# O’Reilly Automotive (ORLY) Financial Model

Free Excel 3-statement financial model and company analysis for O’Reilly Automotive.

- Canonical: https://finamodel.com/companies/oreilly-automotive
- Industry: Automotive
- Downloadable model: Yes
- Excel download: https://finamodel.com/company-models/ORLY.xlsx

## Model Purpose

This model projects store-level economics, working capital dynamics, and aggressive share repurchase activity to determine the equity valuation of O'Reilly Automotive for a fundamental equity investor.

## Company Overview

O'Reilly Automotive is a leading specialty retailer of automotive aftermarket parts, tools, supplies, equipment, and accessories in North America. The company operates a dual-market strategy, serving both Do-It-Yourself (DIY) retail customers and professional service providers (DIFM) from the same store base.

- **Business segments:** The company operates as a single reportable segment but splits revenue approximately 50% DIY and 50% Professional.
- **Key geographies:** Primarily the United States (over 6,400 stores), with a growing presence in Mexico and Canada following recent acquisitions.
- **Business model type:** Asset-heavy retail and distribution network. The company relies on a strategic, regional, tiered distribution network to provide same-day or overnight access to hard-to-find parts.
- **Competitive position:** O'Reilly is a top-two player in the US auto parts duopoly alongside AutoZone, consistently taking market share from weaker competitors like Advance Auto Parts and fragmented independent shops.
- **Recent major events:** In June 2025, the company completed a 15-for-1 forward stock split. In 2024, it acquired Groupe Del Vasto to expand its Canadian footprint.

## Revenue Deep Dive

O'Reilly reports consolidated revenue, but growth is driven by store count expansion and comparable store sales across two customer types.

### DIY (Do-It-Yourself)

- **Segment name:** DIY Sales (approximate 50% of total revenue)
- **Revenue driver formula:** Average Stores Open x Average DIY Revenue per Store
- **Historical growth rate:** Low single-digit CAGR (1% to 3%)
- **Key growth levers and headwinds:** Driven by macroeconomic factors, consumer discretionary income, and the age of the US vehicle fleet. Headwinds include inflation and tariffs pressuring lower-income consumers.
- **Pricing dynamics:** Highly competitive but rational pricing environment. The company passes supplier price increases through to the consumer.
- **Seasonality:** Spring and summer are typically stronger due to increased driving and weather-related maintenance.

### Professional (Do-It-For-Me / DIFM)

- **Segment name:** Professional Sales (approximate 50% of total revenue)
- **Revenue driver formula:** Average Stores Open x Average Professional Revenue per Store
- **Historical growth rate:** Mid to high single-digit CAGR (6% to 10%)
- **Key growth levers and headwinds:** Driven by parts availability, delivery speed, and relationship building. The professional market is highly fragmented, providing a long runway for consolidation and market share gains.
- **Pricing dynamics:** Relationship-based pricing with volume discounts.
- **Seasonality:** Similar to DIY, with spikes during extreme weather events (heatwaves or deep freezes) that cause battery and alternator failures.

## Cost Structure



### Variable Costs / COGS

- **Line items:** Product costs, inbound freight, purchasing and receiving costs, inspection costs, internal transfer costs, and distribution centre operating costs.
- **Gross margin range:** 51.0% to 52.0% (51.6% in FY2025).
- **Key input costs:** Auto parts (heavily sourced from Asia, creating tariff exposure), fuel for distribution, and warehouse labour.
- **Scaling:** Gross margin expands slightly as the company leverages its fixed distribution centre costs over higher sales volumes.

### Operating Expenses

- **SG&A:** Store payroll, store rent, advertising, self-insurance reserves, and corporate overhead. SG&A typically runs at 31.0% to 32.5% of sales (32.1% in FY2025).
- **Depreciation & Amortisation:** Embedded within SG&A and COGS depending on the asset, but generally runs at 1.5% to 2.0% of sales.
- **Self-Insurance:** The company self-insures for workers' compensation and auto liability. Adjustments to these reserves can cause 30 to 50 basis point swings in SG&A.

### Margin Profile

- **Gross margin:** 51.6% (FY2025), trending slightly upward due to pricing power and supply chain efficiencies.
- **Operating margin:** 19.5% to 20.5% (19.5% in FY2025).
- **Net margin:** 13.5% to 14.5% (14.3% in FY2025).

## Balance Sheet Structure

- **Total assets:** Approximately $13 billion to $15 billion.
- **Key asset categories:** Inventory is the largest tangible asset, running at approximately $870,000 per store. Property and equipment is also significant, as O'Reilly owns a higher percentage of its stores and distribution centres compared to peers.
- **Working capital profile:** O'Reilly operates with heavily negative working capital, which is a massive structural advantage.
  - **Days Sales Outstanding (DSO):** Very low (under 10 days), as DIY is cash/credit card at the point of sale, and Professional accounts are settled quickly.
  - **Days Inventory Outstanding (DIO):** High (around 220 to 240 days), as the company stocks a massive number of SKUs to ensure parts availability.
  - **Days Payable Outstanding (DPO):** Extremely high (around 280 to 300 days).
  - **AP to Inventory Ratio:** The company funds its entire inventory balance through supplier payables. The AP-to-Inventory ratio ended FY2025 at 124%.
- **PP&E:** Consists of owned store locations, distribution centres, and store fixtures.

## Capital Expenditure & Investment

- **Capex as % of revenue:** 6.0% to 7.5% (Guided to $1.3 billion to $1.4 billion for FY2026 on ~$18.8 billion in revenue).
- **Maintenance vs. growth:** The majority of capex is growth-oriented, funding 225 to 235 new store openings per year and the construction of massive new distribution centres.
- **M&A pattern:** Occasional bolt-on acquisitions to enter new geographies (such as VIP Auto in New England, Mayasa in Mexico, and Groupe Del Vasto in Canada).

## Debt & Capital Structure

- **Total debt:** Approximately $5 billion to $6 billion in senior notes.
- **Leverage target:** Management targets an adjusted debt to EBITDAR ratio of 2.5x. They issue debt to maintain this ratio as earnings grow.
- **Credit rating:** Investment grade (BBB).
- **Share repurchase programme:** This is the primary use of free cash flow and incremental debt. The company repurchased $2.1 billion of stock in FY2025 (22.7 million shares post-split).
- **Dividend policy:** The company does not pay a dividend. All return of capital is executed via share buybacks.

## Cash Flow Characteristics

- **Operating cash flow conversion:** Excellent. OCF consistently exceeds Net Income (OCF was $2.8 billion in FY2025 on $2.54 billion of Net Income).
- **Free cash flow margin:** 10.0% to 12.0% of revenue.
- **Working capital impact:** Because the AP-to-Inventory ratio is over 100%, growth in inventory (to stock new stores) is entirely funded by suppliers. This means unit growth actually generates working capital cash inflows.
- **Cash tax rate:** Closely tracks the statutory rate (approximately 22% to 23%).

## Sheet Structure

1. **Assumptions:** Hardcoded drivers for store growth, comp sales, margins, working capital ratios, and capital allocation.
2. **Store Roll-Forward:** Tracks beginning stores, gross openings, closures, and ending stores. Calculates average stores open.
3. **Revenue Build:** Calculates DIY and Professional revenue based on average stores and revenue per store metrics.
4. **Income Statement:** Consolidated P&L from Revenue down to Net Income and EPS (incorporating the 15-for-1 stock split).
5. **Working Capital Schedule:** Projects Inventory, Accounts Payable, and Accounts Receivable. Crucially models the AP-to-Inventory ratio.
6. **Balance Sheet:** Standard assets, liabilities, and shareholders' equity.
7. **Cash Flow Statement:** OCF, CFI (Capex), and CFF (Debt issuance and Share Repurchases).
8. **Debt & Interest Schedule:** Tracks senior notes, revolving credit facility, and interest expense.
9. **Equity & Shares Schedule:** Models the massive share repurchase programme, calculating ending share count and weighted average shares for EPS.
10. **DCF Valuation:** Unlevered free cash flow build, WACC calculation, and terminal value.

## Key Financial Relationships

1. `Ending Store Count = Beginning Store Count + Gross Store Openings - Store Closures`
2. `Average Store Count = (Beginning Store Count + Ending Store Count) / 2`
3. `Comparable Store Sales Growth = (Current Year Average Revenue per Store / Prior Year Average Revenue per Store) - 1`
4. `Total Revenue = Average Store Count x Average Revenue per Store`
5. `Gross Profit = Total Revenue x Gross Margin Percentage`
6. `SG&A Expense = Total Revenue x SG&A Margin Percentage`
7. `Operating Income = Gross Profit - SG&A Expense`
8. `Ending Inventory = Ending Store Count x Average Inventory per Store`
9. `Accounts Payable = Ending Inventory x AP-to-Inventory Ratio`
10. `Operating Cash Flow = Net Income + D&A + Change in Net Working Capital + Stock-Based Compensation`
11. `Share Repurchase Spend = Free Cash Flow + Net Debt Issued`
12. `Shares Repurchased = Share Repurchase Spend / Average Share Price During Period`
13. `Ending Shares Outstanding = Beginning Shares Outstanding - Shares Repurchased`

## Cross-Sheet Dependencies

- The **Store Roll-Forward** feeds the **Revenue Build** and the **Working Capital Schedule** (to calculate total inventory based on per-store averages).
- The **Revenue Build** feeds the top line of the **Income Statement**.
- The **Income Statement** generates Net Income, which feeds the top of the **Cash Flow Statement**.
- The **Working Capital Schedule** calculates changes in NWC, which feeds the **Cash Flow Statement**.
- The **Cash Flow Statement** determines available cash for the **Equity & Shares Schedule** (buybacks).
- The **Equity & Shares Schedule** calculates the new share count, which feeds back to the **Income Statement** to calculate EPS.
- The **Debt & Interest Schedule** calculates interest expense, which feeds the **Income Statement** (creating a circular reference that requires an iterative calculation or a circuit breaker).

## Sign Convention

- **Income Statement:** Revenue is positive. Expenses (COGS, SG&A, Interest, Taxes) are negative. Net Income is positive.
- **Balance Sheet:** All assets, liabilities, and equity balances are positive.
- **Cash Flow Statement:** Cash inflows are positive. Cash outflows (Capex, Share Repurchases, Debt Repayment) are negative.
- **Schedules:** Gross openings are positive, closures are negative.

## Things Most Likely to Go Wrong

- **Stock Split Adjustment:** The company executed a 15-for-1 stock split in June 2025. Historical per-share data (EPS, share price, share count) must be retrospectively adjusted to prevent massive year-over-year errors in the model.
- **Working Capital Cash Flow:** Builders often model inventory growth as a use of cash. For O'Reilly, because AP > Inventory, store expansion actually generates working capital cash flow. The AP-to-Inventory ratio must be explicitly modelled.
- **Share Repurchase Impact on Equity:** O'Reilly buys back so much stock that its Retained Earnings and Total Shareholders' Equity are deeply negative. The model must allow for negative total equity without flagging an error.
- **Self-Insurance Volatility:** SG&A includes self-insurance reserve adjustments. Do not straight-line historical SG&A without normalising for these one-time casualty claim adjustments.
- **Interest Expense Circularity:** The company issues debt to buy back stock. Debt balances drive interest expense, which lowers net income, which lowers cash flow, which changes the debt needed.
- **Store Count Averages:** Revenue must be driven by *average* stores open during the period, not ending stores, as openings are weighted throughout the year.
- **Tariff Exposure:** COGS is highly sensitive to freight and import tariffs. The model should include a toggle or scenario for gross margin compression due to supply chain costs.
- **Excise Tax on Buybacks:** The model must account for the 1% excise tax on share repurchases, which impacts cash flow.

## Validation Checks

- "Gross margin must remain between 51.0% and 52.5%; flag if outside this band."
- "AP-to-Inventory ratio should remain above 100% (historically 120% to 125%); flag if it drops below 100%."
- "Total Shareholders' Equity should be negative due to treasury stock from buybacks; do not flag as an error."
- "Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period."
- "Operating Cash Flow must exceed Net Income (OCF / NI > 1.0x)."
- "Adjusted Debt to EBITDAR should remain near the management target of 2.5x."
- "Share count must decrease year-over-year; flag if shares outstanding increase."

## Key Assumptions (Default Values)

| Assumption | Default Value | Unit | Rationale |
|---|---|---|---|
| Gross Store Openings | 230 | Stores | Midpoint of management's 2026 guidance (225 to 235). |
| Store Closures | 10 | Stores | Historical average for underperforming or relocated units. |
| Comparable Store Sales Growth | 4.0% | % | Midpoint of management's 3.0% to 5.0% guidance for 2026. |
| Gross Margin | 51.8% | % | Midpoint of management's 51.5% to 52.0% guidance for 2026. |
| SG&A Margin | 32.1% | % | In line with FY2025 actuals, reflecting ongoing wage and insurance inflation. |
| Effective Tax Rate | 22.5% | % | Historical average statutory and state tax blend. |
| AP-to-Inventory Ratio | 124.0% | % | Pegged to FY2025 actuals. |
| Average Inventory per Store | 870,000 | $ | Pegged to FY2025 actuals. |
| Capex | 1,350 | $ Millions | Midpoint of management's $1.3B to $1.4B guidance for 2026. |
| Target Debt to EBITDAR | 2.5x | Multiple | Stated management target for capital structure. |
| Average Interest Rate on Debt | 4.5% | % | Weighted average cost of existing senior notes. |
| Share Repurchase Allocation | 100.0% | % | Percentage of excess free cash flow directed to buybacks. |
| Excise Tax on Buybacks | 1.0% | % | Statutory US excise tax on share repurchases. |
| WACC | 8.5% | % | Standard discount rate for a stable, large-cap US retailer. |
| Terminal Growth Rate | 2.5% | % | Long-term GDP and inflation proxy. |

## Data Sources & Benchmarks

- **Filings:** SEC EDGAR (O'Reilly Automotive, Inc. CIK: 0000898173).
- **Investor Relations:** O'Reilly Auto Parts IR website for quarterly earnings presentations and Analyst Day transcripts.
- **Key Peers:** AutoZone (AZO) is the most direct comparable (similar dual-market strategy and capital structure). Advance Auto Parts (AAP) is a secondary peer.
- **Industry Data:** Auto Care Association factbook for total addressable market size and US vehicle fleet age data.
- **Alternative Data:** Placer.ai for store foot traffic analysis; import/customs data for supply chain and tariff exposure tracking.

## Sources

- O'Reilly Automotive Q4 2025 Earnings Release and Call Transcript (Seeking Alpha, Quartr)
- O'Reilly Automotive FY2025 Form 10-K (SEC EDGAR)
- O'Reilly Automotive Q3 2025 Earnings Release
- O'Reilly Automotive Q2 2025 Earnings Release
- O'Reilly Automotive FY2024 Form 10-K (SEC EDGAR)

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## Frequently asked questions

### What is O'Reilly Automotive's core business model?

O'Reilly Automotive is a leading specialty retailer of automotive aftermarket parts, tools, and accessories in North America. The company employs a dual-market strategy, serving both Do-It-Yourself (DIY) retail customers and professional service providers (DIFM) from its extensive store base. It maintains an asset-heavy retail and distribution network, utilizing a tiered system to ensure quick access to parts.

### How does O'Reilly Automotive generate its revenue?

O'Reilly Automotive generates consolidated revenue primarily through store count expansion and comparable store sales. Its revenue is split approximately 50% from Do-It-Yourself (DIY) customers and 50% from professional service providers (DIFM). The company has a growing presence in the United States, Mexico, and Canada.

### Why does O'Reilly Automotive operate with negative working capital?

O'Reilly Automotive operates with heavily negative working capital due to its efficient management of payables and inventory. The company funds its entire inventory balance through extremely high Days Payable Outstanding (around 280 to 300 days) while maintaining very low Days Sales Outstanding (under 10 days). This structural advantage allows it to effectively utilize supplier financing.

### What is O'Reilly Automotive's capital expenditure strategy?

O'Reilly Automotive's capital expenditure strategy is primarily growth-oriented, funding 225 to 235 new store openings per year and the construction of new distribution centers. Capex is guided to be between 6.0% to 7.5% of revenue, with recent bolt-on acquisitions also contributing to its expansion into new geographies.

### What is the purpose of the O'Reilly Automotive financial model?

The O'Reilly Automotive financial model projects store-level economics, working capital dynamics, and aggressive share repurchase activity. Its primary purpose is to determine the equity valuation of O'Reilly Automotive for a fundamental equity investor. The model forecasts financial performance from FY2026 through FY2030.

### Can I download an Excel financial model for O'Reilly Automotive?

Yes, an Excel financial model for O'Reilly Automotive is available for download. This general corporate model provides projections for the company's financials from FY2026 to FY2030, including key assumptions like revenue growth and cost structures.

[Interactive forecast calculator](https://finamodel.com/companies/oreilly-automotive/forecast)