Cuộc họp công bố kết quả kinh doanh Quý 3/2026 của O'Reilly Automotive (ORLY): Doanh số cùng cửa hàng tăng 7,2%, nâng dự báo triển vọng

Điểm tin chính

• O’Reilly Automotive đã báo cáo tăng trưởng doanh số cùng cửa hàng đạt 7,2% trong quý 3/2026, nâng mức tăng trưởng từ đầu năm đến nay lên 7,1%. Tăng trưởng doanh số cùng cửa hàng tích lũy 2 năm đạt 12,8%.
• EPS pha loãng tăng 14% so với cùng kỳ năm ngoái. Ban lãnh đạo đã nâng dự báo EPS cả năm lên 3,25 - 3,35 USD, tương ứng với mức tăng trưởng khoảng 11% ở điểm giữa của khoảng dự báo.
• Doanh số cùng cửa hàng mảng khách hàng chuyên nghiệp tăng hơn 10% một chút, nhờ sự đóng góp đồng đều từ giá trị đơn hàng trung bình cao hơn và số lượng giao dịch tăng. Doanh số cùng cửa hàng mảng bán lẻ tăng ở mức một chữ số tầm trung bất chấp lưu lượng khách tự sửa chữa (DIY) giảm.
• Biên lợi nhuận gộp tăng 54 điểm cơ bản lên 52,4%, bao gồm khoản lợi ích 39 triệu USD từ hoàn thuế quan tương đương 76 điểm cơ bản. Nếu không tính khoản này, biên lợi nhuận gộp nằm ở mức thấp nhất trong phạm vi kỳ vọng của ban lãnh đạo.
• Dự báo tăng trưởng doanh số cùng cửa hàng cả năm đã tăng lên 5,5% - 6,5% từ mức 4% - 6%, trong khi dự báo doanh thu được đặt ở mức 19,0 tỷ USD - 19,3 tỷ USD.
• O’Reilly đã mở 63 cửa hàng trong quý và đẩy nhanh tốc độ mở rộng, hướng tới mục tiêu mở mới ròng 265 - 275 cửa hàng vào năm 2027 so với kế hoạch 225 - 235 cửa hàng cho năm 2026.

Dữ liệu tài chính cốt lõi

Kết quả kinh doanh và hoạt động

Mảng kinh doanh dành cho khách hàng chuyên nghiệp đóng góp lớn nhất vào tăng trưởng doanh số cùng cửa hàng trong quý 3. Doanh số cùng cửa hàng mảng chuyên nghiệp tăng hơn 10% một chút, trong đó mức tăng trưởng giá trị đơn hàng trung bình và số lượng giao dịch đóng góp đồng đều. Ban lãnh đạo cho biết sự gia tăng ở mức một chữ số tầm trung về số lượng đơn hàng của khách hàng chuyên nghiệp cho thấy sự gia tăng thị phần trên diện rộng.

Doanh số cùng cửa hàng mảng bán lẻ tăng ở mức một chữ số tầm trung. Số lượng giao dịch tự sửa chữa (DIY) giảm ở mức một chữ số tầm thấp, điều mà ban lãnh đạo cho là do áp lực đối với người tiêu dùng, đặc biệt là những khách hàng có thu nhập thấp hơn. Giá trị đơn hàng trung bình cao hơn đã bù đắp cho sự sụt giảm lượng khách ghé thăm do khách hàng tiếp tục ưu tiên việc bảo dưỡng và sửa chữa xe.

Lạm phát trên cùng một mã sản phẩm (same-SKU inflation) đạt mức trên 4% một chút ở cả hai mảng bán lẻ và chuyên nghiệp cộng lại. Các sản phẩm từ dầu mỏ, bao gồm dầu động cơ và chất bôi trơn, là động lực chính. Mức tăng trưởng giá trị đơn hàng trung bình vượt qua lạm phát trên cùng mã sản phẩm, nhờ độ phức tạp của phụ tùng ngày càng tăng và cơ cấu đơn hàng thuận lợi.

Các danh mục sản phẩm dành cho thời tiết nắng nóng có kết quả hoạt động tốt, nhưng ban lãnh đạo cho biết đà tăng trưởng doanh số diễn ra trên diện rộng. Công ty cũng báo cáo đà tăng trưởng tiếp tục duy trì trong tháng 10.

O’Reilly đã mở 63 cửa hàng mới trong quý 3 và mở mới ròng 173 cửa hàng trong 9 tháng đầu năm. Các địa điểm mới được mở tại 36 bang của Mỹ, Canada và Mexico. Chi phí vốn đạt tổng cộng 860 triệu USD từ đầu năm đến nay, chủ yếu hỗ trợ cho các cửa hàng và năng lực phân phối.

Dự báo của ban lãnh đạo

Ban lãnh đạo dự kiến lạm phát trên cùng mã sản phẩm sẽ giảm bớt trong quý 4 khi O’Reilly vượt qua mức so sánh cao nhất từ quý 4/2025. Tuy nhiên, công ty hiện dự báo lạm phát khoảng 2,5%-3% trong quý, cao hơn mức khoảng 1% trong nhận định trước đó, một phần do giá các sản phẩm dầu mỏ có thể tiếp tục ở mức cao.

Cho năm 2027, ban lãnh đạo đặt mục tiêu mở mới ròng 265-275 cửa hàng. Việc mở rộng dự kiến sẽ tiếp tục đa dạng hóa về mặt địa lý trên khắp Mỹ, Canada và Mexico, đồng thời sẽ được hỗ trợ bởi năng lực phân phối gia tăng và đầu tư vào công nghệ.

Rủi ro và các yếu tố cần theo dõi

• Các danh mục sản phẩm gốc dầu mỏ đã tạo ra áp lực khoảng 40 điểm cơ bản lên biên lợi nhuận gộp do cơ cấu doanh số không thuận lợi và việc ấn định giá không duy trì được hoàn toàn tỷ suất lợi nhuận trong quý.
• Khoản hoàn thuế quan trị giá 39 triệu USD được mô tả là một khoản thu nhập bất thường, một lần và tách biệt với các quyết định định giá của công ty.
• Sự sụt giảm giao dịch mảng tự sửa chữa (DIY) cho thấy áp lực đối với người tiêu dùng có thu nhập thấp hơn. Ban lãnh đạo cảnh báo rằng áp lực tiêu dùng có thể gia tăng.
• Chi phí nhiên liệu cao hơn đang ảnh hưởng đến hoạt động phân phối và chi phí SG&A, trong khi lạm phát trên diện rộng hơn đang bắt đầu tác động đến chi phí bảo trì, chăm sóc sức khỏe, tự bảo hiểm và các chi phí hoạt động khác.
• Giá hàng hóa vẫn biến động. Ban lãnh đạo cho biết giá dầu và các điều kiện chuỗi cung ứng có thể giữ lạm phát ở mức cao hoặc làm giảm lợi ích từ việc điều chỉnh giá.
• Thời tiết vẫn tiềm ẩn nhiều yếu tố không chắc chắn. O’Reilly được hưởng lợi từ cái nóng và cái lạnh khắc nghiệt, nhưng ban lãnh đạo từ chối dự đoán tác động của một mùa đông có thể ôn hòa hơn.

Tóm tắt phần Hỏi & Đáp với các chuyên gia phân tích

Chuẩn hóa biên lợi nhuận gộp: Ban lãnh đạo cho biết các khoản hoàn thuế quan nên được tách biệt khỏi kết quả hoạt động kinh doanh cốt lõi. Khoảng một nửa trong số 40 điểm cơ bản áp lực từ các sản phẩm dầu mỏ là do cơ cấu sản phẩm, phần còn lại liên quan đến việc định giá và thời điểm ghi nhận chi phí. O’Reilly kỳ vọng ngành sẽ chuyển tiếp các khoản tăng chi phí này sang người tiêu dùng theo thời gian, nhưng không đưa ra mốc thời gian cụ thể khi nào tỷ suất lợi nhuận có thể phục hồi.

Chi phí SG&A và khả năng sinh lời tăng thêm: Phần lớn mức tăng chi phí SG&A so với kỳ vọng trước đó xuất phát từ các quyết định nội bộ nhằm hỗ trợ sản lượng bán hàng cao hơn, bao gồm nhân sự cửa hàng, tiền hoa hồng và tiền thưởng động viên. Áp lực bên ngoài bao gồm nhiên liệu, chăm sóc sức khỏe, tự bảo hiểm và lạm phát chi phí chung. Ban lãnh đạo vẫn cam kết duy trì chất lượng dịch vụ ngay cả khi điều đó hạn chế khả năng tối ưu hóa chi phí trong ngắn hạn.

Nhu cầu của người tiêu dùng: Ban lãnh đạo đánh giá nhu cầu chung từ cả khách hàng tự sửa chữa (DIY) và chuyên nghiệp là tương đối khả quan, nhưng thừa nhận rằng khách hàng DIY có thu nhập thấp chịu áp lực lớn hơn so với người tiêu dùng có thu nhập trung bình và cao. Chi tiêu cho bảo dưỡng và sửa chữa xe tiếp tục được ưu tiên.

Doanh số cùng cửa hàng năm 2027: Ban lãnh đạo không đưa ra dự báo doanh số cùng cửa hàng cho năm 2027. Ban lãnh đạo cho biết cơ sở so sánh mức cao của năm trước, lạm phát và thời tiết sẽ ảnh hưởng đến triển vọng, đồng thời tái khẳng định kỳ vọng tiếp tục gia tăng thị phần theo thời gian.

Phân bổ vốn: Mức tăng đòn bẩy tài chính và hoạt động mua lại cổ phiếu không được coi là sự thay đổi trong mô hình lợi nhuận dài hạn. O’Reilly có kế hoạch tiến một cách thận trọng tới mục tiêu đòn bẩy 2,5 lần, tiếp tục đầu tư vào các cửa hàng và hệ thống phân phối, đồng thời hoàn trả phần vốn dư thừa thông qua mua lại cổ phiếu.

Tự động hóa hệ thống phân phối: Ban lãnh đạo cho biết các khoản đầu tư tự động hóa nhằm mục đích tăng công suất, năng suất và tốc độ hoàn tất đơn hàng. Ban lãnh đạo cũng cảnh báo không nên kỳ vọng tiết kiệm chi phí nhanh chóng, đồng thời mô tả việc triển khai tại các trung tâm phân phối hiện hữu sẽ diễn ra dần dần và phụ thuộc vào hiệu quả lợi nhuận của từng dự án.

Toàn văn biên bản cuộc họp kết quả kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Welcome to the O'Reilly Automotive, Inc. Third Quarter 2026 Earnings Call. My name is Tom, and I will be your operator for today's call. [Operator Instructions]

I will now turn the call over to Jeremy Fletcher. Mr. Fletcher, you may begin.

Jeremy Fletcher

Thank you, Tom. Good morning, everyone, and thank you for joining us. During today's conference call, we will discuss our third quarter 2026 results and our updated outlook for the remainder of 2026. After our prepared comments, we will host a question-and-answer period.

Before we begin this morning, I would like to remind everyone that our comments today contain certain forward-looking statements, and we intend to be covered by, and we claim the protection under the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You can identify these statements by forward-looking words such as estimate, may, could, will, believe, expect, would, consider, should, anticipate, project, plan, intend or similar words.

The company's actual results could differ materially from any forward-looking statements due to several important factors described in the company's latest annual report on Form 10-K for the year ended December 31, 2025, and other recent SEC filings. The company assumes no obligation to update any forward-looking statements made during this call.

At this time, I would like to introduce Brad Beckham.

Brad Beckham

Thanks, Jeremy. Good morning, everyone, and welcome to the O'Reilly Auto Parts third quarter conference call. Participating on the call with me this morning are Brent Kirby, our President; and Jeremy Fletcher, our Chief Financial Officer; Greg Henslee, our Executive Chairman; and David O'Reilly, our Executive Vice Chairman, are also present on the call.

I'm excited to begin our call by thanking our outstanding team of professional parts people for their hard work and commitment to producing industry-leading results. We have over 96,000 team members across North America, living our culture of excellent customer service, and I'm excited by the momentum our team has sustained.

Our comparable store sales growth of 7.2% in the third quarter and 7.1% year-to-date demonstrate our team's ability to generate strong results even against very difficult comparisons. Our third quarter 2026 results represent comparable store sales growth on a 2-year stack basis of 12.8%, which is an acceleration to the growth we generated in the first half of the year. Our team's focus on profitable growth translated this strong top line performance into a 14% increase in diluted earnings per share, on top of the 12% we delivered in the third quarter of last year. While we are pleased by these results, we are even more excited about the opportunities we have ahead of us and firmly believe that our focus on consistently strong execution will allow us to continue to compound these results.

I'd like to start the discussion of our performance in the third quarter by walking through the details of our comparable store sales increase. Our comp growth of 7.2% significantly surpassed our expectations for the quarter, and we were pleased to see contributions to our outperformance from both sides of our business.

As we noted on our last call, we were pleased with the strong step-up in sales results in July as summer heat began to set in. This benefit was sustained throughout the quarter, and we generated consistently strong results against the supportive backdrop with the robust sales growth spread fairly evenly for each month of the quarter.

We are also pleased with continued strength across our business thus far in October. Our performance in hot weather-related categories was very strong in the third quarter, which we attribute to both a favorable weather dynamic across our markets as well as the strong performance from our team to capture market share in these key categories. However, these categories were not the sole driver of our outperformance as we were able to capitalize on end demand and strong performance across the breadth of our business.

Our professional business was the larger driver of our overall comparable store sales growth with a third quarter professional comp of slightly over 10%. However, both our professional and retail businesses contributed fairly evenly to our outperformance against our expectations. Our professional comp growth was split evenly between an increase in average ticket and increased transaction counts. Our team's ability to once again generate mid-single-digit growth in professional customer ticket counts is evident of broad-based share gains in our professional business.

We will always pursue market share with a disciplined mindset that ensures we appropriately prioritize industry-leading service and availability our teams work so hard to provide.

Our retail business also had a strong quarter with a mid-single-digit comparable store sales increase. While we did experience a low single-digit headwind in DIY transaction counts, that we believe is evidence of some pressure on the overall consumer, we were pleased to see a continued prioritization of maintenance spend by our customers as well as strong demand in key hot weather categories.

The pressure to DIY transaction counts was more than offset by increases in average ticket. Our average ticket in the third quarter included a benefit from same SKU inflation of slightly over 4% in our combined DIY and professional businesses. This tailwind came in above our expectations with the primary driver being petroleum-based products such as oil and lubricants. Since these categories are a greater portion of sales on the DIY side of our business, we have a slightly higher inflationary benefit in DIY than we did for our professional business.

We also want to highlight that our overall growth in average ticket exceeded the benefit from same SKU inflation we realized in the third quarter, which reflects the continued benefit from parts complexity as well as positive dynamics in the composition of our customer tickets.

Now I'd like to provide some color on our updated full year comparable store sales guidance. We raised our full year guidance from a range of 4% to 6% to a range of 5.5% to 6.5%. The primary driver for the increase was our outperformance in the third quarter. We expect SKU inflation will continue to benefit our results in the fourth quarter, but still anticipate a moderation in this benefit as we lap our largest same SKU comparison in the fourth quarter of 2025. We consider pricing to be rational within the industry and could see some continued upside to our same SKU expectations.

However, the primary driver of our step-up in same SKU inflation in the third quarter was tied to some of our more commodity-based categories that can have more fluid price changes. So we are cognizant that our pricing benefits could subside as we finish out 2026 and remain cautious that the pressures consumers are facing could intensify.

Aside from the short-term volatility that these dynamics could cause, we still expect resilient demand within the industry and have confidence that the consistent execution of our team will drive share gains on both sides of the business. Stepping back a bit to look at the overall backdrop and our fundamental drivers of demand, we have seen stable growth in vehicle miles driven, and the car parc within the U.S. continues to grow and age.

Keeping vehicles in safe and reliable operating conditions is critical to the daily commuting needs of the majority of the population across our markets. Consumers simply don't have a choice when it comes to the repair and maintenance of their vehicles as the sole mode of transportation, whether they depend on our professional parts people to help diagnose their problem and get them the right parts for a job or they rely on their trusted local professional service provider who is supported by our unmatched parts availability and unwavering customer service.

Either way, when it comes to maintenance or repair, our customers, both professional and DIY alike need access to a broad range of parts and they need those parts quickly. Our execution in store and across our entire supply chain puts us in the best position to fill these needs quickly, reliably and with the quality products our customers trust.

Our ability to close out the year strong and generate industry-leading top line results beyond the fourth quarter will be primarily driven by our ability to meet these needs and do so while providing excellent customer service.

Before I turn the call over to Brent, I would like to take a moment to highlight our updated diluted earnings per share guidance. As noted in our press release, we have updated our EPS guidance to the range of $3.25 to $3.35. This incorporates our year-to-date performance and sales outlook along with our gross margin and SG&A expectations for the fourth quarter, which Brent will discuss next. Brent will also provide some color on the tariff refunds we've received in the third quarter.

At the midpoint, our current EPS guidance is an increase of approximately 2% from the midpoint of our previous guidance and a year-over-year increase of 11%. We are pleased our team continues to generate strong returns for our shareholders through executing on our long-held operating fundamentals.

As I wrap up my prepared comments, I would like to once again thank the entire O'Reilly team across North America for their continued dedication to our company, our customers and the strong performance in the third quarter.

Now I'll turn the call over to Brent.

Brent Kirby

[Technical Difficulty] Thanks, Brad. I would also like to join Brad in congratulating Team O'Reilly on a strong performance in the third quarter and thank them for their commitment to our culture and our customers. I would like to begin my comments this morning by discussing our third quarter -- gross margin results and our outlook for the remainder of 2026.

For the third quarter, our gross margin of 52.4% was significantly above our expectations and up 54 basis points from last year. The largest driver of this gross margin expansion, as we noted in our press release yesterday, was a $39 million benefit from tariff refunds, which equates to 76 basis points of rate benefit to the third quarter. Excluding this discrete tailwind -- our third quarter gross margin results came in at the bottom of our expected range, driven by a few puts and takes that I would like to discuss next.

First, we continue to see sustained incremental acquisition cost improvements that have benefited our year-over-year gross margins, and those results were in line with our expectations for the third quarter and consistent with our experience in the first half of the year. We were also pleased to generate better-than-expected leverage of our distribution costs on stronger sales volumes, though this tailwind was partially offset by fuel price pressure within our supply chain.

Offsetting these tailwinds to gross margins were discrete product mix and margin rate pressures related to cost and pricing dynamics for certain categories that drove a portion of our sales outperformance. In particular, much of the incremental same-SKU pricing benefit we realized in the quarter came from the acquisition cost increases we passed through for petroleum-based commodity categories, with motor oil being the biggest driver. These are high turn and primarily front room categories that are widely available in the marketplace and carry lower gross margins than our company average.

So the significant comparable store tailwind in these categories drove a mixed headwind to our total gross margins. We also saw some margin rate pressure specifically in these petroleum-based categories. The market pricing levels for these products have adjusted upward to pass through more than the incremental increase in acquisition costs, but short of the adjustment necessary to maintain gross margin rate within the quarter.

These dynamics of mix and rate did present a pressure to overall gross margins of approximately 40 basis points. However, we are still pleased we were able to generate strong gross profit dollar growth within these categories. I would also note that while these categories that benefited from pricing helped to support our strong comparable store sales results in the quarter, the remainder of our business also performed very well, with top line sales that exceeded our expectations at gross margin rates that were in line with previous guidance forecast.

Before moving on to our fourth quarter gross margin outlook, I want to pause and give some additional detail on the tariff refunds. For most of the products that we sell, we are not the importer of record, and accordingly, our suppliers directly pay the tariffs on impacted goods. As we have previously noted, we took subsequent acquisition cost increases relating to those tariffs and as such, have been in negotiations with our supplier partners surrounding how those tariff refunds are expected to be shared.

The $39 million we recognized in the third quarter are tariff refunds our supplier partners received directly and passed through to us. We are in regular and continual conversations with our supplier community regarding all factors that play into a healthy and stable vendor customer relationship from acquisition costs to fill rate sourcing and supplier financial health. The ultimate realization of any tariff refund is just one component of these broad-based discussions, and we will continue to work with our supplier community on all these fronts.

Our gross margin expectations for the remainder of the year take into consideration all of these factors, we've raised our full year gross margin guidance by 10 basis points to a range of 51.6% to 52.1%. Implicit within this guidance is the expectation that our fourth quarter gross margin rate will moderate somewhat relative to our third quarter rate that includes the tariff refund benefit.

Next, I'd like to turn to SG&A to provide some details on the quarter. Our SG&A leverage of 16 basis points was significantly better than our expectations for the quarter, and we are pleased with our team's ability to drive profitable sales growth while managing our SG&A structure. SG&A dollar growth was higher than expected, with our average per store growth of 4.8%, driven primarily by the necessary spend to ensure that we are executing in-store service levels to match the strong sales volumes.

We are also experiencing the expected modest level of pressure from higher fuel prices within our SG&A structure, as well as some degree of broader secondary cost inflation pressure in our operating model. As we have progressed through 2026, our incremental SG&A dollar spend above our earlier forecast has been primarily driven by variable selling costs, namely in-store service levels and incentive compensation to support sales volumes that have been elevated against our original expectations.

As we generate top line growth and take market share, it's critical for us to uphold our high standard for store-level execution, and we will continue to staff our stores to provide the excellent customer service that drives repeat business.

Looking to the remainder of the year, we would now expect our full year SG&A per store growth in a range between 4.5% and 5%, with the ultimate spend within that range to be determined by our ability to sustain our top line momentum. In conjunction with our updated sales, gross margin and SG&A forecast, we are raising our operating profit guidance range by 20 basis points to an updated range of 19.5% to 20%. This reflects the strong operating cost leverage of our year-to-date results with the gross margin improvements that I previously discussed. At the midpoint, this reflects full year operating profit margin expansion of 29 basis points.

Moving on to inventory. Our per store inventory finished the quarter at $912,000, which was up 6.3% from this time last year and 4.8% from the end of 2025. We continue to expect to finish the year with an average inventory per store growth of 5%, and our inventory turns of 1.6x are in line with the productivity that we would like to see from our inventory investments. We believe our work to continually enhance store level inventories and deploy inventory throughout our tiered distribution network is a strong factor in our share gains and we will continue to pursue opportunities to bring inventory closer to our customers.

Lastly, I will give some detail on our capital investments and new store growth. Capital expenditures year-to-date totaled $860 million, and we remain on track with the projects driving our full year CapEx guidance range of $1.3 billion to $1.4 billion. During the third quarter, we opened 63 new stores across North America, bringing our year-to-date new store openings to 173 net new stores. We are on pace to achieve our 2026 new store opening target of 225 to 235 net new store openings.

Our annual new store growth has trended upward since the pandemic and reflects the strong returns we continue to see from our new store investments. We are pleased with the performance we've seen from each of our new store classes as well as the opportunity we have to both expand into newer markets and to continue to backfill existing markets. These opportunities have us excited to announce today the continued acceleration of our new store growth with a 2027 new store target of 265 to 275 net new stores.

Our new store growth so far in 2026 has been spread across 36 states, Canada and Mexico and our plan for 2027 will follow a similar approach. This is reflective of both the opportunity we see across the United States for continued store growth as well as our strategy and priorities for opening new stores, both domestic and internationally.

We have always viewed the primary driver of new store success to be the high-performing group of team members within that store. Additionally, with every new store we open, we have to ensure we have the distribution capacity for our supply chain teams to be able to provide the level of service and availability our store team members rely on to serve our customers.

As a result, we will continue to prioritize our capital deployment toward new store investments and distribution expansion projects that facilitate and support our core growth engine. We are excited to give our new and existing customers more opportunities to choose O'Reilly, and we believe we have the best team in the automotive aftermarket to continue to fuel this growth.

As I close my comments, I want to thank team O'Reilly once again for their commitment to providing consistent, excellent service to all our customers each and every day.

Now I'll turn the call over to Jeremy.

Jeremy Fletcher

Thanks, Brent. I would also like to thank all of team O'Reilly for another strong quarter. Now we will fill in some additional details on our third quarter results and outlook for the remainder of 2026. For the third quarter, sales increased $416 million, driven by a 7.2% increase in comparable store sales and a $94 million non-comp contribution from stores opened in 2025 and 2026 that have not yet entered the comp base. For 2026, we now expect our total revenues to be between $19 billion and $19.3 billion.

Our third quarter effective tax rate was in line with expectations at 23.1% of pretax income, comprised of a base rate of 23.3% reduced by a 0.2% benefit for share-based compensation. This compares to the third quarter of 2025 rate of 21.4% of pretax income, which was comprised of a base tax rate of 22.2%, reduced by a 0.8% benefit for share-based compensation.

For the full year of 2026, we now expect an effective tax rate of 22.7%. We expect the quarterly rate to fluctuate due to variations in the tax benefit from share-based compensation and the tolling of certain tax periods in the fourth quarter. Now we will move on to free cash flow and the components that drove our results.

Free cash flow for the first 9 months of 2026 was $1.7 billion versus $1.2 billion in the same period last year. The increase in free cash flow was primarily driven by robust growth in operating income and the timing of payment for renewable energy tax credits with a higher cash outflow for these payments occurring in 2025. For the full year of 2026, we are increasing our expected free cash flow guidance to a range of $1.9 billion to $2.2 billion.

Moving on to debt. We finished the third quarter with an adjusted debt-to-EBITDA ratio of 2.26x, which was an increase from our ratio at the end of 2025 at 2.04x. We successfully issued $1.6 billion in senior notes during the third quarter, marking our largest ever senior note offering with proceeds used primarily to term out borrowings under our commercial paper program in anticipation of the October redemption of maturing senior notes. This incremental step-up in leverage reflects our additional borrowings and is consistent with our intention to prudently approach our optimal leverage target of 2.5x.

We continue to be pleased with the execution of our share repurchase program. And during the third quarter, we repurchased 12 million shares at an average share price of $87.34 for a total investment of $1 billion. Our 2026 year-to-date share repurchases through the date of yesterday's press release totaled 41 million shares for a total investment of $3.7 billion. We have consistently viewed our buyback program as an effective means of returning excess capital to our shareholders and a step-up in share repurchase volume in 2026 reflects our strong cash flow generation and incremental borrowings as we move towards our leverage target. When it is appropriate to return excess capital to shareholders, we are very confident that the average repurchase price is supported by the expected discounted future cash flows of our business.

As a reminder, our EPS guidance, Brad outlined earlier includes the impact of shares repurchased through this call but does not include any additional share repurchases. Before I open up our call for your questions, I would like to thank our team for their commitment to the excellent customer service that drives our success.

This concludes our prepared comments. At this time, I would like to ask Tom, the operator, to return to the line, and we will be happy to answer your questions.

Operator

[Operator Instructions] The first question is from Scott Ciccarelli from Truist Securities.

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Scot Ciccarelli

Can you help us understand the gross margin dynamics a bit better? I know you noted some gross margin pressures where you didn't raise prices as quickly as needed to maintain gross margins. But you also knew you had tariff refunds coming in. So it's as simple as taking out the $39 million benefit from tariff refunds to get to an adjusted gross margin number. Or were those refund dollars considered when you're making some of your pricing decisions?

Jeremy Fletcher

Scott, thanks for the questions, Jeremy. I'll kind of start and others can join in. I think the most appropriate reason why we called it out in the press release yesterday is we do view the tariff refunds as a unique item as a one-off item. And I think it's more than appropriate to think about gross margin results, excluding what we saw there. I think in a similar vein, we would tell you that we really didn't factor the benefit of those into how we thought about managing our gross margins in the quarter.

We would have been, I think, happy to have had just layering on top of what our previous expectations for gross margin would have been. I think more of how we thought about gross margin in the quarter were the things that Brent talked about. And I know it was part of his prepared comments, but I'll just maybe walk through it again here. In part, some of the strong comps we saw were generated by some pricing benefits that were -- were new to us in the quarter and a little bit unexpected. In particular, at least a portion of those were in these petroleum-based commodity categories, motor oil being the largest one.

And we would tell you that, that lift to our overall comps out of the 7.2%, it was probably about a 1% portion of that comp was driven by those categories. That happens to be just a lower margin category for us in general. And so, had we not even had the rate pressures probably about half of that 40 basis points that Brent talked about earlier would have just been a mix pressure to us in the quarter is that -- as that category sell comps pretty significantly better than even the rest of the company.

But then we did also see some timing pressures in how we think about the market passing that through. Ultimately, we've kind of seen a little bit of that in the past during the course of the pandemic. There were some impacts in oil, particularly as supply chains were challenged, it's a similar scenario here where it took a little bit longer for the market to adjust to that. And ultimately, we'll see where that happens.

But I still feel good that the cost impact that we have seen in those categories has been adequately passed through. We're generating better gross profit dollars, but just not at quite the same rate of what we would have seen before. We've been active as a catalyst to continue to move that up where it's appropriate. And so it's not a call that we made because of the tariff refunds that have moved through. It's really just kind of where the market is set on those items.

Brad Beckham

Yes. I would just say, this is Brad. Jeremy said it very well. But we do want to be clear that those are 2 discrete things you're appropriate to ask what you did, but we manage price in a rational industry the way we always have, whether it be oil, whether it be any petroleum-based products or any other hard part or outfront merchandise categories, nothing's changed in our philosophy in terms of pricing.

Operator

Your next question is coming from David Bellinger from Mizuho.

David Bellinger

Two questions. First, I wanted to look at the SG&A growth per store you're now guiding that to 4.5% to 5% for the full year. How much of that is internal versus external? Or said better, how much of that is in your control in terms of being tied to better-than-expected sales growth? And how much is based on some of these outside factors out of your control and more industry-based like wages, health care and just other costs out there.

Jeremy Fletcher

Yes. I can start there, David, and then the guys can chime in. Relative to, I think, the change that we've seen in the back half of the year versus where we would have previously expected. The majority of what we see is really tied to the actions that we're taking internally to make sure that we're matching our service levels and how we operate our business to align with the strong sales volume that our teams are being able to generate.

For sure, some component of that is just incentive comp. We -- as you know, within our stores, we operate with a heavy mix of full-time team members. They're all compensated really down in the entry level in our stores with commissions. And so there's a direct tie to the success of our stores with all of our teams. But then we've also seen strong volumes and good activity, particularly on the professional side of the business with solid traffic.

And so we have worked hard to match to that. There is a component piece we had, I think, considered a lot of what we've seen from pressures like fuel for instance, but that has also caused a little bit pressure to where we would have sat last quarter as we have seen those prices -- those costs remain high, and that's been coupled with a lot of the activity that we've had to generate as we're supporting more deliveries to our professional customers.

And we're starting to see, I think, bleed into other areas of our cost structure. Any time you got to roll a truck to fix the AC, at one of your stores or those types of items you're starting to see some of that cost pressure bleed in. And so we're cognizant of that being potential pressure. As we think about the -- how we finish out the year in the fourth quarter, the variance for where we land with that, largely, we would expect would be driven by our ability to sustain the strong sales results that we've seen and we've been very, very happy with. But certainly, we're paying attention to how some of the rest -- the broader inflation filters into the costs we have to manage.

David Bellinger

Yes. Got it. And if you go back to the petroleum-based categories, again, just the full percentage point comp lift that you got there. Understanding prices have gone up, but not to the extent to maintain gross margin rate. Should that change at all going forward? Are there more price increases that will be enough to recapture some of that 40 basis points of gross margin that just wasn't made up this quarter.

Brent Kirby

Yes. David, this is Brent. I can start and the guys can chime in. It's a fair question. And Jeremy mentioned this. We can't -- obviously don't have a crystal ball. We can't tell the future. But the closest thing we have in recent times to compare this to really is some of the challenges we faced in -- during some of the COVID quarters when petroleum products were moving up at a very rapid rate.

Again, these are high-turn products, broadly available in the market. We're obviously going to be competitive. We're going to maintain a competitive posture on these products. So we monitor that daily, weekly. Our teams do a great job of that. And we're going to always adjust to the market to be competitive. But we also are in a very rational industry. It continues to be able to pass those increases along over time.

So what I'll tell you is based on historical, I can't tell you exactly what's going to happen in Q4. I mean there's some belief that oil could even go farther north in Q4 with some continuation in the Iran conflict, who knows, nobody has a crystal ball. But what I would tell you, if I look historically at what we saw during the COVID time period was a very similar dynamic. Yes, we were able to adjust the rate over time. It's really just about the time of the turn on that product category specifically.

Jeremy Fletcher

Maybe the only other thing that I would add there is that when we look past that kind of discrete item for us for the results in the quarter. We still feel very good about the comp results. The oil was less, we'll take it every quarter we can. But we are so confident, I think, very strongly in that kind of 6% ballpark anyway, at gross margin that in other areas of our business were in line with our expectation.

And that did include some degree of pressures that were either primarily or secondary related to some of the fuel cost pressures, freight that priced through and the industry on really the rest of kind of the basket has been rational and pass-through rate in ways that are consistent with what we would have seen historically.

So we view that kind of dynamic as still being consistent with what we would expect and positive as we move forward.

Operator

Your next question is from Simeon Gutman from Morgan Stanley.

Simeon Gutman

So back to this SG&A and incremental margin question. So you're clearly gaining share and SG&A per store is still growing at a relatively elevated rate. So is it -- how should we think about incremental profitability of that growth? Are investments either investments or just cost of operating the business getting higher such that it's just a little more expensive to maintain or to grow the share at the rate you're doing. And I think it's fine if it is, and that's okay. But should we take the expectation down that SG&A just somehow moderates and then incremental margins could get wider.

Jeremy Fletcher

Yes. No, it's a great question, Simeon. I can start there and others can chime in. I think for us, a couple of factors that they contribute to what you're right and characterized a little bit higher than historical average SG&A rate. I think there is some component of just -- more significant cost inflation within that number than what we would have seen maybe in years past 10, 12 years ago.

And we see that dynamic in the top line. I do think that at the level of sales results that we've been able to generate, including real share gains that drive incremental activity within our stores. We think that, that also has an incremental pressure to us. And to whatever extent we are able to sustain that, we continue to believe philosophically that that's an important use of how we manage our operating structure, and we think over the course of time that drives operating profit dollar growth that allows us to capture more of the addressable market in our industry, and we feel good about that.

There's also a component of where our spend has been that sets the -- or a little bit higher than it would have been in previous years, and it's the types of investments that we've talked about over the course of several quarters now as we want to make sure that we're being prudent from a long-term perspective and how we invest in things like technology and ensuring that our store network is well maintained that we're -- that we position ourselves well from an inventory deployment perspective and manage that well.

So some part of what we've seen is, I think, a little bit unique to this environment, but we also -- we've been pretty elective in being aggressive in how we pursue what we think are exciting opportunities to grab share in our industry.

Brad Beckham

Yes. Simeon, I think Jeremy said it pretty well. I think just to pull it up for a second and just everything our team focuses on from a strategic standpoint is always focused on this 10% share that we have and our opportunity that continues to -- we feel like to consolidate the industry through organic growth through aggressive strategies both in the U.S., Mexico and Canada. So we always start there, and we continue to start there and feel like we have some short-term and mid- and long-term opportunities for sure.

And then when you get into your direct question about margins and SG&A and just leverage over time. I think the reason we want to have a little bit of caution is we want to continue to obviously reserve the right to make sure we're keeping up with our volumes from a service level standpoint, everything Jeremy talked about, but also it's just a point in time where there are some things that are, frankly, out of direct control of our operating teams, whether it be in the stores, whether it be in our distribution centers, et cetera, with what we've seen with medical, what we've seen with self-insurance, what we're seeing with fuel and some of those things. So we just want to be a little bit careful knowing that we're not going to -- while we may continue to have some of those pressures.

Here in the short term, we're not going to sacrifice those service levels, and we're committed to appropriate leverage over the mid to long-term.

Simeon Gutman

Okay. The follow-up is, a year ago, you saw some elasticity with lower income consumers around now. And you mentioned you weren't seeing that when we saw you at the Investor Day. And can you update us on that?

And then related to the near term, you were appropriately, I think, prudent about inflation or pricing moderating. Could this oil-driven inflation? And then it may trickle to other categories, actually end up either keeping pricing where it is into the early part of next year or actually increasing it?

Brad Beckham

Simeon, I'll start with the consumer and then maybe kick it over to Jeremy and Brent on the second part of your question, both good ones.

We continue to be where we've been on the consumer. Overall, we feel really good about our performance. We continue to have conviction that our consumer DIY and DIFM are relatively healthy, though we recognize and believe that the middle to upper income consumer kind of on the higher end of DIY and then into the DIFM consumer is a little healthier than the low-end DIY consumer.

That said, we still are really where we were at the Analyst Day that when we look at our category performance, when we look at geographies, when we look at different cohorts to consumers, they are still prioritizing the maintenance and repair of their vehicles. There could be a few areas of discretionary and maybe some larger ticket jobs here and there that we may see a little bit of pressure. But overall, for our results, on both sides of the business, we still feel like consumers continue to spend on maintenance and repair.

Jeremy Fletcher

Yes. Simeon, on the second part of your question around inflation, maybe the first place I would start is we do still expect moderation moving from third quarter to fourth quarter, really just even at existing price levels with that comparison just being a little bit more of a step up.

So where we would have been last quarter, maybe thinking we'd be around 1% for fourth quarter, we would expect to be around 2.5%. We'll see maybe 2.5%, 3% for the fourth quarter. That does assume some expectation around particularly some of the petroleum-based commodity pricing continuing to still be a little bit elevated. We think that even if we get relief in the short term, there's some supply chain issues to work out there.

And so, we think that there's still potential for some volatility there, and we'll have to see what can happen in a couple of months as to how that looks as we flow into next year. And so we'll have, I think, a better read on how to set expectations for what we would see next year. But there's some amount of what we see, I think specific to that issue, that will probably take a little bit of unwinding. And so we feel somewhat comfortable that we're going to be in a little bit more elevated price environment there through the balance of 2026.

Operator

Your next question is from Kate McShane from Goldman Sachs.

Katharine McShane

In prior El Niño cycles in 2015, 2016 and 2023 and '24, you did note slower DIY sales in cold weather categories. Just with the super El Niño cycle expected to come up here, how should we think about the impact to comp and just maybe how you would manage through it this time and if there are any differences from last time.

Brad Beckham

Yes. Great question. We historically have not been very good at predicting weather patterns, weather cycles. So I want to be careful just assuming that all the predictions are accurate.

I think just frankly, we spend all our time focusing on just what we can control our service levels, our ability to gain share. I think it's just yet to be seen what happens this winter. We obviously, in our industry, demand signals continue to be very healthy. We talked about that a little bit in the prepared comments, miles driven, age and size of car park, we still feel really good about that.

And to your question, we do like extremes. We like hot summers and we like cold winters. And a lot of those type drivers when we talk about weather aren't just short term. They're really the wear and tear that happens over a longer period of time. So again, yet to be seen, we love a good winter. It sounds like it could be a little bit mild, but who knows.

I think one of the keys is that when we think about the hot summer that just took place, we feel good about how we performed in hot weather categories even if we had a little bit of a mild winter, heat is actually what is really hard on batteries, other components, rotating electrical starters, alternators, things like that. And so even though -- even if it was a little bit of a mild winter when it gets cold, those things can still fail even if it's not extreme.

And so I just wasn't overemphasize or really underemphasize that we just have to see how it plays out. I think our conviction just continues to be that no matter come what the winter plays out like that we continue to have our ability to take share on both sides of the business.

Operator

Your next question is coming from Michael Lasser from UBS.

Michael Lasser

The current consensus for O'Reilly for 2027 calls for a 4% same-store sales increase. This is coming off of much of what has been talked about over the last 40 minutes, a fading benefit from like-for-like inflation, uncertainty with the weather and a year of outsized share gains for O'Reilly in particular. And in the past, that is ushered in maybe a more moderate pace of share gains in the year ahead.

So the next time we have the opportunity to talk to you, we are all going to be speculating whether you guide the outset of the year, a 2% to 4% comp, a 3% to 5% comp. This is a wonderful opportunity for you to help manage your -- manage our expectations. Would you think that next year is going to be a below average year in light of everything you're going to have to lap from this year.

Jeremy Fletcher

Thanks for the question, Michael. Obviously, we're not going to be able to put too fine a point on it for next year. It's not what we really ever do. I think that some components of the items that you talked about involve some things that are going to occur over the next few months that are very relevant to how we form our expectations there. So inflation has been a big part of the story for the last couple of years, and we want a clean read into that as we think about next year.

And then obviously, the weather dynamics are unique to each period, and Brad talked about that just quite a bit already. We have had a very strong year in driving better traffic to our stores in the broader competitive space. And those are always tough bars to meet year-over-year. But we also continue to have a lot of excitement and optimism around the execution in the core components of our business model that are delivering that strength.

So I would tell you internally, nobody within our management team or in our entire field organization feels like that we don't have any expectation that next year is a step back in that ability to grow and to gain share. We'll have a better read into that as we turn the calendar year and look for some of those other specific factors.

But independent of any individual quarter or how we think about the dynamics or what the comparisons look like, we are operating a model and with a team that absolutely has the expectation that we will gain share over the course of time. And that there will be some -- always some puts and takes there are unique things to happen in individual quarters. But our team is fine that we ought to be able to add growth on top of growth and compound the strength that we've seen really this year and last year as well.

Michael Lasser

Understood. My follow-up is there's been an interesting dynamic at O'Reilly over the last couple of years where the pace of operating expense has been elevated. At the same time, O'Reilly has been increasing its leverage ratio to buy back more stock. Should we, as outsiders, interpret that as a signal to suggest that the composition of your earnings algorithm is just perpetually going to change where more of your earnings growth is going to come from buybacks because the cost of doing business has remained elevated. If that's maybe too much of a stretch to assume what will it take for O'Reilly to get back to the days when it only saw around 2%, 2.5% SG&A per store growth.

Jeremy Fletcher

I'll probably address the question around how we think about leverage and buybacks on that, Michael. I don't think that there's anything, I think, unique from a strategy shift or a change in how we view that, we've long said that we have a leverage target that's higher than where we had been at. We're optimistic about most things that we do, and we felt like that this was an appropriate window to be able to ratchet that up.

Ultimately, that's an item that will -- in short, it's just going to determine a little bit how we rebalance the debt capital funding our business and that flows through the buybacks being a little bit more aggressive. But that's not a long-term shift. We'll settle in from a leverage perspective and land, I think, in an appropriate place, and you'll see us continue to generate strong cash flows, invest them back into the business and deliver the excess capital back to shareholders through the buyback, which we continue to feel is a good methodology for doing that.

None of that is informed by a change in expectation around our ability to generate returns off of what we invest in the business, and those are quantified for us internally in operating profit dollar growth. And we continue to be excited about what that looks like for our business. It has felt good about how we have managed our overall cost structure to aggressively pursue that. And so that's really the answer to the question around what does that look like over the course of time, we're continuing to add a lot of stores.

We're supporting our stores with distribution centers. We're leaning into the places where we think we help to make our business better and grow, and we'll manage our cost structure to be effective in doing all those things.

Operator

Your next question is coming from Steve Forbes from Guggenheim.

Steven Forbes

Maybe for Brent or Brad, I appreciate the store growth guidance for 2027. And I guess given the DC capacity needs to support this growth, can you talk through sort of regional expectations around that footprint expansion? And then maybe sort of just frame up for us sort of how you guys think about store growth potential on a percentage basis, right, or an absolute basis? Even further out, right, in 2029? Or are we sort of reaching a level of comfort? Or does the business have the capacity to continue to accelerate the absolute level?

Brad Beckham

Steve. Great question. This is Brad. I'll start out and see if the other guys want to chime in. But appreciate you asking about store growth. We feel really good about where we're going to end the year here with our target growth for '26. We continue to feel really great about how all our new store cohorts are performing. And so really excited to announce our new store growth opening for '27 that you're asking about.

I think to kind of the first part of your question, we want to emphasize very similar to what our growth looked like in '26. Brent cited earlier that, that growth in '26 was spread out over 36 states as well as incremental in Mexico and Canada. And that is going to look very similar. A lot's made about our new DC in Northern Virginia and kind of that upper Mid-Atlantic. But I want to remind you and everybody that our growth is going to continue to be spread out over the majority of the states that we operate in today. That's existing markets, that's West Coast, East Coast, North and South.

And obviously, incremental as we get more mature in the international markets. But we feel really good about the way we've been able to add to our distribution capabilities and we've talked a lot about for a long time, and that allows us to really spread that growth out across the U.S. And what that really does is it enables all our operational teams to open less stores per region, so to speak and that allows them to really focus on the quality of the store manager, the quality of the parts people rolling out the right district managers, the right regional directors.

And so it will be a combination of everything we talked about and we said earlier. And so I feel really good about that. We're excited, I'm not going to guide to store growth or percentage overall for beyond '27 today. But would just tell you that we're going to continue to pour into our expansion plans. New stores are -- continue to be our strongest return on our next dollar spend. That's obviously going to be backed up by distribution capabilities, distribution expansion, technology, both in our stores, our distribution centers, our entire supply chain.

And so we'll leave that for this time next year, but we'll tell you that store growth specifically is going to continue to be a big part of our strategy.

Steven Forbes

And then maybe a brief follow-up. As you mentioned, technology within the regional DCs and supply chain broadly, the AutoStore efforts, many of us got to see it right down at the Analyst Day. Curious if there's a way to sort of think through or frame up for us what the variable cost savings are or can be what the time to serve benefits you're seeing today, what they can be. Any way to think about sort of how you guys will leverage those efforts and sort of lean into them over time here to continue to drive sort of separation?

Brent Kirby

Yes, Steven, thanks for the question. This is Brent. I can start on that one and the other guys can jump in. Obviously, yes, we were pleased to host you all at our Analyst Day recently at our Atlanta, D.C. and see some of that technology. But I guess the thing I would just kind of lean into philosophically for us, we're always -- every DC project, we're always thinking about how do we make it most efficient for our store base that we're trying to serve, give us the most capacity and the most productivity in terms of the return on that investment.

And so really, as we think forward, nothing really has changed with our strategy. Obviously, we've got -- we have a generation of DCs out there where we had a compelling business case to move to that level of automation. So far, we're pleased with what I'm seeing in terms of the return on those investments and the results we're getting. That allows us to get additional capacity in some of those buildings for additional store counts, which we need as we continue to grow just to some of Brad's comments, we continue to backfill existing markets in many of these geographies across the U.S.

What I would tell you, though, is we're always going to be looking for that. I mean, that is not -- we're always looking for -- and even if you go back to generations beyond auto store, we've put in, we've got carousel in some of our buildings. I mean we're just -- when we make that investment, we're always looking at the best way to get the best ROI on that DC investment. And we're going to continue to do that with new projects. We're excited about the project in South Central U.S. outside the Dallas Metroplex that we've announced, where the teams are working on that.

We're excited to see what we bring there. We'll bring some levels of automation there in that building, not ready to talk about anything in detail yet. But again, we're always looking at those kind of things to make sure we get the most productivity capacity and the best return on those investments. We're also continuing to look at the infrastructure we need in some other geographies as well to continue to support that store growth that Brad talked about.

And the only other thing I'll say is about distribution is not only just domestically, obviously, that -- if you think about our footprint in terms of our distribution footprint, 32 regional DCs, 400 hub stores, how we continue to move product up and down the tiered distribution capacity that we have to serve all of our stores. And we're going to -- we are following the same plan and blueprint in Mexico and Canada as well. So we're excited about all of those growth opportunities for our distribution work.

Jeremy Fletcher

Yes, Steve, I think the key -- Brent said it very well. I think the -- one of the key points is we have always been so rifled in on DC productivity and ROI on our existing boxes that we would just caution anybody from extrapolating anything specific to goods-to-person solutions that are newer to us because that's going to be slow and incremental. It's yet to be seen what those investments will look like in some of the brownfield opportunities we have with existing DCs. And also, it's not just productivity and cost mechanism. Some of the automation that you've seen as well as how we're looking at the rest of our DCs is equally focused on getting those parts out the door that much quicker with our industry-leading advantage on how we run city counter, how we do those overnight special orders of the average 170,000 SKUs in those buildings. So I just want to make sure we balance how you all are thinking about that.

Operator

Thank you. We have reached our allotted time for questions. I will now turn the call back over to Mr. Brad Beckham for closing remarks.

Brad Beckham

Thank you, Tom. We would like to conclude our call today by thanking the entire O'Reilly team for your continued dedication to our customers. I would like to thank everyone for joining our call today, and we look forward to reporting our fourth quarter and full year results in February. Thank you.

Operator

This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.