Dive Brief:
- O’Reilly Automotive is sharing the benefits of refunds from now-invalidated tariffs with its suppliers, President Brent Kirby told analysts in a July 30 earnings call.
- Kirby explained that O’Reilly is “not paying a lot of direct tariffs” since, historically, its sourcing model primarily relies on other suppliers as the importer of record.
- Kirby did not elaborate on the exact form the tariff refund benefits are taking, but said the company aims to make sure "we are benefiting from sharing the benefit from those refunds with our supplier partners.”
Dive Insight:
Kirby said that there may be a bit of “misinterpretation” regarding direct refunds in O’Reilly’s supply chain model versus other retailers.
“But when you think about just direct tariff rebates or refunds as some retailers have spoken about it, that's something we are doing in cost and cost of goods and how we negotiate the cost of goods,” Kirby told analysts.
Several retailers and brands have started to reap tariff refund benefits, with many outlining different ways they plan to allocate the money.
Amazon, for instance, said it would return refunds to customers in limited set of circumstances while joining retailers such as Walmart in planning to to use returned funds to cut prices.
Meanwhile, Ford Motor Co. — which expects $1.3 billion in tariff refunds — intends to use the funds for its Ford Blue and Ford Pro business divisions. Other brands pushing different strategies include ingredient maker McCormick & Co., which plans to use its $28 million in returned funds to offset supply chain pressures, such as higher costs.
Like many other retailers, O’Reilly has been making efforts to curb overall tariff impacts, with a specific focus on manufacturers, Kirby said. This includes working closely with its suppliers to diversify the country of origin for products, as well as prioritizing supplier health. The auto parts retailer has also been pursuing a broader private label portfolio in a bid to get better product control and source single SKUs from several suppliers.
“And we're continuing to build capabilities that allow us to — in the cases that it benefits us — become that importer of record,” Kirby told analysts. “In the cases it doesn't — not be that importer of record.”
Editor’s note: This story was first published in our Procurement Weekly newsletter. Sign up here.
