Advance Auto Parts — Third Quarter 2026 Earnings Summary

Financial Performance:

• Third quarter 2026 net sales totaled $2,012 million, a decrease from $2,036 million in the third quarter of 2025.
• Comparable store sales decreased 1.2% in the third quarter of 2026 compared to the prior year.
• Gross profit was $897 million (44.6% of net sales) in Q3 2026, compared to $881 million (43.3%) in Q3 2025; adjusted gross profit was $899 million (44.7%).
• Selling, general and administrative (SG&A) expenses were $850 million (42.2% of net sales) in Q3 2026, compared to $859 million (42.2%) in Q3 2025; adjusted SG&A was $808 million (40.2%).
• Operating income was $47 million (2.3% of net sales) in Q3 2026, compared to $22 million (1.1%) in Q3 2025; adjusted operating income was $91 million (4.5%).
• Diluted earnings per share (EPS) was $0.25 in Q3 2026, compared to a loss of $0.02 in Q3 2025; adjusted diluted EPS was $0.79, compared to $0.92 in Q3 2025.
• Year-to-date (forty weeks ended October 10, 2026) net sales were $6,626 million, compared to $6,628 million in the prior year period.
• Year-to-date operating income was $218 million, compared to a loss of $87 million in the prior year period.
• Year-to-date diluted EPS was $1.54, compared to $0.63 in the prior year period; adjusted diluted EPS was $2.59.
• Free cash flow year-to-date was $109 million, compared to a negative $277 million in the prior year period.
• Total debt (GAAP) was $3,388 million as of October 10, 2026; adjusted net debt was $2,492 million.
• Adjusted Net Debt to Adjusted EBITDAR ratio was 2.2x as of October 10, 2026.
• Cash and cash equivalents were $3,085 million as of October 10, 2026, down from $3,123 million at the start of the fiscal year.

Guidance and Future Outlook:

• Full year 2026 net sales guidance revised to approximately $8,500 million (prior guidance: $8,485 million to $8,575 million).
• Full year 2026 comparable store sales guidance revised to approximately 1.00% (prior guidance: 1.00% to 2.00%).
• Full year 2026 adjusted operating income margin guidance revised to 4.00% to 4.30% (prior guidance: 3.80% to 4.50%).
• Full year 2026 adjusted diluted EPS guidance revised to $2.75 to $3.10 (prior guidance: $2.60 to $3.30).
• Full year 2026 free cash flow guidance raised to approximately $150 million (prior guidance: approximately $100 million), representing over $400 million growth year-over-year.
• Capital expenditures guidance remains at approximately $300 million.
• Store growth guidance remains unchanged: 30 to 35 new store openings and 15 to 20 market hub openings.

Business Segments and Product Lines:

• The Pro channel led performance in Q3 with low-single-digit sales growth, driven by stronger Main Street Pro growth.
• The DIY channel declined in the low-single-digit range for the quarter, recovering from negative mid-single-digit levels at the start of the quarter.
• Comparable sales trends improved sequentially during Q3, turning positive in the final four weeks.
• Sales declined in the low-single-digit range during the first eight weeks before turning positive in the final four weeks.
• The company operated 4,325 stores as of October 10, 2026, including 4,087 AAP stores and 238 Carquest stores.
• During the twelve weeks ended October 10, 2026, the company opened 17 stores (16 AAP, 1 Carquest) and closed 3 stores (1 AAP, 2 Carquest).
• During the forty weeks ended October 10, 2026, the company opened 26 stores (24 AAP, 2 Carquest) and closed 6 stores (3 AAP, 3 Carquest).

Market and Competitive Landscape:

• The company serves both professional installers and do-it-yourself customers in North America.
• The company operates in a volatile demand environment with industry cost pressures.
• The company serves 787 independently owned Carquest branded stores across the U.S., Canada, Puerto Rico, the U.S. Virgin Islands, and various Caribbean islands.

Risks and Challenges:

• The company faces risks related to macroeconomic conditions, including deterioration in general economic conditions and geopolitical factors.
• Risks include inflation, labor costs and availability, and supply chain complexities.
• The company notes risks associated with restructuring and asset optimization plans, including the ability to complete store openings.
• Risks include the highly competitive nature of the industry and potential impacts of tariffs and trade restrictions.
• The company's ability to obtain additional funding could be impacted by changes in its credit rating.

Management Commentary and Tone:

• Shane O'Kelly, President and CEO, stated that comparable sales performance improved as the quarter progressed and thanked the team for their hard work.
• Management noted that strategic initiatives are starting to gain traction despite a volatile demand environment.
• Management remains focused on delivering sustainable, profitable growth over the long term.
• The decrease in gross profit margin was attributed to changes in product and channel sales mix and supply chain expense deleverage.
• The decrease in SG&A as a percentage of net sales was driven by a reduction in expenses supported by disciplined expense management.

Other Key Points:

• On October 26, 2026, the company declared a regular cash dividend of $0.25 per share, payable on January 22, 2027, to stockholders of record as of January 8, 2027.
• The company generated over $100 million of free cash flow year-to-date.
• Adjusted operating margin for Q3 2026 was 4.5%.
• The company incurred $42 million in restructuring and related expenses in Q3 2026, compared to $33 million in Q3 2025.
• Year-to-date restructuring and related expenses were $84 million, compared to $180 million in the prior year period.
• The company recorded $38 million in impairment charges for property and equipment and ROU assets in Q3 2026.
• Year-to-date impairment charges were $53 million.
• The company's net leverage ratio goal is to re-establish an investment grade rating.
• The company operates primarily within the United States with additional locations in Canada, Puerto Rico, and the U.S. Virgin Islands.