O'Reilly Plunges After Sales Miss Estimates

O’Reilly Automotive Inc. plunged the most in more than five years after the auto-parts retailer said same-store sales fell short of its forecast for the second quarter, and competitors’ stock prices went along for the ride.

Same-store sales rose 1.7 percent in the second quarter, trailing O’Reilly’s projection for growth of 3 percent to 5 percent, the company said in a statement Wednesday. Shares of the Springfield, Missouri-based retailer plunged as much as 21 percent in New York, the steepest intraday drop since June 2012. Advance Auto Parts Inc. and AutoZone Inc. also declined on the news, falling as much as 16 percent and 10 percent, respectively.

Auto-parts retailers and repair chains have been pummeled in the stock market this year after many reported profits and sales that missed analyst estimates in the first quarter. Retailers blamed weak consumer demand at the start of the year on delayed tax refunds and a mild winter that reduced the need to replace some car parts. O’Reilly’s Chief Executive Officer Greg Henslee said weak consumer demand continued into the second quarter after signs of stronger sales earlier this spring.

“After exiting the first quarter and entering April on an improved sales trend, we faced a more challenging sales environment than we expected for the remainder of the quarter,” Henslee said. “While we are disappointed with our sales results in the first half of the year, we remain confident in the long-term health of our industry.”

Shares of Standard Motor Products Inc. and Dorman Products Inc., which count auto-parts retailers among their top customers, also dropped on Wednesday.

O’Reilly’s sluggish sales rekindled concerns that competition from e-commerce could be eroding demand at brick and mortar stores, Consumer Edge Research analyst David Schick wrote in a note to clients Wednesday.

“While our analysis does not see risk of the entire sector going online -- we think the threat is meaningful for some categories and is unlikely to fade until visibility improves,” he said.
O’Reilly scheduled the release of its second-quarter earnings report for July 26.

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