Brad Beckham
Chief Executive Officer at O'Reilly Automotive
Thanks, Jeremy. Good morning, everyone, and welcome to the O'Reilly Auto Parts 4th-quarter conference call. Participating on the call with me this morning are Brent Kirby, our President; and Jeremy Fletcher, our Chief Financial Officer. Greg Hinsley, our Executive Chairman; and David O'Reilly, our Executive Vice-Chairman, are also present on the call. To begin today's call, I'd like to recognize the hard work and commitment demonstrated by our team of over 93,000 professional parts people throughout 2024.
It is their commitment to our company and our customers that enabled us to deliver a solid year, highlighted by an increase in comparable-store sales of 2.9% and an increase in diluted earnings per share of 5.7%. 2024 was a challenging year across the automotive aftermarket and our financial results reflected the headwinds our industry faced, finishing below the expectations we set for our business entering 2024.
Our team has established a long track-record of robust growth and profitability. So we are never fully satisfied when we fall short of that high bar. However, we are pleased with our team's ability to navigate the challenging environment and still deliver increases in comparable-store sales and earnings per share, representing our 32nd consecutive year of growth in these metrics since becoming a public company.
We are very pleased to have delivered record earnings despite a $0.46 headwind to EPS, resulting from a 4th-quarter charge of $35 million to adjust our auto claims self-insurance liabilities, which Brent will discuss in more detail during his prepared comments. Brent. This charge was a headwind of over 1% to the full-year EPS growth we reported for 2024.
The charge was even more impactful to the 4th-quarter, representing a headwind of approximately 5% to the 2.6% EPS growth we reported for the quarter. Now I'd like to take a few minutes to provide some color on our 4th-quarter sales results. Our comparable-store sales for the 4th-quarter grew 4.4%, which was at the high-end of our expectations.
Our sales growth was driven by solid results in both professional and DIY. The relative performance between the two sides of our business was more balanced in the 4th-quarter than we experienced in the first-nine months of 2024. Our professional business again delivered mid-single-digit comp growth, while DIY grew just over 3%, the best quarterly result in 2024. To some degree, our 4th-quarter results were consistent with the pressured demand environment we have experienced throughout 2024.\The headwinds we have seen from broad-based pressure on consumers persisted in the 4th-quarter and were reflected in continued softness in discretionary categories such as tools, accessories and performance parts. However, we saw continued strong demand in maintenance categories in the 4th-quarter. We also benefited from strong performance in winter weather-related categories as we calendared easier comparisons to the mild start of winter in the 4th-quarter of 2023.
Harsh inclement winter weather creates a tailwind to our business and the timing of when we have experienced this type of weather has created some variability over the last few years. As a reminder, last year, we really did not see severe winter weather in the 4th-quarter of 2023 with more of the harsh conditions that support our business arriving in January of 2024.. So-far, this season has been more typical as we have seen the impact of winter weather spread-out a little more evenly.
As a result, from a cadence perspective, our business in the quarter was steady month-to-month when viewed relative to the normal sales volume trends in our business., our comps in October benefited from 2024 having one less Sunday than the prior year and our December comps reflected the easier weather comparisons.
Again, these monthly variances were driven by prior year comparisons and not by variability in our business within the 4th-quarter of the current year. Next, I'll discuss average ticket and traffic dynamics underpinning our sales growth for the 4th-quarter. Ticket count growth was the larger contributor to our comparable-store sales increase in the quarter, again led by the professional side of our business, in-line with the consistent strength we saw throughout 2024.
DIY ticket counts also grew in the 4th-quarter, representing our best quarterly performance for the year as this side benefited from solid performance in maintenance categories and the favorable winter weather comparisons. On a two-year stack basis, which smooths out the effect of the timing of impact of weather, 4th-quarter DIY traffic was down slightly, in-line with full-year 2024 trends. We believe our customer transaction count results lead the industry on both sides of our business, reflecting continued market-share gains in a tough environment.
Average ticket values were also a positive contributor to our comp growth in the 4th-quarter and included a benefit from same-ski inflation of just under 1%. For the full-year of 2024, our 2.9% comparable-store sales increase was at the high-end of the revised guidance range we provided on last quarter's call, but just below the 3% to 5% guidance we set at the beginning of the year. The sales growth achieved in 2024 was on-top of the robust increases our team delivered in 2023 and 2022 of 7.9% and 6.4%, respectively.
Against the tougher industry backdrop, our team has worked diligently to double down on our efforts to provide the best customer service in our industry, allowing us to both sustain the business we have earned from our customers over the last few years and further grow our market-share. Thank you. Next, I want to transition to a discussion of our guidance for 2025, starting with our sales outlook. As we disclosed in our earnings release yesterday, we're establishing our annual comparable-store sales guidance for 2025 at a range of 2% to 4% and we want to provide a snapshot of how we view both industry and macroeconomic conditions and our prospects for the coming year.
Thank you. As we've discussed over the last few quarters, the current environment in the automotive aftermarket has been challenging, but is not unlike other cycles we've seen over our decades of experience in our industry. We operate in an extremely stable sector of retail and our customers are very resilient in periods of economic uncertainty., the dynamics of the car park also contribute to stability in our industry.
Vehicles are engineered and manufactured to be reliably driven at higher mileages. This reliability, coupled with the substantial cost of replacement creates a compelling value proposition for customers to invest in the repair and maintenance necessary to keep their existing vehicles on the road. The result has been a growing US car park characterized by an increased average vehicle age, which combined with steady growth in total miles driven supports durable demand in the automotive Aftermarket. So against this stable backdrop, our industry has encountered years similar to 2024 where industry-wide growth is hard to come by and positive sales momentum is only available through market-share gains and industry consolidation. We remain confident these periods are short-lived and that our industry consistently rebounds due to the core strength of the demand drivers underpinned by the vehicle population. As such, we are optimistic in the long-term fundamentals of our industry and the prospects for conditions to improve as we move through 2025. Thank you. However, we remain cautious regarding the potential for worsening economic conditions or the possibility of short-term economic shocks, particularly pressure to the consumer from sustained high-price levels, rapidly increasing interest rates or energy costs, spikes in gas prices or other adverse circumstances. T Hese considerations are built into our 2025 outlook and full-year guidance, but are particularly relevant as we enter the year-on a similar trajectory to our 2024 exit and face challenging comparisons in the first-quarter on a multi-year basis. Our focus as a company is to control our own destiny and drive our industry-leading results in any market condition and our performance this year will ultimately depend on our effectiveness in executing our business model and providing exceptional customer service. To that end, we expect both our DIY and professional businesses to be positive contributors to our comparable-store sales growth in 2025. We anticipate stronger growth in professional from increased ticket counts driven by an expected higher industry growth rate on this side of the business and by our ability to continue to capture market-share. We also expect to be a DIY share gainer, but expect these gains to be offset by the long-term industry dynamic of pressure to ticket counts resulting from increased parts quality and corresponding extended service and repair intervals. As a result, we anticipate DIY traffic will be down slightly in 2025, but that a higher-ticket value associated with the increasing complexity and quality of parts will drive comparable-store sales growth in DIY similar to our experience in 2024. Our projected outlook for average ticket growth in 2025 assumes a benefit from same-SKU inflation of approximately 1%. Consistent with our historical practice, we are assuming only modest increases in price levels from this point forward in 2025. In a few moments, Brent will discuss how we view the potential for increased tariffs on our supply-chain and margin outlook. For now, I will just highlight that our sales assumptions exclude any changes in tariffs as it remains too early to project the impact to our business. Thank you. Before I move on from our sales guidance, I would like to highlight our expectations for the quarterly cadence of our sales growth in 2025. We expect our quarterly comparable-store sales growth to be relatively even throughout 2025 with relatively minor differences driven by more challenging headwinds in the first and 4th-quarter and easier compares in the second and third quarters. Thus far in the first-quarter, our sales volumes are tracking in-line with our expectations against the tough comparison to favorable winter weather in January of last year. Now I'd like to move on to discuss our capital investment and expansion plans. Our capital expenditures for 2024 were just over $1 billion, in-line with 2023 and marginally above our full-year guidance range, driven by the timing of spend on distribution infrastructure projects. For 2025, we are setting our capital expenditure guidance at $1.2 billion to $1.3 billion. The increased level of projected investment is centered around our plans to accelerate our store and distribution expansion. Starting with our store network, we disclosed on last quarter's call our target of 200 to 210 net-new store openings for 2025. The increase in new-store openings reflects our continued strong new-store performance and our confidence in our ability to successfully balance our organic growth with greenfield growth across our North American footprint. For domestic US store growth, our projected new-store openings are spread across over 35 different states, balanced between expansion in newer markets in the Northeast, the Mid-Atlantic and Puerto Rico as well as backfill in existing markets coast-to-coast. Our plans also include continued growth in Mexico. In 2024, we opened 25 new stores in Mexico, bringing our store count to 87 stores and expect to open a similar number of stores in 2025. We are still in the early innings of our expansion in Mexico, but we are gaining momentum and capitalizing on the opportunity to spread new-store growth over several market areas, while at the same time also beginning to increase density in-markets outside of our core historical base in Guadalajara. We are also building the development muscle necessary for greenfield new-store growth in Canada. Our 2025 target does not yet include a substantial number of new stores in Canada, but the coming year will be as an important one to build-out the organic capabilities and advance the development of the new-store pipeline that will fuel our growth in the coming years. Thank you. Beyond the increase in our new-store targets, we are also expected to increase our growth capital spend as a result of two additional factors: a continuing shift to owned new-store growth versus leased stores and incremental investments in our hub store network. Our ability to successfully open stores that increasingly generate higher sales volumes and stronger cash flows is driving enhanced returns on capital invested in our new-store growth. In light of these strong returns, we are planning 2025 new-store openings to include a projected 60% to 40% mix of owned versus leased stores. We are also pleased with the returns we have generated through our ongoing -- ongoing expansion and enhancement of our hub store network. Our ability to support our stores with quick access to broad localized SKU availability is an important factor-in our ability to effectively compete and take market-share on both sides of the business. We have executed our hub strategy for decades. One of the strengths of this strategy is our flexibility to adjust the number, location and size of our hub stores to ensure our network provides our customers with the best access to inventory in each of our markets. As such, our capital investment projections for 2025 include planned increases in the number and size of our hub stores. The second major driver of our 2025 capex outlook is our continued investment in distribution capabilities. The competitive advantage we maintain in industry-leading inventory availability is fueled by our substantial investment in our distribution network, and Brent will provide an update on our current distribution projects and expectations for 2025 during his supply-chain update. Our store hub and distribution expansion represents the lion's share of the planned growth in capex for 2025, but also included in our outlook our continued ongoing investments to maintain and refresh the image and appearance of our store fleet as well as continued strategic investments in technology. Now, as I wrap-up my prepared comments, I would like to once again thank Team O'Reilly for your unwavering commitment to providing excellent customer service every day-in each of our over 6,300 stores. Now, I'll turn the call over to Brent.
