Advance Auto Parts Earnings: EPS Beat, Sales Miss

Advance Auto Parts, Inc. (NYSE: AAP) reported adjusted earnings per share (EPS) above expectations for the quarter ended July 18, 2026, despite a revenue shortfall and a decline in comparable store sales. The company raised its adjusted EPS guidance while reaffirming full-year sales and margin targets.

EPS Beat Despite Revenue Miss and Margin Gains

Advance Auto Parts reported net sales of $2.0 billion for the quarter, falling short of consensus estimates near $2.03–$2.04 billion. Comparable store sales declined 0.5% year over year, reflecting softer demand. GAAP net income rose to $55 million, with GAAP diluted EPS of $0.90. Adjusted diluted EPS reached $1.03, beating analyst estimates by about $0.22–$0.23 per share.

Adjusted gross margin expanded to 46.2%, and adjusted operating margin increased to 5.6%. Management attributed margin gains to merchandising and pricing discipline, along with a $26 million tariff refund under the International Emergency Economic Powers Act (IEEPA). The company said the tariff refunds contributed 130 basis points of gross margin expansion and added roughly $0.31 to adjusted EPS.

The company reaffirmed its full-year 2026 net sales guidance of $8.485 billion to $8.575 billion and maintained its expectation of 1.0% to 2.0% comparable store sales growth. It also reaffirmed adjusted operating income margin and free cash flow guidance while raising adjusted EPS guidance to a range of $2.60 to $3.30 per share, citing higher pre-tax interest income.

Demand Mix, Store Growth, and Capital Moves

Growth in the professional installer (Pro) channel offset a larger-than-expected decline in do-it-yourself (DIY) sales, contributing to the modest comparable store sales decline. The company ended the quarter with 4,311 stores, up from 4,292 a year earlier.

Cash flow improved significantly. Year-to-date operating cash flow reached about $252 million, compared with a prior-year outflow of $106 million. Free cash flow rose to roughly $120 million to $195 million from about negative $3 million in the prior-year period. Net leverage declined to 2.1 times from 2.4 times in the previous quarter, helped by the repurchase and retirement of approximately $30 million in debt principal during the quarter.

On August 18, 2026, the board declared a regular cash dividend of $0.25 per share, payable October 23 to shareholders of record on October 9.

The combination of stronger margins, tariff relief, and improved cash flow supported management’s decision to raise adjusted EPS guidance while maintaining full-year sales and margin targets.

Management described the quarter as navigating a "volatile demand environment" with constrained consumer spending, which weighed on sales growth and contributed to the same-store sales decline.