ADVANCE AUTO PARTS INC
For the period ended Jul 12, 2025. Filed Aug 14, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jul 12, 2025 · Filed Aug 14, 2025
AAP$45.50-5.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-04-19; filed 2025-05-22.
0001158449-25-000189
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-07-12; filed 2025-08-14.
0001158449-25-000272
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 97 previous paragraphs and 104 current paragraphs.
58 unchanged; 32 reworded; 13 added; 4 removed; 3 previous and 1 current paragraphs rearranged.
Tables are not compared: 5 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (13)
Current report
In August 2025, subsequent to the end of the second quarter of fiscal 2025, the Company completed various financing-related transactions, including in the issuance of $1.95 billion in Senior Unsecured Notes with net proceeds of approximately $1.62 billion, after the redemption of the Company’s 5.90% Senior Notes due March 9, 2026 and direct transaction and closing costs. The Company also terminated its existing 2021 Credit Agreement which has been replaced by a new asset-based loan revolving credit facility (the “ABL Facility”). For further information related to these subsequent events activities, see Note 6. Long-term Debt and Fair Value of Financial Instruments of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 and Part I, Item 2, “Liquidity and Capital Resources” of this Quarterly Report.
Current report
•Changes in the number of miles driven
Current report
On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OBBBA”). The Company has determined the OBBBA has an immaterial impact to Company’s provision for income taxes and deferred tax balances.
Current report
In August 2025, subsequent to the end of our second fiscal quarter of 2025, the Company completed a series of financing-related transactions as further summarized below under “Long-Term Debt” and “Credit Facilities.” As a result of these transactions, the Company issued $1.95 billion in aggregate principal amount of new Senior Unsecured Notes due 2030 and 2033 and redeemed its outstanding $300 million in aggregate principal amount of 5.90% Senior Notes due 2026 (the “2026 Notes”). The Company expects the net proceeds of these transactions to significantly increase cash and cash equivalents, net of direct transaction and closing costs, by approximately $1.62 billion.
Current report
In the third quarter of fiscal 2025, the Company expects to recognize net proceeds as financing activities, after direct financing and closing costs, of approximately $1,920 million related to the issuance of the new Senior Unsecured Notes and financing cash outflows of approximately $300 million for the redemption of the Company’s outstanding 2026 Senior Notes, as further discussed below.
Current report
On August 4, 2025, the Company issued (i) $975 million in aggregate principal amount of 7.000% Senior Notes due 2030 (the “2030 Notes”) and (ii) $975 million in aggregate principal amount of 7.375% Senior Notes due 2033 (collectively, the “Senior Unsecured Notes”) in a private transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the “Act”). Interest on the Senior Unsecured Notes is payable in cash on February 1 and August 1 of each year, commencing on February 1, 2026. The 2030 Notes will mature on August 1, 2030, and the 2033 Notes will mature on August 1, 2033. Net proceeds from the issuance of the Senior Unsecured Noted were approximately $1,920 million, net of direct transaction and closing costs. The Senior Unsecured Notes are guaranteed by each of the Company’s wholly-owned domestic subsidiaries that also guarantee the ABL Facility.
Current report
In accordance with the terms of the Indenture governing the Senior Unsecured Notes, the Company may, at its option and on any one or more occasions, redeem some or all of the Senior Unsecured Notes at the redemption prices described in the Indenture. In addition, in the event of a Change of Control Triggering Event (as defined in the Indenture), the Company will be required to offer to repurchase the Senior Unsecured Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date. The Indenture also contains customary provisions for events of default and certain covenants limiting the ability of the Company and its subsidiaries to incur debt secured by liens and to enter into certain sale and lease-back transactions.
Current report
Following the closing of the issuance of the Senior Unsecured Notes, the Company utilized a portion of the net proceeds to redeem in full its outstanding $300 million in aggregate principal amount of 2026 Notes and the Company expects to record an immaterial loss on redemption in the third quarter of fiscal 2025 associated with this extinguishment. The remaining proceeds from the issuance are available for general corporate purposes, and, upon closing of the ABL Facility, as further discussed under “Credit Facilities” below, approximately $2.3 billion of cash and cash equivalents, was designated as qualified cash, subject to customary “springing” control agreements, to the initial borrowing base for the ABL Facility.
Current report
The Company expects to incur additional interest expense, net of interest income earned on cash and cash equivalents held, of approximately $25 to $30 million during the second half of fiscal 2025, as a result of the new debt issuance.
Current report
On July 24, 2025, the Company entered into Amendment No. 7 (“Amendment No. 7”) to the 2021 Credit Agreement, which among other things, permitted the issuance of the Senior Unsecured Notes discussed above.
Current report
On August 12, 2025, the 2021 Credit Agreement was terminated and replaced by the ABL Facility. The Company expects to record an immaterial loss on extinguishment of the 2021 Credit Agreement during the third quarter of fiscal 2025. The ABL Facility provides for a five-year senior secured first lien asset-based revolving credit facility of up to $1 billion with an uncommitted accordion feature, subject to a borrowing base thereunder. Outstanding amounts under the ABL Facility will accrue interest at a floating rate, which, at the Company’s election, can be either (i) SOFR plus an applicable margin or (ii) an alternative base rate plus an applicable margin. The applicable rate varies based on Average Historical Excess Availability (as defined in the ABL Facility) from (i) with respect to base rate loans, 0.25% to 0.75% and (b) with respect to SOFR loans, 1.25% to 1.75% and resets quarterly on a prospective basis and is, in part, derived based-upon the utilization of the facility. Interest is payable on a quarterly basis. Unused commitments under the ABL Facility will accrue an unused commitment fee of either 0.30% or 0.25% per annum, depending on average utilization.
Current report
The ABL Facility has first lien on substantially all of the accounts receivable, inventory, cash and related assets of the Company and its subsidiary guarantors thereunder. Advance Auto Parts, Inc. is the ABL Facility borrower and the guarantors are (i) each of our subsidiaries that guarantee our recently issued Senior Unsecured Notes and (ii) certain of our Canadian subsidiaries. Availability under the ABL Facility is limited to the lesser of (i) the borrowing base, equal to the sum of 90% of eligible credit card receivables, 85% of eligible trade accounts receivable, 85% of the net orderly liquidation value of eligible inventory and 100% of qualified cash (up to certain limits for the purpose of determining borrowing capacity), subject, in each case, to customary reserves established by the collateral agent under the ABL Facility from time to time, including reserves related to outstanding obligations to our suppliers that are payable to the paying agents, as a result of such suppliers electing, at their option, to utilize third-party financing, commonly referred to as supply chain financing, and debt maturity reserves, and (ii) the aggregate revolving credit commitments. The ABL Facility contains customary representations and warranties, events of default and financial, affirmative and negative covenants for facilities of this type, including but not limited to a springing financial covenant relating to a fixed charge coverage ratio, defined in the ABL Facility as the ratio of Consolidated Adjusted EBITDA minus Consolidated Capital Expenditures minus Taxes to Fixed Charges, each as defined in the ABL Facility, on a four quarter trailing basis, which requires a minimum 1:1 coverage ratio to be maintained, and restrictions on certain indebtedness, liens, investments and acquisitions, asset dispositions, restricted payments, prepayment of certain indebtedness and transactions with affiliates, subject to various thresholds and caps.
Current report
In accordance with the ABL Facility, the Company is required to hold cash and cash equivalents in designated accounts with lenders, referred to as Qualified Cash Accounts as defined in ABL Facility. These amounts are unrestricted and the Company is able to direct, and have sole control over, the manner of disposition of funds in such accounts, subject to: 1) maintaining a minimum availability under the ABL facility of at least the greater of (i) 12.5% of the Line Cap and (ii) $125 million; and 2) maintaining excess availability under the ABL Facility of at least $400 million. The Qualified Cash Accounts are subject to springing control agreements pursuant to which the cash deposited therein will become restricted in the event of default or a breach of such covenants.
Removed paragraphs (4)
Previous report
•Continued focus on cost and supply chain optimization.
Previous report
•Miles driven
Previous report
(6) Refer to the reconciliation of diluted weighted-average common shares outstanding (GAAP) to adjusted diluted weighted-average common shares outstanding (Non-GAAP) which is the denominator utilized to calculate adjusted diluted (loss) earnings per share (Non-GAAP). Adjusted diluted weighted-average common shares outstanding (Non-GAAP) excludes the dilutive impact of share-based awards as such shares are considered anti-dilutive in consideration of the Company’s Non-GAAP loss for the period.
Previous report
As of April 19, 2025, the Company had a credit rating from S&P of BB+ and from Moody’s Investor Service of Ba1. As of April 19, 2025, the outlooks by Standard & Poor’s and Moody’s on the Company’s credit rating were negative and stable, respectively. The current pricing grid used to determine the Company’s borrowing rate under the Credit Agreement is based on the Company’s credit ratings. A downgrade in the Company’s credit ratings could occur if its business operations deteriorate, its leverage increases or if available liquidity becomes insufficient to maintain operations. If the Company’s credit ratings decline, the interest rate on outstanding balances may increase, the 2021 Credit Agreement would become securitized pursuant to its terms and the Company’s access to additional financing on favorable terms may be limited. A decline in credit ratings or perceived creditworthiness, among other factors, may impact participation in supplier finance programs, which in turn could shorten payable terms, result in an increase in working capital requirements or otherwise negatively impact capital resources, potentially materially. See Note 9. Supplier Finance Programs, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1.
Reworded paragraphs (32)
Previous wording
The following discussion and analysis of financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 28, 2024 (filed with the SEC on February 26, 2025) which the Company refers to as the “2024 Form 10-K”), and the Company’s unaudited condensed consolidated financial statements and the notes to those statements that appear elsewhere in this report. The results of operations for the interim periods are not necessarily indicative of the operating results to be expected for the full year. Consistent with the previous fiscal year, the Company’s first quarter of the year contains sixteen weeks. The Company’s remaining three quarters each consist of twelve weeks.
Current wording
The following discussion and analysis of financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 28, 2024 (filed with the SEC on February 26, 2025) which the Company refers to as the “2024 Form 10-K”), and the Company’s unaudited condensed consolidated financial statements and the notes to those statements that appear elsewhere in this report. The results of operations for the interim periods are not necessarily indicative of the operating results to be expected for the full year. Consistent with the previous fiscal year, the Company’s first quarter of the year contained sixteen weeks. The Company’s remaining quarters each consist of twelve weeks, with the exception of the fourth quarter of fiscal 2025 which consists of thirteen weeks.
Previous wording
First Quarter Fiscal 2025 Management Overview
Current wording
Second Quarter Fiscal 2025 Management Overview
Previous wording
The Company’s financial results for continuing operations for the first quarter of 2025 includes:
Current wording
The Company’s financial results from continuing operations for the second quarter of 2025 includes:
Previous wording
•Net sales during the first quarter of fiscal 2025 were $2.6 billion, a decrease of 6.8% compared with the first quarter of fiscal 2024. Comparable store sales declined 0.6%.
Current wording
•Net sales during the second quarter of fiscal 2025 were$2.0 billion, a decrease of 7.7% compared with the second quarter of fiscal 2024. Comparable store sales increased by 0.1%.
Previous wording
•Gross profit margin for the first quarter of 2025 was 42.9% of net sales, a decrease of(50) basis points compared with the first quarter of fiscal 2024.
Current wording
•Gross profit margin for the second quarter of 2025 was 43.5% of net sales, a decrease of 14 basis points compared with the second quarter of fiscal 2024.
Previous wording
•Selling, general and administrative expenses for the first quarter of fiscal 2025 were 48.0% of net sales, an increase of 648 basis points compared with the first quarter of fiscal 2024.
Current wording
•Selling, general and administrative expenses, exclusive of restructuring and related expenses for the second quarter of fiscal 2025 were 40.9% of net sales, an increase of 13 basis points compared with the second quarter of fiscal 2024.
Previous wording
•The Company generated diluted earnings per share of $0.40 during the first quarter of fiscal 2025, compared with diluted earnings per share of $0.29 for the comparable period of 2024.
Current wording
•The Company generated diluted earnings per share of$0.25 during the second quarter of fiscal 2025, compared with diluted earnings per share of$0.51 for the comparable period of 2024.
Previous wording
The Company continues to make progress on the various elements of its business plan, which is focused on improving the customer experience, margin expansion, and driving consistent execution for both professional and DIY customers. Key updates for the first quarter of fiscal 2025 include:
Current wording
The Company continues to make progress on the various elements of its business plan, which is focused on improving the customer experience, margin expansion, and driving consistent execution for both professional and DIY customers. In the first quarter of fiscal 2025, the Company completed all store location closures under the 2024 Restructuring Plan designed to improve the Company’s profitability and growth potential, and streamline its operations. For further information related to restructuring and related activities, see Note 3. Restructuring of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1.
Previous wording
During the first quarter of fiscal 2025, new global trade tariffs were announced on imports to the U.S., including additional tariffs on various countries from which the Company directly or indirectly imports and/or sources merchandise, including Canada, China and Mexico, among others. Various modifications and delays to the U.S. tariffs have been announced and further changes are expected to be made in the future, which may include additional sector-based tariffs or other measures. The ultimate impact of tariffs on the Company’s business remains uncertain. See Part II, Item 1A, “Risk Factors” of this Quarterly Report.
Current wording
During the first and second quarters of fiscal 2025, new global trade tariffs were announced on imports to the U.S., including additional tariffs on various countries from which the Company directly or indirectly imports and/or sources merchandise, including Canada, China and Mexico, among others. Since the initial announcement in the first quarter of fiscal 2025, various modifications and delays to the U.S. tariffs have been announced and further changes are expected to be made in the future, which may include additional sector-based tariffs or other measures. In response to the tariffs, certain of our suppliers have increased prices. However, the impact of such increases to-date has not been material to the Company’s business, financial condition and results of operations. The ultimate impact of tariffs on the Company’s business remains uncertain. See Part II, Item 1A, “Risk Factors” of this Quarterly Report.
Previous wording
The key factors used in selecting sites and market locations in which the Company operates include population, demographics, traffic count, vehicle profile, number and strength of competitors’ stores and the cost of real estate. During the sixteen weeks ended April 19, 2025, 10 stores were opened and 513 were closed, resulting in a total of 4,285 stores as of the end of the first fiscal quarter compared with a total of 4,788 stores as of December 28, 2024. The significant reduction in stores in the first quarter of fiscal 2025 relates to actions taken under the Company’s restructuring and related activities. See Note 3. Restructuring, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1.
Current wording
The key factors used in selecting sites and market locations in which the Company operates include population, demographics, traffic count, vehicle profile, number and strength of competitors’ stores and the cost of real estate. During the twenty-eight weeks ended July 12, 2025, 18 stores were opened and 514 were closed, resulting in a total of 4,292 stores as of the end of the second fiscal quarter compared with a total of 4,788 stores as of December 28, 2024. The significant reduction in stores during fiscal 2025 relates to actions taken under the Company’s restructuring and related activities. See Note 3. Restructuring, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1.
Previous wording
For the first quarter of fiscal 2025, net sales decreased 6.8% and comparable store sales declined 0.6% compared with the first quarter of fiscal 2024. The decline was driven by lower sales as a result of store closures executed under the 2024 Restructuring Plan during the first quarter of fiscal 2025.
Current wording
For the twelve weeks ended July 12, 2025, net sales decreased 7.7% and comparable store sales increased 0.1% compared with the twelve weeks ended July 13, 2024. For the twenty-eight weeks ended July 12, 2025, net sales declined 7.2% compared with the same period in 2024. Comparable store sales decreased 0.3% for the twenty-eight weeks ended July 12, 2025, compared with the twenty-eight weeks ended July 13, 2024. The decline for both the second quarter and twenty-eight week prior comparative periods was driven by lower sales as a result of store closures executed under the 2024 Restructuring Plan during the first quarter of fiscal 2025.
Previous wording
Gross profit for the first quarter of fiscal 2025 was $1,109 million, or 42.9% of net sales, compared with $1,204 million, or 43.4% of net sales, for the first quarter of fiscal 2024. The decrease in gross profit margin was due to lower margin liquidation sales associated with the 2024 Restructuring Plan. Total gross profit also decreased as a result of lower net sales driven by store closures executed under the 2024 Restructuring Plan.
Current wording
For the twelve weeks ended July 12, 2025, gross profit was $874 million, or 43.5% of net sales, compared with $950 million, or 43.6% of net sales, for the twelve weeks ended July 13, 2024. For the twenty-eight weeks ended July 12, 2025 and July 13, 2024, gross profit was $1,984 million, or 43.2% of net sales, and $2,153 million, or 43.5% of net sales. The decrease in gross profit margin compared to both the second quarter and twenty-eight week prior comparative periods was due to the amount of lower-margin liquidation sales associated with the 2024 Restructuring Plan. Total gross profit also decreased as a result of lower net sales stemming from store closures executed under the 2024 Restructuring Plan.
Previous wording
Selling, general and administrative (SG&A) expenses, exclusive of restructuring and related expenses for the first quarter of fiscal 2025 were $1,122 million, or 43.4% of net sales, compared with $1,151 million, or 41.5% of net sales, for the first quarter of fiscal 2024. Overall SG&A expenses decreased year over year as a result of store closures executed under the 2024 Restructuring Plan. SG&A expenses as a percentage of net sales in the first quarter of fiscal 2024 benefited from a net gain on asset sales, see Note 7. Leases, of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item1.
Current wording
For the twelve weeks ended July 12, 2025, selling, general and administrative (SG&A) expenses, exclusive of restructuring and related expenses, were $823 million, or 40.9% of net sales, compared with $889 million, or 40.8% of net sales, for the twelve weeks ended July 13, 2024. For the twenty-eight weeks ended July 12, 2025, SG&A expenses, exclusive of restructuring and related expenses, were $1,945 million, or 42.3% of net sales, compared with $2,039 million, or 41.2% of net sales, for the twenty-eight weeks ended July 13, 2024. Overall SG&A expenses decreased in both the twelve week and twenty-eight week periods ended July 12, 2025, as compared to prior comparative periods, as a result of store closures executed under the 2024 Restructuring Plan reducing overhead and operating costs. SG&A expenses as a percentage of net sales for the twenty-eight weeks ended July 13, 2024, benefited from a net gain on asset sales, see Note 7. Leases, of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item1.
Previous wording
Restructuring and related expenses for the first quarter of 2025 were $118 million, or 4.6% of net sales. The increase in expenses as compared to the same period in fiscal 2024, relates to the Company’s 2024 Restructuring Plan which was announced during the fourth quarter of fiscal 2024. The Company estimates that it will incur additional expenses of approximately $75 million to $100 million. These expenses primarily relate to lease terminations, professional services, and other exit costs to be incurred by the end of fiscal year 2025. See Note 3. Restructuring, of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1.
Current wording
For the twelve weeks ended July 12, 2025, restructuring and related expenses were $29 million, or 1.4% of net sales, compared to $7 million, or 0.3% of net sales, in the prior year comparable period. For the twenty-eight weeks ended July 12, 2025, restructuring and related expenses were $148 million, or 3.2% of net sales, compared to $8 million, or 0.2% of net sales, in the prior year comparable period. The increase in expenses as compared to the same period in fiscal 2024, relates to the Company’s 2024 Restructuring Plan which was announced during the fourth quarter of fiscal 2024. The Company estimates that it will incur additional expenses of approximately $35 million to $50 million through the remainder of fiscal 2025 related to the active restructuring plans. The expenses for both the twelve weeks ended and twenty-eight weeks ended July 12, 2025, relate to lease terminations, professional services, severance and termination costs and other exit costs. We expect that the Company’s 2024 Restructuring Plan will be substantially completed by the end of fiscal 2025. See Note 3. Restructuring, of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1.
Previous wording
Other income, net increased as compared to the same period in fiscal 2024 due to higher interest income earned resulting from higher cash and cash equivalent balances held, driven by the proceeds received from the sale of the Worldpac business in the fourth quarter of fiscal 2024. Other income, net in the first quarter of fiscal 2025 also includes income recognized from the transition services (“TSA Services”) agreement with Worldpac that commenced in the fourth quarter of fiscal 2024.
Current wording
For the twelve weeks and the twenty-eight weeks ended July 12, 2025, other income, net increased as compared to the same periods in fiscal 2024, due to higher interest income earned from higher cash and cash equivalent balances held, driven by the proceeds received from the sale of the Worldpac business in the fourth quarter of fiscal 2024. Other income, net also includes income recognized from the transition services (“TSA Services”) agreement with Worldpac that commenced in the fourth quarter of fiscal 2024.
Previous wording
The Company’s provision for income taxes for the first quarter of 2025 was a benefit of $155 million compared with a expense of $12 million for the same period in 2024. The decrease in tax expense for the first quarter of 2025 was a result of lower income before taxes and a net discrete tax benefit of $126 million related to certain tax benefits associated with capital loss deductions.
Current wording
For the twelve weeks ended July 12, 2025, the Company’s effective tax rate was 28.6% as compared to 29.5% for the same period in 2024. The Company’s provision for income taxes for the twenty-eight weeks ended July 12, 2025, was a benefit of $149 million compared with an expense of $25 million for the same period in 2024. The decrease in tax expense for the twelve weeks ended July 12, 2025, as compared to the prior comparative period, was a result of lower income before taxes. The decrease in tax expense for the twenty-eight weeks ended July 12, 2025 was a result of lower income before taxes and a net discrete tax benefit in the first quarter of fiscal 2025 of $126 million related to certain tax benefits associated with capital loss deductions.
Previous wording
The Company uses certain non-GAAP financial measures described below to supplement the Company’s unaudited condensed consolidated financial statements prepared and presented in accordance with GAAP and to understand and evaluate the Company’s core operating performance. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented as the Company believes that such non-GAAP financial measures provide useful information about the Company’s financial performance, enhance the overall understanding of the Company’s past performance and future prospects, and allow for greater transparency with respect to important metrics used by the Company’s management for financial and operational decision-making. The Company is presenting these non-GAAP metrics to provide investors insight to the information used by the Company’s management to evaluate its business and financial performance. The Company believes that these measures provide investors increased comparability of the Company’s core financial performance over multiple periods with other companies in the Company’s industry. The Company may make reference tocertain financial measures not derived in accordance with GAAP within Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report. Non-GAAP financial measures, including Adjusted Net (loss) income, Adjusted diluted (loss) Earnings Per Share (“Adjusted Diluted EPS”), Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Sales, General and Administrative expense (“Adjusted SG&A”), Adjusted SG&A Margin, Adjusted Operating (loss) Income and Adjusted Operating (loss) Income Margin, should not be used as a substitute for GAAP financial measures, or considered in isolation, for the purpose of analyzing the Company’s operating performance, financial position or cash flows.
Current wording
The Company uses certain non-GAAP financial measures described below to supplement the Company’s unaudited condensed consolidated financial statements prepared and presented in accordance with GAAP and to understand and evaluate the Company’s core operating performance. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented as the Company believes that such non-GAAP financial measures provide useful information about the Company’s financial performance, enhance the overall understanding of the Company’s past performance and future prospects, and allow for greater transparency with respect to important metrics used by the Company’s management for financial and operational decision-making. The Company is presenting these non-GAAP metrics to provide investors insight to the information used by the Company’s management to evaluate its business and financial performance. The Company believes that these measures provide investors increased comparability of the Company’s core financial performance over multiple periods with other companies in the same industry. The Company may make reference tocertain financial measures not derived in accordance with GAAP within Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report. The Company’s Non-GAAP financial measures reflect results from continuing operations, including Adjusted Net Income (loss), Adjusted Diluted Earnings (loss) Per Share (“Adjusted Diluted EPS”), Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Sales, General and Administrative expense (“Adjusted SG&A”), Adjusted SG&A Margin, Adjusted Operating Income (loss) and Adjusted Operating Income (loss) Margin, and should not be used as a substitute for GAAP financial measures, or considered in isolation, for the purpose of analyzing the Company’s operating performance, financial position or cash flows.
Previous wording
•Distribution network optimization: Expenses primarily relating to the conversion of the stores and distribution centers to market hubs, including temporary labor, incremental depreciation, as a result of accelerating long-lived assets over a shorter useful life, nonrecurring professional service fees and team member severance.
Current wording
•Distribution network optimization: Expenses primarily relating to the conversion of the stores and distribution centers to market hubs, including realized losses on liquidated inventory, temporary labor, nonrecurring professional service fees and team member severance.
Previous wording
(1) Restructuring and other related expenses included$30 million of nonrecurring services rendered by third-party vendors assisting with the 2024 Restructuring Plan,$15 million of severance and other labor related costs,$7 million related to incremental reserves on loan guarantees and$11 millionof other related expenses associated with closures, including the transfer of assets.
Current wording
(1) Restructuring and other related expenses for thetwelve weeks ended July 12, 2025 includes $5 million of nonrecurring services rendered by third-party vendors assisting with the 2024 Restructuring Plan and $2 million of other related expenses associated with location closures, including the transfer of assets. Restructuring and other related expenses for the twenty-eight weeks ended July 12, 2025 includes $35 million of nonrecurring services rendered by third-party vendors assisting with the 2024 Restructuring Plan, $15 million of severance and other labor related costs, $7 million for reserves on independent loans and $14 million of other related expenses associated with location closures, including the transfer of assets.
Previous wording
(2) The Company recorded impairment charges for ROU assets and property and equipment of $9 million, net of gains on sale, and incremental accelerated depreciation and amortization for property and equipment and ROU assets of$36 million.
Current wording
(2) The Company recorded incremental accelerated depreciation and amortization for property and equipment and ROU assets of $13 million for thetwelve weeks ended July 12, 2025. The Company recorded incremental accelerated depreciation and amortization for property and equipment and ROU assets of $49 million and impairment charges for ROU assets and property and equipment of $9 million, net of gains on sale, for the twenty-eight weeks ended July 12, 2025.
Previous wording
The Company’s principal sources of liquidity are cash and cash equivalents. The Company’s primary cash requirements necessary to maintain the Company’s current operations include payroll and benefits, inventory purchases, contractual obligations, capital expenditures, payment of income taxes, funding of initiatives and other operational priorities, such as restructuring and asset optimization plans. In addition, cash is required to pay the Company’s dividend and to pay interest and principle on the Company’s long-term debt when due. The following tables present selected financial information related to the Company’s liquidity (in millions):
Current wording
The Company’s principal sources of liquidity are cash and cash equivalents and borrowing availability under a revolving credit facility. The Company’s primary cash requirements necessary to maintain the Company’s current operations include payroll and benefits, inventory purchases, contractual obligations, capital expenditures, payment of income taxes, funding of initiatives and other operational priorities, such as restructuring and asset optimization plans. In addition, cash is required to pay the Company’s dividend and to pay interest and principle on the Company’s long-term debt when due. The following tables present selected financial information related to the Company’s liquidity (in millions):
Previous wording
The decrease in cash and cash equivalents was primarily due to net cash used in operating activities of $156 million, primarily as a result of a decrease in net working capital, inclusive of cash payments made in the period related to the Company’s 2024 Restructuring Plan, $27 million used for purchases of property and equipment, net of proceeds from sales, and the payment of $15 million in dividends.
Current wording
The decrease in cash and cash equivalents was primarily due to net cash used in operating activities of $106 million, primarily as a result of a decrease in net working capital, inclusive of cash payments made in the period related to the Company’s 2024 Restructuring Plan, $75 million used for purchases of property and equipment, net of proceeds from sales, and the payment of $30 million in dividends.
Previous wording
In addition to cash and cash equivalents presented above, as of April 19, 2025, the Company also maintained access to $885 million in undrawn capacity through the Company’s revolving credit facility (the “2021 Credit Agreement”) as further described below. The Company also maintains certain supplier finance programs. See Note 9. Supplier Finance Programs, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1.
Current wording
In addition to cash and cash equivalents presented above, as of July 12, 2025, the Company also maintained access to $817 million in undrawn capacity through the Company’s revolving credit facility (the “2021 Credit Agreement”) as further described below. The 2021 Credit Agreement was terminated on August 12, 2025 and replaced by a new $1.0 billion asset-based revolving credit facility (the “ABL Facility”). The Company expects to designate a significant amount of cash and cash equivalents as Qualified Cash as defined in ABL Facility, that will count towards the initial borrowing base for the ABL Facility as further discussed within the section “Credit Facilities” below.
Previous wording
The Company believes that its cash and cash equivalents and sources of liquidity will satisfy its working and other capital requirements for at least the next 12 months and thereafter for the foreseeable future.
Current wording
The financing-related transactions completed in the third quarter of fiscal 2025, are intended to strengthen the Company’s financial condition and provide additional cash and cash equivalents and sources of liquidity. The Company believes that its cash and cash equivalents and sources of liquidity will satisfy its working and other capital requirements for at least the next 12 months and thereafter for the foreseeable future.
Previous wording
For the sixteen weeks ended April 19, 2025, cash used in operating activities decreased by $153 million compared with the same period of prior year. The decrease as compared to the comparative period was primarily driven by a decrease in net working capital, inclusive of cash payments made in the period related to the Company’s 2024 Restructuring Plan.
Current wording
For the twenty-eight weeks ended July 12, 2025, cash used in operating activities changed unfavorably by $145 million compared with the same period of prior year. The decrease as compared to the comparative period was due to a decrease in net working capital, inclusive of cash payments made in the period related to the Company’s 2024 Restructuring Plan.
Previous wording
For the sixteen weeks ended April 19, 2025, cash flows used in investing activities decreased by $9 million to $27 million as compared with the first quarter of fiscal 2024. The decrease in cash used in investing activities was attributable to lower spend on property and equipment and higher proceeds from the sale of property and equipment.
Current wording
For the twenty-eight weeks ended July 12, 2025, cash flows used in investing activities remained relatively flat as compared with the twenty-eight weeks ended July 13, 2024, with higher spend on property and equipment in the current period, offset by higher proceeds from the sale of property and equipment.
Previous wording
For the sixteen weeks ended April 19, 2025, cash flows used in financing activities was $17 million, a decrease of $8 million as compared with the first quarter of fiscal 2024. The decrease in cash used in financing activities was due to the noncontrolling interest purchase payments in the first quarter of fiscal 2024 with no such payments made in the first quarter of fiscal 2025.
Current wording
For the twenty-eight weeks ended July 12, 2025, cash flows used in financing activities was $32 million, a decrease of $11 million as compared with the twenty-eight weeks ended July 13, 2024. The decrease in cash used in financing activities was due primarily to payments on the purchase of noncontrolling interests in the twenty-eight weeks ended July 13, 2024 with no such payments made in the twenty-eight weeks ended July 12, 2025.
Previous wording
The Company’s Board of Directors has declared a cash dividend every quarter since 2006. Any payments of dividends in the future will be at the discretion of the Company’s Board of Directors and will depend upon the Company’s results of operations, cash flows, capital requirements and other factors deemed relevant by the Board of Directors. In addition, Amendment No. 5 to the 2021 Credit Agreement prevents the Company from increasing the amount of the Company’s cash dividends.
Current wording
The Company’s Board of Directors has declared a cash dividend every quarter since 2006. Any payments of dividends in the future will be at the discretion of the Company’s Board of Directors and will depend upon the Company’s results of operations, cash flows, capital requirements and other factors deemed relevant by the Board of Directors. Similar to the 2021 Credit Agreement, the Company’s new ABL Facility, as detailed further below, has certain restrictions that may limit the Company’s ability to increase the amount of the Company’s cash dividends above its current levels.
Previous wording
On November 13, 2024, the Company’s Board of Directors approved the 2024 Restructuring Plan, which was designed to improve the Company’s profitability and growth potential and streamline its operations. In fiscal 2023, the Company also announced a strategic and operational plan to streamline the Company’s supply chain by configuring a multi-echelon supply chain by leveraging current asset and operating fewer, more productive distribution centers that focus on replenishment and move more parts closer to the customer. The Company estimates that it will incur additional expenses of approximately $75 million to $100 million including $50 million to $75 million of cash expenses primarily composed of lease terminations and other exit expenses and professional services, by the end of fiscal year 2025. For further information, see Note 3. Restructuring, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1.
Current wording
On November 13, 2024, the Company’s Board of Directors approved the 2024 Restructuring Plan, which was designed to improve the Company’s profitability and growth potential and streamline its operations. In fiscal 2023, the Company also announced a strategic and operational plan to streamline the Company’s supply chain by configuring a multi-echelon supply chain by leveraging current asset and operating fewer, more productive distribution centers that focus on replenishment and move more parts closer to the customer. The Company estimates that it will incur additional expenses of approximately $20 million to $30 million of cash expenses related to the active restructuring plans, primarily composed of lease terminations and other exit expenses and professional services, by the end of fiscal year 2025. For further information, see Note 3. Restructuring, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1.
Previous wording
As of April 19, 2025 the Company had outstanding long-term debt totaling $1,790 million, of which $299 million is classified as short-term related to the 5.90% Senior Unsecured Notes due March 9, 2026. For further details, see Note 6. Long-term Debt and Fair Value of Financial Instruments, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1.
Current wording
As of July 12, 2025 the Company had outstanding long-term debt totaling $1,792 million, of which $300 million is classified as short-term related to the 5.90% Senior Unsecured Notes due March 9, 2026.
Previous wording
As of April 19, 2025 and December 28, 2024, the Company had nooutstanding borrowings under the 2021 Credit Agreement. As of April 19, 2025 the Company had $885 million of borrowing availability and $115 million letters of credit outstanding under the 2021 Credit Agreement. As of December 28, 2024, the Company had $1 billion of borrowing availability and no letters of credit outstanding under the 2021 Credit Agreement. The Company is required to maintain certain financial covenants related to the 2021 Credit Agreement and as of April 19, 2025, the Company was in compliance with such financial covenants. On February 25, 2025, the Company entered into Amendment No. 6 (“Amendment No. 6”) to the 2021 Credit Agreement.
Current wording
As of July 12, 2025 and December 28, 2024, the Company had nooutstanding borrowings under the 2021 Credit Agreement. As of July 12, 2025 the Company had $817 million of borrowing availability and $183 million letters of credit outstanding under the 2021 Credit Agreement. As of December 28, 2024, the Company had $1 billion of borrowing availability and no letters of credit outstanding under the 2021 Credit Agreement. The Company is required to maintain certain financial covenants related to the 2021 Credit Agreement and as of July 12, 2025, the Company was in compliance with such financial covenants. On February 25, 2025, the Company entered into Amendment No. 6 (“Amendment No. 6”) to the 2021 Credit Agreement.
Previous wording
As of April 19, 2025 and December 28, 2024, the Company also had $90 million and $91 million, respectively, of bilateral letters of credit issued separately from the 2021 Credit Agreement, none of which were drawn upon. These bilateral letters of credit generally have a term of one year or less and primarily serve as collateral for the Company’s self-insurance policies.
Current wording
As of July 12, 2025 and December 28, 2024, the Company also had $89 million and $91 million, respectively, of bilateral letters of credit issued separately from the 2021 Credit Agreement, none of which were drawn upon. These bilateral letters of credit generally have a term of one year or less and primarily serve as collateral for the Company’s self-insurance policies.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
For further details, see Note 6. Long-term Debt and Fair Value of Financial Instruments of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1., respectively.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
•Completed all store location closures under the 2024 Restructuring Plan designed to improve the Company’s profitability and growth potential, and streamline its operations; and
Previous report — wording carried elsewhere
For further information related to restructuring and related activities, see Note 3. Restructuring of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1.
Previous report — wording carried elsewhere
The Company’s effective tax rate was a benefit of (118.3)% and an expense of 41.4% for the sixteen weeks ended April 19, 2025 and April 20, 2024, respectively. The reduction in the effective tax rate compared to the same period in fiscal 2024 was due to a net discrete tax benefit of $126 million related to certain tax benefits associated with capital loss deductions.