Advance Auto Parts (AAP) reported mixed second-quarter 2026 results on August 20, sending AAP stock down 21.75% to $43.96. Investors focused on weaker sales and softer DIY demand, even as the retailer posted stronger margins and earnings.
The company earned adjusted profit of $1.03 per share, above the $0.81 analyst estimate. Revenue reached $2.0 billion, below the $2.04 billion forecast, while comparable store sales fell 0.5%.
Advance Auto Parts said its professional customer business grew at a low-single-digit pace. However, DIY sales dropped at a low-double-digit rate as consumers reduced spending on nonessential repairs and purchases.
AAP stock moved lower after the report, despite the earnings beat. The decline pushed shares closer to the lower end of their 52-week range of $37.89 to $65.21.
Adjusted gross margin rose 242 basis points to 46.2% during the quarter. Adjusted operating margin increased 257 basis points to 5.6%. About $26 million in pre-tax IEEPA tariff refunds supported the result.
Adjusted earnings per share rose 49% from $0.69 a year earlier. The company also reported a net leverage ratio of 2.1 times, which remained inside its target range of 2.0 to 2.5 times.
Year-to-date free cash flow reached $120 million through July 18, compared with a $201 million outflow a year earlier. Cash from continuing operations rose to $252 million, while capital spending increased to $132 million. This marked a sharp cash turnaround.
Advance Auto Parts completed its distribution center consolidation, cutting the network from nearly 40 sites to 15 unified warehouse locations. Management said the change should improve parts availability and lower transportation costs.
The retailer also added about 80,000 products to its catalog this year after adding 100,000 in fiscal 2025. It has completed 25% of planned distribution center process changes. The company expects full rollout by mid-2027.
Advance Auto Parts kept its 2026 sales forecast between $8.485 billion and $8.575 billion. It also maintained comparable sales growth guidance of 1% to 2% and operating margin guidance of 3.8% to 4.5%.
The company raised adjusted EPS guidance to 2.60-3.30 from 2.40-3.10. It now plans 30-35 new stores and 15-20 market hubs. Free cash flow guidance remains near $100 million, while capital spending stays around $300 million.
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