During today's conference call, we will discuss our first quarter 2026 results and our updated outlook for 2026. Their hard work and absolute dedication to excellent customer service produced a strong start to 2026 for O'Reilly, with an 8.1% increase in comparable store sales. Our team successfully translated these robust sales results into an impressive 14% increase in operating profit through our focus on profitable growth and expense control. We coupled this strong operating performance with the return of excess capital through our share repurchase program to deliver a 16% increase in diluted earnings per share in the quarter.
Our comp growth of 8.1% solidly surpassed our expectations, and we were pleased to see above-plan contributions from both sides of our business in the quarter. This outperformance was driven by better-than-expected growth in ticket counts on both sides of the business. Today, I will further discuss our first quarter gross margin and SG&A results and provide an update on the progress toward our expansion and capital investment plans for 2026. Our first quarter gross margin of 51.5% was a 19 basis point increase from the first quarter of 2025, which was in line with our expectations.
The acquisition cost environment remains stable and the pricing environment continues to be rational across our industry. Additionally, at this point, neither our first quarter results nor our outlook include any benefit from tariff refunds. However, we did not see a material impact in the first quarter and have not adjusted our full year outlook assumptions for these factors. At this stage, we believe we have the ability to manage the current dynamics surrounding product acquisition cost and freight within our full-year guidance range.
| Metric | Period | Current guidance |
|---|---|---|
| Total revenues | FY2026 | $18.7B-$19.0B (unchanged) (steady) |
| Gross margin | FY2026 | 51.5%-52.0% (maintained) (steady) |
| Operating profit margin | FY2026 | 19.3%-19.8% (raised 10 bps) (higher) |
| SG&A per store growth | FY2026 | approximately 3%-4% |
| Effective tax rate | FY2026 | 22.6% (unchanged) (steady) |
| Free cash flow | FY2026 | $1.8B-$2.1B (unchanged) (steady) |
| Same-SKU inflation | FY2026 | approximately 3% (unchanged) (steady) |
| Inventory per store growth | FY2026 | approximately 5% by year-end |
| AP to inventory ratio | FY2026 | approximately 122% by year-end |
| Metric | YoY | Note |
|---|---|---|
| Comparable store sales | +8.1% | Above-plan growth on both sides of the business driven by better-than-expected ticket counts, aided by tax refunds and favorable weather plus share gains. |
| Total sales | +10.2% | Comp growth of 8.1% plus a $91 million non-comp contribution from newer stores and international, an increase of $424 million. |
| Operating profit | +14% | Strong sales translated through a focus on profitable growth and expense control. |
| Diluted EPS | +16% | Strong operating performance plus the return of excess capital through share repurchases. |
| Gross margin | +19 bps to 51.5% | Acquisition cost reductions and improved distribution-cost leverage offset seasonal product mix pressure. |
| Free cash flow | up to $785M from $455M | Robust operating income growth, a reduction in net inventory, and timing of CapEx spend. |
| Average SG&A per store | +5.5% | Incremental spend to support elevated sales volumes plus year-over-year pressure from insurance and other liabilities; expected to moderate through the year. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Market share gains | Strong share gains in prior couple of years | Management agrees the spread versus the industry is accelerating, with broad-based share gains on both DIY and professional, largely from smaller and weaker independent players. | Rising |
| Tax refunds and weather tailwinds | — | Larger average and total refund dollars coincided with favorable, warm dry weather to support Q1 demand; management views it as catch-up of pent-up demand rather than pull-forward. | Rising |
| Private label penetration | — | Climbed above 50% of total revenue, improving margins, brand loyalty, and sourcing flexibility, with no stated penetration target and consistent adoption in mature and new markets. | Rising |
| Fuel price and oil shock impact | Sustained price over $4/gallon as threshold for miles driven | Potential SG&A pressure from the large delivery fleet and motor oil cost risk from the Iran conflict, but no material Q1 impact and no change to full-year assumptions. | Steady |
| Tariff environment | — | Net tariff exposure remained relatively stable with no material Q1 impact; no benefit from tariff refunds included in results or outlook. | Steady |
| SG&A and labor management | Cost overruns flagged in Q4 | Per-store SG&A growth driven mainly by wage rates plus liability costs; improved retention and productivity, with growth expected to moderate as the year progresses. | Improving |