ADVANCE AUTO PARTS INC

Previous wording

Second Quarter Fiscal 2026 Management Overview

Current wording

Third Quarter Fiscal 2026 Management Overview

Previous wording

The Company’s financial results for the second quarter of 2026 includes:

Current wording

The Company’s financial results for the third quarter of 2026 include:

Previous wording

Net sales during the second quarter of fiscal 2026 were $2.0 billion, a decrease of 0.5% compared with the second quarter of fiscal 2025. Comparable store sales decreased by 0.5%.

Current wording

Net sales during the third quarter of fiscal 2026 were $2.0 billion, a decrease of 1.2% compared with the third quarter of fiscal 2025. Comparable store sales decreased by 1.2%.

Previous wording

Gross profit margin for the second quarter of fiscal 2026 was 46.2% of net sales, an increase of 267 basis points compared with the second quarter of fiscal 2025.

Current wording

Gross profit margin for the third quarter of fiscal 2026 was 44.6% of net sales, an increase of 131 basis points compared with the third quarter of fiscal 2025.

Previous wording

Selling, general and administrative ("SG&A") expenses, exclusive of restructuring and related expenses for the second quarter of fiscal 2026, were 40.6% of net sales, a decrease of 35 basis points compared with the second quarter of fiscal 2025.

Current wording

Selling, general and administrative ("SG&A") expenses, exclusive of restructuring and related expenses for the third quarter of fiscal 2026, were 40.2% of net sales, a decrease of 41 basis points compared with the third quarter of fiscal 2025.

Previous wording

The Company generated diluted earnings per share of $0.90 during the second quarter of fiscal 2026, compared with diluted earnings per share of $0.25 for the comparable period of 2025.

Current wording

The Company generated diluted earnings per share of $0.25 during the third quarter of fiscal 2026, compared with diluted loss per share of $0.02 for the comparable period of 2025.

Previous wording

On February 20, 2026, the U.S. Supreme Court overturned certain U.S. tariffs imposed under the International Emergency Economic Powers Act ("IEEPA"). During fiscal 2025, the Company incurred product costs directly related to the IEEPA tariffs. Tariffs directly paid by the Company are subject to direct refund via the IEEPA tariff refund process. Given the significant uncertainty around the recovery of tariffs that were previously paid, the Company recognizes IEEPA tariff refunds if and when received. During the twelve weeks ended July 18, 2026, the Company recognized $26 million in IEEPA tariff refunds, which are reflected as a benefit to cost of sales on the condensed consolidated statement of operations as of July 18, 2026. The Company will continue to assess the recoverability of these tariffs, and will recognize any future recoveries when realized or realizable, the magnitude of which in future periods is not expected to be material to the Company's condensed consolidated financial statements.

Current wording

On February 20, 2026, the U.S. Supreme Court overturned certain U.S. tariffs imposed under the International Emergency Economic Powers Act ("IEEPA"). During fiscal 2025, the Company incurred product costs directly related to the IEEPA tariffs. Tariffs directly paid by the Company are subject to direct refund via the IEEPA tariff refund process. Given the significant uncertainty around the recovery of tariffs that were previously paid, the Company recognizes IEEPA tariff refunds if and when received. In the second fiscal quarter of 2026, the Company recognized $26 million in IEEPA tariff refunds, recorded as a benefit to cost of sales on the condensed consolidated statement of operations. Subsequent to the second quarter of fiscal 2026, the Company has recognized an immaterial amount of IEEPA refunds. The Company will continue to assess the recoverability of these tariffs, and will recognize any future recoveries when realized or realizable, the magnitude of which in future periods is not expected to be material to the Company's condensed consolidated financial statements.

Previous wording

During the second quarter of fiscal 2026, the Company entered into a Rule 10b5-1 Repurchase Plan (the "Repurchase Plan") to effect repurchases of outstanding principal amounts of the Company's outstanding 1.75% Senior Unsecured Notes due October 1, 2027 (the "2027 Notes") and the 5.95% Senior Unsecured Notes due March 9, 2028 (the "2028 Notes"), subject to certain price and market conditions. During the second quarter ended July 18, 2026, the Company repurchased an aggregate $0.1 million and $29 million of outstanding principal related to the 2027 Notes and 2028 Notes under the Repurchase Plan, respectively, which was reflected in the carrying value of long-term debt on the condensed consolidated balance sheets. The plan was terminated upon completion of the repurchases.

Current wording

During the second quarter of fiscal 2026, the Company entered into a Rule 10b5-1 Repurchase Plan (the "Repurchase Plan") to effect repurchases of outstanding principal amounts of the Company's outstanding 1.75% Senior Unsecured Notes due October 1, 2027 (the "2027 Notes") and the 5.95% Senior Unsecured Notes due March 9, 2028 (the "2028 Notes"), subject to certain price and market conditions. During the second quarter ended July 18, 2026, the Company repurchased an aggregate $0.1 million and $29 million of outstanding principal related to the 2027 Notes and 2028 Notes under the Repurchase Plan, respectively, which was reflected in the carrying value of long-term debt on the condensed consolidated balance sheets. The plan was terminated upon completion of the repurchases. No such plans were entered into during the third quarter of fiscal 2026.

Previous wording

The recent geopolitical events in the Middle East have continued to cause significant disruption in the normal flow of oil, refined petroleum products and related commodities, which has increased the variability of the price of oil and non-petroleum products. Although the length and impact of these events are highly unpredictable, they could lead to market disruptions, including significant volatility in prices, supply, credit and capital market, consumer behavior and supply chain disruptions. These items, along with actual or perceived weakness in the economic and business climate, could have an adverse impact on our financial condition and results of operations in future periods.

Current wording

The ongoing geopolitical events in the Middle East have continued to cause significant disruption in the normal flow of oil, refined petroleum products and related commodities, which has increased the variability of the price of oil and non-petroleum products. Although the length and impact of these events are highly unpredictable, they could lead to market disruptions, including significant volatility in prices, supply, credit and capital markets, consumer behavior and supply chain disruptions. These items, along with actual or perceived weakness in the economic and business climate, could have an adverse impact on our financial condition and results of operations in future periods.

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 twenty-eight weeks ended July 18, 2026, nine stores were opened and three stores were closed, resulting in a total of 4,311 stores as of the end of the second fiscal quarter compared with a total of 4,305 stores as of January 3, 2026.

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 forty weeks ended October 10, 2026, twenty-six stores were opened and six stores were closed, resulting in a total of 4,325 stores as of the end of the third fiscal quarter compared with a total of 4,305 stores as of January 3, 2026.

Previous wording

For the twelve and twenty-eight weeks ended July 18, 2026, net sales were relatively flat. Comparable stores sales for the twelve and twenty-eight weeks ended July 18, 2026 decreased 0.5% and increased 1.7%, respectively, compared with the same period in 2025.

Current wording

For the twelve and forty weeks ended October 10, 2026, net sales were relatively flat. Comparable store sales for the twelve and forty weeks ended October 10, 2026 decreased 1.2% and increased 0.8%, respectively, compared with the same period in 2025.

Previous wording

For the twelve weeks ended July 18, 2026 and July 12, 2025, gross profit was $0.9 billion, or 46.2% of net sales, and $0.9 billion, or 43.5% of net sales, respectively. For the twenty-eight weeks ended July 18, 2026 and July 12, 2025, gross profit was $2.1 billion, or 45.6% of net sales, and $2.0 billion or 43.2% of net sales, respectively. The increase in gross profit as a percentage of net sales compared to the prior comparative periods was driven by expansion in product margin and the recognition of tariff refunds in the second quarter of fiscal 2026. The twenty-eight weeks ended July 18, 2026 also benefited from the impact of lower margin liquidation sales related to our 2024 Restructuring Plan, which negatively impacted gross profit margin in the twenty-eight weeks ended July 12, 2025.

Current wording

For the twelve weeks ended October 10, 2026 and October 4, 2025, gross profit was $0.9 billion, or 44.6% of net sales, and $0.9 billion, or 43.3% of net sales, respectively. For the forty weeks ended October 10, 2026 and October 4, 2025, gross profit was $3.0 billion, or 45.3% of net sales, and $2.9 billion or 43.2% of net sales, respectively. The increase in gross profit as a percentage of net sales compared to the prior comparative periods was driven by expansion in product margin, partially offset by channel and product mix unfavorability. The forty weeks ended October 10, 2026 also benefited from the recognition of tariff refunds in the second quarter of fiscal 2026 and the impact of lower margin liquidation sales related to our 2024 Restructuring Plan, which negatively impacted gross profit margin for the forty weeks ended October 4, 2025.

Previous wording

For the twelve weeks ended July 18, 2026, SG&A expenses, exclusive of restructuring and related expenses, were relatively flat as compared to the prior comparative period. For the twenty-eight weeks ended July 18, 2026, SG&A expenses, exclusive of restructuring and related expenses, were $1.9 billion, or 41.0% of net sales, compared with $1.9 billion, or 42.3% of net sales, for the twenty-eight weeks ended July 12, 2025. Overall, SG&A expenses decreased in the twenty-eight weeks ended July 18, 2026, as compared to the prior comparative period, as a result of operating costs eliminated for stores closed as a result of our 2024 Restructuring Plan.

Current wording

For the twelve weeks ended October 10, 2026, SG&A expenses, exclusive of restructuring and related expenses, were $0.8 billion, or 40.2% of net sales, compared with $0.8 billion, or 40.6% of net sales for the twelve weeks ended October 4, 2025. For the forty weeks ended October 10, 2026, SG&A expenses, exclusive of restructuring and related expenses, were $2.7 billion, or 40.7% of net sales, compared with $2.8 billion, or 41.8% of net sales, for the forty weeks ended October 4, 2025. Overall, SG&A expenses decreased in the twelve and forty weeks ended October 10, 2026, as compared to the prior comparative periods, primarily as a result of operating cost savings realized from our restructuring plans. The forty weeks ended October 10, 2026 also benefited from operating costs eliminated for stores closed in the first quarter of fiscal 2025 as a result of our 2024 Restructuring Plan, as such operating costs prior to closure were included in the forty weeks ended October 4, 2025.

Previous wording

For the twelve weeks ended July 18, 2026, restructuring and related expenses were $10 million, or 0.5% of net sales compared to $29 million, or 1.4% of net sales for the twelve weeks ended July 12, 2025. For the twenty-eight weeks ended July 18, 2026, restructuring and related expenses were $41 million, or 0.9% of net sales, compared to $148 million, or 3.2% of net sales, in the prior year comparable period. The decrease in expenses as compared to the same periods in fiscal 2025 relates to timing of the Company’s 2024 Restructuring Plan which was announced during the fourth quarter of fiscal 2024, with the majority of costs being incurred during fiscal 2024, and during the first half of fiscal 2025 following the closure of all stores under the Plan in the first quarter of fiscal 2025. Substantially all of the costs under the restructuring plans have been incurred as of July 18, 2026. The Company estimates that it will incur additional expenses of approximately $10 million to $20 million through the remainder of fiscal 2026 related to the active restructuring plans. See Note 11. Restructuring, of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1.

Current wording

For the twelve weeks ended October 10, 2026, restructuring and related expenses were $42 million, or 2.1% of net sales compared to $33 million, or 1.6% of net sales for the twelve weeks ended October 4, 2025. The increase in expenses as compared to the prior year comparative period was primarily due to an increase in impairment charges for store and distribution center locations impacted through the Company's active restructuring plans. For the forty weeks ended October 10, 2026, restructuring and related expenses were $84 million, or 1.3% of net sales, compared to $180 million, or 2.7% of net sales, in the prior year comparable period. The decrease in expenses as compared to the same period in fiscal 2025 relates to timing of the Company’s 2024 Restructuring Plan which was announced during the fourth quarter of fiscal 2024, with the majority of costs being incurred during fiscal 2024, and during the first half of fiscal 2025 following the closure of all stores under the Plan in the first quarter of fiscal 2025. Substantially all of the costs under the restructuring plans have been incurred as of October 10, 2026. The Company estimates that it will incur additional expenses of approximately $5 million to $10 million through the remainder of fiscal 2026 related to the active restructuring plans. See Note 11. Restructuring, of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1.

Previous wording

For the twelve weeks and twenty-eight weeks ended July 18, 2026, interest expense increased as compared to the same periods in fiscal 2025, due to an increase in the principal amount of interest bearing long-term debt from the debt issuance completed in the third quarter of fiscal 2025.

Current wording

For the twelve weeks and forty weeks ended October 10, 2026, interest expense increased as compared to the same periods in fiscal 2025, due to an increase in the principal amount of interest bearing long-term debt from the debt issuance completed in the third quarter of fiscal 2025.

Previous wording

For the twelve weeks and twenty-eight weeks ended July 18, 2026, other income, net increased as compared to the same period in fiscal 2025, due to higher interest income earned from higher cash and cash equivalent balances held due to the net proceeds received from the issuance of $1.95 billion in Senior Unsecured Notes in the third quarter of fiscal 2025. This was partially offset by lower interest rates and a reduction in income recognized from the transition services (“TSA Services”) agreement with Worldpac.

Current wording

For the twelve weeks and forty weeks ended October 10, 2026, other income, net increased as compared to the same periods in fiscal 2025, due to higher interest income driven by (i) higher invested cash balances, reflecting the net proceeds from the issuance of $1.95 billion of Senior Unsecured Notes in the third quarter of fiscal 2025, and (ii) higher interest rates on our invested cash balances. This was partially offset by lower income recognized from the transition services agreement with Worldpac.

Previous wording

For the twelve weeks ended July 18, 2026, the Company's provision for income taxes reflected an expense of $20 million as compared to an expense of $6 million for the same period during 2025. For the twenty-eight weeks ended July 18, 2026, the Company’s provision for income taxes reflected an expense of $30 million compared with an income tax benefit of $149 million for the same period in 2025. The income tax benefit in fiscal 2025 resulted from a net discrete tax benefit in the first quarter of fiscal 2025 of $126 million, related to an internal legal entity restructuring event completed in the fiscal year treated as a taxable stock disposition for U.S. federal income tax purposes. As a result, the Company recognized a capital loss deduction which was utilized against capital gain income.

Current wording

For the twelve weeks ended October 10, 2026, the Company's provision for income taxes reflected an expense of $9 million, inclusive of a discrete charge in the period from return-to-provision adjustments related to the filing of prior-year returns, as compared to a benefit of $1 million for the same period during 2025. The change year-over-year was driven by an increase in net income. For the forty weeks ended October 10, 2026, the Company’s provision for income taxes reflected an expense of $40 million compared with an income tax benefit of $150 million for the same period in 2025. The income tax benefit in fiscal 2025 resulted from a net discrete tax benefit in the first quarter of fiscal 2025 of $126 million, related to an internal legal entity restructuring event completed in the fiscal year treated as a taxable stock disposition for U.S. federal income tax purposes. As a result, the Company recognized a capital loss deduction which was utilized against capital gain income.

Previous wording

The Company’s principal sources of liquidity are cash and cash equivalents and borrowing availability under the asset-based loan revolving credit facility (the "ABL 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 dividends and to pay interest and principal on the Company’s long-term debt when due. The following table presents 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 the asset-based loan revolving credit facility (the "ABL Facility"). We generate cash through our operating activities and 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 dividends and to pay interest and principal on the Company’s long-term debt when due. The following table presents selected financial information related to the Company’s liquidity (in millions):

Previous wording

Cash and cash equivalents was relatively flat, as net cash provided by operating activities of $252 million was offset by $131 million used for purchases of property and equipment, net of proceeds from sales; the final working capital payment made related to the Company's sale of Worldpac totaling $55 million; the payment of $30 million in dividends; and the repayment of $29 million of long-term debt.

Current wording

Cash and cash equivalents decreased in the period, as net cash provided by operating activities of $311 million was offset by $200 million used for purchases of property and equipment, net of proceeds from sales; the final working capital payment made related to the Company's sale of Worldpac totaling $55 million; the payment of $45 million in dividends; and the repayment of $29 million of long-term debt.

Previous wording

For the twenty-eight weeks ended July 18, 2026, cash provided by operating activities changed favorably by $358 million compared with the same period of prior year. The increase as compared to the comparative period was due to lower cash charges related to the 2024 Restructuring Plan and other changes in net working capital.

Current wording

For the forty weeks ended October 10, 2026, cash provided by operating activities changed favorably by $429 million compared with the same period of prior year. The increase as compared to the comparative period was due to lower cash charges related to the 2024 Restructuring Plan and other changes in net working capital.

Previous wording

For the twenty-eight weeks ended July 18, 2026, cash flows used in investing activities of continuing operations increased by $58 million compared with the twenty-eight weeks ended July 12, 2025, with higher spend on property and equipment in the current period, partially offset by lower proceeds from the sale of property and equipment.

Current wording

For the forty weeks ended October 10, 2026, cash flows used in investing activities of continuing operations increased by $72 million compared with the forty weeks ended October 4, 2025, with higher spend on property and equipment, net in the current period, as the Company continues to invest in information technology, supply chain, e-commerce, new greenfield store and distribution center sites and enhancements and/or major renovation projects of existing stores.

Previous wording

Net cash used in investing activities of discontinued operations for the twenty-eight weeks ended July 18, 2026, increased by $55 million compared with the twenty-eight weeks ended July 12, 2025, due to the timing of the final working capital payment made related to the Company's sale of Worldpac.

Current wording

Net cash used in investing activities of discontinued operations for the forty weeks ended October 10, 2026, increased by $55 million compared with the forty weeks ended October 4, 2025, due to the timing of the final working capital payment made related to the Company's sale of Worldpac.

Previous wording

As of July 18, 2026 and January 3, 2026, the Company had outstanding principal of long-term debt totaling $3.4 billion and $3.5 billion, respectively.

Current wording

As of October 10, 2026 and January 3, 2026, the Company had outstanding principal of long-term debt totaling $3.4 billion and $3.5 billion, respectively, with $350 million of outstanding principal due within the next twelve months related to the 1.75% Senior Unsecured Notes due October 1, 2027.

Previous wording

As of July 18, 2026 and January 3, 2026, the Company had no bilateral letters of credit issued separately from the ABL Agreement.

Current wording

As of October 10, 2026 and January 3, 2026, the Company had no bilateral letters of credit issued separately from the ABL Facility agreement.