No.5, O'Reilly Auto Parts

Growth is all part of the plan at O’Reilly Automotive, and the rate at which the company is expanding comes as no surprise to some of its top executives.
“In 1997, one of our goals was to achieve $1 billion in sales in five years, and we achieved that in four years,” Chief Operating Officer Ted Wise said.
In 2005, the company is poised to hit another long-term goal: This time, they’re hoping to double those figures in the same amount of time.
“Our goal is to be a $2 billion company by the end of this year, and right now, we’re on track to do that,” CEO Greg Henslee said.
Revenue has increased 31 percent over the last three years, from $1.3 billion in 2002 to $1.7 billion in 2004, and if O’Reilly hits its $2 billion mark in 2005, the increase would be slightly more than 50 percent.
O’Reilly started in November 1957 with one store and 12 employees. Today, there are 1,249 stores in 19 states and 17,000 employees. In January, the company was ranked No. 4 in Aftermarket Business’ Auto Chain Report’s Top 50 Distributors, based on the number of company-owned stores.
Part of that expansion was tied to two hefty acquisitions: a January 1998 merger with Hi/LO Auto Supply added 190 retail locations and a distribution center in Houston, while an October 2001 acquisition of Mid-State Automotive Distributors Inc. added four distribution centers and another 85 stores.
Acquisitions are still a significant part of O’Reilly’s growth, though most likely on a smaller scale. Of the 160 new locations the auto parts retailer is targeting for 2005, less than 50 should come from acquisitions, Wise said.
Staff from the acquired stores are often transferred into the O’Reilly stores, where their already established relationships with local retail customers and auto professionals help to maintain the hometown image, Wise added.
The ability to serve both professional installers and do-it-yourselfers is a key part of the company’s market strategy. This enables smaller, rural market growth and the placement of more stores in a given market, Wise said.
And it translates to the bottom line as well. The split between professional and retail sales is 50–50, Chief financial Officer Jim Batten said.
Some of that ability to expand stemmed from the company’s decision to go public in 1993. The company trades on the Nasdaq under the symbol ORLY. One of the reasons the company went public was because the O’Reilly family wanted to share ownership with the team. The decision also provided capital needed to grow the business and accelerate store openings, Batten said.
“Now, we’re generating that growth from our own cash flow,” Batten said.
Stock prices opened at $4.37 per share when O’Reilly first went public; today it trades at $51 per share, with an average annual return rate of 21 percent, Batten said.
A new distribution center in Atlanta opened the first week of March. Future plans include the continued openings of new stores: for the next few years, O’Reilly is targeting a 12 percent or 13 percent increase in retail locations, Wise said.
The expansion remains consistent with O’Reilly’s commitment to grow its management staff from within. Each new store allows for promotions to store management, Wise said.
Employees who are committed to both the company and its philosophy of professional, excellent customer service are also key to growth.
“Everyone has good parts; they can have good locations and competitive prices. But at the end of the day, the bottom line is most affected by how we service the customer,” Wise said.