1 Retailer Still Profiting From the Recession


Despite the recession, auto part suppliers have recently put up strong performances as consumers largely chose to maintain their older cars rather than spend on new vehicles. One such auto parts maker, O'Reilly (NAS: ORLY) , falls into this category. In spite of the adverse economic conditions, it reported a 34% jump in its second-quarter profit. Its strong performance enabled the Missouri-based retailer to raise its annual outlook.

O'Reilly, though, isn't alone as the trend is visible across the industry. Replacement parts maker Genuine Parts (NYS: GPC) recently posted strong second-quarter results. AutoZone (NYS: AZO) too reported a strong quarter last time, putting up a 12% increase in its profits. Let's now take a closer look at O'Reilly's quarter.

A look at the numbers
Assisted by improved economic conditions, revenues increased 7%, to $1.48 billion. Comparable store sales were up by 4.4% in the second quarter, compared to an increase of 7.9% last year. That's a solid follow-on performance.

The company opened 44 new stores this quarter, which takes the total store count to 3,657. It has now opened 99 stores this year and is on track to open a net total of 170 stores this fiscal year. This is certainly positive news since it reflects management's faith in the company's growth story.

O'Reilly's strong performance is reflected in its operating margin, too. Operating margins increased to 15% from 14.2% in the year-ago quarter. This was the first quarter in which operating margins crossed 15%. In the end, net income rose to $133.8 million from $99.6 million, up 34% from the year-ago period. Free cash flow looked even stronger than net income, at $211.2 million.

The company has a strong balance sheet and is looking at returning value to shareholders through stock buybacks. It repurchased 3.3 million shares last quarter and has about $162 million remaining on its buyback authorization.

The Foolish bottom line
O'Reilly's had a strong second quarter and has the numbers to back it up. Its new store openings and the state of the economy should help the company continue its strong run into the rest of the year. O'Reilly is definitely a company to watch out for, so add it to your watchlist by clicking here.

At the time thisarticle was published Shubh Datta doesn't own any shares in the companies mentioned above.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.