O'Reilly Automotive Inc. Reports Operating Results (10-Q)
O Reilly Auto has a market cap of $13.04 billion; its shares were traded at around $103.13 with a P/E ratio of 24.9 and P/S ratio of 2.3. O Reilly Auto had an annual average earning growth of 19.1% over the past 10 years. GuruFocus rated O Reilly Auto the business predictability rank of 5-star.
Highlight of Business Operations:Sales for the first quarter ended March 31, 2012, increased $147 million to $1.53 billion from $1.38 billion for the same period one year ago, representing an increase of 11%. Comparable store sales for stores open at least one year increased 7.4% and 5.7% for the first quarters ended March 31, 2012 and 2011, respectively. Comparable store sales, adjusted for the impact of one additional day during the first quarter ended March 31, 2012, as a result of Leap Day, increased 6.1% versus 5.7% for the first quarter ended March 31, 2011. Comparable store sales are calculated based on the change in sales of stores open at least one year and exclude sales of specialty machinery, sales to independent parts stores and sales to Team Members.
Gross profit for the first quarter ended March 31, 2012, increased to $762 million (or 49.8% of sales) from $670 million (or 48.4% of sales) for the same period one year ago, representing an increase of 14%. The increase in gross profit dollars was primarily a result of the increase in sales from new stores and the increase in comparable store sales at existing stores. The increase in gross profit as a percentage of sales was primarily due to distribution center efficiencies, acquisition cost improvements, a more focused advertised price strategy and improved inventory shrinkage. Distribution center efficiencies are the result of leverage on our increased sales volumes, more tenured and experienced distribution center (DC) Team Members in our maturing DCs and the absence in the current period of CSK store related inventory changeover activities, which were completed during 2011. Acquisition cost improvements are the result of our ongoing negotiations with our vendors to improve our inventory purchase costs. The benefit to gross margin from a more focused advertised price strategy is the result of shorter duration, low margin promotions in the current period designed to drive customer loyalty, build brand awareness and generate future business as compared to the same period last year. The improved shrinkage is driven by continued, strong field operational performance supported by our robust point-of-sale system, which provides our store managers with important tools to track and control inventory, resulting in improved inventory shrinkage.
Selling, general and administrative expenses (SG&A) for the first quarter ended March 31, 2012, increased to $514 million (or 33.6% of sales) from $473 million (or 34.2% of sales) for the same period one year ago, representing an increase of 9%. The increase in total SG&A dollars was primarily the result of additional employees, facilities and vehicles to support our increased store count, partially offset by a lower level of advertising costs. The decrease in SG&A as a percentage of sales was primarily the result of increased leverage of store occupancy and headquarter costs on strong comparable store sales, lower utility and other occupancy costs due to milder winter weather in most of our markets during the current period as compared to the same period last year and leverage on our advertising spend resulting from effectively utilizing a national advertising platform, partially offset by higher store level payroll as we increase our store staffing hours in our ongoing efforts to improve customer service.
Total other expense for the first quarter ended March 31, 2012, decreased to $8 million (or 0.5% of sales) from $30 million (or 2.2% of sales) for the same period one year ago, representing a decrease of 75%. The decrease in total other expense for the year was primarily due to one-time charges related to our financing transactions that were completed in January of 2011 (discussed in detail below), partially offset by increased interest expense on higher average outstanding borrowings in the current period as compared to the same period one year ago.
Our provision for income taxes for the first quarter ended March 31, 2012, increased to $92 million (or 6.0% of sales) from $64 million (or 4.6% of sales) for the same period one year ago, representing an increase of 45%. The increase in our provision for income taxes was due to the increase in our taxable income. Our effective tax rate for the first quarter ended March 31, 2012, was 38.5% of income before income taxes compared to 38.3% for the same period one year ago. The increase in the effective tax rate was primarily the result of the expiration of certain federal income tax credit statutes.
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