Reuben Gregg Brewer, The Motley Fool

Wed, May 28, 2025, 3:41 PM5 min read

• O'Reilly Automotive is an auto parts retailer with a rapidly expanding business.

• The company is dealing with some cost headwinds today.

• If O'Reilly can keep expanding its store footprint, it should be able to keep growing its earnings.

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O'Reilly Automotive (NASDAQ: ORLY) operates a fairly boring business selling auto parts to consumers and commercial customers. And yet a $10,000 investment in the retailer at the turn of the century would now be worth over $1.2 million. Could putting $10k into the stock today make you a millionaire?

At its core, O'Reilly Automotive is a retailer. The auto parts it sells place the company into the industrial sector, but the way a retailer grows is basically the same as it would be in any other sector. It can sell more from each of its stores or it can open more stores -- or both. That's really the basic math of growth in the retail niche.

New stores are far more impactful to top-line growth than selling more from existing stores. That's how O'Reilly has grown so much over the years. To put some numbers on that, it operated 6,416 stores at the end of the first quarter of 2025. Roughly a decade ago, it operated 4,433 locations. Basically, it expanded its store footprint by roughly 45% in 10 years. That's a lot of growth in a fairly short time.

That's not to suggest that O'Reilly isn't operating its stores very well. It couldn't have kept growing like that for so long if it weren't. Notably, in the first quarter of 2025, same-store sales increased a solid 3.6%. Basically, O'Reilly is executing well on the two most important growth drivers it has at its disposal. And that is how it has made millionaires out of early investors.

The problem that new investors have to grapple with is that O'Reilly is a much larger company today than it was a decade ago, let alone at the turn of the century. That makes it harder to keep growing. At some point, it will have saturated the market opportunity it has.

But management doesn't believe it's at that point yet, noting that it has plans to open as many as 210 new stores in 2025. As long as it can keep profitably opening up new locations, the company's growth will likely continue.

That said, there are other issues to consider today. For starters, the company is dealing with rising operating expenses. That led to a year-over-year drop in net income in the first quarter of 2025. Earnings per share rose, but only because of a large share buyback program. Dealing with issues like rising operating costs gets more difficult as a company gets larger because there are more moving parts to deal with.