During today's conference call, we will discuss our fourth quarter and full year 2025 results and our outlook for 2026. We finished the year with a comparable store sales increase of 5.6% in the fourth quarter, which brought our full year comp for 2025 to 4.7%. The 4.7% was at the high end of our revised guidance range of 4%-5% and above the expectations we set in our initial guidance coming into 2025. Our strong comparable store sales performance, coupled with the continued successful execution of our new store expansion, drove a total sales increase of 6.4% to $17.8 billion.
To provide some perspective, our 2025 sales reflect an increase of over 50% in total sales volume over the last five years, representing growth of over $6 billion since 2020. For the full year, we generated operating profit of $3.5 billion, a 6.4% increase over 2024. On a percentage of sales basis, our 2025 operating profit of 19.5% was flat to the prior year and right at the midpoint of the guidance range we maintained throughout 2025. We believe our continued sales growth trends reflect share gains won by consistently executing our proven business model while also delivering incremental improvements to further differentiate our service from the competition.
We will continue to prioritize these initiatives to lean into our business to sustain our growth momentum. During the fourth quarter, we generated diluted earnings per share of $0.71, which represents an increase of 13% over the prior year. For the full year, we generated EPS of $2.97, which was an increase of 10% over 2024. As we noted in yesterday's press release, our 2025 results represent our 33rd consecutive year of annual comparable store sales increases and record levels of revenue, operating income, and EPS.
| Metric | Period | Current guidance |
|---|---|---|
| Comparable store sales | FY2026 | 3%-5% |
| Total revenue | FY2026 | $18.7B-$19.0B |
| Gross margin | FY2026 | 51.5%-52.0% (midpoint +16 bps) |
| Diluted EPS | FY2026 | $3.10-$3.20 (+6.1% at midpoint) |
| Effective tax rate | FY2026 | 22.6% (approximately +0.9 pts (a ~$0.04 EPS headwind)) |
| Free cash flow | FY2026 | $1.8B-$2.1B (increase) |
| Per-store inventory growth | FY2026 | approximately 5% |
| AP to inventory ratio | FY2026 | approximately 122% (moderation) |
| Metric | YoY | Note |
|---|---|---|
| Comparable store sales | up 5.6% (Q4); 4.7% full year | Professional business over 10% comp plus positive DIY; share gains from consistent execution |
| Total sales | up 6.4% to $17.8B | Strong comps plus new store expansion |
| Gross margin | up 49 bps to 51.8% (Q4) | Acquisition cost improvements, distribution efficiencies, and managed pricing, despite professional-mix headwind |
| Diluted EPS | up 13% to $0.71 (Q4); up 10% to $2.97 full year | Strong comps and gross margin, partly offset by SG&A cost pressures |
| Operating profit | up 6.4% to $3.5B (19.5% of sales, flat) | Sales growth offset by elevated self-insurance and healthcare costs |
| Same-SKU inflation | approximately 6% (Q4) | Tariff-induced product cost pressures with a rational pricing environment |
| Free cash flow | down to $1.6B from $2.0B | Accelerated renewable energy tax credit payment timing and higher CapEx |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Self-insurance / healthcare cost pressure | Flagged earlier in 2025 | Persisted longer than expected (increases on top of increases); more heightened in front half of 2026 | Pressured |
| Professional (DIFM) business | Strong throughout 2025 | Over 10% comp for second consecutive quarter; preferred partner positioning | Improving |
| DIY consumer demand | Pressured transaction counts in Q3 into early Q4 | Stabilized with modest month-to-month improvement, but still slightly negative traffic comps | Stabilizing |
| Distribution network expansion | Fort Worth DC in development (operational Q1 2028) | Stafford, Virginia DC opened in Q4, opening Mid-Atlantic/Northeast; CapEx provision for next slate of projects | Expanding |
| Tariff and pricing environment | Significant cost ramp and price changes in Q3 | Leveled out in Q4 with consistent month-to-month inflation benefit; 2026 guide assumes stable environment with no tariff-change projections | Stable |
| Mexico business model evolution | Distribution-led model | Transitioning away from lower-margin jobber sales toward independent jobbers, creating a ~4-5 bps gross margin tailwind and modest SG&A pressure | Evolving |