O'Reilly Automotive (NASDAQ:ORLY) executives said the company closed 2025 with a strong finish and entered 2026 with expectations for continued growth, while also acknowledging meaningful cost pressure tied largely to self-insurance and healthcare expenses.
Fourth-quarter and full-year 2025 results
CEO Brad Beckham said O’Reilly posted a 5.6% comparable store sales increase in the fourth quarter, bringing full-year 2025 comparable store sales growth to 4.7%, which he described as the high end of the company’s revised guidance range of 4% to 5%.
For profitability, management reported:
- Full-year operating profit: $3.5 billion, up 6.4% from 2024
- Operating margin: 19.5% for 2025, flat versus the prior year and at the midpoint of guidance
- Fourth-quarter diluted EPS: $0.71, up 13% year over year
- Full-year EPS: $2.97, up 10% from 2024
Beckham also said 2025 marked the company’s 33rd consecutive year of annual comparable store sales increases, alongside record revenue, operating income, and earnings per share.
Sales drivers: Professional strength, steadier DIY trends
Management again pointed to the professional side of the business as the primary growth engine. Beckham said professional comparable sales were up over 10% for the second consecutive quarter, while DIY comparable sales were positive in the low single digits.
Ticket size was a key driver. Beckham said average ticket growth was mid-single digits on both sides of the business, driven by same-SKU inflation of approximately 6% in the quarter, partially offset by product mix. He said tariff-driven acquisition cost increases had ramped in the third quarter, but that inflation in the fourth quarter “leveled out” and was consistent month to month, which management viewed as evidence of a stable pricing environment.
Transaction counts were also positive overall in the fourth quarter, fueled by professional growth, though DIY transaction counts remained modestly pressured. Beckham said discretionary DIY categories such as appearance and accessories were most affected, but he characterized overall DIY trends as consistent with prior quarters and said the company did not see heightened consumer weakness beyond what it had already observed.
Beckham added that December was slightly stronger than October and November, helped by winter weather-related categories and continued strength in maintenance-related categories. Management described winter weather trends as typical and consistent with last year, including early 2026.
Margin performance and expense headwinds
President Brent Kirby said fourth-quarter gross margin was 51.8%, up 49 basis points from the fourth quarter of 2024, and above expectations. For the full year, gross margin was 51.6%, up 39 basis points and in the top half of guidance.
Kirby attributed gross margin performance to supply chain execution, distribution efficiencies, and store-level execution, including managing pricing and acquisition costs in a rapidly evolving cost environment. For 2026, O’Reilly guided gross margin to 51.5% to 52%, which at the midpoint implies modest expansion versus 2025, even as faster growth in professional sales is expected to remain a headwind to mix.
On expenses, Kirby and CFO Jeremy Fletcher highlighted cost pressure from self-insurance and related areas. Fourth-quarter SG&A as a percentage of sales was 33.0%, down 25 basis points year over year, though management noted the comparison benefited from a $35 million reserve adjustment charge in fourth-quarter 2024 tied to historic auto liability claims.
Kirby said SG&A leverage was below expectations in the quarter as per-store SG&A rose 3.3%, driven primarily by elevated inflation in self-insurance programs, including team member healthcare, workers’ compensation, general claims expense, litigation costs, and auto liability reserves. Full-year 2025 per-store SG&A rose 4%, finishing 0.5 point above the full-year guide due to the same drivers.
In Q&A, Fletcher said the inflation in these lines had persisted longer than expected, describing it as “increases on top of increases,” and said the company maintained a cautious posture for 2026. He also pointed to higher depreciation as capital spending has increased, along with ongoing technology investments.
2026 outlook: steady industry, investments and expansion
For 2026, the company set comparable sales guidance of 3% to 5%. Beckham said management views the automotive aftermarket backdrop as relatively stable, with continued consumer incentives to repair and maintain existing vehicles. He cited an approximate 1% increase in total miles driven over the last two years and expects steady growth supported by a growing car park.
Management expects average ticket growth to be supported primarily by same-SKU inflation, which the company anticipates will be similar to 2025’s level of just under 3% for the year on both sides of the business. Beckham said the company expects more of the inflation benefit to occur in the first half of 2026 as the inverse of 2025’s timing, with the back half seeing more muted inflation and greater contribution from parts complexity. The guidance assumes no incremental changes in tariffs beyond current conditions, though executives said the industry has historically been rational and disciplined in pricing behavior.
O’Reilly guided 2026 total revenues to $18.7 billion to $19.0 billion and EPS to $3.10 to $3.20, with Fletcher noting an expected headwind of about $0.04 from a higher effective tax rate. The company expects a full-year 2026 effective tax rate of 22.6%.
Kirby said O’Reilly expects per-store SG&A growth of 3% to 4% in 2026, with a cautious view that self-insurance and legal costs could remain pressured. The company’s operating profit guidance range is 19.2% to 19.7%, roughly in line with 2025 at the midpoint.
On investment and growth, management outlined higher capital spending and an acceleration in store growth:
- 2025 CapEx: just under $1.2 billion
- 2026 CapEx guidance: $1.3 billion to $1.4 billion
- 2026 net new store target: 225 to 235, about 25 more than 2025
Beckham said the 2026 plan includes a step up in U.S. openings and growth in Mexico similar to the 25 stores added there in 2025. The company also opened its first greenfield location in Canada in the fourth quarter of 2025 and expects a handful of 2026 openings in Canada.
Kirby highlighted supply chain expansion, including the opening of a new distribution center in Stafford, Virginia in the fourth quarter, which executives said positions the company to pursue growth in the Mid-Atlantic I-95 corridor. The company also continues work on a distribution center in Fort Worth, Texas, expected to be operational in Q1 2028. In Q&A, Beckham said the company views the Mid-Atlantic buildout similarly to other expansion markets, combining greenfield growth and potential acquisitions, while emphasizing the advantages of its hub-and-spoke and delivery model as density increases.
Inventory per store ended 2025 at $870,000, up 9% year over year, and management expects per-store inventory to rise about 5% in 2026. Fletcher said 2025 free cash flow was $1.6 billion versus $2.0 billion in 2024, citing accelerated payment timing for renewable energy tax credits and higher CapEx, and he guided 2026 free cash flow to $1.8 billion to $2.1 billion.
Fletcher said the company repurchased 23 million shares in 2025 at an average price of $92.26 for $2.1 billion, and ended the year with an adjusted debt-to-EBITDA ratio of 2.03x, below its 2.5x leverage target.
About O’Reilly Automotive (NASDAQ:ORLY)
O’Reilly Automotive, Inc is a leading retailer and distributor in the automotive aftermarket, supplying parts, tools, supplies and accessories for both professional service providers and do‑it‑yourself (DIY) customers. The company’s product assortment covers replacement parts, maintenance items, performance parts, collision components and shop equipment, complemented by diagnostic tools, batteries, chemicals and consumables. O’Reilly serves customers through company-operated retail stores, commercial sales programs for repair shops and maintenance fleets, and digital channels that support parts lookup, ordering and fulfillment.
The company operates a broad supply chain that includes regional distribution centers to support rapid replenishment of store inventory and commercial deliveries.
