Advance Auto Parts lifts FY2026 EPS guidance, keeps sales outlook

Advance Auto Parts Inc. (NYSE: AAP ) on Thursday reported mixed second-quarter results and affirmed its fiscal year 2026 sales guidance, which was below estimates.

Adjusted EPS of $1.03 beat the consensus of 81 cents.

Meanwhile, sales of $2.00 billion fell short of the $2.039 billion estimate.

The stock crashed by 25% on Thursday, closing at $42.39.

Business Performance Comps grew about 1% during the first eight weeks of the second quarter before weakening in the final four weeks.

Comparable sales decreased 0.5% in the quarter.

Pro sales grew low single digits as expected, while DIY sales declined low single digits.

Main Street Pro continued to outperform, with comparable sales more than 200 basis points above total Pro comps, supporting market-share gains.

Read Also: Top Wall Street Forecasters Revamp Advance Auto Parts Expectations Ahead Of Q2 Earnings DIY demand was pressured by tighter household budgets, weaker discretionary spending, delayed large-ticket projects and weather-related softness, creating an estimated 100-150 basis-point comparable-sales headwind.

In DIY, maintenance and failure categories such as filters, motor oil and batteries performed better, while hard parts lagged as customers deferred larger projects.

In Pro, hard-parts categories including brakes and undercar continued to outperform, supported by improved parts availability and more consistent delivery times.

Same-SKU inflation rose to about 4% from 3% in the first quarter, driven by market pricing and higher commodity costs, particularly motor oil and petroleum products.

Lower transaction volumes were partly offset by higher units per transaction on both a one- and two-year basis.

The company added 80,000 SKUs in the first half of 2026 after 100,000 in 2025, with merchandising initiatives contributing about 100 basis points to product-margin expansion.

DC consolidation reduced the network from nearly 40 to 15 facilities.

Five Market Hubs opened in 1H, bringing the total to 38, with 15-20 more planned for 2026 and 60 targeted by mid-2027.

Margins & Cash Flow Adjusted gross margin expanded 240 basis points, supported by tariff refunds and stronger product margins, partially offset by higher freight and fuel costs.

Adjusted operating income rose to $112 million from $61 million a year ago quarter.

Adjusted operating margin reached 5.6%, up about 260 basis points year over year, reflecting significant expansion from strategic initiatives despite unfavorable channel mix and higher commodity costs.

Year-to-date free cash flow reached $120 million, marking a return to positive cash generation after two years of outflows, with $30 million used to repurchase outstanding debt.

The company ended the quarter with about $3.1 billion in cash.

Advance Auto Parts completed its distribution center consolidation, reducing the network from nearly 40 facilities to 15.

Outlook The company raised its fiscal year 2026 adjusted EPS guidance to $2.60-$3.30 from $2.40-$3.10, compared with the $2.92 estimate, while maintaining its sales outlook of $8.485 billion-$8.575 billion versus the $8.581 billion estimate.

Advance Auto reaffirmed its full-year outlook for comparable sales growth of 1%-2% while continuing to focus on merchandising, supply chain and store operations.

Adjusted operating margin remains at 3.8%-4.5%, while gross margin is expected to expand 110-150 basis points to about 45% for the quarter.

Tariff refunds are expected to add 30 basis points to gross margin, offset by sales mix and higher shipping, freight and fuel costs.

Advance plans to open 30-35 stores in 2026, including six already opened, and 15-20 Market Hubs, with five opened in the first half and nine planned for the third quarter.

The company plans to accelerate Market Hub openings to reach 60 locations by mid-2027 to improve same-day parts availability.

Management remains confident in reaching its medium-term 7% adjusted operating margin target.

AAP Price Action: Advance Auto Parts shares were up 0.59% at $42.64 during premarket trading on Friday, according to Pro data.

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