Opinion: O’Reilly Automotive quietly sets sights on new revenue goal

Inside the walls of O’Reilly Automotive Inc.’s Springfield headquarters, executives have spearheaded a campaign for $10 billion in revenue by 2020.

A Team O’Reilly-labeled towel issued to employees says “Driven to ‘10,’ We All Win.” A green highway logo printed on a white cloth carries the phrase: “$10 billion in 2020” with an all-caps “Be O’Reilly Proud!” underscoring the campaign messaging.

The publicly traded auto parts retailer (Nasdaq: ORLY) is turning staff members’ attention to the 11-figure number. It’s a message that permeates into the warehouses and distribution channels.

Yet, O’Reilly Automotive officials are tight-lipped about it.

An investor relations representative contacted by Springfield Business Journal reporter Brian Brown declined to acknowledge the goal. Other employees, board members and shareholders aren’t talking about it either. Some say they aren’t aware of it.

O’Reilly Auto is no stranger to billion-dollar goals. Company officials started talking in billions in 1997, when they set a five-year goal for $1 billion in revenues. They accomplished it in four years, so executives decided to double those sales by the end of 2005.

After knocking that down, another double-down was in order. In 2007, O’Reilly embarked on a $4 billion revenue goal by 2010. Dubbed “4 N 10,” SBJ reported on the campaign years ahead of the stated finish line. O’Reilly ended up blowing past that sales goal, aided by the 2008 acquisition of CSK Auto Corp. (NYSE: CAO).

The current corporate silent treatment is a reversal of past communication.

“We’re very growth-oriented, so once we achieve one goal, we certainly set another goal out there for us,” O’Reilly spokesman Mark Merz told SBJ in 2008.

While the public dialogue about them has waned, the goals still stand. To be sure, setting sales goals is normative in business, and even provides a healthy energy toward employee productivity.

So can O’Reilly hit $10 billion by 2020?

There seems to be little doubt about that.

Last year, the company recorded $7.2 billion in revenue, up from $6.65 billion in 2013 and $6.18 billion in 2012. Comparatively, that’s sluggish growth. But it’s still about $500 million to the good each year. That’s what happens when you deal in the billions. The margins are harder to realize.

Through three quarters this year, revenues are just over $6 billion, which projects the annual sales at roughly $8 billion. That’s not automatic, however, given the fourth quarter of 2014 was the company’s weakest among the last five quarters.

Back to the internal goal: That leaves five years to grow revenues another $2 billion.

Financial analysts who follow O’Reilly say they’re confident in the goal – but only after they learned it existed.

Following the sales trends, company shares have been riding historical highs and just last week marked yet another 52-week high. Following third-quarter results of $266.3 million in net income, a 23 percent increase from a year ago, ORLY shares traded as high as $277.96 on Oct. 29. The previous 52-week high was just a day earlier, at $263.66. I’ve lost count how many times in the past year a 52-week high was set.

It’s been a fun ride in business reporting. Fans, i.e., shareholders, are flying their O’Reilly flags high.

Pittsburgh Steelers’ fans have the Terrible Towel.

Texas A&M has the 12th Man towel.

O’Reilly has the Driven to 10 towel.

It seems employees just need to be careful where they waive it.

Springfield Business Journal Editorial Director Eric Olson can be reached at eolson@sbj.net.