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O'Reilly Automotive Shares Plunge 20% After Comparable Sales Fall Short of Guidance

What happened

Shares of O'Reilly Automotive, Inc. (NASDAQ: ORLY), a leading retailer in the automotive aftermarket industry, are plunging more than 20% as of 11:30 a.m. EDT Wednesday, after management announced disappointing second-quarter comparable-store sales. The company isn't alone: Competitors AutoZone, Inc. (NYSE: AZO) and Advance Auto Parts (NYSE: AAP) are down 9% and 14%, respectively.

So what

The company's comparable-store sales increased 1.7% during the second quarter. Despite a move higher, investors were clearly disappointed that comps checked in well below management's prior guidance of a 3% to 5% increase. While the sell-off in O'Reilly's stock indicates investors were caught off guard by the disappointing sales, it's been a trend at the company throughout 2017: Comparable-store sales through the first six months were only up 1.3%. For comparison, O'Reilly's comparable-store sales jumped 5.1% through the first half of 2016. 

Image source: Getty Images.

Now what

Investors are also a little cautious holding on to shares of O'Reilly after all the noise made recently with its move into the grocery world -- companies of all kind are wondering if they're the next target for the e-commerce juggernaut. Unfortunately for investors, this is a real concern, and Amazon may one day set its sights on automotive parts, which would only add to the challenges O'Reilly's faces today.

"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," said Greg Henslee, O'Reilly's CEO. "The comparable store sales shortfall will also have a consequent impact on our operating profitability, which we will report in our full second quarter earnings release on July 26th." Henslee added, "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 and our team's ability to provide exceptional customer service and take market share in this challenging demand environment."

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Daniel Miller has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool owns shares of O'Reilly Automotive and has the following options: short August 2017 $250 calls on O'Reilly Automotive and long August 2017 $220 puts on O'Reilly Automotive. The Motley Fool recommends AutoZone. The Motley Fool has a disclosure policy.