As one of the most successful auto parts retailers in America and an exemplary net-lease investment, O’Reilly Auto Parts is Westwood Net Lease Advisors’ featured Tenant of the Quarter. Since their original store opened in 1957 in Springfield, Missouri, they’ve grown to 5,420 locations and continue to lead their sector in all areas of the market. Their large distribution network and list of competitive advantages add value to their company and make their stores stable, lucrative net-lease investments.
Who is O’Reilly Auto Parts?
O’Reilly Auto Parts operates stores in 47 states and offers an extensive line of new, aftermarket, and remanufactured automotive parts, maintenance items, tooling supplies, accessories, automotive tools, and service equipment for both professionals and do-it-yourself customers. Getting parts in the hands of customers faster than their competitors is one factor in their success, along with their vast inventory and customer-focused objectives.
“Our success has been built on the foundation of the O’Reilly culture of excellent customer service, and we remain very confident in our team’s ability to seize on growth opportunities as we expand into new markets.” Jeff Shaw, Chief Operating Officer and Co-President, Q3 Earnings Call
Financially Strong & Growing
In addition to their steady stock market performance (NASDAQ: ORLY) and increasing year-over-year profits, a Moody’s Baa1 rating and an S&P “investment grade” BBB rating, their growth projection has no end in sight. According to Greg Johnson, Chief Executive Officer and Co-President, “we have experienced product acquisition cost inflation driven by tariffs and other input cost increases. However, the nondiscretionary nature and immediacy of need in the products sold have allowed us to pass through these cost increases. We now expect to see a larger benefit from increasing the average ticket with the same SKU 2 ½% to 3% for the full year.”
According to the Q3 earnings call, comparable store sales growth stands at 3.9% and sales increased $184 million. They also opened 76 new stores, bringing the year-to-date total store openings to 181. For 2019, they expect total revenue to be 10 to $10.3 billion, and in 2020, plan to open 180 new stores.
“We’re very pleased with the performance of our new stores and continue to be excited about our opportunities to identify great locations and great store teams to profitably grow our business in markets across the country.” Jeff Shaw, Chief Operating Officer and Co-President, Q3 Earnings Call
O’Reilly is a Superior Net-Lease Investment Opportunity
O’Reilly Auto Parts stores meet the criteria for a solid net-lease investment. Though they are not absolute triple-net (NNN) leases, they require very little landlord responsibility (roof and structure), which makes it viable to own a store in any state no matter where you live, and they offer many other positive attributes. O’Reilly is a high-credit tenant with long-term, corporate-guaranteed leases and consistent sales growth, and an economic staple in good times and bad, all of which makes for a reliable, nearly recession-proof net-lease investment.
O’Reilly net-lease investment benefits include:
- Average price point around $2.1 million.
- A strong yield with 5.5% to 6% cap rates.
- Typical lease: 15-20 years with a corporate guarantee.
- 2-, 4-, and 5-year renewal options.
- Typically in strong locations.
- Few landlord responsibilities and predictable monthly income.
- Continuous auto parts demand in good and bad economic times.
- Over 5,400 stores in 47 states; 180 new stores planned in 2020.
- Immediate and long-term tax benefits for capital preservation, including depreciation and capital expenditures.
An existing or new O’Reilly Auto Parts store would be a great complement to your current mix of commercial income properties or as a first-time investment, as they tend to be priced around the $2M mark.
To Wrap it Up – O’Reilly Auto Parts Stores Add Stability to Investment Portfolio
Just like other investments, it’s best to have a selection of assets in your portfolio that perform differently to meet your short-term and long-term goals. Different asset classes within net-lease investments, for example – auto parts stores, dollar stores, fast food, health care, banks, and pharmacies – offer predictability not found in many other investments and offer less risk when it comes to market fluctuations.
If you’re interested in buying an O’Reilly Auto Parts store, the best way to find one is to engage with a reputable Westwood Net Lease Advisor who knows the national market and is well-known in the marketplace. We have the expertise to find off-market and developing properties and will help you from the property search to closing – all at no charge to you. Contact us today for your free, no-obligation consultation. 314-997-5227
