Springfield-based O’Reilly Automotive Inc. (Nasdaq: ORLY) is ringing in the new year by adjusting the duties of its top officers and celebrating an acquisition designed as a stepping stone into the Northeast auto parts retail market.
The company closed Dec. 31 on a purchase of the parts and retail assets of privately owned Lewiston, Maine-based VIP Parts Tires & Service for an undisclosed amount. VIP Parts operates 56 retail stores in Maine, New Hampshire and Massachusetts and a distribution center in Maine. O’Reilly President and CEO Greg Henslee said the move is part of the company’s strategy to increase its presence along the East Coast.
“We don’t have a presence in the Northeastern states. It is really the only area of the country in which we are absent. We had evaluated a few companies up here as potential acquisition targets, and VIP and its owner John Quirk decided he wanted to pursue selling the parts portion of his business,” Henslee said during a Dec. 19 phone interview while in Maine meeting VIP staff members.
Through the asset deal, VIP continues to manage the service bays and mechanic shops attached to its retail centers in most cases, while O’Reilly owns and operates the auto parts and retail centers. Henslee said the agreement also solidifies a book of business for O’Reilly as VIP has committed to making O’Reilly its primary auto parts supplier. Henslee declined to provide financial terms of the agreement.
“We will use this as a springboard to expand south into more Northeastern states,” Henslee added. “This is a strategic acquisition.”
VIP owner Quirk did not return calls for comment by press time.
The acquisition adds to the 3,896 stores nationwide, only behind market leader AutoZone’s 4,685 stores. The deal comes as duties among O’Reilly’s top managers are changing.
On Jan. 1, Henslee shed the co-president title he had held since 1999 with Chief Operating Officer Ted Wise as Wise transitions to the role of executive vice president of expansion, Henslee said. The move allows Wise to work fewer hours and move toward an eventual retirement.
“For several years now, Ted’s primary focus has been on real estate acquisition and expansion. This allows him to take on a role and transition to an easier work schedule,” Henslee said.
Wise, who started his career with O’Reilly in 1970, was named vice president in 1984 and executive vice president in 1990. In 1999, he was appointed co-president and in 2005 added the role of COO to his duties.
Henslee, who was named CEO in 2005, doesn’t expect his job responsibilities to change. To help take on some of the duties, 24-year O’Reilly veteran Jeff Shaw was named executive vice president of store operations and sales.
“With this promotion, (Shaw) will take on many of the responsibilities Ted has had in the past. For several years, (Shaw) has been the primary management member directing our store operations and our professional sales efforts and he’ll continue to do that, but he will take on some additional high-level responsibilities,” Henslee said.
He said the company is not planning to name a COO successor with the promotion of Shaw in place. Shaw has worked as senior vice president of store operations and sales since 2004.
John Neff, an O’Reilly stock analyst for Middleburg, Va.-based Akre Capital Management, said in October O’Reilly had service gaps in the Northeast and in Florida, when Springfield Business Journal reported the parts supplier is moving forward with plans to build a 390,000-square-foot distribution center in Lakeland, Fla.
In a follow-up interview, Neff said he wasn’t surprised to learn about the VIP deal.
“(O’Reilly) will increase its footprint in the Northeast organically, but I think this was an accelerant,” Neff said, calling it a wise move for O’Reilly to leave the service operations in VIP’s hands. “It is maintaining its discipline as far as what business it is in.”
Henslee said the Sunshine-state distribution center, which would help O’Reilly expand into central and southern Florida, should be complete by early 2014.
O’Reilly operated 46 stores in Florida at the end of 2011, the most recent data available before 2012 year-end results become public in February, according to O’Reilly spokesman Mark Merz. Prior to the VIP asset acquisition, the auto-parts retailer had no stores in New Jersey, New York, Massachusetts, Connecticut, Rhode Island, Vermont or Maine.
Moving forward, Neff said he expects O’Reilly’s next move to be a Northeast distribution center.
“There will be a need for distribution center development in the Northeast to support what I assume is going to be a growing business for them in that part of the country,” Neff said.
The VIP distribution center is No. 24 in the O’Reilly system, according to Merz.
The company recorded third-quarter net income of $148.4 million, a 27.4 percent increase compared to earnings of $116.5 million in the same quarter last year. O’Reilly has scheduled to release its fourth-quarter and full-year earnings Feb. 6.[[In-content Ad]]
