Brad Beckham
Co-President at O'Reilly Automotive
Thanks, Greg, and good morning everyone. I would like to begin by congratulating Team O'Reilly on another excellent performance in the third quarter. The ability of our team to deliver continued industry-leading sales performance requires a consistent and intense focus on our culture and the fundamentals of excellent customer service. I would like to thank all of our team members for their hard work, commitment, and dedication to our great company.
Now, I'd like to walk through the details of our sales performance for the quarter on both the professional and DIY sides of our business. We spoke on our last call to the strong start to the quarter in July, driven in part by extreme heat in many of our markets as we were pleased to see these very strong volumes carried on throughout the quarter.
From a cadence perspective, we saw a similar top-line outperformance in each month of the quarter as compared to both the expectations we built into our plan coming into 2023 and the updated guidance we provided on last quarter's conference call. As we discussed throughout 2023, our prior year comparisons get more challenging as we move throughout the back half of the year, and this dynamic was reflected in the cadence of our comparable-store sales in the third quarter with our strongest comps for the quarter in July and August.
However, on a two-year stacked basis, our performance was much more consistent through the quarter with September only slightly below the full-quarter performance due to a moderation of the hot weather benefit we realized earlier in the quarter. While we did see outperformance during the quarter in categories impacted by heat such as cooling and HVAC, we also experienced broad strength in application-specific car park categories as well as maintenance categories such as oil and filters. These dynamics give us confidence that while we did benefit from the weather it was not the primary driver of our above expectations, results and the sales we are generating in failure and maintenance categories indicate a healthy level of broad-based consumer demand.
Our professional business continues to be the more significant outperformer and our team was able to deliver another quarter of mid-teens comparable-store sales growth in our professional business in the third quarter. This outstanding growth was in line with the professional sales increase we achieved in the second quarter while facing increasingly challenging prior-year comparisons. We are extremely pleased with our team's ability to gain share through consistently executing our business model and providing industry-leading value to our professional customers. Our expectation is to continue to grow our share in the professional business as we see plenty of opportunity in both new and existing markets to consolidate the overall DIFM market.
Turning to our DIY business. We were pleased to generate solid comparable-store sales growth with our top-line growth consistent with the first half of the year even as we saw an expected moderation in the benefit from inflation. In line with the trends we've seen this year, our DIY comparable-store sales growth has been driven primarily by increased average ticket values. However, we were pleased to see positive DIY ticket count comps in the third quarter.
Our teams continue to execute our dual market strategy driving market-share growth in our DIY business alongside our robust growth in professional. However, our portion of the total DIY market share in the US is still relatively low and we see continued DIY growth as a tremendous area of opportunity for our company.
Now, I would like to provide some color on our average ticket and ticket count performance. Average ticket growth was again in the mid-single-digits on a combined basis and was slightly larger -- was the slightly larger share of our comparable-store sales increase. While we are seeing the expected reduced benefit from same SKU inflation as we move throughout the year, our moderation in total average ticket growth has not been as significant due to offsetting strength we've seen from parks complexity and product mix.
Moving forward, we expect a more normalized same SKU inflation benefit, but are confident that future average ticket growth will be supported by increased parts complexity, which has been the primary historical driver of our average ticket. Even though average ticket growth was the larger contributor to our comparable-store sales growth, we are very pleased with our ticket count comps, which was the larger contributor to the outperformance versus expectations. Our team's ability to out-hustle and out-service our competition for this increased traffic volume is paramount to ensuring these share gains translate into repeat business. It has never been more important to ensure that we have highly trained teams, a professional parts people supported by superior product availability in every single one of our 6,000-plus stores.
As I finish up our remarks on sales performance in the quarter, I would like to highlight our updated full-year sales guidance. We have increased our full-year comparable-store sales guidance to a range of 7% to 8% from our previous range of 5% to 7% and increased our total sales guidance to a range of $15.7 billion to $15.8 billion. This update is reflective of our year-to-date performance through today's call, including a solid start to the quarter with October trends in line with how we exited the third quarter.
As we finish out 2023, our fourth quarter reflects our most challenging comparisons of the year as we lap that 9% comparable-store sales increase in the fourth quarter last year and expect to see a fully normalized same-skew benefit. Our outlook for the remainder of the year is consistent with the guidance we have maintained throughout 2023.
While we've been very pleased with the degree to which our performance has outpaced our expectations in the first nine months of 2023, we are always cautious as we approach the last few months of the year, which historically can be volatile due to variability in winter weather and pressures consumers can face during the holiday shopping season. As a reminder, our prior year comparisons are the most challenging in December as we benefited from broad-based strength in weather-related categories at the end of 2022.
Against this backdrop, we maintain a positive outlook on the fundamentals of our industry. We are confident that the key demand drivers for the aftermarket, including steady recovery in miles driven and a very favorable US vehicle fleet dynamics are in place to support steady growth moving forward. We also believe that our customers have remained resilient and are continuing to prioritize the maintenance of their existing vehicles in order to avoid taking on a payment for a higher-priced newer vehicle. As you have heard from me already today, we see lots of opportunities in our markets to grow faster than the industry. Our team is charged by the results we're seeing from our solid execution of the basic fundamentals of our business that translate to success.
Next, I would like to take some time to discuss our SG&A performance in the quarter. SG&A as a percentage of sales was 30.1%, a deleverage of 29 basis points from the third quarter of 2022, driven by an increase in SG&A per store of approximately 8.5%. Our SG&A growth in the third quarter was above our expectations, so. I want to provide some additional color on what drove the results in the third quarter. As we saw in the first half of 2023, the majority of our outsized year-over-year SG&A growth as compared to our historical growth rates was the result of planned investments in initiatives targeted at enhancing our long-term operational strength. Our spend on these items was largely in line with our expectations coming into the quarter and we remain pleased with the positive impact we are generating by reinvesting in our stores, technology, and most important in Team O'Reilly. While these initiatives continue to play out as planned. Our total SG&A dollar spend per store in the third quarter was higher than we expected coming into this quarter. This was driven by incremental costs necessary to support our significant comparable-store sales outperformance, but which also resulted in better leverage of SG&A expenses than we saw in the second quarter.
Our focus remains on relentlessly pursuing the excellent customer service that strengthens the long-term relationship we have with our customers and we will continue to be aggressive where we see opportunities to accelerate topline growth and in-turn create leverage over-time, driving long-term returns. Based on our results in the third quarter and expectations for the remainder of the year, we now expect to see SG&A per store increase 7% to 7.5% for the full year. With this increase from prior guidance, we still expect our full-year operating margin to come in within the range of 19.8 to 20.3% of sales driven by leverage on our strong top-line results. Expense control remains as important to the O'Reilly culture, as it always has, and we will be judicious in how we manage our spend to ensure we are seeing long-term results from the investments we make in the business. This focus on profitable growth has drove our 17% increase in third quarter diluted earnings per share. We are updating our full-year EPS guidance to $37.80 to $38.30, representing an increase of $0.75 at the midpoint, reflecting the strong performance in the third quarter.
Before I turn the call over to Brent, I would like to again thank Team O'Reilly for their hard work and dedication to the O'Reilly culture. Greg has been a tremendous leader for our company, an incredible mentor to me, and is a tough act to follow but I'm very excited for the future of our company and our entire team is committed to our company's continued success.
Now I'll turn the call over to Brent.
