During today's conference call, we will discuss our third quarter 2025 results and our outlook for the remainder of the year. Team O'Reilly continues to win in each of our markets, and our team's dedication to excellent customer service drove the solid comparable store sales increase of 5.6% we generated in the third quarter. The combination of our strong sales results with a 9% increase in operating income and a 12% increase in diluted earnings per share demonstrate our team's focus on driving profitable growth. Our professional business continues to be the more significant driver of our sales results with an increase in comparable store sales of just over 10%.
We continue to be pleased with the strength in our pro-ticket count growth, which was the primary driver of our professional comp increase and the biggest contributor to our outperformance relative to our expectations. We remain confident that the professional sales growth our teams are delivering is the result of share gains, and as we continue to be the supplier of choice for our professional customers. As we've anticipated coming into the third quarter, we saw a significant ramp in tariff-driven acquisition cost increases and made appropriate adjustments to selling prices. When looking at category dynamics on the professional side of our business, we are seeing very strong performance across both failure and maintenance-related categories and are pleased with the resiliency of customer demand.
Now I would like to provide some color on our updated full-year comparable store sales guidance. As noted in yesterday's press release, we updated our guidance from the previous range of 3%-4.5% to a range of 4%-5%. At the midpoint, our full-year range reflects our outlook when factoring in current sales volumes as we progress through September and thus far into October. Today, I will start by discussing our third quarter gross margin and SG&A results, as well as provide an update on capital expansion and our updated outlook on these items.
| Metric | Period | Current guidance |
|---|---|---|
| Comparable store sales | FY2025 | 4%-5% (Raised) |
| Same-skew inflation benefit | Q4 2025 | Mid-single-digit (New) |
| Gross margin | FY2025 | 51.2%-51.7% (Maintained) |
| SG&A per store growth | FY2025 | At or slightly above the top end of 3.5% (Raised) |
| Operating margin | FY2025 | 19.2%-19.7% (Maintained) |
| Net new store openings | FY2025 | 200-210 (Reaffirmed) |
| Net new store openings | FY2026 | 225-235 (including U.S., Mexico, Puerto Rico, and Canada) (New) |
| Metric | YoY | Note |
|---|---|---|
| Comparable store sales | +5.6% | Professional comps just over 10% on ticket-count-driven share gains, plus average ticket benefits from same-skew inflation, partially offset by DIY ticket-count pressure. |
| Operating income | +9% | Strong sales performance with disciplined expense management. |
| Diluted EPS | +12% | Operating income growth combined with share repurchase benefit. |
| Gross margin | +27 bps to 51.9% | Prudent supply chain management and distribution productivity offsetting the professional customer-mix headwind. |
| Professional comparable store sales | + just over 10% | Pro-ticket count growth and broad-based share gains across market areas. |
| Same-skew inflation | just over 4% | Significant ramp in tariff-driven acquisition cost increases with corresponding selling price adjustments, felt evenly on both sides of the business. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Tariff-driven inflation | — | Just over 4% same-skew inflation in Q3 with a significant tariff-driven cost ramp; mid-single-digit benefit expected in Q4; management believes the lion's share of cost impacts is now reflected | Peaking |
| DIY consumer / price elasticity | DIY in line with expectations in July after June pressure | Modest mid-quarter pressure to DIY ticket counts and deferral of larger-ticket jobs, viewed as early short-term reaction; no trade-down observed | Softening |
| Professional business strength | — | Very strong across failure and maintenance categories; professional customers less economically constrained and less reactive to inflation | Resilient |
| Store expansion / international | 2025 target of 200-210 stores | 2026 target of 225-235 net new stores, with Canada expansion starting in 2026 and continued measured growth in Mexico | Accelerating |
| Supplier health / First Brands | — | Industry supplier health described as best since the pandemic; First Brands is a bit more than 3% of COGS, mitigated by dual/triple/quadruple sourcing and over 50% proprietary brand revenue | Stable |
| SG&A / cost inflation | Elevated SG&A per store for roughly two years | Q3 SG&A per store up 4% on medical and casualty insurance inflation; full-year now at or slightly above top end of 3.5% guide | Elevated |