a very consistent month-to-month. This dynamic aligned with our expectations given the timing of the impact we have seen in tariff and acquisition costs, and we believe also reflects a stable pricing environment in the aftermarket. We were pleased with a positive contribution to comps from ticket count growth in Q4, driven by continued robust growth in our professional business, partially offset by modest pressure in DIY transaction counts. Our Q4 performance in our professional business matched the consistent strength we saw throughout 2025. The value proposition we are creating for our customers is clearly distinguishing O'Reilly as the preferred partner to the professional service provider.
Brad Beckham: After a significant ramp in these cost pressures and corresponding price changes in Q3, Q4 leveled out, and the inflation benefit was realized in a very consistent month-to-month. This dynamic aligned with our expectations given the timing of the impact we have seen in tariff and acquisition costs, and we believe also reflects a stable pricing environment in the aftermarket. We were pleased with a positive contribution to comps from ticket count growth in Q4, driven by continued robust growth in our professional business, partially offset by modest pressure in DIY transaction counts. Our Q4 performance in our professional business matched the consistent strength we saw throughout 2025. The value proposition we are creating for our customers is clearly distinguishing O'Reilly as the preferred partner to the professional service provider.
Speaker #2: This dynamic aligned with our expectations given the timing of the impact we have seen in tariff and acquisition costs , believe also reflects a stable pricing environment in the aftermarket were .
Speaker #2: pleased with a We positive contribution to comps from ticket count growth in the fourth quarter , driven by robust continued growth in our professional business , partially offset by modest pressure in DIY transaction counts .
Speaker #2: Our fourth quarter performance in our professional business matched the consistent strength we saw throughout 2025. The value proposition we are creating for our customers is clearly distinguishing O'Reilly as the third partner to the professional service.
David Brown: Next, I want to provide an update on the results in our DIY business in the fourth quarter. As we have discussed throughout 2025, we have remained cautious regarding the impact to consumers from broad-based inflation and macroeconomic pressures. This included our comments on the pressured trends to transaction counts we saw midway through our third quarter and into the beginning of Q4. As we move through the fourth quarter, we saw stabilization in the demand backdrop in our DIY business, including some modest improvements in DIY transactions month-to-month, but both in absolute terms and relative to our initial plan expectations for the cadence of our business. To be clear, we still experienced some pressure that resulted in slightly negative traffic comps as we finished out our fourth quarter.
Brad Beckham: Next, I want to provide an update on the results in our DIY business in the fourth quarter. As we have discussed throughout 2025, we have remained cautious regarding the impact to consumers from broad-based inflation and macroeconomic pressures. This included our comments on the pressured trends to transaction counts we saw midway through our third quarter and into the beginning of Q4. As we move through the fourth quarter, we saw stabilization in the demand backdrop in our DIY business, including some modest improvements in DIY transactions month-to-month, but both in absolute terms and relative to our initial plan expectations for the cadence of our business. To be clear, we still experienced some pressure that resulted in slightly negative traffic comps as we finished out our fourth quarter.
Speaker #2: Next , I want to provider an update provide on the results in our DIY business in the fourth quarter , as we have discussed 2025 , we throughout have remained cautious regarding the impact to consumers from bot broad based inflation and macroeconomic pressures .
Speaker #2: This . This included our comments on the pressure trends to transaction counts . We saw midway third quarter and into the through our beginning of Q4 .
Speaker #2: As we move through the fourth quarter, we saw a stabilization in the backdrop demand DIY in our business, including some modest improvements in DIY transactions month to month.
Speaker #2: in But absolute both terms and plan relative to our initial . Expectations for cadence of our the business . To be clear , still we experience pressure some resulted that in slightly negative traffic comps as we finished out our fourth quarter .
David Brown: This was most evident in the small subset of our DIY business that is highly discretionary in nature, including categories like appearance and accessories. On balance, we view the current sales trends in our DIY business as pretty consistent with what we have seen for the last several quarters now. However, we are pleased to not see any heightened pressure to the consumer that would indicate a more significant negative reaction to economic conditions. Turning to the cadence for the quarter for our consolidated business, our results were fairly consistent throughout the quarter, with December being slightly stronger than the first two months. This was due in part to solid performance as we finished out the year in winter weather-related categories. These categories performed well even against tougher comparisons to last year.
Brad Beckham: This was most evident in the small subset of our DIY business that is highly discretionary in nature, including categories like appearance and accessories. On balance, we view the current sales trends in our DIY business as pretty consistent with what we have seen for the last several quarters now. However, we are pleased to not see any heightened pressure to the consumer that would indicate a more significant negative reaction to economic conditions. Turning to the cadence for the quarter for our consolidated business, our results were fairly consistent throughout the quarter, with December being slightly stronger than the first two months. This was due in part to solid performance as we finished out the year in winter weather-related categories. These categories performed well even against tougher comparisons to last year.
Speaker #2: most This was small subset of our DIY business that is highly discretionary nature , including categories like appearance and accessories . On balance , we view the sales trends in our DIY business as pretty consistent with what we have seen last several quarters .
Speaker #2: However , we are pleased to not see any heightened pressure to the consumer that would indicate a more negative significant reaction to economic conditions .
Speaker #2: cadence to the for the Turning quarter for our consolidated business , our results were fairly consistent throughout the quarter , with being December slightly stronger than the first two months .
Speaker #2: This was due in part to solid performance as we finished out the year in winter weather-related categories. These categories performed well even against tougher comparisons to last year.
David Brown: We view this season, both in the fourth quarter and what we have seen so far in 2026, as typical winter weather and consistent with last year. Beyond the strength in our winter weather-related categories, we also saw strong results in the fourth quarter in maintenance-related categories, in line with the trends we have seen for several quarters now. Next, I want to transition to a discussion of our guidance for 2026, starting with our sales outlook. As we disclosed in our release yesterday, we're establishing our annual comparable store sales guidance for 2026 at a range of 3% to 5%. We want to provide some additional color on how we're viewing the economic conditions in our industry and our opportunities to outperform the market. Beginning with our industry outlook, we view the fundamental backdrop for the automotive aftermarket as relatively stable.
Brad Beckham: We view this season, both in the fourth quarter and what we have seen so far in 2026, as typical winter weather and consistent with last year. Beyond the strength in our winter weather-related categories, we also saw strong results in the fourth quarter in maintenance-related categories, in line with the trends we have seen for several quarters now. Next, I want to transition to a discussion of our guidance for 2026, starting with our sales outlook. As we disclosed in our release yesterday, we're establishing our annual comparable store sales guidance for 2026 at a range of 3% to 5%. We want to provide some additional color on how we're viewing the economic conditions in our industry and our opportunities to outperform the market. Beginning with our industry outlook, we view the fundamental backdrop for the automotive aftermarket as relatively stable.
Speaker #2: We view season this both in the fourth quarter and what we have seen so far in 26 , typical as weather and winter consistent with last year .
Speaker #2: the Beyond winter strength in our weather related categories , we also saw strong results in the fourth quarter in maintenance related categories . line with In the trends we have seen for several quarters now I want to transition to a .
Speaker #2: Next , guidance starting with our sales outlook . As we for 2026 , disclosed in our release yesterday , we're establishing our annual comparable store sales guidance for 2026 at a range of 3 to 5% .
Speaker #2: provide some to additional color we're viewing the economic conditions in our industry and the opportunities in our opportunities to outperform market the . Beginning with our industry outlook , we view the fundamental backdrop for the automotive aftermarket as relatively stable .
David Brown: While we believe the industry has experienced some sluggishness over the last several quarters from a more cautious consumer, we believe the drivers for demand in our industry remain very solid. There continues to be a very compelling value proposition for consumers to invest in the repair and maintenance of their existing vehicles to meet their daily transportation needs. The US car park has seen an increase in total miles driven of approximately 1% over the last 2 years. We expect to continue to see steady growth in this metric, supported by growth in the total size of the car park. Due to the resiliency of our customers and the nondiscretionary nature of our business, we have confidence in a steady industry environment in 2026, even if we continue to see a cautious stance from consumers.
Brad Beckham: While we believe the industry has experienced some sluggishness over the last several quarters from a more cautious consumer, we believe the drivers for demand in our industry remain very solid. There continues to be a very compelling value proposition for consumers to invest in the repair and maintenance of their existing vehicles to meet their daily transportation needs. The US car park has seen an increase in total miles driven of approximately 1% over the last 2 years. We expect to continue to see steady growth in this metric, supported by growth in the total size of the car park. Due to the resiliency of our customers and the nondiscretionary nature of our business, we have confidence in a steady industry environment in 2026, even if we continue to see a cautious stance from consumers.
Speaker #2: While we believe the industry is experienced, some sluggishness over the last several quarters, more discussion of our—we believe the drivers for demand in industry remain very solid.
Speaker #2: There continues to be a very compelling proposition for consumers to invest in the repair and maintenance of their vehicles to meet their daily transportation needs.
Speaker #2: The US car park has seen an increase in total miles on how driven of approximately 1% over the last We two years . expect to continue to see steady growth in this metric , supported by growth in the total size of the car park due to the resiliency of our customers and the non-discretionary nature of our business .
Speaker #2: We have confidence in a steady environment . In industry 2026 , even if we continue to see a cautious stance from consumers Ultimately , .
David Brown: Ultimately, our performance this year will depend on our effectiveness in executing our business model, providing exceptional customer service, and in turn gaining market share. To that end, our 2026 comparable store sales guidance includes expected growth in both our professional and DIY businesses that we anticipate will again outpace the industry. For 2026, we expect to see continued growth in average ticket values, primarily supported by anticipated same-SKU inflation. As a reminder, our 2025 results reflected a muted impact from inflation in the first half of the year before we began to pass through tariff cost increases beginning in Q3. In total, 2025 saw same-SKU inflation of just under 3% on both sides of our business, and we anticipate similar levels in 2026.
Brad Beckham: Ultimately, our performance this year will depend on our effectiveness in executing our business model, providing exceptional customer service, and in turn gaining market share. To that end, our 2026 comparable store sales guidance includes expected growth in both our professional and DIY businesses that we anticipate will again outpace the industry. For 2026, we expect to see continued growth in average ticket values, primarily supported by anticipated same-SKU inflation. As a reminder, our 2025 results reflected a muted impact from inflation in the first half of the year before we began to pass through tariff cost increases beginning in Q3. In total, 2025 saw same-SKU inflation of just under 3% on both sides of our business, and we anticipate similar levels in 2026.
Speaker #2: our performance this year will depend on our effectiveness in executing our business model , providing exceptional service and in turn , customer gaining market share .
Speaker #2: To that end , our 2026 comparable store sales guidance includes expected growth in both our professional and DIY businesses that we anticipate will again outpace the industry for 2026 .
Speaker #2: We expect to see continued growth in average ticket values, primarily supported by anticipated same-SKU inflation. As a reminder, our 2025 results reflected a muted impact from inflation in the year.
Speaker #2: Before the first half of the year, we began to pass through tariff cost increases beginning in the third quarter. In total, 2025 saw same-skew inflation of just under 3% on both sides of our business, and we anticipate similar levels in 2026.
David Brown: However, we expect to see most of this benefit in the first half of the year as the inverse to the 2025 timing as we calendar the period before the ramp in tariff costs and associated price increases. These projections reflect our typical assumption of only modest incremental changes in prices from the current levels exiting 2025 as we move throughout the year. This assumption also reflects our best read on the broader pricing environment in our industry. As such, our guidance expectations do not anticipate incremental changes in tariffs or subsequent impacts to the pricing environment within our industry. Given the uncertainty surrounding potential future changes in this landscape, we still expect the industry to behave rationally from a pricing perspective and only react as necessary to realize changes in acquisition costs.
Brad Beckham: However, we expect to see most of this benefit in the first half of the year as the inverse to the 2025 timing as we calendar the period before the ramp in tariff costs and associated price increases. These projections reflect our typical assumption of only modest incremental changes in prices from the current levels exiting 2025 as we move throughout the year. This assumption also reflects our best read on the broader pricing environment in our industry. As such, our guidance expectations do not anticipate incremental changes in tariffs or subsequent impacts to the pricing environment within our industry. Given the uncertainty surrounding potential future changes in this landscape, we still expect the industry to behave rationally from a pricing perspective and only react as necessary to realize changes in acquisition costs.
Speaker #2: However, we expect to see most of this benefit in the first half of the year, as the inverse to the 2025 timing.
Speaker #2: As we calendar the period before the ramp in tariff costs and associated price increases . These projections reflect our typical assumption of only modest incremental changes in prices from the current levels exiting 2025 .
Speaker #2: As we throughout the year move , this assumption also reflects our best read on the broader pricing environment in our industry . As such , our guidance expectations do not anticipate incremental in impacts subsequent to the pricing environment within tariffs or our industry .
Speaker #2: Given the surrounding potential future changes in this landscape . We still expect the industry to behave rationally from a pricing perspective and only react as necessary to realize changes in acquisition costs .
David Brown: Consistent with our experience in 2025, we anticipate there will be limited incremental benefit within our average ticket growth outside of inflation. However, as we begin to calendar the comparison to the ramp in same-SKU inflation in the back half of 2025, we expect a return to the normal dynamic supporting our average ticket. So for the back half of 2026, we expect growth in average ticket to reflect muted inflation and a more substantial benefit from increasing parts complexity. We anticipate average ticket growth will be the larger contributor to our projected comparable store sales performance, but we also expect ticket count growth to positively support our comps in 2026. We believe professional ticket counts will continue to be strong and will reflect incremental market share gains on this side of our business.
Brad Beckham: Consistent with our experience in 2025, we anticipate there will be limited incremental benefit within our average ticket growth outside of inflation. However, as we begin to calendar the comparison to the ramp in same-SKU inflation in the back half of 2025, we expect a return to the normal dynamic supporting our average ticket. So for the back half of 2026, we expect growth in average ticket to reflect muted inflation and a more substantial benefit from increasing parts complexity. We anticipate average ticket growth will be the larger contributor to our projected comparable store sales performance, but we also expect ticket count growth to positively support our comps in 2026. We believe professional ticket counts will continue to be strong and will reflect incremental market share gains on this side of our business.
Speaker #2: Consistent with our experience in 2025, we anticipate there will be limited, incremental benefit within our average ticket growth outside of inflation.
Speaker #2: However , as we begin to calendar the comparison to the ramp in inflation in the back half of 25 , we expect a return to the normal dynamics supporting our average ticket .
Speaker #2: So for the back half of 2026, we expect growth in average ticket to be muted, reflecting inflation, and a more substantial benefit from increasing parts complexity.
Speaker #2: We average ticket growth will be the larger contributor to our projected comparable store performance , but sales we also expect ticket count growth to positively support our comps in 2026 .
Speaker #2: We believe professional ticket counts will continue to be and will incremental market share gains on this side of our business . Given our history of performance in growing our share in the professional business , our 2026 expectations anticipate some moderation in ticket growth as we compare against the high bar we have set .
David Brown: Given our history of performance in growing our share in the professional business, our 2026 expectations anticipate some moderation in ticket growth as we compare against the high bar we have set. However, we have been extremely pleased with our team's ability to comp the comp and stack continued professional transaction growth year after year and anticipate 2026 will be no different. We also continue to believe that we have substantial opportunities to earn a bigger piece of the pie in our DIY business. In 2026, we expect DIY transaction counts to be pressured and slightly negative as a result of the long-term industry trend of better engineered and manufactured parts and extended service and repair intervals, along with our continued caution regarding the confidence of the entry-level DIY consumer.
Brad Beckham: Given our history of performance in growing our share in the professional business, our 2026 expectations anticipate some moderation in ticket growth as we compare against the high bar we have set. However, we have been extremely pleased with our team's ability to comp the comp and stack continued professional transaction growth year after year and anticipate 2026 will be no different. We also continue to believe that we have substantial opportunities to earn a bigger piece of the pie in our DIY business. In 2026, we expect DIY transaction counts to be pressured and slightly negative as a result of the long-term industry trend of better engineered and manufactured parts and extended service and repair intervals, along with our continued caution regarding the confidence of the entry-level DIY consumer.
Speaker #2: However, we have been extremely pleased with our team's ability to comp the comp and stack ability, continued professional transaction growth year after year, and anticipate 2026 will be no different.
Speaker #2: We also continue to believe that we have substantial opportunities to earn a bigger piece of the pie in our DIY business in 2026.
Speaker #2: We expect DIY transaction counts to be pressured and slightly negative as a result of the long term industry trend of better engineered and manufactured parts , and extended repair and with our intervals service continued caution , along regarding the confidence of entry level consumer DIY .
David Brown: Even though we've seen some pressure to transaction counts on this side of our business, we still believe we're outperforming the industry and gaining share. Before I move on from our sales guidance, I would like to highlight our expectations for the quarterly cadence of our sales growth in 2026. On a weekly volume basis, our guidance assumes our business will be fairly steady in 2026, absent unforeseen seasonal variability in weather. As a result, our quarterly comparable store sales assumptions are primarily driven by the comparisons to the results we generated in 2025. Based on the same-SKU inflation dynamics I outlined earlier, we would anticipate the first half of the year to generate a strong comp at the high end of our guidance range, with the back half of the year reflecting the more challenging comparisons.
Brad Beckham: Even though we've seen some pressure to transaction counts on this side of our business, we still believe we're outperforming the industry and gaining share. Before I move on from our sales guidance, I would like to highlight our expectations for the quarterly cadence of our sales growth in 2026. On a weekly volume basis, our guidance assumes our business will be fairly steady in 2026, absent unforeseen seasonal variability in weather. As a result, our quarterly comparable store sales assumptions are primarily driven by the comparisons to the results we generated in 2025. Based on the same-SKU inflation dynamics I outlined earlier, we would anticipate the first half of the year to generate a strong comp at the high end of our guidance range, with the back half of the year reflecting the more challenging comparisons.
Speaker #2: the Even though we've seen some pressure to transaction counts on this side of our business , we still believe we're outperforming the industry and gaining share .
Speaker #2: Before I move on from our sales guidance, I would like to highlight our expectations for the cadence of our quarterly sales growth in 2026.
Speaker #2: On a weekly volume basis, our guidance assumes our business will be fairly steady in 2026, absent unforeseen seasonal variability in weather.
Speaker #2: As a result , our quarterly comparable store sales assumptions driven are comparisons to the primarily results we generated in 2025 . Based on the same skew inflation dynamics I outlined earlier .
Speaker #2: We would anticipate the first half of the year to generate a strong comp at the our guidance high end of range , with the back half of the year reflecting the more challenging comparisons are .
David Brown: We are pleased to be off to a solid start in 2026 in line with these expectations, supported by favorable winter weather in January. Now, I'd like to move on to discuss our capital investment and expansion plans. Our capital expenditures for 2025 came in just under $1.2 billion, in line with our revised full-year guidance range and up approximately $150 million from 2024. For 2026, we are setting our Capex guidance at $1.3 to $1.4 billion. The primary driver of the increase in our projected investment is centered around our planned acceleration in new store growth. As we noted on last quarter's call, we have established a target of 225 to 235 net new store openings for 2026, an increase of approximately 25 stores over our growth in 2025.
Brad Beckham: We are pleased to be off to a solid start in 2026 in line with these expectations, supported by favorable winter weather in January. Now, I'd like to move on to discuss our capital investment and expansion plans. Our capital expenditures for 2025 came in just under $1.2 billion, in line with our revised full-year guidance range and up approximately $150 million from 2024. For 2026, we are setting our Capex guidance at $1.3 to $1.4 billion. The primary driver of the increase in our projected investment is centered around our planned acceleration in new store growth. As we noted on last quarter's call, we have established a target of 225 to 235 net new store openings for 2026, an increase of approximately 25 stores over our growth in 2025.
Speaker #2: pleased to be We off to a start solid in 2026 , with these in line expectations supported by favorable winter weather in January .
Speaker #2: Now, I'd like to move on to discuss our capital investment and expansion plans. Our capital expenditures for 2025 came in just under $1.2 billion, in line with our revised full-year guidance range and approximately $150 million up from 2024.
Speaker #2: For 2026 . We are setting our CapEx guidance at 1.3 to $1.4 billion . The primary driver of the increase in our projected investment is centered around our planned acceleration and new store growth .
Speaker #2: As we noted on last quarter's call , we have established a target of 225 to 235 net new store openings for 2026 , an increase of approximately 25 stores over our growth in 2025 .
David Brown: This new store target contemplates a step up in US store openings as well as similar growth in Mexico to the 25 stores we added in that market last year. The increase in new store openings is motivated by our continued strong new store performance and the confidence we have in our ability to grow strong store teams and effectively execute our business model across our North American footprint. We are also pleased to have opened our first Greenfield location in Canada in Q4 2025. We anticipate a handful of our projected 2026 new store openings to be opened in Canada as we see the early fruits from the development of our organic growth machine in this expansion market. The second major component of our 2026 Capex outlook is our continued investment in distribution capabilities.
Brad Beckham: This new store target contemplates a step up in US store openings as well as similar growth in Mexico to the 25 stores we added in that market last year. The increase in new store openings is motivated by our continued strong new store performance and the confidence we have in our ability to grow strong store teams and effectively execute our business model across our North American footprint. We are also pleased to have opened our first Greenfield location in Canada in Q4 2025. We anticipate a handful of our projected 2026 new store openings to be opened in Canada as we see the early fruits from the development of our organic growth machine in this expansion market. The second major component of our 2026 Capex outlook is our continued investment in distribution capabilities.
Speaker #2: This new store , , contemplates a step up in US store openings , as well as a similar growth in Mexico to the added in 25 stores we target market year that increase .
Speaker #2: The increase in new store openings is motivated, continued by our strong new store performance and the confidence we have in our ability to grow strong store teams and effectively execute our business model across our North American footprint.
Speaker #2: We are also pleased to have opened our first greenfield location in Canada in the fourth quarter of 2025 . We anticipate a handful of our projected 2026 new store openings to be open in Canada .
Speaker #2: As we see the early fruits from the development of our organic growth machine in this expansion market, the second major component of our 2026 CapEx outlook is our continued investment in distribution capabilities.
David Brown: Our anticipated investment in these projects is expected to be down slightly in 2026 but still represents a key element of our business model and growth strategy. Brent will provide an update on our current distribution projects and expectations for 2026 during his supply chain update. Finally, our capital investment outlook includes an expected step up in our ongoing investments to maintain and refresh the image and appearance of our store fleet, as well as continued strategic investments in technology projects and infrastructure. As I wrap up my comments before turning the call over to Brent, I want to take a moment to thank our team for their continued dedication to our customers and our company. We once again had the privilege to come together with the entire leadership team of our company at our annual leadership conference in January of this year.
Brad Beckham: Our anticipated investment in these projects is expected to be down slightly in 2026 but still represents a key element of our business model and growth strategy. Brent will provide an update on our current distribution projects and expectations for 2026 during his supply chain update. Finally, our capital investment outlook includes an expected step up in our ongoing investments to maintain and refresh the image and appearance of our store fleet, as well as continued strategic investments in technology projects and infrastructure. As I wrap up my comments before turning the call over to Brent, I want to take a moment to thank our team for their continued dedication to our customers and our company.
Speaker #2: anticipated Our investment in these projects is expected to be down slightly in 2026 , but still represents a key element of our business model and growth strategy .
Speaker #2: Brent will provide an update on our current distribution projects and his supply chain expectations for During update . Finally , our capital investment outlook includes an up in our ongoing investments to maintain and refresh the image and appearance of our store fleet , as well as continued strategic investments technology in projects and infrastructure wrap up my As I comments .
Speaker #2: before turning the call over to Brent , I want to take a moment to thank our team for their continued dedication to our customers and our company .
Brad Beckham: We once again had the privilege to come together with the entire leadership team of our company at our annual leadership conference in January of this year. Our conference theme was "Built for This," and there absolutely could not have been a more appropriate rallying cry to capture the excitement we have for our company's prospects as we enter 2026. Time and again, our professional parts people have proven they truly are the most highly skilled and customer-focused team in our industry, and they continue to be the key to our success. We couldn't be more excited about the coming year, and I look forward to the next chapter of outstanding performance our team is going to deliver. Now, I'll turn the call over to Brent.
Speaker #2: Once again, I had the privilege to come together with the entire leadership team of our company at our annual leadership conference in January of this year.
David Brown: Our conference theme was "Built for This," and there absolutely could not have been a more appropriate rallying cry to capture the excitement we have for our company's prospects as we enter 2026. Time and again, our professional parts people have proven they truly are the most highly skilled and customer-focused team in our industry, and they continue to be the key to our success. We couldn't be more excited about the coming year, and I look forward to the next chapter of outstanding performance our team is going to deliver. Now, I'll turn the call over to Brent.
Speaker #2: Our conference theme was for built this , and there absolutely could not have been a more appropriate rallying cry to capture the excitement we have for our company's prospects enter 2026 .
Speaker #2: Time and again , our as we professional parts people have proven they truly are the most highly skilled and customer focused team in our industry , and they continue to be the key to our success couldn't be more excited about the coming year , and I look forward to the next chapter about performance .
Operator: Thanks, Brad. I would also like to begin my comments this morning by congratulating Team O'Reilly on another strong year. Once again, your commitment to excellent customer service drove our performance in 2025. Today, I will further discuss our fourth quarter and full-year operational results and provide some additional color on our outlook for 2026. Starting with gross margin, our fourth quarter gross margin of 51.8% was a 49 basis point increase from the fourth quarter of 2024 and above our expectations. Our full-year gross margin came in at 51.6%, representing an increase of 39 basis points over last year and in the top half of our guidance range. Our team was able to deliver this strong gross margin performance despite facing a headwind from the robust performance in our professional business for both the fourth quarter and the full year.
Brent Kirby: Thanks, Brad. I would also like to begin my comments this morning by congratulating Team O'Reilly on another strong year. Once again, your commitment to excellent customer service drove our performance in 2025. Today, I will further discuss our fourth quarter and full-year operational results and provide some additional color on our outlook for 2026. Starting with gross margin, our fourth quarter gross margin of 51.8% was a 49 basis point increase from the fourth quarter of 2024 and above our expectations. Our full-year gross margin came in at 51.6%, representing an increase of 39 basis points over last year and in the top half of our guidance range.
Speaker #2: Our team is going to deliver. Now I'll turn the call over to Brent. Brad, thanks.
Speaker #3: I would also like to begin my comments this morning by congratulating Tim O'Reilly on another strong year. Once again, your commitment to excellent customer service drove our performance in 2025.
Speaker #3: Today I will further fourth quarter and discuss our full year operational results and provide some additional color on our outlook for 2026 . Starting with margin .
Speaker #3: Our fourth quarter gross margin of 51.8% was a 49 basis point increase from the fourth quarter of 2020. Four and above. Our expectations.
Speaker #3: Our full year gross came margin in at 51.6% , representing an points 39 basis over last year . in the of our And guidance range .
Brent Kirby: Our team was able to deliver this strong gross margin performance despite facing a headwind from the robust performance in our professional business for both the fourth quarter and the full year. Our gross margin performance is the result of the collective efforts of our supply chain, store, and distribution operations teams. Our supply chain teams, with outstanding support from our supplier partners, were highly effective in navigating the rapidly evolving cost environment in 2025 to drive improved gross margins through incremental improvements in acquisition costs and effective management of the pricing environment. Our distribution teams were equally effective at driving efficiencies and capitalizing on our strong sales momentum.
Speaker #3: Our team delivered this strong gross margin performance despite facing a headwind from the performance in our professional business for both the fourth quarter and the full year. Our gross margin performance is the result of the collective efforts of our supply chain, store, and distribution operations teams.
Operator: Our gross margin performance is the result of the collective efforts of our supply chain, store, and distribution operations teams. Our supply chain teams, with outstanding support from our supplier partners, were highly effective in navigating the rapidly evolving cost environment in 2025 to drive improved gross margins through incremental improvements in acquisition costs and effective management of the pricing environment. Our distribution teams were equally effective at driving efficiencies and capitalizing on our strong sales momentum. Our DC teams generated improved leverage on our distribution cost while relentlessly delivering the highest standard of service and support to our stores. Finally, our store teams executed at a high level to maximize our value proposition to our customers. Their ability to consistently provide excellent customer service and industry-leading inventory availability enabled us to generate a healthy margin in an environment of increasing acquisition cost.
Speaker #3: Our supply chain teams with outstanding support from our supplier partners were highly effective in navigating the rapidly evolving cost environment . In 2025 to drive improved gross margins through incremental improvements in acquisition costs and effective management of the pricing environment .
Brent Kirby: Our DC teams generated improved leverage on our distribution cost while relentlessly delivering the highest standard of service and support to our stores. Finally, our store teams executed at a high level to maximize our value proposition to our customers. Their ability to consistently provide excellent customer service and industry-leading inventory availability enabled us to generate a healthy margin in an environment of increasing acquisition cost.
Speaker #3: Our distribution teams were equally effective at driving efficiencies and capitalizing on our strong sales momentum. Our DC teams generated improved leverage on our distribution cost, while relentlessly delivering the highest standard of service and support to stores.
Speaker #3: our store teams Finally , our executed at a high level to maximize our value proposition to our customers . Their ability to consistently provide excellent customer service and industry leading inventory availability enabled us to generate a healthy margin in an environment of increasing acquisition costs .
Operator: For 2026, we expect to continue to see further expansion of gross margin as we calendar our gains in 2025 and capitalize on incremental improvements to reduce acquisition costs as we progress through the year. We have established a guidance range for 2026 of 51.5 to 52%, which at the midpoint would represent a 16 basis point increase over 2025. Our guidance reflects our continued confidence in the ability of our teams to effectively manage cost and leverage the premium value proposition that they create for our customers to generate improvements in our gross margin rate, despite expected incremental headwinds from a faster growth rate in our professional customer sales. Our gross margin rate also reflects an anticipated benefit from the continued evolution of our business in Mexico, away from a distribution model to independent jobbers.
Brent Kirby: For 2026, we expect to continue to see further expansion of gross margin as we calendar our gains in 2025 and capitalize on incremental improvements to reduce acquisition costs as we progress through the year. We have established a guidance range for 2026 of 51.5 to 52%, which at the midpoint would represent a 16 basis point increase over 2025. Our guidance reflects our continued confidence in the ability of our teams to effectively manage cost and leverage the premium value proposition that they create for our customers to generate improvements in our gross margin rate, despite expected incremental headwinds from a faster growth rate in our professional customer sales. Our gross margin rate also reflects an anticipated benefit from the continued evolution of our business in Mexico, away from a distribution model to independent jobbers.
Speaker #3: For 2026, we expect to continue to see further expansion of gross margin as we calendar our gains in 2025 and capitalize on incremental improvements to reduce acquisition costs as we progress through the year.
Speaker #3: We have established a guidance range for 2026 of 51.5% to 52%, which at the midpoint would represent a 16 basis point increase over 2025.
Speaker #3: Our guidance reflects our continued confidence in the ability of our teams to effectively manage and leverage the premium value proposition that they create for our customers, to generate improvements in our gross margin rate.
Speaker #3: Despite expected incremental headwinds from a faster growth rate in our professional customer sales, our gross margin rate also reflects an anticipated benefit from the continued evolution of our business in Mexico, away from a distribution model to independent jobbers.
Operator: As we continue to increase our store count in Mexico, we anticipate a continued rapid transition away from jobber sales that historically represented the majority of our sales mix in Mexico. The reduction of these lower gross margin sales creates a mixed tailwind to our consolidated gross margin rate but also modestly pressures our SG&A rate as we reduce the leverage benefit of these non-store sales. From a cadence perspective, our quarterly gross margin remained fairly consistent throughout 2025, with the quarter-to-quarter differences reflecting the pace of improvement we realized as we progressed through the year. We expect a similar quarterly cadence for 2026. As Brad mentioned during his remarks, our guidance for 2026 assumes a stable cost and price inflation environment.
Brent Kirby: As we continue to increase our store count in Mexico, we anticipate a continued rapid transition away from jobber sales that historically represented the majority of our sales mix in Mexico. The reduction of these lower gross margin sales creates a mixed tailwind to our consolidated gross margin rate but also modestly pressures our SG&A rate as we reduce the leverage benefit of these non-store sales. From a cadence perspective, our quarterly gross margin remained fairly consistent throughout 2025, with the quarter-to-quarter differences reflecting the pace of improvement we realized as we progressed through the year. We expect a similar quarterly cadence for 2026. As Brad mentioned during his remarks, our guidance for 2026 assumes a stable cost and price inflation environment.
Speaker #3: As we continue to increase our store count in Mexico . We anticipate a continued rapid away from jobber transition sales that historically represented the majority of our sales mix in Mexico .
Speaker #3: The reduction of these lower gross margin sales creates a mixed tailwind to our consolidated gross margin rate . But also modestly pressures our G&A rate as we reduce the leverage benefit of these non-store sales from a cadence perspective , our quarterly gross margin remained fairly consistent throughout 2025 , with the quarter to quarter differences reflecting the pace of improvement realized as we .
Speaker #3: We progressed through the year. We expect a similar quarterly cadence for 2026. As Brad mentioned during his remarks, our guidance for 2026 assumes a stable cost and price inflation environment.
Operator: Our baseline assumptions include the normal puts and takes in the cost environment that we would expect in a typical year and do not include any projections for volatility related to changes in tariffs in either direction. Ultimately, we expect our industry to continue to behave rationally and have confidence in our team's ability to effectively navigate through any changes that we may encounter in the coming year. Next, I want to provide an update on some supply chain and distribution initiatives. To start on the distribution side of our business, we are very excited to report the successful opening of our newest distribution facility in Stafford, Virginia, in Q4. The addition of this DC opens up a new section of the map in the heavily populated and important untapped markets for us in the Mid-Atlantic I-95 Corridor.
Brent Kirby: Our baseline assumptions include the normal puts and takes in the cost environment that we would expect in a typical year and do not include any projections for volatility related to changes in tariffs in either direction. Ultimately, we expect our industry to continue to behave rationally and have confidence in our team's ability to effectively navigate through any changes that we may encounter in the coming year. Next, I want to provide an update on some supply chain and distribution initiatives. To start on the distribution side of our business, we are very excited to report the successful opening of our newest distribution facility in Stafford, Virginia, in Q4. The addition of this DC opens up a new section of the map in the heavily populated and important untapped markets for us in the Mid-Atlantic I-95 Corridor.
Speaker #3: baseline Our assumptions include the normal puts and takes in the cost environment that we would expect in a typical year , and do not include any projections for volatility related to changes in tariffs in either direction .
Speaker #3: Ultimately, we expect our industry to continue to behave rationally, and have confidence in our team's ability to effectively navigate through any changes that we may encounter in the coming year.
Speaker #3: Next , I want to provide an update on some chain and supply distribution initiatives start on the . To distribution side of our business , we are very excited to report the successful opening of our newest distribution facility in Stafford , Virginia in the fourth quarter .
Speaker #3: The addition of this DC opens up section of the a new map in the heavily important populated and markets . For us in the Mid-Atlantic I-95 .
Operator: We're also making great progress on the development of our new distribution center in Fort Worth, Texas, and expect this facility to be operational in Q1 of 2028. This new facility will expand our available capacity in some of our most important mature core markets, enabling continued new store growth and support of increased per-store volumes that have grown significantly over the last several years. Finally, our capital investment outlook for 2026 includes dollars allocated to future expansion and development of our distribution infrastructure. Coming into 2025, we had a similar provision in our CapEx plan that was ultimately allocated to the Fort Worth project. So, while we do not currently have specific details to announce on the next slate of projects, we are steadfast in our commitment to proactively enhance our distribution network to support the store growth opportunities that Brad outlined earlier.
Brent Kirby: We're also making great progress on the development of our new distribution center in Fort Worth, Texas, and expect this facility to be operational in Q1 of 2028. This new facility will expand our available capacity in some of our most important mature core markets, enabling continued new store growth and support of increased per-store volumes that have grown significantly over the last several years. Finally, our capital investment outlook for 2026 includes dollars allocated to future expansion and development of our distribution infrastructure. Coming into 2025, we had a similar provision in our CapEx plan that was ultimately allocated to the Fort Worth project.
Speaker #3: Also, we're making great corridor development of our new distribution center in Fort Worth, Texas, and expect this facility to be operational in Q1 of 2028.
Speaker #3: This new facility will expand our available capacity and some most important mature core markets , enabling continued new store growth and support of store volumes that have grown significantly over the last several years .
Speaker #3: Finally, our capital investment outlook for 2026 includes dollars allocated to future expansion and development of our distribution infrastructure. Coming into 2025, we had a similar provision in our CapEx plan that was ultimately allocated to the Fort Worth project.
Brent Kirby: So, while we do not currently have specific details to announce on the next slate of projects, we are steadfast in our commitment to proactively enhance our distribution network to support the store growth opportunities that Brad outlined earlier. The success of our industry-leading distribution infrastructure is a direct reflection of the professionalism of our distribution operations teams. These leaders have proven time and again their effectiveness in planning, building, and seamlessly opening new distribution centers, often successfully executing multiple DC projects at the same time. Moving on to inventory, our inventory per store at the end of 2025 was $870,000, which was up 9% from the end of last year.
Speaker #3: So while we do not currently have specific details to announce on the next slate of projects , we are steadfast in our commitment to proactively enhance our distribution network to support the store growth opportunities Brad that outlined earlier .
Operator: The success of our industry-leading distribution infrastructure is a direct reflection of the professionalism of our distribution operations teams. These leaders have proven time and again their effectiveness in planning, building, and seamlessly opening new distribution centers, often successfully executing multiple DC projects at the same time. Moving on to inventory, our inventory per store at the end of 2025 was $870,000, which was up 9% from the end of last year. The investment exceeded our initial plans on a per-store basis, driven by our continued opportunistic investments to support our sales momentum. For 2026, we expect per-store inventory to increase approximately 5%, comprised of investments in hub store inventories and targeted additions in store assortments. We continue to prioritize incremental inventory enhancements to capitalize on the opportunities that we see to accelerate our growth momentum and are pleased with the productivity of these investments.
Speaker #3: The success of our industry-leading distribution infrastructure is a direct reflection of the professionalism of our distribution operations teams. These leaders have proven time and again their effectiveness in planning and seamlessly opening new distribution centers, often successfully executing multiple projects at the same time.
Speaker #3: Moving on to inventory , our per inventory store at the end of 2025 $870,000 , was which was up 9% from the end of last year .
Brent Kirby: The investment exceeded our initial plans on a per-store basis, driven by our continued opportunistic investments to support our sales momentum. For 2026, we expect per-store inventory to increase approximately 5%, comprised of investments in hub store inventories and targeted additions in store assortments. We continue to prioritize incremental inventory enhancements to capitalize on the opportunities that we see to accelerate our growth momentum and are pleased with the productivity of these investments.
Speaker #3: The investment our initial plans on exceeded a per store basis , driven by our continued opportunistic investments to support our sales momentum for 2026 , we per store inventory to .
Speaker #3: Increase approximately 5% , comprised of investments in Hub Store and inventories targeted additions in store assortments . We continue to prioritize incremental inventory enhancements to capitalize on the opportunities that we see to accelerate our growth momentum , and are pleased with the productivity of these investments .
Operator: Now, I want to spend some time covering our SG&A and operating profit performance for 2025 and our outlook for 2026. Fourth quarter SG&A expense as a percent of sales was 33.0%, down 25 basis points from the fourth quarter of 2024. This reduction was the product of the favorable comparison to the $35 million charge that we recorded in the fourth quarter of 2024 to adjust reserves relating to our self-insurance liabilities for historic auto liability claims. The leverage benefit came in below our expectations for the quarter as a result of an elevated per-store SG&A increase of 3.3%. A portion of this higher-than-anticipated spend reflects incremental expenses in support of our strong sales momentum, which finished the quarter at the high end of our expectations, as Brad noted earlier.
Brent Kirby: Now, I want to spend some time covering our SG&A and operating profit performance for 2025 and our outlook for 2026. Fourth quarter SG&A expense as a percent of sales was 33.0%, down 25 basis points from the fourth quarter of 2024. This reduction was the product of the favorable comparison to the $35 million charge that we recorded in the fourth quarter of 2024 to adjust reserves relating to our self-insurance liabilities for historic auto liability claims. The leverage benefit came in below our expectations for the quarter as a result of an elevated per-store SG&A increase of 3.3%. A portion of this higher-than-anticipated spend reflects incremental expenses in support of our strong sales momentum, which finished the quarter at the high end of our expectations, as Brad noted earlier.
Speaker #3: Now, I'll spend some time covering our operating profit performance for 2025, as well as our SG&A and outlook for 2026. I want to highlight that fourth quarter G&A as a percent of expense sales was 33.0%, down 25 basis points from the fourth quarter of 2020.
Speaker #3: For this reduction was the result of the favorable comparison to the $35 million charge that we recorded in the fourth quarter of 2020. Four.
Speaker #3: To adjust reserves relating to our liabilities for historic auto liability claims . The leverage benefit came in below our expectations for the quarter .
Speaker #3: As a result of an elevated per store SG&A increase of 3.3% . A portion of this higher than anticipated spend reflects incremental support of in our strong sales momentum , which finished the quarter at the high end of our expectations .
Operator: However, the larger impact driving our spend in the quarter was the broad-based pressures that we saw from continued heightened cost inflation in our self-insurance programs, including headwinds in team member healthcare cost, workers' compensation and general claims expenses, litigation cost, and auto liability reserves. Average per-store SG&A expenses for the full year of 2025 were up 4%, finishing a half a point above our full-year guide as a result of these same drivers. Outside of the headwinds that we faced from these discrete expense pressures, our remaining SG&A was in line with our expectations. Our ongoing priorities for our expense management remain focused on improving our operational strength in our stores, opportunistically pursuing enhanced technology, and further equipping our teams. As we look forward to 2026, we are planning to grow average SG&A per store by 3% to 4%.
Brent Kirby: However, the larger impact driving our spend in the quarter was the broad-based pressures that we saw from continued heightened cost inflation in our self-insurance programs, including headwinds in team member healthcare cost, workers' compensation and general claims expenses, litigation cost, and auto liability reserves. Average per-store SG&A expenses for the full year of 2025 were up 4%, finishing a half a point above our full-year guide as a result of these same drivers.
Speaker #3: As Brad noted earlier . However , the larger impact driving our spend in the quarter was the broad based pressures that we saw from continued cost heightened inflation in our self-insurance programs , including headwinds in team member healthcare , cost worker's compensation and general claims expenses , litigation costs and auto liability reserves .
Speaker #3: Average per-store G&A expenses for the full year of 2025 were up 4%, finishing a half a point above our full-year guide.
Brent Kirby: Outside of the headwinds that we faced from these discrete expense pressures, our remaining SG&A was in line with our expectations. Our ongoing priorities for our expense management remain focused on improving our operational strength in our stores, opportunistically pursuing enhanced technology, and further equipping our teams. As we look forward to 2026, we are planning to grow average SG&A per store by 3% to 4%.
Speaker #3: a As result of these same drivers , outside of the headwinds that we faced from these discrete expense pressures . Our remaining SG&A was in line with our expectations .
Speaker #3: Our ongoing priorities for our expense management remain focused on improving our operational strength and stores, opportunistically pursuing enhanced technology and further equipping our teams as we look forward to 2026.
Operator: Our SG&A expectations reflect ongoing management of our expense structure to support our core operations and lean into the sales growth opportunities that Brad outlined earlier. We have also factored in continued plans to prioritize enhancements to our hub network, development of incremental tools for our teams, and improvements in technology infrastructure and capabilities. Also included within our assumptions is a cautious outlook regarding potential continued pressure in the self-insurance and legal line items that created the headwinds throughout 2025. While our recent experience for these costs has been more pressured than is typical for our business, at times in our history, we have experienced similar periods of accelerated above-trend increases. Ultimately, we believe the inflation growth rates for these expenses will stabilize over time, but we remain cognizant of the potential to see further pressures in 2026.
Brent Kirby: Our SG&A expectations reflect ongoing management of our expense structure to support our core operations and lean into the sales growth opportunities that Brad outlined earlier. We have also factored in continued plans to prioritize enhancements to our hub network, development of incremental tools for our teams, and improvements in technology infrastructure and capabilities. Also included within our assumptions is a cautious outlook regarding potential continued pressure in the self-insurance and legal line items that created the headwinds throughout 2025. While our recent experience for these costs has been more pressured than is typical for our business, at times in our history, we have experienced similar periods of accelerated above-trend increases.
Speaker #3: We are planning to grow average G&A per store by 3 to 4% . Our SGA expectations reflect ongoing management of our expense structure to support our core operations lean into the sales growth opportunities and that Brad outlined earlier .
Speaker #3: We have also factored in continued plans to prioritize enhancements to our hub network, development of incremental tools for our teams, and improvements in technology, infrastructure, and capabilities.
Speaker #3: Also included within our assumptions is a cautious outlook regarding potential continued pressure in the self-insurance and legal line items that created the headwinds throughout 2025 .
Speaker #3: While our recent for experience these been more pressured than costs have is typical for our business , at history , times in our we have periods experienced of accelerated above trend increases .
Brent Kirby: Ultimately, we believe the inflation growth rates for these expenses will stabilize over time, but we remain cognizant of the potential to see further pressures in 2026. Based on the anticipated cadence of our SG&A spend during the year and how our comparisons to 2025 lay out, we are anticipating SG&A growth on a per-store basis to be higher in the first half of the year than the back half of the year, consistent with the comparable store sales cadence that Brad detailed earlier.
Speaker #3: we inflation growth Ultimately , believe the rates for these expenses will stabilize over time , but we remain cognizant of the potential to see further pressures in 2026 .
Operator: Based on the anticipated cadence of our SG&A spend during the year and how our comparisons to 2025 lay out, we are anticipating SG&A growth on a per-store basis to be higher in the first half of the year than the back half of the year, consistent with the comparable store sales cadence that Brad detailed earlier. Based on our SG&A expectations and projected gross margin range, we are setting our operating profit guidance range at 19.2 to 19.7%, which at the midpoint is in line with our full-year 2025 results. Stepping back for a moment from the puts and takes that drove our operating cost dynamics over the past year and our expectations for 2026, we remain pleased with our team's ability to drive consistent top-line growth at stable, strong operating margins.
Speaker #3: Based on the anticipated cadence of our SG&A spend during the year and how our comparisons to 2025 lay out, we are anticipating growth on a per store basis to be higher in the first half of the year than in the back half of the year.
Brent Kirby: Based on our SG&A expectations and projected gross margin range, we are setting our operating profit guidance range at 19.2 to 19.7%, which at the midpoint is in line with our full-year 2025 results. Stepping back for a moment from the puts and takes that drove our operating cost dynamics over the past year and our expectations for 2026, we remain pleased with our team's ability to drive consistent top-line growth at stable, strong operating margins.
Speaker #3: Consistent with the comparable store sales cadence that Brad detailed earlier, and based on our SG&A expectations and projected margin range, we are setting our operating profit guidance range at 19.2% to 19.7%, which at the midpoint is in line with our full-year 2025 results.
Speaker #3: Stepping back for a moment from the puts and takes that drove our operating cost dynamics over the past year and our expectations for 2026.
Speaker #3: remain pleased with our team's ability to drive consistent top line growth at stable , strong operating margins . Our on enhancing our strong competitive positioning to sustain our industry leading growth momentum is the strategic North Star that drives how we leverage our capital and operating investments to drive long term growth and high returns .
Operator: Our focus on enhancing our strong competitive positioning to sustain our industry-leading growth momentum is the strategic North Star that drives how we leverage our capital and operating investments to drive long-term growth and high returns. Before I turn the call over to Jeremy, I want to once again thank Team O'Reilly for their continued hard work and unwavering commitment to our customers. Now, I will turn the call over to Jeremy. Thanks, Brent. I would also like to thank all of Team O'Reilly for their continued hard work and dedication to our customers. Now, we will fill in some additional details on our fourth quarter results and guidance for 2026. For the fourth quarter, sales increased $319 million, driven by a 5.6% increase in comparable store sales and a $94 million non-comp contribution from stores opened in 2024 and 2025 that have not yet entered the comp base.
Brent Kirby: Our focus on enhancing our strong competitive positioning to sustain our industry-leading growth momentum is the strategic North Star that drives how we leverage our capital and operating investments to drive long-term growth and high returns. Before I turn the call over to Jeremy, I want to once again thank Team O'Reilly for their continued hard work and unwavering commitment to our customers. Now, I will turn the call over to Jeremy.
Speaker #3: Before I turn the call over to Jeremy , I want to once again Tim O'Reilly for their continued hard unwavering commitment work and customers .
Jeremy Fletcher: Thanks, Brent. I would also like to thank all of Team O'Reilly for their continued hard work and dedication to our customers. Now, we will fill in some additional details on our fourth quarter results and guidance for 2026. For the fourth quarter, sales increased $319 million, driven by a 5.6% increase in comparable store sales and a $94 million non-comp contribution from stores opened in 2024 and 2025 that have not yet entered the comp base.
Speaker #3: Now , I'll turn the call over to Jeremy .
Speaker #2: Thanks .
Speaker #3: also like . Brent .
Speaker #2: To
Speaker #2: thank all of Tim O'Reilly for their continued I would hard work and dedication to our customers . Now we will fill in some additional details on our fourth quarter results and guidance for 2026 .
Speaker #2: For the fourth quarter, sales increased $319 million, driven by a 5.6% increase in comparable store sales and a $94 million non-comp contribution from stores in 2024 and 2025 that have not yet entered the comp base.
Operator: For 2026, we expect our total revenues to be between $18.7 and $19 billion. Our fourth quarter effective tax rate was 21.5% of pre-tax income, comprised of a base rate of 21.8% reduced by a 0.3% benefit for share-based compensation. This compares to the fourth quarter of 2024 rate of 19.6% of pre-tax income, which was comprised of a base tax rate of 20.4% reduced by a 0.7% benefit for share-based compensation. The fourth quarter of 2025 base rate, as compared to 2024, was higher as a result of the timing of recognition of certain tax credits. For the full year, our effective tax rate was 21.7% of pre-tax income, comprised of a base rate of 22.6% reduced by a 0.9% benefit for share-based compensation.
Jeremy Fletcher: For 2026, we expect our total revenues to be between $18.7 and $19 billion. Our fourth quarter effective tax rate was 21.5% of pre-tax income, comprised of a base rate of 21.8% reduced by a 0.3% benefit for share-based compensation. This compares to the fourth quarter of 2024 rate of 19.6% of pre-tax income, which was comprised of a base tax rate of 20.4% reduced by a 0.7% benefit for share-based compensation. The fourth quarter of 2025 base rate, as compared to 2024, was higher as a result of the timing of recognition of certain tax credits. For the full year, our effective tax rate was 21.7% of pre-tax income, comprised of a base rate of 22.6% reduced by a 0.9% benefit for share-based compensation.
Speaker #2: For 2026 , we expect our total be revenues to between 18.7 and $19 billion . Our fourth quarter , effective tax rate was 21.5% of pre-tax income , comprised of a base rate of 21.8% , reduced by a 0.3% benefit for share based compensation .
Speaker #2: This fourth quarter of 2024, we had a rate of 19.6% of pre-tax income, which was comprised of a base tax rate of 20.4%, reduced by a 0.7% benefit for share-based compensation.
Speaker #2: The fourth quarter of rate as compared to 2024 , was higher as a result of the timing of of certain tax credits . For the full year , our effective tax rate was 21.7% of pre-tax income , comprised of a base rate of 22.6% , reduced by a 0.9% benefit for share based compensation .
Operator: For the full year of 2026, we expect an effective tax rate of 22.6%, comprised of a base rate of 23.0% reduced by a benefit of 0.4% for share-based compensation. We expect the quarterly rate to fluctuate due to variations in the tax benefit from share-based compensation and the tolling of certain tax periods in the fourth quarter. As we outlined in our press release yesterday, we have established our earnings per share guidance for 2026 at $3.10 to $3.20, which reflects an increase over 2025 EPS of 6.1% at the midpoint. This year-over-year increase in our guidance range reflects the anticipated headwind of approximately $0.04 from the increase in our expected effective tax rate. Now, we will move on to free cash flow, the components that drove our results in 2025, and our expectations for 2026.
Jeremy Fletcher: For the full year of 2026, we expect an effective tax rate of 22.6%, comprised of a base rate of 23.0% reduced by a benefit of 0.4% for share-based compensation. We expect the quarterly rate to fluctuate due to variations in the tax benefit from share-based compensation and the tolling of certain tax periods in the fourth quarter. As we outlined in our press release yesterday, we have established our earnings per share guidance for 2026 at $3.10 to $3.20, which reflects an increase over 2025 EPS of 6.1% at the midpoint. This year-over-year increase in our guidance range reflects the anticipated headwind of approximately $0.04 from the increase in our expected effective tax rate. Now, we will move on to free cash flow, the components that drove our results in 2025, and our expectations for 2026.
Speaker #2: For the full year of we 2026 , expect an effective tax rate of 22.6% , comprised of a base rate of 23.0% , reduced benefit of 0.4% for share based compensation .
Speaker #2: We expect the quarterly rate to fluctuate due to variations in the tax benefit from share-based compensation and the tolling of certain tax periods.
Speaker #2: In the fourth quarter, as we outlined in our press release yesterday, we have established our earnings per share guidance for 2026 at $3.10 to $3.20, which reflects an increase over 2025 EPS of 6.1% at the midpoint.
Speaker #2: This year over year increase in our guidance range reflects the anticipated headwind of approximately increase in our expected effective $0.04 from the tax rate .
Speaker #2: Now , we will move on to free cash flow and the components that drove our results in 2025 and our expectations for 2026 .
Operator: Free cash flow for 2025 was $1.6 billion versus $2 billion in 2024. The reduction in free cash flow was driven by the accelerated timing of payment in Q3 of renewable energy tax credits that were originally planned to settle in 2026, and higher Capex, partially offset by growth in operating income. For 2026, we expect free cash flow to be in the range of $1.8 to $2.1 billion. The expected increase in free cash flow is driven by the inverse impact of the timing of the 2025 tax credit purchase payment and growth in operating income, partially offset by the step-up in capital expenditures Brad outlined in his comments. I also want to touch briefly on our AP to inventory ratio.
Jeremy Fletcher: Free cash flow for 2025 was $1.6 billion versus $2 billion in 2024. The reduction in free cash flow was driven by the accelerated timing of payment in Q3 of renewable energy tax credits that were originally planned to settle in 2026, and higher Capex, partially offset by growth in operating income. For 2026, we expect free cash flow to be in the range of $1.8 to $2.1 billion. The expected increase in free cash flow is driven by the inverse impact of the timing of the 2025 tax credit purchase payment and growth in operating income, partially offset by the step-up in capital expenditures Brad outlined in his comments. I also want to touch briefly on our AP to inventory ratio.
Speaker #2: Free cash flow for 2025 was $1.6 billion, versus $2 billion in 2020. The reduction in free cash flow was driven by the accelerated timing in the third quarter of renewable energy tax credits that were originally planned to settle in 2026, and higher CapEx, partially offset by growth in operating income. We expect free cash flow to improve in 2026.
Speaker #2: Flow to be in the range of $1.8 to $2.1 billion. The expected increase in free cash flow is driven by the inverse impact of the timing of the 2025 tax credit purchase and growth in operating income, payment partially offset by the step up in capital expenditures.
Operator: We finished Q4 at 124%, which was down from 128% at the end of 2024 and slightly below our expectations for the end of 2025. For 2026, we expect to see continued moderation resulting from our planned incremental inventory investment, and we expect to finish the year at a ratio of approximately 122%. Moving on to debt, we finished Q4 with an adjusted debt to EBITDA ratio of 2.03x as compared to our end-of-2024 ratio of 1.99x, driven by a modest increase in adjusted debt. We continue to be below our leverage target of 2.5x and plan to prudently approach that number over time. We continue to be pleased with the execution of our share repurchase program, and for 2025, we repurchased 23 million shares at an average share price of $92.26 for a total investment of $2.1 billion.
Jeremy Fletcher: We finished Q4 at 124%, which was down from 128% at the end of 2024 and slightly below our expectations for the end of 2025. For 2026, we expect to see continued moderation resulting from our planned incremental inventory investment, and we expect to finish the year at a ratio of approximately 122%. Moving on to debt, we finished Q4 with an adjusted debt to EBITDA ratio of 2.03x as compared to our end-of-2024 ratio of 1.99x, driven by a modest increase in adjusted debt. We continue to be below our leverage target of 2.5x and plan to prudently approach that number over time. We continue to be pleased with the execution of our share repurchase program, and for 2025, we repurchased 23 million shares at an average share price of $92.26 for a total investment of $2.1 billion.
Speaker #2: Brad outlined in his comments . I also want to touch briefly on our AP to inventory ratio . We finished the fourth quarter at 124% , which was down from at the end 128% of 2024 , and slightly below our expectations end for the of 2025 .
Speaker #2: For 2026, we expect to see moderation resulting from our planned incremental inventory continued investment, and we expect to finish the year at a ratio of approximately 122%.
Speaker #2: Moving on to debt. We finished the fourth quarter with an adjusted debt to EBITDA ratio of 2.03 times, as compared to our end of 2024 ratio of 1.99 times, driven by a modest increase in adjusted debt.
Speaker #2: We continued to be below our leverage target of 2.5 times and plan to prudently approach that number over time continue to be . pleased We with the execution of our share repurchase program , and for 2025 , we repurchased 23 million shares at an share price of average for a total investment of $2.1 billion .
Operator: Since the inception of our share repurchase program in 2011, we have repurchased 1.5 billion shares at an average share price of $18.77 for a total investment of $27 billion. 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. 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 to your questions, I would like to thank our team for their continued commitment to the excellent customer service that drives our success. This concludes our prepared comments.
Jeremy Fletcher: Since the inception of our share repurchase program in 2011, we have repurchased 1.5 billion shares at an average share price of $18.77 for a total investment of $27 billion. 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. As a reminder, our EPS guidance includes the impact of shares repurchased through this call, but does not include any additional share repurchases.
Speaker #2: Since the inception of our share repurchase program in 2011, we have repurchased 1.5 billion shares at an average share price of $18.77, for a total investment of $27 billion.
Speaker #2: We remain very confident that the average repurchase price is supported by the expected 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 #2: As a reminder , our EPs guidance includes the impact of shares repurchased through this call , but in does not include any additional share repurchases .
Jeremy Fletcher: Before I open up our call to your questions, I would like to thank our team for their continued commitment to the excellent customer service that drives our success. This concludes our prepared comments. At this time, I would like to ask Matthew, the operator, to return to the line, and we will be happy to answer your questions.
Speaker #2: Before I open up our call to you, I would like to thank our team for their continued questions and customer service that drives our success.
Operator: At this time, I would like to ask Matthew, the operator, to return to the line, and we will be happy to answer your questions. Thank you. We will now begin the question and answer session. If you have a question, please press star one on your phone. If you wish to be removed from the queue, please press star two. We do ask that while posing your question, please pick up your handset if you're listening on a speakerphone to provide optimum sound quality. 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. Your first question is coming from Scot Ciccarelli from Truist Securities. Your line is live. Good morning, guys. Thanks for the info.
Speaker #2: This concludes our prepared comments . this time , I would like to ask Matthew , the to return to the line operator , , and we will be answer your happy to questions .
Operator: Thank you. We will now begin the question and answer session. If you have a question, please press star one on your phone. If you wish to be removed from the queue, please press star two. We do ask that while posing your question, please pick up your handset if you're listening on a speakerphone to provide optimum sound quality. 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. Your first question is coming from Scot Ciccarelli from Truist Securities. Your line is live.
Speaker #1: Thank you. Now we will begin the question and answer session. If you have a question, please press star one on your phone.
Speaker #1: If you wish to be removed from the queue , please press star two . We do ask that while posing your question . Please pick up your you're handset if speakerphone listening on a optimum provide quality to sound , please limit your questions to one question and one follow up question .
Speaker #1: Again, if you once have a question, please press star one on your phone. Your first question is coming from Scott Ciccarelli from RBC Capital Markets.
Scot Ciccarelli: Good morning, guys. Thanks for the info. Based on your history, how long could we see some of these expenses, like the healthcare that you mentioned, continue to run above historical levels? And then related to that, if SG&A's per-store growth is expected to moderate in 2H, does that also imply that's kind of the exit rate and we should expect more normalized SG&A growth as we roll into 2027? Thanks.
Operator: Based on your history, how long could we see some of these expenses, like the healthcare that you mentioned, continue to run above historical levels? And then related to that, if SG&A's per-store growth is expected to moderate in 2H, does that also imply that's kind of the exit rate and we should expect more normalized SG&A growth as we roll into 2027? Thanks. Hey, Scot. This is Jeremy. Thanks for the questions. I'll probably take the second one first there. I don't know that any of us would feel super comfortable talking maybe to where exit rate would be and how we would think about how we would view 2027.
Speaker #1: Your line is live .
Speaker #4: morning Good guys . Thanks for the info . Based on your history , how long could we see expenses , like the health care that you mentioned continue run above historical levels and then related to that , if a store growth is expected to moderate per into H , does that also imply that's kind of the exit rate .
Jeremy Fletcher: Hey, Scot. This is Jeremy. Thanks for the questions. I'll probably take the second one first there. I don't know that any of us would feel super comfortable talking maybe to where exit rate would be and how we would think about how we would view 2027.
Speaker #4: And we should expect more normalized G&A growth as we roll into ’27. Thanks.
Speaker #2: Hey Scott , this is Jeremy . Thanks for the questions . I'll probably take the the second one first . There don't know .
Speaker #2: You know, I don't think that any of us would feel super comfortable, you know, talking maybe to where exit rate would be and how we would think about how we would, would view 2027.
Operator: Outside of maybe how we would just think in a normal environment, the kind of the structural pieces of where we've been managing spend within our business, where we feel good about the efficiency of how we're attacking, taking care of customer service, and managing kind of all the core day-to-day expenses, and then also have been pretty pleased with the places over the course of 2025 and really the last few years where we've seen opportunities to lean into our business and, I think, equip some things that really help to drive that differentiation that helps us gain share and drive our sales momentum. In terms of the first part of the question around the cadence, the timing of that, it's a little bit hard to completely troubleshoot that. I think you heard in Brent's comments that we're still kind of cautious for what we've seen there.
Jeremy Fletcher: Outside of maybe how we would just think in a normal environment, the kind of the structural pieces of where we've been managing spend within our business, where we feel good about the efficiency of how we're attacking, taking care of customer service, and managing kind of all the core day-to-day expenses, and then also have been pretty pleased with the places over the course of 2025 and really the last few years where we've seen opportunities to lean into our business and, I think, equip some things that really help to drive that differentiation that helps us gain share and drive our sales momentum. In terms of the first part of the question around the cadence, the timing of that, it's a little bit hard to completely troubleshoot that.
Speaker #2: Outside of maybe how we would just think in a , in a normal environment , the , the kind structural of the pieces of where , where we've been managing spend within our business , where , you know , we feel good about the , the efficiency of how we're how we're attacking , taking care of customer service in managing all the core day to kind of day expenses .
Speaker #2: And then also have been pretty pleased with the places over the course of of 2025 . And really the last few years where we've seen opportunities to lean into our business I think equip some things that really help to drive that , that differentiation that helps us gain , gain , share and drive our sales momentum .
Speaker #2: You know , in terms of the first part of the question around and the cadence of that , you know , it's a little bit hard to to completely troubleshoot that .
Jeremy Fletcher: I think you heard in Brent's comments that we're still kind of cautious for what we've seen there. The pressure that we've seen in Canada, I think, has persisted longer than we would normally expect and has been a little bit of a story of increases on top of increases that we thought were already pretty dramatic. And so we do have a little bit of a cautious posture for that, for how we think about 2026, and in particular, as we think about the first part of the year where we're not against as easy of a comparison because of the pressure that really came in over the last, I guess, half of 2025.
Speaker #2: I think you heard in in Brent's comments that , you know , we're still kind of cautious for what we've seen there . The , the pressure that we've seen .
Operator: The pressure that we've seen in Canada, I think, has persisted longer than we would normally expect and has been a little bit of a story of increases on top of increases that we thought were already pretty dramatic. And so we do have a little bit of a cautious posture for that, for how we think about 2026, and in particular, as we think about the first part of the year where we're not against as easy of a comparison because of the pressure that really came in over the last, I guess, half of 2025. We understand at some point the base of that cost of fillers builds up, and we expect it to moderate and kind of stabilize over the course of time. But there's still some cautiousness, I think, as we approach how we think about that in 2026.
Speaker #2: Candidly , I think is persisted longer than we would than , normally expect and has been a little bit of a of a story of of increases , of on top of increases that we thought were already pretty dramatic .
Speaker #2: And so we do have a little bit of cautious posture a for that , for how we think about about particular , as we think 2026 and in about the first part of the year where we're we're not up against as as easy of a comparisons because of the pressure that that really came in over the last , I guess , half of 2025 .
Jeremy Fletcher: We understand at some point the base of that cost of fillers builds up, and we expect it to moderate and kind of stabilize over the course of time. But there's still some cautiousness, I think, as we approach how we think about that in 2026. So that's why you kind of see a little bit of a balanced approach to how we've thought about what that spend looks like as we move through the year.
Speaker #2: You know , we we understand , you know , at some point the , the base of that , of explosion builds up and , and we expect it to moderate to moderate and kind of stabilize over the course of time but there's , there's , there's still some cautiousness , I think as we approach how we think .
Operator: So that's why you kind of see a little bit of a balanced approach to how we've thought about what that spend looks like as we move through the year. Any other line items we need to be thoughtful of just for our modeling purposes? Within SG&A, Scot? Yes, correct. Yeah. So I mean, I think the component pieces that we talk about there, for sure, the pressured items, the things I think that were different than what we expected as we move through the back half of 2025 are those self-insurance items. But we continue to, I think, see and you can see it on our cash flow statement, a pretty heightened growth in the depreciation run rate that we've had. That's the key to the Capex and all the places that we're continuing to invest within our business. I think those are the areas.
Speaker #2: about that in But that's why you kind of see a little bit of a of a balanced approach to how about what that we've thought spin looks like as through the year .
Scot Ciccarelli: Any other line items we need to be thoughtful of just for our modeling purposes?
Operator: Within SG&A, Scot?
Speaker #4: Any other
Speaker #4: Line items we need to be thoughtful of just for our modeling purposes?
Scot Ciccarelli: Yes, correct.
Jeremy Fletcher: Yeah. So I mean, I think the component pieces that we talk about there, for sure, the pressured items, the things I think that were different than what we expected as we move through the back half of 2025 are those self-insurance items. But we continue to, I think, see and you can see it on our cash flow statement, a pretty heightened growth in the depreciation run rate that we've had. That's the key to the Capex and all the places that we're continuing to invest within our business. I think those are the areas.
Speaker #2: Within SG&A , Scott .
Speaker #4: Yes ,
Speaker #4: .
Speaker #2: I think the Yeah . correct that we talked So , I mean , about there , for and things , I sure , the were pressured items different than what we expected as we move through the back half of 2025 .
Speaker #2: Are those those self-insurance items . But , you know , we continue , I think , see , and you think that can see it on our on our cash flow statement , a pretty heightened growth in the depreciation run rate that we've had .
Operator: And then for sure, a component piece of how we think about what we're managing and moving forward within and how we're deploying, I think, some tools within our business is the technology spend that continues to be, I think, an important initiative for us. Got it. Thank you. Thanks, Scot. Thank you. Your next question is coming from Steven Forbes from Guggenheim. Your line is live. Good morning, everyone. Brad, trying to think through the Virginia DC opportunity a little bit more. So I was hoping if you can maybe help frame up how you guys are planning to sort of build out the hub network and thinking through sort of capacity build behind Virginia. So I don't know if you can provide any color on the mix of stores that will be serviced from Virginia in the 2026 class.
Jeremy Fletcher: And then for sure, a component piece of how we think about what we're managing and moving forward within and how we're deploying, I think, some tools within our business is the technology spend that continues to be, I think, an important initiative for us.
Speaker #2: That's the CapEx and all the key to the places that we're continuing to invest within our business . those are I think the the areas for sure , .
Speaker #2: a And then component piece of how we think about what we're 2026 . And so managing and moving forward within in how we're .
Scot Ciccarelli: Got it. Thank you.
Jeremy Fletcher: Thanks, Scot.
Speaker #2: Deploying . I think some tools within our business is the technology spend that continues to be , I think , an important initiative for us .
Operator: Thank you. Your next question is coming from Steven Forbes from Guggenheim. Your line is live.
Speaker #2: .
Speaker #4: Thank you. Got it.
Speaker #5: Thanks , Scott .
Steven Forbes: Good morning, everyone. Brad, trying to think through the Virginia DC opportunity a little bit more. So I was hoping if you can maybe help frame up how you guys are planning to sort of build out the hub network and thinking through sort of capacity build behind Virginia. So I don't know if you can provide any color on the mix of stores that will be serviced from Virginia in the 2026 class. We're really just hoping for any color on gauging just how aggressive you guys are going to get sort of exploring that Northeast and the East Coast corridor.
Speaker #1: Your next question is coming. Thank you. From Forbes, from Steve. Line is Guggenheim. You’re live.
Speaker #6: everyone . Brad , maybe trying to think through the Virginia DC little bit more . So I was hoping if you could help frame maybe up how you guys are planning to sort of build out the hub network and thinking through sort of capacity build behind Virginia .
Speaker #6: So I don't know if you can provide any color on the mix of stores that will be serviced from Virginia in the 2026 class , but really , just hoping not any color on gauging just how guys are going aggressive you to get .
Operator: We're really just hoping for any color on gauging just how aggressive you guys are going to get sort of exploring that Northeast and the East Coast corridor. Yeah, absolutely. Well, good morning, Steve. Thanks for the question. Great one. Yeah, we couldn't be more excited about the launch of our new DC. We have an unbelievable leadership team there in Stafford. That's a very large regional distribution center for us that kicked off with maybe 1/3 of its capacity, roughly, that transitioned from other distribution centers on the periphery of that area, from Greensboro, North Carolina, from the Ohio side, not much leverage to the north with our DC that sets up in Boston.
Brad Beckham: Yeah, absolutely. Well, good morning, Steve. Thanks for the question. Great one. Yeah, we couldn't be more excited about the launch of our new DC. We have an unbelievable leadership team there in Stafford. That's a very large regional distribution center for us that kicked off with maybe 1/3 of its capacity, roughly, that transitioned from other distribution centers on the periphery of that area, from Greensboro, North Carolina, from the Ohio side, not much leverage to the north with our DC that sets up in Boston.
Speaker #6: Sort of exploring that northeast and the East Coast corridor .
Speaker #5: absolutely . Well , good morning , Steve . Thanks for the question . Great . One . Yeah . You know , we couldn't be more excited about the launch of our new DC .
Speaker #5: We have an unbelievable leadership team there in Stafford . You know that's a very large regional for us that you distribution center know kicked off with a you know , maybe maybe a third of its capacity roughly that from other distribution centers on the periphery of that area from Greensboro north Carolina , from the Ohio side , not much leverage to the north with our DC that sets up in Boston .
Operator: But I always like to talk about the fact that depending on where you draw the line there in the upper Mid-Atlantic between Virginia and getting all the way through New York City, you can almost come up with 1/3 of the population of the US and all the vehicles to go along with it, all the market share to go along with it, though you obviously have a lot of tough competitors, large and small. But we look at really the way that we're going to store that market really no different, Steve, than we look at any other expansion market. We're going to be our real estate teams are getting after that market, not only from a Greenfield perspective, but also from a potential acquisition perspective. You've heard us talk about the Salvo acquisition of those 7 stores in that Baltimore, Maryland market.
Brad Beckham: But I always like to talk about the fact that depending on where you draw the line there in the upper Mid-Atlantic between Virginia and getting all the way through New York City, you can almost come up with 1/3 of the population of the US and all the vehicles to go along with it, all the market share to go along with it, though you obviously have a lot of tough competitors, large and small. But we look at really the way that we're going to store that market really no different, Steve, than we look at any other expansion market. We're going to be our real estate teams are getting after that market, not only from a Greenfield perspective, but also from a potential acquisition perspective.
Speaker #5: But know , you always , we I like to talk about the fact that depending on , you know , where you draw the line , in the upper Mid-Atlantic between Virginia and getting all the way through New there York you can almost come up with a third of the population of the US and all the vehicles to go along with it , all the market share to go along with it , though , you obviously have a lot of tough competitors , large and small , but we look at really the way that store that we're going to market , really no different .
Speaker #5: Steve , than than we look at any other expansion market . You know , we're going to we're going to be , you know , our real estate teams are getting after that market not only from from a greenfield perspective , but also from a potential acquisition perspective .
Brad Beckham: You've heard us talk about the Salvo acquisition of those 7 stores in that Baltimore, Maryland market. Really, the whole key to that distribution center, besides the 5-night-a-week replenishment that we can service out 200mi, is that model where we have well over 150,000 SKUs. Once you build that DC out, once you build out the store network that'll service not only overnight, but will service that greater Washington, DC market basically every hour on the hour in that greater metro area, which provides just an unbelievable advantage over most every competitor we have, if not all of them. Then we'll backfill that with our hub and spoke model, no different than we have any other parts of the country.
Operator: Really, the whole key to that distribution center, besides the 5-night-a-week replenishment that we can service out 200mi, is that model where we have well over 150,000 SKUs. Once you build that DC out, once you build out the store network that'll service not only overnight, but will service that greater Washington, DC market basically every hour on the hour in that greater metro area, which provides just an unbelievable advantage over most every competitor we have, if not all of them. Then we'll backfill that with our hub and spoke model, no different than we have any other parts of the country.
Speaker #5: You've heard us the salvo acquisition of those seven stores in that Baltimore , Maryland market . And really , you know , the whole key to that besides the five nights a week replenishment that we can service out hundred miles , is that model where we have , you know , well over 150,000 SKUs .
Speaker #5: you build Once that once you build out the out , DC store that'll service only overnight , but will service that greater Washington DC Basically every market .
Speaker #5: Hour on the hour in that greater metro area, which provides just an unbelievable advantage over most every competitor we have, if not all of them.
Speaker #5: And then we'll backfill that, you know, with our hub and spoke—no different than we have in our model network in other parts of the country.
Operator: Knowing there's a lot of traffic, a lot of cars in that market, we're going to make sure that all those runs from that city counter out of that DC, as well as any hub stores. We're going to make sure that it's absolutely appropriate for that market share that we know we can go get. The thing I would tell you in terms of kind of how that plays into the population that we'll bring in in 2026, it will still be our new store cohort for 2026 will still be, even with Virginia, will still be really spread out over the US. When I think about the ability that our team has given us from Brent to the entire supply chain team, as we've opened these DCs, we've opened up capacity not just in one or two DCs.
Brad Beckham: Knowing there's a lot of traffic, a lot of cars in that market, we're going to make sure that all those runs from that city counter out of that DC, as well as any hub stores. We're going to make sure that it's absolutely appropriate for that market share that we know we can go get. The thing I would tell you in terms of kind of how that plays into the population that we'll bring in in 2026, it will still be our new store cohort for 2026 will still be, even with Virginia, will still be really spread out over the US. When I think about the ability that our team has given us from Brent to the entire supply chain team, as we've opened these DCs, we've opened up capacity not just in one or two DCs.
Speaker #5: You know , hub knowing there's a lot of traffic , a lot of cars in that , you know , we're going to make market sure that all those runs that city counter that from , as well as any hub stores out of , we're going to make sure that it's absolutely appropriate for that market share that we know we can go get .
Speaker #5: And , you know , the thing I would tell you in terms of kind of how that plays the population , that into we'll bring in in 26 , it will still be our new store cohort for 2026 , will still be even with Virginia , will still be really spread over the know , out , you US .
Speaker #5: When I think about the , the , the ability that our team has given know , from to the Brent entire chain supply team as we've opened these DCS , we've opened up capacity not just in 1 or 2 DCS .
Operator: For example, in our network, we don't just have capacity now that we've opened Virginia in Greensboro and outside Akron, Ohio. They're in Twinsburg. When you lever those DCs, you end up levering the next layer south and east and back west. So that enables us to have backfill markets the same in a lot of our core, more mature markets. So even though we're really excited about the Stafford footprint itself and the next many years of progress, our 2026 new store cohort will be still evenly spread over a lot of new and existing markets. That's super helpful.
Brad Beckham: For example, in our network, we don't just have capacity now that we've opened Virginia in Greensboro and outside Akron, Ohio. They're in Twinsburg. When you lever those DCs, you end up levering the next layer south and east and back west. So that enables us to have backfill markets the same in a lot of our core, more mature markets. So even though we're really excited about the Stafford footprint itself and the next many years of progress, our 2026 new store cohort will be still evenly spread over a lot of new and existing markets.
Speaker #5: For example , in our network , we don't just have capacity . Now that we've opened Virginia in Greensboro and and outside Akron , Ohio , there in Twinsburg , we actually when you lever DCS , those you end up levering the next layer , you know , south and east and back west .
Speaker #5: And so that enables us to have backfill markets in a lot of our core , more mature markets . So even though we're really excited about the Stafford footprint itself and the next years of progress , our our 26 new store cohort will be still evenly spread over a lot of existing markets .
Steven Forbes: That's super helpful. Maybe just sticking with that a little bit and bringing it back to the expense growth profile, I think some of us, maybe myself for sure, thought there could be some pressure, right, as you sort of build out the field to support the initiatives behind the expansion in the northeast and the East Coast corridor, whether it's district managers, right, or dedicated commercial calling account staff. Is that a pressure in 2026? Is there some de-leverage coming from field buildout, or is it more methodical and you're sort of expecting the productivity to sort of be onboarded that sort of neutralizes the field buildout initiative?
Operator: Maybe just sticking with that a little bit and bringing it back to the expense growth profile, I think some of us, maybe myself for sure, thought there could be some pressure, right, as you sort of build out the field to support the initiatives behind the expansion in the northeast and the East Coast corridor, whether it's district managers, right, or dedicated commercial calling account staff. Is that a pressure in 2026? Is there some de-leverage coming from field buildout, or is it more methodical and you're sort of expecting the productivity to sort of be onboarded that sort of neutralizes the field buildout initiative? Hey, Steve, this is Jeremy. It's a really good question. I would tell you that our model always, I think, is predicated on that organic growth kind of coming at some cost from a leverage pressure perspective.
Speaker #5: .
Speaker #6: That's super helpful . Maybe just sticking with that a little bit bringing and it back to the expense growth think some of us , maybe I for sure myself , pressure , whereas you sort of build out the field to support the initiatives behind the expansion in the northeast and the East Coast corridor , whether it's district profile .
Speaker #6: managers , right , or dedicated calling account staff , is that is that a pressure in 2026 , like , is commercial there some deleverage coming from field build or or is it more out methodical and you're sort of expecting the productivity to to sort of be onboarded that , that that sort of neutralizes the field build out initiative .
Jeremy Fletcher: Hey, Steve, this is Jeremy. It's a really good question. I would tell you that our model always, I think, is predicated on that organic growth kind of coming at some cost from a leverage pressure perspective. I mean, we have that, I think, component piece every year. Some of it is for the types of infrastructure things that you talk about there, but some of it is just those are going to be the least productive stores when you bring them on. So to the extent that we've seen a little bit of an acceleration, I think, more broadly there, that's part of how we think about the broader cost structure.
Speaker #2: Hey , Steve , this is Jeremy . It's a really good question . And I would tell you that that that our model always I think is predicated on that organic growth kind of coming some cost from a at leverage pressure perspective .
Operator: I mean, we have that, I think, component piece every year. Some of it is for the types of infrastructure things that you talk about there, but some of it is just those are going to be the least productive stores when you bring them on. So to the extent that we've seen a little bit of an acceleration, I think, more broadly there, that's part of how we think about the broader cost structure. In terms of just how we think about building that infrastructure, I don't know that even within the Virginia DC, that incremental growth is all that different than what we would look at and see in other parts of our business. Maybe the only nuance there that I'd call you to is we've really got a growth machine operating in three different countries right now.
Speaker #2: we I mean , have that I think piece every year . Some is for the types of infrastructure things that you talk about .
Speaker #2: There, some of it is just, you know, those are going to be the least productive stores when you bring them. So, to the extent that we've seen a on.
Speaker #2: little bit of an acceleration , I think more broadly there , you know , that's that's part of how we , we , we think about the , broader cost structure , the , the in terms of , you know , just the how we of think about building that don't know that even within the , the , the Virginia DC , that incremental growth is all that infrastructure .
Jeremy Fletcher: In terms of just how we think about building that infrastructure, I don't know that even within the Virginia DC, that incremental growth is all that different than what we would look at and see in other parts of our business. Maybe the only nuance there that I'd call you to is we've really got a growth machine operating in three different countries right now. And some of the, I think, initial stages of building out that muscle in Mexico and Canada have included a little bit of what you're talking about there, where there's some maybe a little bit less efficiency in how we think about some of that growth.
Speaker #2: different than I what we would look at . And see in other in other parts business . only nuance there that I'd call you to is , you know , machine operating a growth in we've really got countries right now in three different .
Operator: And some of the, I think, initial stages of building out that muscle in Mexico and Canada have included a little bit of what you're talking about there, where there's some maybe a little bit less efficiency in how we think about some of that growth. Because look at a company like or the growth that we're having in Canada right now, some of that infrastructure we're building for the first time, how do you go out and get after finding sites and being able to build that construction muscle? So there's a little bit of, I think, that that plays into our guidance. But by and large, it's mostly just how our flywheel is built. Helpful. Thank you. Thanks, Steve. Thank you. Your next question is coming from Michael Lasser from UBS. Your line is live. Good morning. Thank you so much for taking my question.
Speaker #2: of the I And some think , initial stages of building out that muscle in of our Canada have included a little Maybe the what you're talking about there , where there's some , some maybe a little bit less efficiency in how we think about some of that growth .
Jeremy Fletcher: Because look at a company like or the growth that we're having in Canada right now, some of that infrastructure we're building for the first time, how do you go out and get after finding sites and being able to build that construction muscle? So there's a little bit of, I think, that that plays into our guidance. But by and large, it's mostly just how our flywheel is built.
Speaker #2: Because , Mexico and like or the , the , the growth that bit of we're having in , in know , some of that Canada right infrastructure building for the first time , now , you how do you go out and get finding after sites and being able to build that , that construction So there's a muscle ?
Steven Forbes: Helpful. Thank you.
Speaker #2: A little bit of that, I think, goes into our plays guidance. But by and large, it's just how mostly our business is built.
Jeremy Fletcher: Thanks, Steve.
Operator: Thank you. Your next question is coming from Michael Lasser from UBS. Your line is live.
Speaker #6: Thank Helpful . you .
Michael Lasser: Good morning. Thank you so much for taking my question. So your initial guidance for this year at 3% to 5% is 100 basis points higher than you guided originally for the outset of 2025. Is the only difference this year versus last year the visibility you have into inflation and like-for-like pricing? And if that's the case, what's the prospect that if tariffs are rolled back, there could be broad-based deflation moving through the year in the industry?
Speaker #5: Thanks , Steve .
Speaker #1: Thank you. Your next question is coming from Michael Lasser from UBS. Your line is live.
Operator: So your initial guidance for this year at 3% to 5% is 100 basis points higher than you guided originally for the outset of 2025. Is the only difference this year versus last year the visibility you have into inflation and like-for-like pricing? And if that's the case, what's the prospect that if tariffs are rolled back, there could be broad-based deflation moving through the year in the industry? Yeah. Good morning, Michael. Thanks for the question. I think it's a good observation that as we sit here, I guess, at the beginning of 2026 relative to where we would have been last year, we do, I think, fundamentally have a different pricing assumption built in.
Speaker #7: Good morning . Thank you so much for question , though your initial guidance for this year , at 3 to 5% is 100 basis points higher than you guided originally for the outset of 2025 , is the only difference this year versus last The have into inflation and like for like pricing .
Speaker #7: And is that if that's the case , what's the prospect that if tariffs are rolled back , there could be broad based deflation moving the year in industry ?
Jeremy Fletcher: Yeah. Good morning, Michael. Thanks for the question. I think it's a good observation that as we sit here, I guess, at the beginning of 2026 relative to where we would have been last year, we do, I think, fundamentally have a different pricing assumption built in. You're aware of what our historical practice is there, that we don't spend a lot of time and energy trying to predict those types of changes moving forward when we kind of set our initial guide. Even this year, I think what we've put in front of all of you is, I think, consistent with that idea that we're not trying to forecast a lot of different changes in our overall price levels, but we know that we'll calendar this benefit that we've seen.
Speaker #2: Yeah . Good morning Michael . Thanks for the question . I it's a think good that as observation we sit as we at the here , I guess beginning of 2026 , relative to where we would have been last year , we do , I think fundamentally have a different pricing built in and you're aware of of what our historical practice is there that we don't we don't spend a lot of time and energy trying to predict those types of changes moving forward .
Operator: You're aware of what our historical practice is there, that we don't spend a lot of time and energy trying to predict those types of changes moving forward when we kind of set our initial guide. Even this year, I think what we've put in front of all of you is, I think, consistent with that idea that we're not trying to forecast a lot of different changes in our overall price levels, but we know that we'll calendar this benefit that we've seen. The second part of your question, I can start there, and Brad or Brent might want to jump in behind me on this. But historically, I think our industry has been pretty disciplined and pretty rational in hanging on to prices once we pass them through.
Speaker #2: When we kind of set our initial guide and even this year , I think , what , what what we've put in front of all of you is I think with that consistent idea that that we're not we're not trying to forecast a lot of different overall price levels .
Jeremy Fletcher: The second part of your question, I can start there, and Brad or Brent might want to jump in behind me on this. But historically, I think our industry has been pretty disciplined and pretty rational in hanging on to prices once we pass them through. When you think about the large amount of the business that's done on the professional side, where you're in your customer's businesses on a weekly, on a daily basis, and you're having to talk through those conversations, those are pretty hard-won pricing increases.
Speaker #2: But we know that we'll changes in the calendar this benefit that we've seen . The second part of your question , I can start there in Brad or Brent might want to jump in me on this , but you know , historically , I think our industry has been pretty has disciplined and pretty rational in hanging on to prices .
Operator: When you think about the large amount of the business that's done on the professional side, where you're in your customer's businesses on a weekly, on a daily basis, and you're having to talk through those conversations, those are pretty hard-won pricing increases. Over the course of time, you know that even if there is some, I think, relief from a cost pressure perspective, it's typically temporary. You'll see it kind of fill back in as you roll forward, and you don't want to have a lot of volatility in how you approach that from a customer perspective. Ultimately, we'll see. We'll be priced competitively for the market. We think of behavior rationally. We think we can earn a premium, gross margin premium for how we take care of our customers and execute our business and the value that we create.
Speaker #2: Once once we pass been pretty behind know , when you think about the amount of the business that's done on the professional large side , where you're you're in your customers businesses on a , businesses on daily a weekly , basis , and talk through those you're having to conversations .
Jeremy Fletcher: Over the course of time, you know that even if there is some, I think, relief from a cost pressure perspective, it's typically temporary. You'll see it kind of fill back in as you roll forward, and you don't want to have a lot of volatility in how you approach that from a customer perspective. Ultimately, we'll see. We'll be priced competitively for the market. We think of behavior rationally. We think we can earn a premium, gross margin premium for how we take care of our customers and execute our business and the value that we create. And so we think that that holds out well. But ultimately, we'll just have to see where the market goes on it as well.
Speaker #2: pretty hard . Those are Won pricing increases . And and over the course of time , you know , that that that even if there is some I think relief from a cost perspective , pressure typically temporary .
Speaker #2: You know , you'll kind of fill back in as you as see it you roll forward it's and , and want to have a lot of volatility in how you you don't approach that from a customer perspective .
Speaker #2: Ultimately, we'll see. We'll be priced competitively for the market. We think we behave rationally. We think we can earn a premium gross margin for how we take care of our customers.
Operator: And so we think that that holds out well. But ultimately, we'll just have to see where the market goes on it as well. Yeah. And Michael, this is Brent. I would add just on the tariff rollback front, I know that question's hanging out there, but we still believe that there's an environment out there with the administration that's focused on tariffs. And whether the first method worked, we feel like there's other levers that can be pulled. And as Jeremy said, when we think about the outlook for 2026, we're assuming what we know now, and we'll see where that goes. Okay. My follow-up question is, you're starting out the year with an assumption around 3 to 4% SG&A per store growth. Over the last few years, you've undercalculated or the growth rate has been a little hotter than what you had initially expected.
Speaker #2: And business and the value that we create. And so we think that that holds out well. But ultimately, we'll just have to see where the market goes on it as well.
Brent Kirby: Yeah. And Michael, this is Brent. I would add just on the tariff rollback front, I know that question's hanging out there, but we still believe that there's an environment out there with the administration that's focused on tariffs. And whether the first method worked, we feel like there's other levers that can be pulled. And as Jeremy said, when we think about the outlook for 2026, we're assuming what we know now, and we'll see where that goes.
Speaker #3: Yeah. And Michael, this is
Speaker #3: on the add just tariff rollback premium front . I know that question's hanging out there . But you know I we we still believe that there's an environment out there with the administration that's focused on tariffs and whether the first method worked .
Speaker #3: We feel like there are other levers that can be pulled. And we, as Jeremy said, when we think about the '26, we're assuming what we know now.
Michael Lasser: Okay. My follow-up question is, you're starting out the year with an assumption around 3 to 4% SG&A per store growth. Over the last few years, you've undercalculated or the growth rate has been a little hotter than what you had initially expected. What's the risk that the same scenario plays out this year? And we are seeing a similar amount of elevated growth in SG&A from another player within the industry. So to what degree is this just a function of the competitive environment, cost of doing business growing up, and we should not be expecting this to moderate over time?
Speaker #3: And where that we'll see goes.
Speaker #8: Okay .
Speaker #7: My follow-up question is, you're starting out the year with an assumption around 3 to 4% comp-average, or CA, per store growth over the last few years.
Speaker #7: You've under-calculated, or the growth has been a little hotter than what you had initially—or the rate has expected. What's the risk that the same scenario plays out this year?
Operator: What's the risk that the same scenario plays out this year? And we are seeing a similar amount of elevated growth in SG&A from another player within the industry. So to what degree is this just a function of the competitive environment, cost of doing business growing up, and we should not be expecting this to moderate over time? Yeah. No, it's a good question, Michael. And I think it's important, I think, for us to probably start where you started in talking about how has this looked over the last few years.
Speaker #7: And we are seeing a similar amount of elevated growth in a from another player within the industry ? So to what degree is this just a function of the competitive environment , business , up , going growing cost of doing up .
Jeremy Fletcher: Yeah. No, it's a good question, Michael. And I think it's important, I think, for us to probably start where you started in talking about how has this looked over the last few years. Because I think that the story for what we've seen maybe in the last 6 months of 2025 has been a little bit more discrete for us, I think, at least relative to our expectations and where we've seen a little bit more heightened inflation from items that are obviously a core part of how we have to run our business, but are a little bit harder to control and are not some of the elective things we've done.
Speaker #7: And we should not be moderating this to expecting time over.
Speaker #2: No it's Yeah . a good it's a good question Michael . And I think it's important I think for us to to probably start where you started about how is this looked over the last few because because in talking years think that that the story for what we've seen maybe in the last six months of bit more discrete 2025 has been a little for us .
Operator: Because I think that the story for what we've seen maybe in the last 6 months of 2025 has been a little bit more discrete for us, I think, at least relative to our expectations and where we've seen a little bit more heightened inflation from items that are obviously a core part of how we have to run our business, but are a little bit harder to control and are not some of the elective things we've done. When we think about some of the rest of where we've managed our overall cost structure over the last, call it, 2, 3, maybe even 4 years, a lot of that has been a little bit more predicated upon where we feel like we've seen opportunities to lean into our business to prioritize certain actions and steps that we think have been effective.
Speaker #2: I think at least relative to expectations and and where we've little bit more heightened inflation from from , are obviously a core part are , of how we have to run our business , but are a little bit harder to control and are not are not some of things done the when we think about some rest of the of where we've we've managed our our overall cost structure over the last call it two , three , maybe even four years , a lot of that little bit has been a more predicated upon where we feel like we've seen to lean into our business , to prioritize certain actions and steps that we been think have opportunities effective in that , in that in itself , and of I think is little bit as we've moved year to year moderated a would tell you that we feel pretty good about how we go to .
Jeremy Fletcher: When we think about some of the rest of where we've managed our overall cost structure over the last, call it, 2, 3, maybe even 4 years, a lot of that has been a little bit more predicated upon where we feel like we've seen opportunities to lean into our business to prioritize certain actions and steps that we think have been effective. And that in and of itself, I think, has moderated a little bit as we've moved year to year. And we would tell you that we feel pretty good about how we go to the street every day and the proposition we have.
Operator: And that in and of itself, I think, has moderated a little bit as we've moved year to year. And we would tell you that we feel pretty good about how we go to the street every day and the proposition we have. Doesn't mean that as we move this year, we won't see additional places and opportunities. But some of what I think you've heard us talk about and what's been built into our model for, I think, a long time, but are also areas where we've leaned into the business a little bit more are things like our hub store investments and how we think about the distribution capabilities and leaning into those as our sales momentum has supported that. So those are always, I think, on the radar screen for us. Those have been very opportunistic types of moves.
Jeremy Fletcher: Doesn't mean that as we move this year, we won't see additional places and opportunities. But some of what I think you've heard us talk about and what's been built into our model for, I think, a long time, but are also areas where we've leaned into the business a little bit more are things like our hub store investments and how we think about the distribution capabilities and leaning into those as our sales momentum has supported that. So those are always, I think, on the radar screen for us. Those have been very opportunistic types of moves.
Speaker #2: to the street every , to day . And the proposition we have And we doesn't mean that that as we move through this year , we won't see additional places and opportunities , but some of what I think you've heard us talk about and what's been built into our model for , I think , a long time .
Speaker #2: But are also areas where we've a little the business leaned into bit more . Are things like our our hub store investments and how we we think about the distribution capabilities and , and leaning into those as our sales momentum has supported that .
Speaker #2: So so those are always , I think , on the radar screen for us . Those have been very types of moves . they have think that We opportunistic productive in allowing us to continue to drive And I'm talking about the sales momentum .
Operator: We think that they have been productive in allowing us to drive the sales momentum. I'm talking about over the last several years. So I think that's important. As we sit here today, I don't think that that's a contributing cause, that industry-wide, that's just now a different table stakes. We think that those are things that yield a positive benefit to us as we've moved. As we think about some of the other items, we talked about it, I think, already in the prepared comments and in the first question. I think we're cognizant of the fact that it could be pressure. Hopefully, we see that stabilize and it's less of a concerning item. But ultimately, we'll just have to see how some of those other items play out. Thank you very much and good luck. Thanks, Michael. Thank you.
Jeremy Fletcher: We think that they have been productive in allowing us to drive the sales momentum. I'm talking about over the last several years. So I think that's important. As we sit here today, I don't think that that's a contributing cause, that industry-wide, that's just now a different table stakes. We think that those are things that yield a positive benefit to us as we've moved. As we think about some of the other items, we talked about it, I think, already in the prepared comments and in the first question. I think we're cognizant of the fact that it could be pressure. Hopefully, we see that stabilize and it's less of a concerning item. But ultimately, we'll just have to see how some of those other items play out.
Speaker #2: last several years . And so I think important . I that's don't , you know , as we sit here today , I don't think that's contributing cause that industry wide , that's just now a table stakes .
Speaker #2: different We think that those are are things that yield a positive benefit to us as we've moved , as we think about some of the other items , you know , we talked about it .
Speaker #2: I think already in the prepared comments and in the first question , you know , we're I think we're , we're cognizant of the fact that it could be pressure .
Speaker #2: Hopefully we see that stabilize and it's less of a of a of a concerning item . But but ultimately we'll just have some of those other items play out
Michael Lasser: Thank you very much and good luck.
Jeremy Fletcher: Thanks, Michael.
Operator: Thank you. Your next question is coming from Greg Melich from Evercore ISI. Your line is live.
Operator: Your next question is coming from Greg Melich from Evercore ISI. Your line is live. Hi. Thanks, guys. I wanted to follow up on some of the softness and cautiousness that you've talked about from the consumer. I think you mentioned in the last call that you saw some potential DIY deferral. How do you see that trending? It sounded like it may be a little better as we got into the winter. And then historically linked to that, how did tax refunds, when they're elevated, historically impact both the DIY and do-it-for-me sides of the business? Yeah. Hey, good morning, Greg. It's Brad. Great question. I'll start out here and let the other guys chime in.
Speaker #7: Thank you very
Speaker #7: Much, and good luck.
Speaker #5: Thanks , Michael .
Greg Melich: Hi. Thanks, guys. I wanted to follow up on some of the softness and cautiousness that you've talked about from the consumer. I think you mentioned in the last call that you saw some potential DIY deferral. How do you see that trending? It sounded like it may be a little better as we got into the winter. And then historically linked to that, how did tax refunds, when they're elevated, historically impact both the DIY and do-it-for-me sides of the business?
Speaker #1: Thank you. Your next question is coming from Greg Melich from Evercore ISI. Your line is live.
Speaker #9: Hi. Thanks, guys. I wanted to follow up on some of the softness and cautiousness that you've talked about with the consumer. I think you mentioned on the last call that you saw some DIY deferral potential. Do you see that—does that sound like it's getting better?
Speaker #9: it may be a we got trend ? It As little winter . And then historically into the linked to that , how did refunds when they're elevated historically impact both the DIY it for me , and do sides of the business .
Brad Beckham: Yeah. Hey, good morning, Greg. It's Brad. Great question. I'll start out here and let the other guys chime in. So yeah, as you know, these last couple of quarters, specifically last quarter, we had really for the first time talked about seeing some pressure to some of the larger ticket jobs, which was, again, kind of the first time we had seen that in more of the failure and maintenance categories. We'd seen it for a longer period of time with discretionary stuff. But really, Q4 was still there? Yeah. You still there, Greg?
Operator: So yeah, as you know, these last couple of quarters, specifically last quarter, we had really for the first time talked about seeing some pressure to some of the larger ticket jobs, which was, again, kind of the first time we had seen that in more of the failure and maintenance categories. We'd seen it for a longer period of time with discretionary stuff. But really, Q4 was still there? Yeah. You still there, Greg? I am. I lost you for a second, Brent. Okay. Okay. But yeah, so just kind of wrapping up on that point, Greg, it was really similar to what we saw last quarter on the larger ticket jobs, etc., though we did see some pretty good signs there in December as some of the winter weather started to kick in and things like that.
Speaker #5: Yeah . Hey good morning Greg it's Brad . question . I'll I'll start out here and let the other guys chime in Great .
Speaker #5: So yeah you know as you know you know these last couple of quarters specifically last quarter we had really for the first time talked about seeing some pressure to some of the larger ticket jobs , which was , again , kind of the first time we had seen in that more the failure and maintenance categories .
Speaker #5: We'd seen it the for a longer period of time with discretionary stuff , but really , Q4 was . into some . Yeah .
Greg Melich: I am. I lost you for a second, Brent.
Brad Beckham: Okay. Okay. But yeah, so just kind of wrapping up on that point, Greg, it was really similar to what we saw last quarter on the larger ticket jobs, etc., though we did see some pretty good signs there in December as some of the winter weather started to kick in and things like that. But generally, overall, Greg, I think we would categorize the consumer very similar to what we have. Still cautious, still watching expenditures and things like that with heightened inflation across homes and everything they do.
Speaker #5: You still there, Greg.
Speaker #9: Am I—I just—I lost you for a second, Brad.
Speaker #9: .
Speaker #5: , okay . Okay But just , you know , kind yeah . So of wrapping up on that point , Greg , you know , we it was , you know , really similar to what we saw last quarter on the larger ticket jobs .
Operator: But generally, overall, Greg, I think we would categorize the consumer very similar to what we have. Still cautious, still watching expenditures and things like that with heightened inflation across homes and everything they do. But we continue to be cautiously optimistic at the same time with the resiliency of our business, the nondiscretionary nature. And then really coming into tax time, the second part of your question, every tax season is a little bit different. It's normally a busy time for us. I think it's still yet to be seen as much positivity as there's been on just what those dollars could actually look like. We still kind of want to wait and see just kind of how that really plays out across the different income levels. We obviously have a very low-income to middle-income DIY consumer and then kind of a middle-income to higher-income DIFM consumer.
Speaker #5: Etc., though we did see some pretty good signs there in December as some winter weather started to kick in and things like that.
Speaker #5: But of the generally overall , Greg , I think we would categorize the consumer very , you know , similar to we have what still still cautious , you know , still watching expenditures and things like that with heightened inflation across , you know , everything homes and they do .
Brad Beckham: But we continue to be cautiously optimistic at the same time with the resiliency of our business, the nondiscretionary nature. And then really coming into tax time, the second part of your question, every tax season is a little bit different. It's normally a busy time for us. I think it's still yet to be seen as much positivity as there's been on just what those dollars could actually look like.
Speaker #5: But we continue to be cautiously optimistic at the same time with the resiliency of our business , the nature . And non-discretionary then really , you know , and then into tax coming time , second part of your question the , you know , every every tax season is a little bit different .
Speaker #5: It's a , you know , normally a busy time I us . think it's still yet to be as much positivity . There's been on just what those dollars could actually look like .
Brad Beckham: We still kind of want to wait and see just kind of how that really plays out across the different income levels. We obviously have a very low-income to middle-income DIY consumer and then kind of a middle-income to higher-income DIFM consumer. And so again, we just have to wait and see whether overall has been pretty conducive to business. And we're right all over the tax season here, so we'll see how it plays out.
Speaker #5: We we still kind of want to wait and see , know , just kind of how that really out across the plays different , different income levels .
Speaker #5: You know , we obviously have very low income to middle income DIY consumer and then kind of a middle income to higher income difm consumer .
Operator: And so again, we just have to wait and see whether overall has been pretty conducive to business. And we're right all over the tax season here, so we'll see how it plays out. Yeah. Just to jump in in case it cut out for anybody else, I think just to summarize where Brad was at on the initial part of your question, saw that some of what you talked about in third quarter as we moved into fourth quarter continued, I think, to see similar dynamics. They didn't accelerate from there. And I think as we kind of move through the quarter, we saw a little bit more of a leveling out to the point that we feel a little bit more like what we're seeing in the DIY business is more consistent with what we've seen over much of 2025 and 2026 or 2024 and 2025. Yeah.
Speaker #5: And so , you know , just have to wait and see , you know , whether again , we overall has been pretty conducive to business .
Jeremy Fletcher: Yeah. Just to jump in in case it cut out for anybody else, I think just to summarize where Brad was at on the initial part of your question, saw that some of what you talked about in third quarter as we moved into fourth quarter continued, I think, to see similar dynamics. They didn't accelerate from there. And I think as we kind of move through the quarter, we saw a little bit more of a leveling out to the point that we feel a little bit more like what we're seeing in the DIY business is more consistent with what we've seen over much of 2025 and 2026 or 2024 and 2025.
Speaker #5: And, you know, we're right all over the tax season here. So we'll see how it plays out.
Speaker #2: Yeah . And just to jump in in case they cut out for anybody else I think to just summarize where where Brad was at on the initial part of your question , saw that some of what you talked about in third quarter , as we moved into fourth quarter , you know , continue , I think , to see similar dynamics .
Speaker #2: They accelerate didn't from there . think as we And I kind of move through the quarter , you know , we saw a little bit that , leveling out to the point more of a you know , bit more like what we're seeing in the DIY business is consistent more with what we've seen over , over much of 2025 and 2026 or 2024 and 2025 .
Brent Kirby: Yeah. Greg, this is Brent. The only thing I would add in addition to what these guys have already said is they've outlined pretty well what we see. The other thing is, though, that we still saw what we feel like were pretty substantial share gains on both sides of the business, even in the quarter. So we feel like we're well-positioned for a challenging environment as well as a less challenging environment.
Operator: Greg, this is Brent. The only thing I would add in addition to what these guys have already said is they've outlined pretty well what we see. The other thing is, though, that we still saw what we feel like were pretty substantial share gains on both sides of the business, even in the quarter. So we feel like we're well-positioned for a challenging environment as well as a less challenging environment. Got it. And then just a clarification, the 600 basis points of same SKU inflation, if average ticket would have been up, say, 4% to 5% because you had fewer items in basket and mix, is that a fair way to summarize for Q? Yeah, that's correct. It's a little bit more of the mix of the basket than it is the pressure on items in the basket, although there's a little bit of that there.
Speaker #3: Yeah , Brent Greg , this is . The only thing I would add , in addition to what these guys have already said is , is , you know , they've outlined pretty well what we see .
Speaker #3: The other thing is , though , that we still saw feel like . We're pretty substantial share gains on both business , even in the what we quarter .
Greg Melich: Got it. And then just a clarification, the 600 basis points of same SKU inflation, if average ticket would have been up, say, 4% to 5% because you had fewer items in basket and mix, is that a fair way to summarize for Q?
Speaker #3: So we feel positioned, like we're well for, you know, a challenging environment as well as a less challenging environment.
Speaker #9: Got it . And then just to clarification , the the 600 bips of same skew inflation , if average ticket would have been up , say 4 to 5% because you had fewer items in basket and mix , is that a fair way to for Q summarize .
Jeremy Fletcher: Yeah, that's correct. It's a little bit more of the mix of the basket than it is the pressure on items in the basket, although there's a little bit of that there. Part of the mix question, too, is just the normal kind of differences in how different component pieces of the basket perform. We had a lot of kind of the maintenance types of categories that did really well in the quarter that are typically a lower ticket or a lower basket size type of transaction. So there's a little bit of that dynamic that's probably just the normal course of how mix can change quarter to quarter.
Speaker #2: Yeah , correct . It's a little bit more of the mix of the basket it than than it is the the that's the basket .
Operator: Part of the mix question, too, is just the normal kind of differences in how different component pieces of the basket perform. We had a lot of kind of the maintenance types of categories that did really well in the quarter that are typically a lower ticket or a lower basket size type of transaction. So there's a little bit of that dynamic that's probably just the normal course of how mix can change quarter to quarter. Got it. Thanks and good luck. Thanks, Greg. Thanks, Greg. Thank you. Your next question is coming from Zach Fadem from Wells Fargo. Your line is live. Hey, good morning. Just want to clarify on the comp guide, maybe ask in a slightly different way. We do have a couple feet of snow on the ground. We've got mid-single-digit inflation and largely expect a bigger than typical tax refund season.
Speaker #2: Pressure items in there’s a little bit of that. Their mix is part of the question too. It’s just the normal kind of differences in how different component pieces of the basket perform.
Speaker #2: We had a lot of the maintenance types of categories that did really well in the quarter, that are typically a lower ticket or a lower basket size type of transaction.
Greg Melich: Got it. Thanks and good luck.
Brent Kirby: Thanks, Greg.
Speaker #2: So there's a little bit of that that's dynamic, but that's probably just the normal of how mix can change for.
Jeremy Fletcher: Thanks, Greg.
Greg Melich: Thank you. Your next question is coming from Zach Fadem from Wells Fargo. Your line is live.
Speaker #9: Thanks and good luck .
Zach Fadem: Hey, good morning. Just want to clarify on the comp guide, maybe ask in a slightly different way. We do have a couple feet of snow on the ground. We've got mid-single-digit inflation and largely expect a bigger than typical tax refund season. So I just want to understand to what extent you are or are not incorporating these factors in your 3 to 5 guide.
Speaker #5: Thanks, Greg. Thanks, Greg.
Speaker #5: .
Speaker #1: Thank you. Next, your question is coming from Zach Fadem from Wells Fargo. Your line is live.
Speaker #10: morning . I just want to clarify on on the comp guide , maybe asking in a slightly different way , as we do have a couple feet of snow on the ground .
Operator: So I just want to understand to what extent you are or are not incorporating these factors in your 3 to 5 guide. Yeah. Hey, good morning, Zach. Thanks for the question. Yeah. We always say around here, we're much better at selling auto parts and kind of focusing on what we can control than we are predicting the future. But we spend a lot of time on this plan and feel really good about where we've landed, balancing out the opportunities with still yet some cautiousness on the consumer.
Speaker #10: We've got mid-single digit inflation and largely expect a bigger than typical tax refund season . So I just want to understand to what extent you are or are not incorporating these factors in your 3 to 5 guide .
Jeremy Fletcher: Yeah. Hey, good morning, Zach. Thanks for the question. Yeah. We always say around here, we're much better at selling auto parts and kind of focusing on what we can control than we are predicting the future. But we spend a lot of time on this plan and feel really good about where we've landed, balancing out the opportunities with still yet some cautiousness on the consumer. So, I think generally, I think, again, still yet to be seen on how weather plays out over a longer period of time, while we did have some good winter weather, to your point, here in the first part of the year, which really in our industry, the almost 30 years I've spent here, the extremes, long, tough winters and hot, hot summers obviously play out well for us over a long period of time.
Speaker #5: Yeah . Hey , good morning Zach . Thanks for the question . Yeah . You know , you know , we we always say around here we're we're much better at selling auto parts and kind of what we focusing on can control than we are predicting the future .
Speaker #5: But we spend a lot of time on this plan . And , you know , feel really good about where we've landed . Balancing out the the opportunities with still yet some cautious cautiousness on the consumer .
Operator: So, I think generally, I think, again, still yet to be seen on how weather plays out over a longer period of time, while we did have some good winter weather, to your point, here in the first part of the year, which really in our industry, the almost 30 years I've spent here, the extremes, long, tough winters and hot, hot summers obviously play out well for us over a long period of time. That said, there can be a lot of puts and takes in the short term with weather. Some of the weather that's hit some of our southern markets doesn't pay off in the mid to long term near as much as it does when the snowplows are on the road hard and heavy for months on end in some of the northern markets.
Speaker #5: you know , I So , think generally , you know , I think again , still yet to seen be on plays out over a weather longer period of time .
Speaker #5: While , you know , while we some good did have weather , to winter your point here , in the first part of the year , which , you know , really in our industry , the almost 30 years I've spent here , the on how know , long , extremes , you tough winters and and hot , hot summers , obviously play out well for us over a long period of time .
Jeremy Fletcher: That said, there can be a lot of puts and takes in the short term with weather. Some of the weather that's hit some of our southern markets doesn't pay off in the mid to long term near as much as it does when the snowplows are on the road hard and heavy for months on end in some of the northern markets. So some of those can be a little bit of a takeaway, and we'll just have to see if that really plays out beyond what it does the next couple of months. But generally speaking, Scot or Zach, again, we feel really good about our guidance, feel good about what we can control this year, but also still have a certain amount of cautiousness with all the pressure on the end consumer.
Speaker #5: That that lot of takes in the short can be a puts and term with weather . Some some of the weather that's hit some of our markets pay off in the mid to long term .
Operator: So some of those can be a little bit of a takeaway, and we'll just have to see if that really plays out beyond what it does the next couple of months. But generally speaking, Scot or Zach, again, we feel really good about our guidance, feel good about what we can control this year, but also still have a certain amount of cautiousness with all the pressure on the end consumer. Got it. And then as you think about the margin, good guys and maybe bad guys in 2026, at the gross margin line, maybe we could talk about magnitude of supply chain and distribution tailwinds on the do-it-for-me mix drag offset by Mexico potential benefit.
Speaker #5: As much as near southern, it doesn't—when do the snowplows are on the road. Hard and heavy for months on end. In some of the northern markets.
Speaker #5: some of So those can be a take away . And of a we'll just have to see if that really plays out . You know , does the next beyond what it couple months .
Speaker #5: But generally speaking , Scott or Zach , again , we feel really good about our guidance . You know , feel good about what we can control this year , but also still have a certain amount of cautiousness with all the pressure on the on the in consumer .
Zach Fadem: Got it. And then as you think about the margin, good guys and maybe bad guys in 2026, at the gross margin line, maybe we could talk about magnitude of supply chain and distribution tailwinds on the do-it-for-me mix drag offset by Mexico potential benefit. And then when you think through just the impact of health insurance and all these other factors, how long or to what extent are you incorporating those elevated levels as you think through 2026?
Speaker #10: Got it . And then as you about think the margin , good guys and maybe bad guys in margin line , maybe we could talk about supply chain and distribution the do it for me mix drag by Mexico potential benefit .
Operator: And then when you think through just the impact of health insurance and all these other factors, how long or to what extent are you incorporating those elevated levels as you think through 2026? Yeah. No, great questions. I'll try to make sure we kind of hit on all the points that you asked about there. We think about the gross margin, I guess, dynamics as we move through the year. Within kind of the context of how we think about the range of our gross margin, the magnitude of, I think, any of the individual drivers that are puts and takes either way are not as large as even that range. So we're talking about items that are typically 10 to 20 basis points, maybe a little bit higher than that in each of the pieces.
Speaker #10: And then through think when you offset just the impact of health and all insurance these other factors , how how long or to what extent are you incorporating those elevated levels as you think through 2026 ?
Jeremy Fletcher: Yeah. No, great questions. I'll try to make sure we kind of hit on all the points that you asked about there. We think about the gross margin, I guess, dynamics as we move through the year. Within kind of the context of how we think about the range of our gross margin, the magnitude of, I think, any of the individual drivers that are puts and takes either way are not as large as even that range. So we're talking about items that are typically 10 to 20 basis points, maybe a little bit higher than that in each of the pieces.
Speaker #2: Yeah, no great questions. I'll try to make sure we kind of hit on all the points that you asked about there.
Speaker #2: We think about the gross margin , I guess we move dynamics as through the within , you know , kind of the context of how we think about about the range of our gross margin , you know , the magnitude of , I think any of the individual drivers that are puts and takes either way not as as large as even , are that range .
Operator: But for sure, a decent size, I think, headwind from the professional business growing as fast as it did, particularly if you look at the Q3 and Q4 where that was heightened. But on the positive end, I would tell you, both, I think, positive drivers, I think the acquisition cost improvement is a little bit a larger piece of that than what we saw on the distribution side, but I think also meaningful efficiencies from a distribution perspective. When we look at just how that lays out for next year, I think knowing the gains that we've had this year and the opportunity to calendar those, we feel good about what our gross margin outlook is last year.
Jeremy Fletcher: But for sure, a decent size, I think, headwind from the professional business growing as fast as it did, particularly if you look at the Q3 and Q4 where that was heightened. But on the positive end, I would tell you, both, I think, positive drivers, I think the acquisition cost improvement is a little bit a larger piece of that than what we saw on the distribution side, but I think also meaningful efficiencies from a distribution perspective. When we look at just how that lays out for next year, I think knowing the gains that we've had this year and the opportunity to calendar those, we feel good about what our gross margin outlook is last year.
Speaker #2: So we're talking about items that are typically 10 to 20 basis points . You know , maybe a little bit higher than that in each of the pieces .
Speaker #2: But for sure , you know , a decent sized I think , headwind from the professional business growing as fast as it did , particularly if you look at the third and fourth quarters where heightened that was was .
Speaker #2: But but on the end positive , I you , would tell you know , both I think positive drivers , I think the acquisition cost improvements a little bit , a larger piece of that than what we saw on the on the distribution side .
Speaker #2: But I think also meaningful efficiencies from a distribution perspective when we when we look at just how that lays out for next year , I think knowing the the gains that we've had this year and the opportunity to to calendar those , we feel good about what our outlook is .
Operator: I think more cautious of what we're going to be able to gain there than what we saw in 2025, which is, I think, a great gross margin year for us, really on both of those, I think, pauses that you look at. And then just kind of the changing evolution of the Mexico business is a helper. It's probably more 4 or 5 basis points than it is a big change, but it is a delta that moves us. In terms of the question around how we're thinking about the cautiousness of pressure, that is, I think, on the SG&A side for some of the types of costs that I think have bit us here in the last couple of quarters, we do think that that's more heightened in the front half of the year.
Jeremy Fletcher: I think more cautious of what we're going to be able to gain there than what we saw in 2025, which is, I think, a great gross margin year for us, really on both of those, I think, pauses that you look at. And then just kind of the changing evolution of the Mexico business is a helper. It's probably more 4 or 5 basis points than it is a big change, but it is a delta that moves us. In terms of the question around how we're thinking about the cautiousness of pressure, that is, I think, on the SG&A side for some of the types of costs that I think have bit us here in the last couple of quarters, we do think that that's more heightened in the front half of the year.
Speaker #2: Last year , I I think think more cautious of of what we're going to be able to gain there than than what we we saw in think , a great , is , I gross margin year for us , really .
Speaker #2: On both of those, I think positives that, and then just kind of the changing evolution of the Mexico business, is a helper.
Speaker #2: It's probably more 4 or 5 basis points than it is a big change . But but it is a delta that moves this , you know , in terms of the question around that , you know , how we're the thinking about cautiousness of pressure .
Speaker #2: that is I You know , think , on SG&A side , the for some of the the the types of costs that I think have have bid us here in the last couple quarters , we that that's more heightened in the front half of the .
Operator: Brent mentioned that in his prepared comments, I think, as much as anything because the comparisons get a lot easier as you move into the balance of the year. But we do expect that as we think about how the year plays out for our SG&A guide, that we would see more pressure from a dollar perspective on payroll growth in the front part of the year, particularly Q1, than we would see kind of imbalance for the full year. Now, that does match up with how we think about the sales cadence as well that we've talked about. I know quite a bit on the call already this morning. And so we probably land in a place that's, from a leverage perspective, is a little bit more consistent quarter to quarter for our expectations of operating profit leverage, SG&A leverage.
Jeremy Fletcher: Brent mentioned that in his prepared comments, I think, as much as anything because the comparisons get a lot easier as you move into the balance of the year. But we do expect that as we think about how the year plays out for our SG&A guide, that we would see more pressure from a dollar perspective on payroll growth in the front part of the year, particularly Q1, than we would see kind of imbalance for the full year. Now, that does match up with how we think about the sales cadence as well that we've talked about. I know quite a bit on the call already this morning.
Speaker #2: mentioned Brent that in in his prepared comments . I think as much as anything , because the comparisons get a lot easier as you move into the balance of the year .
Speaker #2: But we do we do expect that as we think about how the year plays out for our our SG&A guide , that that that we would pressure see more a .
Speaker #2: Dollar from perspective on personal growth than in the front part of the year quarter . , particularly first Then we would see , you know , kind of in balance for the full Now that year .
Speaker #2: That does match up with how we think about the sales cadence as well, that we've talked about. I know quite a bit was covered on the call already this morning.
Jeremy Fletcher: And so we probably land in a place that's, from a leverage perspective, is a little bit more consistent quarter to quarter for our expectations of operating profit leverage, SG&A leverage. But for sure, kind of that thought process of how the dollars play out is going to be more pressured in the front part of the year.
Speaker #2: And so we probably land in a place that's, from a leverage perspective, a little bit more consistent quarter to quarter for our expectations of operating profit leverage, SG&A leverage.
Operator: But for sure, kind of that thought process of how the dollars play out is going to be more pressured in the front part of the year. Really appreciate the color. Thanks for the time. Thanks, Zach. Thanks, Zach. Thank you. Your next question is coming from Brian Nagel from Oppenheimer. Your line is live. Is Brian Nagel's in? Oh. Yeah, you're there. Sorry, the phone was cutting out there. I appreciate it. Look, I want to go back. I know we've discussed it a lot, but just the SG&A and SG&A per store guidance for 2026. The question I want to ask is, we've been talking about these elevated expenses for a while.
Zach Fadem: Really appreciate the color. Thanks for the time.
Speaker #2: But but but for sure kind of that that thought process of how the dollars play out is is is going to be more pressure in the front part of the year .
Jeremy Fletcher: Thanks, Zach.
Brad Beckham: Thanks, Zach.
Operator: Thank you. Your next question is coming from Brian Nagel from Oppenheimer. Your line is live.
Speaker #10: Really appreciate the color. Thanks for the time.
Speaker #3: Thanks .
Brian Nagel: Is Brian Nagel's in? Oh.
Speaker #5: Zach: Thanks, Zach.
Speaker #1: Thank you. Your next question is coming from Brian Nagle from Oppenheimer. Your line is live.
Jeremy Fletcher: Yeah, you're there.
Brian Nagel: Sorry, the phone was cutting out there. I appreciate it. Look, I want to go back. I know we've discussed it a lot, but just the SG&A and SG&A per store guidance for 2026. The question I want to ask is, we've been talking about these elevated expenses for a while. As you look beyond 2026, given how persistent these expenses have been, I mean, are you starting to identify more aggressively levers that could be pulled so that, okay, to the extent these pressures can continue, that internally O'Reilly can start to manage these costs better?
Speaker #11: Brian .
Speaker #2: Yeah , you're there .
Speaker #11: I think the phone was sorry the phone was cut I'm I appreciate it to go back . I know we discussed it a lot , but just , you know , the the CA and .
Speaker #11: for , for for 26 . The Look , I want want to ask is , you know , we've been talking about these elevated expenses for a while .
Operator: As you look beyond 2026, given how persistent these expenses have been, I mean, are you starting to identify more aggressively levers that could be pulled so that, okay, to the extent these pressures can continue, that internally O'Reilly can start to manage these costs better? Yeah. No, it's a great question, Brian. Interestingly, I think not new questions. I think part of what we've experienced over the course of the last year and the things that Brent lined out, some of the self-insurance cost pressures, those types of things around how we manage our vehicle fleet and team member expenses around healthcare and workers' comp, those types of items, it's been a big focus. A big part of how we run our business has been for a long, long time.
Speaker #11: Is , is you look beyond 26 . You know , given the how persistent these expenses have mean , been . I are you starting to identify even more aggressively leverage that could be pulled ?
Speaker #11: You . So okay . know , to the You extent these know , that these , these know , can continue that , pressures , you you know , internally or rather to manage , manage these costs better .
Jeremy Fletcher: Yeah. No, it's a great question, Brian. Interestingly, I think not new questions. I think part of what we've experienced over the course of the last year and the things that Brent lined out, some of the self-insurance cost pressures, those types of things around how we manage our vehicle fleet and team member expenses around healthcare and workers' comp, those types of items, it's been a big focus. A big part of how we run our business has been for a long, long time.
Speaker #11: can start
Speaker #2: Yeah . No , it's a it's a great question , Brian . And and you know , interestingly not I think not new
Speaker #2: questions . I think part of we've what experienced over the course of last year and the the things that that , that Brent lined out , you know , some of the , the , the self-insurance cost pressures , those types of things around how we manage our , our vehicle fleet in , in , in team member expenses around healthcare and , and and worker's comp , those types of items .
Operator: I think part of what we're running up against is it's been a pretty tightly and effectively controlled part of our cost structure for a long time. And so we've had some exposure, that is, inflation has really rolled in, and we've seen it that we don't have, I think, a lot of easy and quick levers to reduce what's something that has always been, I think, a key management item for us. Having said that, however, so many of these items are key items in stress and priority. And some of the things that we talk about from a technology perspective are things that we want to lean into to help us to manage safety and how we manage the overall value in what we're able to deliver from a team member benefits perspective.
Jeremy Fletcher: I think part of what we're running up against is it's been a pretty tightly and effectively controlled part of our cost structure for a long time. And so we've had some exposure, that is, inflation has really rolled in, and we've seen it that we don't have, I think, a lot of easy and quick levers to reduce what's something that has always been, I think, a key management item for us. Having said that, however, so many of these items are key items in stress and priority. And some of the things that we talk about from a technology perspective are things that we want to lean into to help us to manage safety and how we manage the overall value in what we're able to deliver from a team member benefits perspective.
Speaker #2: You know , it's it's been a big it's a big focus a big part of how we run our business has been for a long , long time .
Speaker #2: And I think part of what we're running up against is it's been pretty a tightly and and effectively controlled part of our cost structure for a long time .
Speaker #2: And so , so , you know , we've had some exposure that is , is inflation has really rolled in and we've seen it that we , that that you know , we don't have levers easy and quick a lot of to to reduce what has something always been .
Speaker #2: I think a key management item for us , having said that however , you know , so many of these items are are key items in stress and priority and some of the things that we talk about from a technology perspective are things that we want to lean into , to help us to , to manage safety and how we manage the overall value in we're able to deliver in what from a team member .
Operator: And so those things continue to be important pieces for us to manage and will be things, to your point, at a high level of attention. But they also have always been, I think, important parts of how we think about managing our business well. And so that's right, I think, the right outlook for you. But over the course of time, I think that gives us some confidence that not only does the market slow down and the inflation environment normalize a little bit there, but that we'll continue to work hard to do everything we can to mitigate that pressure. I appreciate it. Thank you. Thanks, Brian. Thanks, Brian. Thanks, Brian. Your next question is absolutely. Your next question is coming from Steven Zaccone from Citi. Your line is live. Great. Good morning. Thanks for taking my question.
Jeremy Fletcher: And so those things continue to be important pieces for us to manage and will be things, to your point, at a high level of attention. But they also have always been, I think, important parts of how we think about managing our business well. And so that's right, I think, the right outlook for you. But over the course of time, I think that gives us some confidence that not only does the market slow down and the inflation environment normalize a little bit there, but that we'll continue to work hard to do everything we can to mitigate that pressure.
Speaker #2: Benefits perspective . And so those things continue to be important pieces for us to will be things to to your point , at a , you know , get a high level of attention .
Speaker #2: But they're also have always been I think , important parts of of think about how we managing our business . Well . And so that's , that's right .
Speaker #2: I think the right outlook But over the course of time , I think that gives us some confidence that for you . not only does the market manage and down the inflation environment , you know , normalize a there , but that little bit continue we'll to work hard to do everything we can to mitigate that pressure .
Brian Nagel: I appreciate it. Thank you.
Jeremy Fletcher: Thanks, Brian.
Brad Beckham: Thanks, Brian.
Brent Kirby: Thanks, Brian.
Brian Nagel: Your next question is absolutely. Your next question is coming from Steven Zaccone from Citi. Your line is live. Great. Good morning. Thanks for taking my question.
Speaker #11: I appreciate it. Thank you.
Speaker #5: Thank you Brian .
Speaker #1: Your next question is absolutely . Your next question is coming from Steven Zaccone from Citi . Your line is live .
Operator: I want to follow up on the same SKU inflation. So can you just help us understand the cadence of the year a little bit more detail? Will the first quarter be similar to the level of same SKU inflation that you've had in the fourth quarter? And then someone asked earlier about this hypothetical of tariffs are reduced. How would that impact you from a timing of inventory perspective, right? If costs come down, would that more likely be like a second half of 2026 phenomenon at this point? Yeah, Steven, thanks for the questions. I think on the first part, and Brad talked about how we think about inflation cadence in his prepared comments, it's really mostly a function of what are we comparing against and what do we see in 2025? As you remember, first quarter was pretty muted in inflation.
Steven Zaccone: I want to follow up on the same SKU inflation. So can you just help us understand the cadence of the year a little bit more detail? Will the first quarter be similar to the level of same SKU inflation that you've had in the fourth quarter? And then someone asked earlier about this hypothetical of tariffs are reduced. How would that impact you from a timing of inventory perspective, right? If costs come down, would that more likely be like a second half of 2026 phenomenon at this point?
Speaker #12: Good morning. Thanks for taking my question. I wanted to follow up on the inflation. So, can you just help us understand the cadence of the year in a little bit more detail?
Speaker #12: Will the first quarter be similar to the level of same inflation that you had in the fourth quarter? And then, someone asked earlier about this hypothetical of tariffs or reduced...
Speaker #12: How would that impact you from a timing of inventory perspective? Right. You know, if costs come down, would that be more like a second half of ’26 phenomenon at this point?
Jeremy Fletcher: Yeah, Steven, thanks for the questions. I think on the first part, and Brad talked about how we think about inflation cadence in his prepared comments, it's really mostly a function of what are we comparing against and what do we see in 2025? As you remember, first quarter was pretty muted in inflation. I think it was maybe 0.5 point. So we would expect to see a similar level of same-SKU. We'll ultimately have to see how it plays out. Some of that can be impacted by just the mix of things that you sell, too, in terms of the magnitude of some of those cost changes.
Speaker #2: Yes the questions . I think on the first part , you know , and Brad talked about the how we think inflation cadence comments .
Speaker #2: prepare and is It's really mostly a function of what of are we comparing against and what do we see in 2025 . And if you remember first quarter was pretty muted in inflation .
Operator: I think it was maybe 0.5 point. So we would expect to see a similar level of same-SKU. We'll ultimately have to see how it plays out. Some of that can be impacted by just the mix of things that you sell, too, in terms of the magnitude of some of those cost changes. But when we think about where price levels sit now and understanding that the turn of that same-SKU benefit will benefit us more in the first half than the second half, that's kind of that thought process that as we start to move up against periods where we realize a benefit in 2025, think about it on maybe a stacked basis, you're going to have similar results. But kind of the declining benefit as you move through the next year. What was the second part of that? And tariffs.
Speaker #2: I think it was maybe a half a point . So we would expect to see a similar level of of of same skew ultimately have to see how it plays out .
Jeremy Fletcher: But when we think about where price levels sit now and understanding that the turn of that same-SKU benefit will benefit us more in the first half than the second half, that's kind of that thought process that as we start to move up against periods where we realize a benefit in 2025, think about it on maybe a stacked basis, you're going to have similar results. But kind of the declining benefit as you move through the next year. What was the second part of that? And tariffs.
Speaker #2: that can be impacted Some of by mix of things that you sell to . In terms of the magnitude of some of those cost changes .
Speaker #2: But but when we think about where price levels sit now and understanding that the that same skew benefit will benefit us more in the first half than the than the second half , that's kind of that thought process we start that as to move up against periods we , where we realize the benefit in 2025 .
Speaker #2: On to think about it on maybe a stacked basis, to have results. But you're going to have kind of the declining benefit as you move through the similar next year.
Operator: Oh, in terms of how we think about the tariff impact flowing through from a cost perspective, that being a LIFO reporter, and we've been, I think, pretty straightforward over the course of the last few years in just talking about what we see reflected in our gross margin results and our cost of goods sold line, is more akin to what the current costs look like. So to whatever extent that we see cost reductions, they typically will show up pretty quickly within our gross margin results. And so that's kind of the right way to think about sort of that tariff cadence that we might see in 2026. Again, with, I think, the note that Brent made earlier that we anticipate a pretty stable environment there.
Jeremy Fletcher: Oh, in terms of how we think about the tariff impact flowing through from a cost perspective, that being a LIFO reporter, and we've been, I think, pretty straightforward over the course of the last few years in just talking about what we see reflected in our gross margin results and our cost of goods sold line, is more akin to what the current costs look like. So to whatever extent that we see cost reductions, they typically will show up pretty quickly within our gross margin results. And so that's kind of the right way to think about sort of that tariff cadence that we might see in 2026. Again, with, I think, the note that Brent made earlier that we anticipate a pretty stable environment there.
Speaker #2: second part of that .
Speaker #3: The tariffs .
Speaker #2: Oh , you know , in terms of , of of how about we think the from a tariff flowing through impact cost that's , that perspective that , you know , lifeboat being a reporter and we've been , I straightforward over the think pretty course of the of the last few years .
Speaker #2: talking what what we see about reflected in In just our gross margin results and our cost of goods sold . Line is , is , is more akin to what the current costs look like .
Speaker #2: So to whatever extent see cost reductions, they typically will show up pretty quickly within that, we, our gross margin. And so that's the right way about to think kind of, sort of, that results.
Speaker #2: cadence , you know , that we might see in 2026 . Again , with I think the note that that Brent made earlier that that we we anticipate a pretty stable environment there .
Operator: We might see some changes, but ultimately, we think that there are other methods by which the administration will have to execute what they want to do from a tariff landscape. Okay. Then the follow-up I had, Steve, asked earlier about going into the Northeast. Can you just help us understand where you are from a market share perspective, maybe DIFM in the Mid-Atlantic and Northeast versus where you are from a market share perspective in some of your mature markets? How do you see the pace of that sales lift happening over the next couple of years now that this DC is opening and there's probably more to come? Yeah. No, great, great question, Steven. Well, the good news is with us in our industry, if we work in this $170 billion industry, we have roughly 10% share. So maybe surprisingly, maybe not so much for others.
Jeremy Fletcher: We might see some changes, but ultimately, we think that there are other methods by which the administration will have to execute what they want to do from a tariff landscape.
Speaker #2: You know , we might see some changes , but ultimately that there are other methods by which the administration will have to to we think execute what they want to do from a tariff landscape .
Steven Zaccone: Okay. Then the follow-up I had, Steve, asked earlier about going into the Northeast. Can you just help us understand where you are from a market share perspective, maybe DIFM in the Mid-Atlantic and Northeast versus where you are from a market share perspective in some of your mature markets? How do you see the pace of that sales lift happening over the next couple of years now that this DC is opening and there's probably more to come?
Speaker #12: Okay . up I Then the follow had , Steve asked earlier about , you know , going into the us can you northeast , just help understand , you know , where you where you are from a market share perspective , maybe and like the Mid-Atlantic and northeast versus where where you are from a difm market share perspective and some of your mature markets , you know , how do you see the pace of that sales lift happening over the next couple of years out of this DC opening ?
Brad Beckham: Yeah. No, great, great question, Steven. Well, the good news is with us in our industry, if we work in this $170 billion industry, we have roughly 10% share. So maybe surprisingly, maybe not so much for others. Even when you look at our most mature markets, it's not the difference in having a 5% share and a 50. It's even when I look at our business here in Missouri or Oklahoma, Kansas, Arkansas, down in Texas, we still have so much market share to go get. And so the differences aren't near what you might think. Now, we've operated kind of in that core of the Mid-Atlantic, the Carolinas, up into Virginia, kind of southern part of Virginia, like Roanoke from the west over to Richmond over to Virginia Beach.
Speaker #12: And then probably more come, too?
Speaker #5: No . Yeah . Great great , great , Stephen . Well , the good news is , you question know , with us and our industry , you know , if we work in $170 billion , this you know , industry , we have roughly 10% share .
Operator: Even when you look at our most mature markets, it's not the difference in having a 5% share and a 50. It's even when I look at our business here in Missouri or Oklahoma, Kansas, Arkansas, down in Texas, we still have so much market share to go get. And so the differences aren't near what you might think. Now, we've operated kind of in that core of the Mid-Atlantic, the Carolinas, up into Virginia, kind of southern part of Virginia, like Roanoke from the west over to Richmond over to Virginia Beach. We've been in those markets for many, many years. They were just more on the edge of where Greensboro would effectively service. And so those markets, along with the North Carolina type market, we would be a little bit more mature, but still immature overall.
Speaker #5: So surprisingly maybe surprisingly , maybe not so much for others . You know , even when you at our most mature markets , it's not the difference in , you know , having a 5% share in a 50 , you know , it's it's , you know , when I look at , you know , our business here in Missouri or Oklahoma , Kansas , Arkansas , down in Texas , you know , we still have so much to go market share get .
Speaker #5: so the And the differences aren't near what you might think . Now , look you know , operated kind of in that core of the we we've Mid-Atlantic .
Speaker #5: The up into Virginia , kind of southern part of Virginia , like the , you know , Roanoke from the west Carolinas over to Richmond , over to Virginia Beach .
Brad Beckham: We've been in those markets for many, many years. They were just more on the edge of where Greensboro would effectively service. And so those markets, along with the North Carolina type market, we would be a little bit more mature, but still immature overall. It would be a lot closer to our average 10% share than it would be some dominant position in terms of big percentage. And so, we don't necessarily disclose by market what our penetration is, but the markets that as you get up into northern Virginia and you look around the DC metro and you look at Baltimore, and obviously, as you get into Philly and New York, we don't have any presence. And so it would be it would be a zero and all opportunity for us.
Speaker #5: We've been in those markets for many, many years. They were just more on the edge of where Greensboro would effectively service.
Speaker #5: And so , you know , those markets with the North even Carolina type market , you know , we would be a little bit more mature , but still immature overall .
Operator: It would be a lot closer to our average 10% share than it would be some dominant position in terms of big percentage. And so, we don't necessarily disclose by market what our penetration is, but the markets that as you get up into northern Virginia and you look around the DC metro and you look at Baltimore, and obviously, as you get into Philly and New York, we don't have any presence. And so it would be it would be a zero and all opportunity for us. But really, all that's going to depend on our ability to execute our business model, do well on both sides of the business. And all that happens only by building really great teams at the store level, the sales force, all those things.
Speaker #5: It would be a lot closer to our average , you know , 10% share than it would be some dominant position in terms of big percentage .
Speaker #5: And so we don't necessarily market , you know , disclose by what our penetration But you know , the markets that as you get up into Northern Virginia and you look around the DC metro and you look at Baltimore and obviously as you get Philly , in New York , we don't have any presence .
Brad Beckham: But really, all that's going to depend on our ability to execute our business model, do well on both sides of the business. And all that happens only by building really great teams at the store level, the sales force, all those things. We still have a tremendous opportunity in that market, but we still have a tremendous opportunity from a share perspective, even in our most mature markets.
Speaker #5: And so it would be , you know , it would be a zero , an all opportunity us for know . , really all that's But , you going to depend on our ability to execute our model , do well on both sides of the business .
Operator: We still have a tremendous opportunity in that market, but we still have a tremendous opportunity from a share perspective, even in our most mature markets. Okay. Thanks for the detail. Thank you. We've reached our allotted time for questions. I'll now turn the call back over to Mr. Brad Beckham for closing remarks. Thank you, Matthew. 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 our call today, and we look forward to reporting our first quarter results in April. Thank you. 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.
Speaker #5: And all that happens only by building really great teams at the store level . The sales force , all those things . And so we still have a tremendous opportunity in that market , but we still have a tremendous opportunity a share perspective , even most in our mature markets .
Steven Zaccone: Okay. Thanks for the detail.
Operator: Thank you. We've reached our allotted time for questions. I'll now turn the call back over to Mr. Brad Beckham for closing remarks.
Speaker #12: Okay. Thanks for the detail.
Brad Beckham: Thank you, Matthew. 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 our call today, and we look forward to reporting our first quarter results in April. Thank you.
Speaker #1: Thank you. We've reached our allotted time for questions. I'll now turn the call back over to Mr. Brad Beckham for closing remarks.
Speaker #5: Matthew, thank you. I would like to conclude our today by call we the entire thanking O'Reilly team for your continued to our customers. I would like to thank everyone for joining our call today, and we look forward to reporting our first quarter results in April.
Operator: 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.
Speaker #5: Thank you .
Speaker #1: Thank you. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day.