Advance Auto Parts NYSE: AAP reported what executives described as a solid start to fiscal 2026, with first-quarter comparable sales rising 3.5%, the company’s strongest quarterly growth in five years.
President and Chief Executive Officer Shane O’Kelly said the results were driven primarily by the company’s Pro channel, particularly its focus on Main Street professional customers, along with improved parts availability and customer service. The DIY channel also returned to positive growth after softness in the prior quarter.
“Our Q1 performance reflects continued improvement in parts availability and customer service, which is helping us respond to favorable industry dynamics,” O’Kelly said on the company’s earnings call.
Sales Improve as Pro Business Leads
Executive Vice President and Chief Financial Officer Ryan Grimsland said net sales for the quarter were $2.6 billion, up 1% from the prior year. Comparable sales increased 3.5%, offset in part by a two-point headwind from cycling $51 million in liquidation sales tied to store optimization activity completed in the first quarter of last year.
Grimsland said the quarter included early benefits from winter storms, which drove sales of failure-related items, though temporary store closures and delayed maintenance spending also caused some disruption. Sales trends improved beginning in mid-February as consumers used tax refunds and resumed maintenance spending amid better weather in March. Overall, he said weather was not a material driver of first-quarter results.
By channel, Pro comparable sales grew in the mid-single-digit range, with monthly growth consistently in that range. Grimsland said the company’s Main Street Pro business outperformed the overall Pro comp by more than 200 basis points, even as Advance continues to optimize its large national account Pro business.
The DIY channel posted low double-digit comparable sales growth, though Grimsland said performance remains tempered by inflation and stretched household budgets. Ticket was positive, with same-SKU inflation of about 3%, in line with expectations. Transaction volumes improved in both channels, and units per transaction continued to rise.
Margins Expand on Merchandising Initiatives
Adjusted gross profit was approximately $1.2 billion, or 45.1% of net sales, representing more than 210 basis points of gross margin expansion from the prior year. Grimsland attributed the improvement mainly to product margin expansion and merchandising initiatives.
Adjusted SG&A was approximately $1.1 billion, or 41.3% of net sales, providing roughly 200 basis points of leverage. SG&A declined 3% year over year as the company cycled about $37 million in expenses tied to last year’s store optimization project. Adjusted operating income was $99 million, or 3.8% of net sales, up 410 basis points year over year. Adjusted diluted earnings per share were $0.77, compared with a loss of $0.22 in the prior-year period.
Free cash outflow improved to $75 million from an outflow of $198 million a year earlier, which Grimsland attributed to stronger operating performance, improved working capital management and lower cash restructuring costs. Inventory rose about 5% from year-end 2025 as the company invested in product depth and breadth across its network.
Company Reaffirms 2026 Outlook
Advance Auto Parts reaffirmed its full-year guidance. The company expects net sales of approximately $8.5 billion and comparable sales growth of 1% to 2%, with each quarter expected to deliver positive same-store sales growth. Management said the first half should be stronger due to easier comparisons and first-quarter performance.
Same-SKU inflation is expected to be in the 2% to 3% range for the year, and Grimsland said recent tariff regulations have not changed the company’s inflation expectations. The company expects Pro to outperform DIY, with both channels contributing positively to comparable sales growth.
For 2026, Advance expects adjusted operating income margin of 3.8% to 4.5%, representing 130 to 200 basis points of year-over-year expansion. Gross margin is expected to expand 110 to 150 basis points to approximately 45%, driven mainly by merchandising initiatives, including strategic vendor sourcing and pricing and promotions optimization.
The company also projected adjusted diluted EPS of $2.40 to $3.10, capital expenditures of approximately $300 million, and free cash flow of about $100 million. Advance plans to open 40 to 45 new stores and 10 to 15 market hubs during the year.
Strategic Priorities Focus on Merchandising, Supply Chain and Stores
O’Kelly said Advance’s strategy remains built on three pillars: merchandising, supply chain and store operations. He said the company continues to work toward a medium-term target of 7% adjusted operating margin.
In merchandising, O’Kelly cited improved vendor relationships, better internal processes and a new assortment framework intended to improve product placement. He said expanded assortment in brakes and undercar categories is helping the company capture more Main Street Pro business.
The company also launched its owned oil brand, ARGOS, which O’Kelly said has met expectations and is now one of Advance’s top brands in the category. The brand has expanded beyond motor oil into hydraulic oils, antifreeze, performance chemicals and washer fluid.
Advance also replaced its Speed Perks loyalty program with Advance Rewards during the quarter. O’Kelly said new member sign-ups, program penetration and total transactions from loyalty members have increased since launch.
On supply chain, O’Kelly said the consolidation of distribution centers is nearing completion, allowing the company to focus on standardizing operations and improving productivity. He said the company expects supply chain process improvements to support gross margin expansion in 2027 and beyond.
Advance has opened two additional market hubs so far this year, bringing its total to 35. The company is targeting 60 market hubs in 2027. Grimsland said markets with a hub ecosystem are performing about 100 basis points better than those without one.
Executives Caution on Consumer Spending
During the question-and-answer portion of the call, executives said second-quarter comparable sales are expected to moderate from the first quarter and remain in line with the company’s guidance range. Grimsland said Advance does not expect major tax refund tailwinds to continue and is monitoring potential volatility in consumer spending, particularly as households face pressure from elevated gas prices.
Grimsland said the period between tax refunds and peak driving season can be difficult to gauge, and the company will watch consumer behavior after Memorial Day. Still, he noted that less than 10% of the company’s business is discretionary.
“This is a needs-based business,” Grimsland said. “The cars need to start, they have to stop.”
O’Kelly said the company’s first-quarter growth was “roughly in line with the market” and reflected progress in parts availability, service and execution. He said Advance remains focused on continuing its strategic plan and improving operational productivity.
About Advance Auto Parts NYSE: AAP
Advance Auto Parts, Inc NYSE: AAP is a leading distributor of automotive aftermarket parts, accessories, and maintenance items. The company operates a network of stores and distribution centers across North America, serving both do-it-yourself (DIY) customers and professional service providers. Advance Auto Parts focuses on offering a comprehensive selection of replacement parts, batteries, engine components, and performance products for cars and light trucks.
The company's product portfolio includes engine oils and lubricants, cooling system components, brake and suspension parts, filters, belts, hoses, and diagnostic tools.
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