Brad Beckham
Chief Operating Officer at O'Reilly Automotive
Thanks, Greg and good morning, everyone. I would also like to begin my comments this morning by congratulating Team O'Reilly on another great year in 2022. Our team's focus on providing consistent, excellent customer service allowed us to generate the outstanding results we reported yesterday and we are excited about the opportunities we see to continue to grow our business.
Now, I'd like to provide some additional color on our fourth quarter comparable store sales results and outline our guidance for 2023. As we discussed on our third quarter conference call, we started the fourth quarter with strong sales volumes in line with trends we saw as we exited the third quarter. Those robust sales volumes continued through the end of the year, delivering results solidly above our expectations on both the professional and DIY sides of our business each month of the quarter.
From a cadence perspective, the monthly comp was steady throughout the quarter with December being the strongest month of the quarter on a 2- and 3-year stack basis. As we finished the year, we saw broad-based strength across all of our weather-related categories, such as batteries cooling and antifreeze as well as our other core non-weather-related categories. We saw strength in both our DIY and professional businesses, with professional again leading the way with double-digit comparable store sales growth on a increases in both ticket counts and average ticket size. As we finished 2022, we were very pleased with our professional performance and we believe the momentum we have created is the direct result of our team executing our proven business model at a high level and providing industry-leading customer service.
We were also pleased to see the improved performance in our DIY business which accelerated on a 1, 2 and 3-year comparable store sales growth basis, driven by our strong average ticket growth. As anticipated, DIY ticket counts were a partial offset to our comp growth due to difficult comparisons from strong traffic growth in the previous 2 years but improved sequentially in quarter, continuing the trend we saw in the third quarter and exceeding our expectations.
As we saw throughout 2022, growth in average ticket values drove our total comparable store sales growth in the fourth quarter. Average ticket size grew in the high single digits on both sides of our business, supported primarily by the mid-single-digit growth in same SKU inflation and augmented by a benefit from increasing clean improved quality and design of new parts.
On a year-over-year basis, we saw a moderation in the same SKU benefit after peaking in the second and third quarters as we lap the acceleration of higher inflation in 2021 and saw modest increases in selling prices as we finished out 2022. The moderation in selling price increases correlate with what we're seeing in product acquisition costs as industry pricing has remained rational on both sides of the business and we've been successful in passing through cost increases.
Now, I want to transition to a discussion of our 2023 sales guidance and our outlook for this year. As we disclosed in our earnings release yesterday, we are establishing our annual comparable store sales guidance for 2023 at a range of 4% to 6%. And we want to provide some color on the factors that are driving our expectations as it relates to both our outlook for our industry as well as the specific opportunities we see for our company.
I'll begin with our view of the prospects for our industry which we believe are still very favorable. The health of the automotive aftermarket continues to be supported by strength in the core fundamental drivers of demand and the last few years have further reinforced the value proposition that motivates consumers to invest in their vehicles. Since the onset of the pandemic, the scarcity of vehicles has forced many consumers to keep their vehicles longer. These investments have made to keep their vehicles well maintained and paid off and we expect to see a continued willingness by consumers to invest in their high-quality vehicles at higher and higher mileages.
We also have a positive outlook on the strength of the consumer our industry and their ongoing willingness to prioritize their transportation needs. We continue to view the health of our customers as strong, supported by extremely low unemployment and robust growth in wages over the past 2 years. We think these factors provide a solid backdrop for growth in miles driven in our industry and solid demand over the next year. While miles driven still remain below pre-pandemic levels, we've seen growth in this key fundamental for our industry over the past 18 months. We believe we will see a continuation of the long-term industry trend in miles driven, resulting from population growth and an increase in the size of the U.S. car park.
As we think about the broader macro factors that could impact the U.S. economy in the coming year, we remain cautious in our outlook for -- outlook concerning ongoing headwinds from inflation and the potential for deterioration in economic conditions. Negative trends in the broader economy can -- it can influence demand in our industry in the short term but we have consistently seen over time that consumers adjust quickly in challenging environments. In fact, in 2022, it was a good illustration of how this can play out. The pressure we saw from elevated gas prices, broad-based inflation and global economic shocks weighed on our results versus our expectations in the first half of the year. However, our customers adjusted as conditions stabilize and our business rebounded to meet our full year sales growth expectations.
Our experience through multiple economic cycles in our company's history is that consumers will prioritize the maintenance and the repair of their existing vehicles as a means to avoid a car payment and save money in the face of economic pressures. Ultimately, due to the nondiscretionary and value-driven nature of our business, we have confidence our industry will perform well in 2023, even if we end up facing challenges in the broader economy. As confident as we are in the strength of our industry, the most important driver for our outlook for 2023 is the opportunity we see to outperform our competition and gain market share by out-executing -- or excuse me, by executing our business model and providing the best customer service in the industry. To this end, I would like to spend a few minutes discussing our outlook on both sides of our business. We expect both our DIY and professional businesses to be positive contributors to our comparable store sales growth in 2023, with professional again expected to outperform.
We are excited about the strength we built in 2022 in our professional business and we believe this will continue to accelerate our growth on this side of the business. We remain highly committed to being the industry leader in the quality of service and inventory availability we provide to the professional customer and our focus moving into 2023 is to aggressively lever these strengths to further consolidate this side of the market. We also see significant opportunity to grow our DIY business but are more cautious in how we view our ability to increase ticket counts on a year-over-year basis. Our DIY ticket counts in 2022 were pressured in comparison to 2021 as we were still calendaring the impact of government stimulus and faced headwinds from gas price shocks and inflation.
We feel like we have now completely lapped the artificial spikes in demand and are pleased with traffic we saw in the back half of the year. While there's been a lot of volatility in our comparisons over the past 3 years, our overall growth in DIY ticket counts has been solidly positive in total during that time frame. We have clearly taken market share since the onset of the pandemic through consistent execution and excellent service even as we face the long-term industry trend of pressure to DIY ticket counts. For 2023, we will continue to face this industry dynamic where increased complexity and quality of parts extend service and repair intervals. As a result, we anticipate DIY traffic down slightly in 2023 with an expectation that we will continue to gain market share to partially offset the normal industry drag on ticket counts.
We expect the pressure to DIY traffic to be more than offset by increased average ticket. We anticipate average ticket on both sides of our business to benefit from low single-digit inflation arising from the carryover benefit on a year-over-year basis as we compare against price levels that ramp throughout 2022.
Consistent with our historical practice, we are including only modest increases in price levels from this point forward in 2023. We do not expect to see growth in average ticket values above and beyond same-SKU inflation, resulting from increased product complexity and our ability to trade customers up to a higher product on the good-better-best spectrum. As we move through 2023, we anticipate comps in the first half of the year to be stronger than the back half as a result of the year-over-year same-SKU inflation as well as easier comparisons in professional ticket counts which ramped throughout 2022 and, to a lesser degree, DIY ticket counts which face more pronounced pressure in the first last year.
We are off to a strong start thus far in 2023 and we are pleased to see continued momentum on both sides of our business. Now I want to spend some time covering our SG&A and operating profit performance in 2022 and our outlook for 2023 before turning the call over to Brent, who will provide color on our gross margin. Fourth quarter SG&A expense as a percentage of sales was 32.2%, in line with the fourth quarter of 2021. As we noted in our press release yesterday, this number includes charge associated with our transition to an enhanced pay time off program for our team members.
Average per store SG&A for 2022 was just -- was up just over 4.8%, driven by incremental variable operating expenses on better-than-expected sales volumes and cost inflation in fuel, wage rates and team member benefits. Over the last several years, our teams have demonstrated an ability to drive an enhanced level of profitability and productivity on our SG&A spend as we are pleased with the finish to 2022.
As we look forward to 2023, we are planning to grow average SG&A per store by approximately 4.5%. This level of spend is a step change higher than we would normally forecast in our initial SG&A guidance. While we anticipate facing some pressures to costs from ongoing inflation, the majority of our incremental spend anticipated in 2023 reflects deliberate decisions we are making to invest in our business.
We are targeting initiatives we believe will enhance the value proposition we offer to both our team members and customers by investing in our professional parts in our customer service levels, in turn, driving both long-term sales and operating profit dollar growth. We plan to deploy these resources to enhance our long-term operational strength with specific emphasis on strengthening our team member experience and benefits, upgrading our store vehicle fleet, refreshing and improving our store image and appearance and deploying incremental technology projects as well as investments in infrastructure.
We believe we have an opportunity to capitalize on our strong competitive position in our industry and further separate ourselves as we consolidate the market. We are highly confident our investment these initiatives will provide strong long-term returns but anticipate we will face initial pressure to our SG&A as a percentage of sales in 2023. Based on these expectations, coupled with the normal drag from new store expansion and our anticipated gross margin rate which Brent will discuss in a minute, we are setting our operating profit guidance range at 19.8% to 20.3% of sales. At the midpoint of our guidance, we are expecting operating profit to increase over 4%.
Ultimately, our leadership is focused on enhancing the excellent customer service and overall value that create strong relationships with our customers on both sides of the business that, in turn, drive long-term growth in operating profits. To finish up my prepared comments, I want to add to what Greg has already said about the incredible experience we had as a leadership team in Dallas and the enthusiasm our team showed for our business and the O'Reilly culture.
This my 26th Leadership Conference, my first being in 1998 when I first became a store manager and there is no doubt in my mind, it was our best one yet. Since there was -- since this was our first in-person conference since 2020, the last 2 being virtual, there was certainly a lot for us to celebrate but I was blown away by the commitment I saw from our team to not rest on our laurels or be satisfied with our past success.
Instead, our team was passionate about the opportunities we have in front of us. As we look forward to 2023 and set an ambitious plan to outperform the competition and gain market share, we will be aggressive in supporting our teams and equipping them with the tools and resources to drive our company to an even higher level of performance. I want to once again thank Team O'Reilly for their continued dedication to our company.
Now, I will turn the call over to Brent.
