Advance Auto Parts, Inc.

Second-quarter net sales were $2 billion, with a slight decline in comparable sales. Adjusted gross profit was $924 million, or 46.2% of net sales, up about 240 basis points year over year; tariff refunds contributed $26 million, or 130 basis points, of that gross margin benefit. Adjusted SG&A was $812 million, or 40.6% of net sales, and adjusted operating income was $112 million, or 5.6% of net sales, up about 260 basis points year over year. Adjusted diluted EPS was $1.03 versus $0.69 last year. Year-to-date free cash flow was $120 million versus a $201 million outflow last year. For 2026, management reaffirmed net sales of about $8.5 billion, comparable sales growth of 1% to 2%, adjusted operating margin of 3.8% to 4.5%, gross margin expansion of 110 to 150 basis points to about 45%, and free cash flow of about $100 million. Adjusted diluted EPS guidance was raised to $2.60 to $3.30. Capex is expected to be about $300 million, with 30 to 35 new stores and 15 to 20 market hubs planned for the year.

Shane O'Kelly framed the quarter as an inflection point in the turnaround, emphasizing that the company is executing on controllable levers while the macro backdrop remains tough. He highlighted improved KPIs such as NPS, time to serve, attachment rates, and the return to positive free cash flow, and said the strategic plan is unchanged across merchandising, supply chain, and store operations. His tone was cautiously optimistic, with repeated emphasis on discipline, execution, and long-term value creation.

Ryan Grimsland focused on the mechanics behind the quarter and the outlook. He cited $2 billion of net sales, $924 million of adjusted gross profit, 46.2% gross margin, $812 million of adjusted SG&A, $112 million of adjusted operating income, and $1.03 adjusted EPS, then explained that tariff refunds, mix, and freight/fuel costs were the main margin drivers. He also pointed to $120 million of year-to-date free cash flow, $3.1 billion of cash, and net debt leverage of 2.1x, while noting the $30 million debt repurchase and reaffirming a roughly $100 million full-year free cash flow target.

Analysts pressed management on whether Main Street Pro transaction growth is sustainable, how much of the quarter’s softness was macro versus strategy, and whether the company should lower the back-half comp outlook. Management said Main Street Pro is gaining traction, national-account pressure should be about half of first-half levels in the second half, and market hubs plus assortment improvements should continue to support wins. On margins, management said Q2 gross margin was held back by DIY mix and freight/fuel costs, not a loss of merchandising effectiveness, and reiterated confidence in at least 100 basis points of margin expansion next year as supply-chain and store initiatives mature.