O'Reilly Growth Cools as Leverage Rises With Buybacks
O'Reilly Automotive posted second-quarter diluted EPS of $0.86, up 10% from a year earlier but a slower pace than the 16% growth it logged in the first quarter.
O'Reilly Automotive (ORLY) reported second-quarter results that showed its growth trajectory losing momentum even as the company raised its full-year outlook. The automotive parts retailer posted revenue of $4.89 billion, up 8% from $4.53 billion a year earlier, while diluted earnings per share rose 10% to $0.86. Both figures decelerated from the first quarter's pace, when revenue grew 10% and EPS grew 16%.
Comparable store sales, the metric most closely watched for retail health, told a similar story. Comp growth slowed to 6.0% in the second quarter from 8.1% in the first quarter and 5.6% in the fourth quarter of 2024. Some of that deceleration reflects tougher comparisons rather than a change in underlying demand: the second quarter lapped a 4.1% prior-year comp, a harder hurdle than the 3.6% comp the first quarter faced.
Margins, which had been expanding for two straight quarters, held flat instead. Operating margin came in at 20.2% of sales, unchanged from a year earlier, after gains of 60 basis points in the first quarter and 80 basis points in the fourth quarter of 2024. Gross margin similarly plateaued at 51.4%, versus 20-basis-point and 50-basis-point expansions in the prior two quarters. SG&A as a percentage of sales was roughly flat at 31.3% versus 31.2% a year earlier, a smaller improvement than the 40-basis-point and 30-basis-point deleverage reversals O'Reilly posted in the two preceding quarters.
Despite the slower quarter, O'Reilly raised its full-year comparable store sales guidance to a range of 4.0% to 6.0%, up from the 3.0% to 5.0% range it issued alongside first-quarter results. The company kept its store-expansion plans intact, with 110 net new stores opened in the first half of 2025 keeping it on pace for its full-year target of 225 to 235 openings, consistent with the 207 net openings it logged in full-year 2024.
O'Reilly leaned further into share repurchases during the quarter, spending $1.51 billion to buy back 16.7 million shares at an average price of $90.40, up from $923 million spent in the first quarter. That brought year-to-date buybacks to roughly $2.43 billion. The remaining repurchase authorization stood at $1.33 billion as of the release, up from $1.14 billion after the first quarter despite the heavier spending pace, indicating the board added to the authorization between quarters.
The buyback pace has come with balance-sheet consequences. Shareholders' deficit widened to $1.84 billion as of June 30 from $763 million at the end of 2024, as repurchases continued to outstrip retained earnings growth. Long-term debt rose to $7.01 billion from $6.02 billion at year-end 2024, after the company raised $847 million in new debt proceeds during the first half to help fund the buybacks. The adjusted debt-to-EBITDAR ratio climbed to 2.17 times on a trailing-twelve-month basis, up from 2.06 times a year earlier.
Operating cash generation remained strong enough to support the spending. Net cash provided by operating activities rose 35% to $2.04 billion for the first half of 2025 from $1.51 billion a year earlier, outpacing the $1.0 billion pace disclosed after the first quarter alone.
The combination of decelerating comps and flat margins alongside heavier debt-funded buybacks marks a shift from the first quarter, when both growth and profitability were expanding together. O'Reilly's raised guidance suggests management still expects demand to hold up through the back half of the year, even as leverage metrics move in the opposite direction from where they stood twelve months ago.