Brad Beckham
Co-President at O'Reilly Automotive
Thanks, Greg, and good morning, everyone. I would also like to begin with a sincere thank you to Team O'Reilly for their commitment to our continued success through providing excellent customer service. We have set an incredibly high bar of performance, and I could not be more excited about the momentum our team drove in the first quarter by executing on the fundamentals of our business and taking care of our customers every day. Our ambitious goals require dedication and hard work from every area of our organization, and I'm extremely proud of the way Team O'Reilly continues to deliver. Now I'd like to take some time to walk through the details of our sales performance for the first quarter and what we saw on each side of the business. I'll start with the professional side of our business, which was the outperformer in the quarter and the driver of our above-expectation results. Our professional sales growth on a comparable basis exceeded 20% for the quarter, and we were very pleased to see outperformance steadily throughout the quarter. The growth trend in our professional business continues to be very strong even in light of increasingly challenging comparisons, and these compounded gains are the direct result of our team's outstanding execution. For us, the bread and butter of our execution on the professional side of our business is always ensuring we have the right part available for our customers when and where they need it and providing efficient delivery service so that a customer can get cars off the rack and turn their base, but it doesn't stop there. Providing top-notch customer service also includes our professional parts people regularly visiting our customers and spending time in their shops, making sure we are doing all we can to deliver value as a business partner, whether it be educating them on our store team and service, our products, equipping that shop with shop management tools or providing training to their technicians. Focusing on these fundamentals and building long-term loyal relationships are the key drivers of our robust professional sales results.
We continue to expect our professional business to be the stronger driver of our growth in 2023, but also see exciting opportunities on the DIY side of our business to win share in the marketplace. Turning to our DIY business. We were generally pleased with our results for the quarter with our teams delivering positive comparable store sales growth each month of the quarter driven by solid results in January and February mixed with some weather-related pressure in March. The first quarter has historically seen the most weather-driven volatility in our business as we see impacts both from the type and severity of winter weather and from the timing of the onset of spring weather. Our DIY customers often take on jobs in their driveways and will take advantage of the first warm days of spring to perform repair, maintenance and tune up items that were temporarily on hold during the winter. The pace of our DIY business in the first quarter was definitely impacted by this weather volatility as unseasonably cool, wet weather across much of the country pressured our March results. However, spring finally sprung as we turned into the calendar into April, and we have been pleased with the solid rebound we have seen in our DIY business. The DIY improvement, coupled with continued robust professional sales growth, has resulted in a strong start to the second quarter. As we have said more than a few times over the years, we don't like to talk about weather since it's out of our control. But on balance, so far in 2023, the volatility in our sales results lines up pretty much exactly with what we would expect, given the timing of spring. Now I would like to provide some color on our ticket count and average ticket performance. Strong ticket count comps on the professional side of our business were partially offset by pressure to DIY ticket counts in the quarter. Directionally, our ticket counts performed as we expected with the gap wider than our original outlook because of the outperformance in our professional business and, to a lesser degree, the weather headwind to DIY in March. We saw mid-single-digit average ticket growth supported by same-SKU inflation at similar levels and in line with our expectations for the quarter.
Our benefit from same-SKU inflation was primarily the result of year-over-year benefit of price increases we passed along in 2022 as opposed to significant incremental cost increases in the first quarter. As a result of this dynamic, we expect first quarter will be the most significant benefit to average ticket increases from same-SKU inflation and continue to expect this benefit to moderate as we move throughout the year and compare against higher price level stemming from price increases in the first half of this year. To wrap up my comments on sales, I would like to highlight our sales guidance and full year outlook. We are maintaining our full year comparable store sales guidance range of 4% to 6% and total sales guidance of $15.2 billion to $15.5 billion. After incorporating above plan first quarter results, we are trending above our full year midpoint and are encouraged by the strength we have seen thus far. However, even though we outpaced our sales plan in the first quarter, our original expectations had already anticipated some of the strength we saw in Q1. As we discussed when we laid out our expectations on our last call, we expect first half 2023 comps to be stronger as a result of the year-over-year same-SKU inflation benefit as well as easier ticket count comparisons on both sides of our business. While we are pleased with our strong sales performance thus far in 2023, we're always cautious about overreacting to first quarter results, especially in light of the weather volatility we can see at the beginning of the year. Ultimately, as Greg noted, we believe industry dynamics are positive and supportive of strong demand moving forward. And we are optimistic about our ability to drive strong results as we move through the year. Rest assured, our teams are focused on taking share in every market and on both sides of the business regardless of any challenges that may arise. Our teams do not waste energy focusing on things outside of our control. We work in a people, service and relationship business. And we spend 100% of our time focusing on and executing the basic fundamentals of our business. Ownership and everything we can control with our team and our service levels is at the core of our culture and in turn, everything we do. Now I'd like to discuss our SG&A performance in the quarter. SG&A as a percentage of sales was 31.7%, a deleverage of 14 basis points from the first quarter of 2022. Our first quarter SG&A results included a planned approximately 35 basis point headwind from the resumption of our annual in-person leadership conference in February.
As we discussed on our conference call in February, this event was our first in-person conference since 2020, and as such, was a headwind to our first quarter SG&A on a year-over-year comparison basis. However, this spend is one of the absolute best investments we make in our team as we celebrated our successes from 2022, shared best practices and strategies for better serving our customers, expanded product knowledge, perpetuated our culture and energized our team to be the dominant supplier of auto parts in each of their markets in 2023. As noted on our last call, we have also invested in our team through the enhanced paid time-off program we rolled out at the end of 2022, which resulted in a $28 million SG&A charge in the fourth quarter of 2022. On a full year basis, the total cost for this program in 2023 will be roughly comparable to our fourth quarter 2022 charge that creates a year-over-year headwinds in the first three quarters of 2023 but a positive comparison in the fourth quarter of this year. For the first quarter, our SG&A per store increased 9.6%, which is well above our expected full year run rate in part because of the year-over-year impacts from both our leadership conference and the team member benefit plan transition. In total, our SG&A spend in the first quarter was above our original plan coming into the quarter driven by incremental costs related to stronger-than-anticipated sales but is in line with our expectations given the sales performance. As we move forward in 2023, we will continue to execute our plans targeted at strengthening our team member experience and benefits, upgrading our vehicle fleet, refreshing and improving our store image and appearance and deploying incremental technology projects as well as investments in infrastructure. We are investing in our teams and our customer service levels from a position of strength. And we'll continue to capitalize on opportunities we see to accelerate share gains, drive long-term profitable growth and generate strong returns on our investments. These initiatives are on track through the first quarter, and we have continued confidence in our ability to deliver on these items as planned. For the full year, we expect to see SG&A per store increase of approximately 4.5% at the top end of our original guide of 4% to 4.5% as a result of incremental spend in the first quarter to support our robust sales growth. Finally, we are maintaining our operating margin guidance range at 19.8% to 20.3% of sales. To conclude my comments, I want to once again thank Team O'Reilly for their dedication to our success.
I am very fortunate to continue to spend time in our stores with our team members and with our customers, both DIY and professional, and can assure you our teams remain focused on relentless execution of our customer service fundamentals. Our team has a proven playbook that has been developed over the 65 years O'Reilly Auto Parts has been serving customers. And our team members are passionate about upholding our standards of service and professionalism. Thank you, Team O'Reilly, and great job. Now I'll turn the call over to Brent.
