O’Reilly Automotive, Inc.

This is our first report on O’Reilly Automotive, Inc., one of the largest retailers of automobile aftermarket parts in the U.S. O’Reilly Automotive had a great last quarter and ended 2022 with an all-around beat. The company reported strong sales volumes and the management claims that the core fundamental demand drivers are still strong, which supports the health of the automotive aftermarket. DIY and professional businesses showed strength. Their high average ticket increase contributed to the improved performance in their DIY division, which accelerated on a 1, 2, and 3-year comparable store sales growth basis. The tremendous traffic growth in the previous two years made it difficult to compare DIY ticket counts to their comp growth. However, sequential improvements in the fourth quarter exceeded the company’s expectations and continued the trend from the third quarter. Furthermore, the average ticket size increased in the high single digits, mostly due to the same SKU inflation’s mid-single-digit growth, with a benefit from rising part complexity as well as bettering the quality and design of new parts. We initiate coverage on the stock of O’Reilly Automotive with a ‘Hold’ rating.