O’Reilly Automotive, Inc. (NASDAQ:ORLY) Q3 2023 Earnings Call Transcript

And we’re hopeful that as we continue to get more aggressive in the upper mid-Atlantic and the true northeast that some of our other opportunities come to light.

Brad Beckham: Yes. And Brett, I would just add maybe on the distribution and supply chain side of things, certainly the the exciting news about our Stafford facility that I talked about in my prepared comments, we’re super excited about getting another large DC in the Mid-Atlantic. We see that as a big, untapped geography for us. And we’re certainly investing to begin to take more advantage of that opportunity. And when you think about our distribution infrastructure, for us, it’s something we’re constantly looking at. And talked about the strength of where our DCs are located and, our DCs are where the cars are, where the people are, and we don’t see that as an opportunity necessarily to, use 3PLs or, we want to own that. We want to run it.

We want to operate it the way we always have. And we’re always looking at hub store opportunities and how they augment the tiering of our DCs and where they are and how we can, be first in class in every market that we operate in in terms of parts availability. So we’re going to continue to do that. We certainly see that that geography as a continued opportunity moving forward.

Brett Jordan: All right. Thank you.

Jeremy Fletcher: Yes. Thank you.

Brad Beckham: Thanks Brett.

Brent Kirby: Thanks Brett.

Operator: Your next question for today is coming from Daniel Imbro from Stephens.

Daniel Imbro: Yes. Hey, good morning, everybody. Thank you for taking our questions.

Jeremy Fletcher: Good morning, Daniel.

Daniel Imbro: Follow-up on Brett question about [indiscernible] here. Just curious how’s the onboarding of the new customer progress? Any hiccups or learnings? Has he won so much business so quickly that any bottlenecks are limiting growth? Is that kind of behind some of these infrastructure investments you guys are talking about?

Jeremy Fletcher: Yes, maybe I’ll start there. This is Jeremy and a little bit of interference on your sound. But I think the question really focuses around what, what have we learned as we’ve, as we’ve seen the share accelerate within our business in how is that impacting how we move forward? For sure, the increase volume that we’re picking up, those are completely new customers that are unfamiliar to us in the markets that we’re in. Every market we exist in, we spend on the professional side of our business, considerable amount of time understanding the market, understanding the shop’s formulas, relationships. For us, the focus is always on how do we create value for those customers? How do we ensure that we’re partnering with their businesses to help them be successful even as we grow business?

For sure, as we’ve seen more and more opportunities to earn business over the course of really the last several years during the course of the pandemic, but especially as we’ve seen the ability to grow on top of growth with those customers, our touch points when we get that extra opportunity to provide outstanding service are just critical to being able to compound that growth. And I think as much as anything, what we’ve seen as we move through the last several quarters is our ability to provide excellent service to really to demonstrate the values that Brad talked about earlier, that we can provide excellent service, great informed technical people within our stores that understand the business can support the work of our professional customers, incredible parts availability, and just a broader support has provided an excellent value and continues to give us more and more opportunities.

Daniel Imbro: That’s helpful. And maybe I want to dig into the SG&A spend a little bit more. Are there any specific initiatives you can unpack around maybe what you’re spending on, whether it’s tech for your professional customers or delivery efficiency? Does anything need to help on that or clarify what you’re spending on so we can better understand how it’s driving sales? Thanks.

Jeremy Fletcher: Yes, I mean, I think that the general things that we’ve talked about are similar to how we’ve spoken to this item throughout throughout the course of the year. And we’re always, I guess, somewhat reluctant to get too far down in the weeds. We think they’re great investments for our company. And we, just competitively, we want to see them play out for a long period of time. But for sure, we’ve made a concerted effort to continue to invest within our team. And we’ve talked about enhanced benefits, PTO and 401-K improvements, and just more broadly how we think about how our store managers manage their work week and things along those lines. We continue to invest in the image and appearance of our stores and our fleet vehicles and ensuring that we get the safest vehicles on the road possible.

And then technology continues to be a huge ongoing investment as we think about all the areas of the business where we can bring better tools online to support the work that our store teams are doing and taking care of our customers.

Daniel Imbro: Fair enough. [indiscernible] and best of luck.

Jeremy Fletcher: Thanks Daniel.

Operator: Your next question for today is coming from Zach Fadem from Wells Fargo.

Zach Fadem: Hey, good morning, guys. I think we’re getting a lot of mixed data points on the state of the industry. And putting your outperformance aside for a minute, curious to hear if you think the broader category is slowing or not? And to what extent the impact of a broader consumer slowdown would have on the aftermarket?

Brad Beckham: Yes. Hey, Zach, it’s Brad. I’ll take a stab at that. And then I may flip it over to Brent to talk generally about what we’re seeing and not seeing on some of those fronts. But generally speaking, Zach, we’re just not seeing that. As part of our results, as you can imagine, it’s just hard for us to say that we’re really seeing that. When I look at, our positive DIY ticket count that I cited in our prepared comments, I mean, that’s, that’s encouraging for us. We’re very excited about the execution of our teams on the DIY side, as well as the, as well as the professional side, when I review the, the data that comes in every week from our sales team on the professional side, we have all our comments and sales call recaps that come through our CRM.