Advance Auto Parts Inc.
PART I
Item 1. Business.
Unless the context otherwise requires, the “Company,” “Advance,” and similar terms refer to Advance Auto Parts, Inc., its subsidiaries and their respective operations on a consolidated basis. The Company’s fiscal year consists of 52 or 53 weeks ending on the Saturday closest to December 31st each year. The Company’s fiscal year ended January 3, 2026 (“2025”) included fifty-three weeks of operations. The Company’s previous two fiscal years ended on December 28, 2024 (“2024”) and December 30, 2023 (“2023”), respectively, each included fifty-two weeks of operations.
Overview
Advance Auto Parts, Inc. and its subsidiaries is a leading automotive aftermarket parts provider in North America, serving both professional installers (“professional”) and “do-it-yourself” (“DIY”) customers, as well as independently-owned operators. The Company’s stores offer a broad selection of brand names, original equipment manufacturer (“OEM”) and owned brand automotive replacement parts, accessories, batteries and maintenance items for domestic and imported cars, vans, sport utility vehicles and light and heavy-duty trucks. As of January 3, 2026, the Company operated 4,305 stores primarily within the United States, with additional locations in Canada, Puerto Rico and the U.S. Virgin Islands. In addition, as of January 3, 2026, we served 809 independently owned Carquest branded stores across the same geographic locations served by our stores in addition to Mexico and various Caribbean islands. Our stores operate primarily under the trade names “Advance Auto Parts” and “Carquest”.
The Company was founded in 1929 as Advance Stores Company, Incorporated, and operated as a retailer of general merchandise, including automotive parts, until the 1980s. During the 1980s, the Company began shifting its focus, specifically targeting the sale of automotive parts and accessories to DIY customers. The Company initiated the professional delivery program in 1996 and has served professional customers since 2000. The Company has grown significantly as a result of strategic acquisitions, new store openings and comparable store sales growth. Advance Auto Parts, Inc., a Delaware corporation, was incorporated in 2001 in conjunction with the acquisition of Discount Auto Parts, Inc. In 2014, the Company acquired General Parts International, Inc., a privately-held company that was a leading distributor and supplier of original equipment and aftermarket automotive replacement products for professional markets operating under the Carquest and Worldpac trade names.
In November 2024, the Company completed the sale of the Worldpac business for net proceeds of approximately $1.44 billion after transaction costs, the final working capital adjustment recorded in the fourth quarter of fiscal 2025 and excluding the impact of taxes. The transaction reflected a strategic shift in the Company’s business with increased focus on the Advance blended-box model. Refer to Note 19. Discontinued Operations, of the Notes to the Consolidated Financial Statements of this Annual Report for further details.
On November 13, 2024, the Company’s Board of Directors approved a restructuring and asset optimization plan (“2024 Restructuring Plan”) designed to improve the Company’s profitability and growth potential and streamline its operations. The 2024 Restructuring Plan is supplemental to other ongoing initiatives, such as our distribution network optimization initiatives, to simplify the Company's business and improve profitable growth and entails, among other items, certain store and independent location closures as well as headcount reductions and organizational design changes to align the Company’s workforce to the expected needs of the Company's business. The Company completed its store footprint optimization with all intended store and independent location closures under the 2024 Restructuring Plan during the first quarter of 2025. Refer to Note 3. Restructuring, of the Notes to the Consolidated Financial Statements of this Annual Report for further details.
During fiscal 2025, the Company continued executing its multi-year strategic plan to drive operational efficiencies, which focuses on merchandising excellence, supply chain transformation and store operations.
Stores
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 2025, 39 stores were opened and 522 were closed, resulting in a total of 4,305 stores as of January 3, 2026 compared with a total of
2
4,788 stores as of December 28, 2024. During fiscal year 2025, the Company completed the footprint optimization portion of its 2024 Restructuring Plan.
The Company serves its professional and DIY customers through a variety of channels ranging from traditional “brick and mortar” store locations to self-service e-commerce sites. The Company believes it is better able to meet its customers’ needs by operating under two trade names, which are as follows:
Advance Auto Parts — The Company’s 4,066 Advance Auto Parts stores, inclusive of 255 hubs and 33 market hubs, as of January 3, 2026, are generally located in freestanding buildings across 44 U.S. states and two U.S. territories, with a focus on both professional and DIY customers. The average size of an Advance Auto Parts location (including stores, hubs and market hubs) is approximately 8,100 square feet. These stores carry a wide variety of products serving aftermarket auto part needs for both domestic and import vehicles with product offerings of approximately 23,200 stock keeping units (“SKUs”), consisting of a custom mix of products based on each store’s market. Supplementing the Company’s stores’ inventory on-hand, less common SKUs are also available on a same-day or next-day basis from any of the larger hub stores or market hub locations.
Carquest — The Company’s 239 Carquest stores as of January 3, 2026, including 157 stores in Canada, are generally located in freestanding buildings with a primary focus on professional customers, but also serve DIY customers. The average size of a Carquest store is approximately 6,600 square feet. These stores carry a wide variety of products serving the aftermarket auto part needs for both domestic and import vehicles with a product offering of approximately 19,100 SKUs. As of January 3, 2026, 809 independently-owned stores operated under the Carquest name.
The Company serves the stores primarily from its executive office in Raleigh, NC.
Company Products
The Company offers a comprehensive portfolio of replacement parts, maintenance items, accessories and tools to support the full lifecycle of vehicles. With an expansive footprint and a wide assortment of products, the Company believes it is well-positioned to meet a broad range of customer needs in a highly fragmented industry. The following table shows some of the types of products that the Company sells by major category:
Parts & Batteries |
Accessories & Chemicals |
Engine Maintenance |
Batteries and battery accessories |
Air conditioning chemicals and accessories |
Air filters |
Belts and hoses |
Air fresheners |
Fuel and oil additives |
Brakes and brake pads |
Antifreeze and washer fluid |
Fuel filters |
Chassis parts |
Electrical wire and fuses |
Grease and lubricants |
Climate control parts |
Electronics |
Motor oil |
Clutches and drive shafts |
Floor mats, seat covers and interior accessories |
Oil filters |
Engines and engine parts |
Hand and specialty tools |
Part cleaners and treatments |
Exhaust systems and parts |
Lighting |
Transmission fluid |
Hub assemblies |
Performance parts |
|
Ignition components and wire |
Sealants, adhesives and compounds |
Loading financial statements...
Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
| Line item |
|---|
| Period ending |
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 January 3, 2026 (filed with the SEC on February 13, 2026) which the Company refers to as the “2025 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 three quarters each consist of twelve weeks.
First Quarter Fiscal 2026 Management Overview
The Company’s financial results for the first quarter of 2026 includes:
Business and Risks Update
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.
On February 20, 2026, the U.S. Supreme Court overturned certain U.S. tariffs imposed under the International Emergency Economic Powers ("IEEPA") Act. 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 has not recognized any amounts related to IEEPA tariff recoveries within its condensed consolidated financial statements as of April 25, 2026. The Company will continue to assess the recoverability of these tariffs, and will recognize any recoveries when realized or realizable, the amounts of which could be material to the Company’s condensed consolidated financial statements.
The recent geopolitical events in the Middle East have caused significant disruption in the normal flow of oil, refined petroleum products and related commodities, which has increased 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.
Industry Update
Operating within the automotive aftermarket industry, the Company is influenced by a number of general macroeconomic factors, many of which are similar to those affecting the overall retail industry. In addition to the “Business and Risk Update” section
17
included within this Management’s Discussion and Analysis of Financial Condition and Results of Operations, these factors include, but are not limited to:
While these factors tend to fluctuate, the Company remains confident in the long-term growth prospects for the automotive parts industry.
Stores
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 25, 2026, four stores were opened and one store was closed, resulting in a total of 4,308 stores as of the end of the first fiscal quarter compared with a total of 4,305 stores as of January 3, 2026.
Results of Operations
|
Sixteen Weeks Ended |
|
|
|
|
|
|||||||||||||
($ in millions) |
April 25, 2026 |
|
|
April 19, 2025 |
|
Change(1) |
|
Basis |
|
||||||||||
Net sales |
$ |
2,614 |
|
|
100.0 |
% |
|
$ |
2,583 |
|
|
100.0 |
% |
$ |
31 |
|
|
— |
|
Cost of sales |
|
1,434 |
|
|
54.9 |
|
|
|
1,474 |
|
|
57.1 |
|
|
40 |
|
|
(221 |
) |
Gross profit |
|
1,180 |
|
|
45.1 |
|
|
|
1,109 |
|
|
42.9 |
|
|
71 |
|
|
221 |
|
Selling, general and administrative expenses, exclusive of restructuring and related expenses |
|
1,079 |
|
|
41.3 |
|
|
|
1,122 |
|
|
43.4 |
|
|
43 |
|
|
(216 |
) |
Restructuring and related expenses |
|
32 |
|
|
1.2 |
|
|
|
118 |
|
|
4.6 |
|
|
86 |
|
|
(334 |
) |
Selling, general and administrative expenses |
|
1,111 |
|
|
42.5 |
|
|
|
1,240 |
|
|
48.0 |
|
|
129 |
|
|
(550 |
) |
Operating income (loss) |
|
69 |
|
|
2.6 |
|
|
|
(131 |
) |
|
(5.1 |
) |
|
200 |
|
|
771 |
|
Interest expense |
|
(65 |
) |
|
(2.5 |
) |
|
|
(27 |
) |
|
(1.0 |
) |
|
(38 |
) |
|
(144 |
) |
Other income, net |
|
31 |
|
|
1.2 |
|
|
|
27 |
|
|
1.0 |
|
|
4 |
|
|
14 |
|
Income tax expense (benefit) |
|
11 |
|
|
0.4 |
|
|
|
(155 |
) |
|
(6.0 |
) |
|
(166 |
) |
|
642 |
|
Net income |
$ |
24 |
|
|
0.9 |
% |
|
$ |
24 |
|
|
0.9 |
% |
$ |
— |
|
|
— |
|
18
Note: Sums may not equal totals due to rounding.
Net Sales
For the sixteen weeks ended April 25, 2026, net sales increased 1.2% and comparable store sales increased 3.5% compared with the same period in 2025. Net sales increased due to higher average sales prices, partially offset by lower transaction volume and the reduction in sales resulting from store closures during the sixteen weeks ended April 19, 2025 associated with our 2024 Restructuring Plan.
The Company calculates comparable store sales based on the change in store or branch sales starting once a location has been open for approximately one year and by including e-commerce sales and excluding sales fulfilled by distribution centers to independently owned Carquest locations. The Company includes sales from relocated stores in comparable store sales from the original date of opening. Comparable store sales is intended only as supplemental information and is not a substitute for Net sales presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Gross Profit
For the sixteen weeks ended April 25, 2026 and April 19, 2025, gross profit was $1.2 billion, or 45.1% of net sales, and $1.1 billion, or 42.9% of net sales, respectively. The increase in gross profit as a percentage of net sales compared to the prior comparative period was driven by expansion in product margin and the impact of lower margin liquidation sales related to our 2024 Restructuring Plan, which negatively impacted gross profit margin in the sixteen weeks ended April 19, 2025.
Selling, General and Administrative Expenses, Exclusive of Restructuring and Related Expenses
For the sixteen weeks ended April 25, 2026, SG&A expenses, exclusive of restructuring and related expenses, were $1.1 billion, or 41.3% of net sales, compared with $1.1 billion, or 43.4% of net sales, for the sixteen weeks ended April 19, 2025. Overall SG&A expenses decreased in the sixteen weeks ended April 25, 2026, as compared to prior comparative periods, as a result of operating costs eliminated for stores closed during the sixteen weeks ended April 19, 2025 as a result of our 2024 Restructuring Plan.
Restructuring and Related Expenses
For the sixteen weeks ended April 25, 2026, restructuring and related expenses were $32 million, or 1.2% of net sales, compared to $118 million, or 4.6% 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 by the end of first quarter of fiscal 2025 following the closure of all stores under the Plan. Substantially all of the costs under the restructuring plans have been incurred as of April 25, 2026. The Company estimates that it will incur additional expenses of approximately $20 million to $30 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.
Interest Expense
For the sixteen weeks ended April 25, 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.
Other Income, Net
For the sixteen weeks ended April 25, 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.
19
Income Tax Expense (Benefit)
For the sixteen weeks ended April 25, 2026, the Company’s provision for income taxes reflected an expense of $11 million compared with an income tax benefit of $155 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.
Liquidity and Capital Resources
Overview
The Company’s principal sources of liquidity are cash and cash equivalents and borrowing availability under 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 principle on the Company’s long-term debt when due. The following table presents selected financial information related to the Company’s liquidity (in millions):
|
April 25, 2026 |
January 3, 2026 |
Change |
|
|||
Cash and cash equivalents |
$ |
2,956 |
$ |
3,123 |
$ |
(167 |
) |
ABL Facility borrowing availability |
|
896 |
|
896 |
|
— |
|
The decrease in cash and cash equivalents was primarily due to the final working capital payment made related to the Company's sale of Worldpac totaling $55 million, $55 million used for purchases of property and equipment, net of proceeds from sales, the payment of $30 million in dividends and net cash used in operating activities of $19 million, primarily as a result of changes in net working capital.
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.
Analysis of Cash Flows
The Company’s cash flows from operating, investing and financing activities were as follows (in millions):
|
Year ended |
|
|||||
|
April 25, 2026 |
|
|
April 19, 2025 |
|
||
Net cash used in operating activities |
$ |
(19 |
) |
|
$ |
(156 |
) |
Net cash used in investing activities of continuing operations |
|
(57 |
) |
|
|
(27 |
) |
Net cash used in investing activities of discontinued operations |
|
(55 |
) |
|
|
— |
|
Net cash used in financing activities |
|
(37 |
) |
|
|
(17 |
) |
Effect of exchange rate changes on cash |
|
1 |
|
|
|
3 |
|
Net decrease in cash and cash equivalents |
$ |
(167 |
) |
|
$ |
(197 |
) |
Operating Activities
For the sixteen weeks ended April 25, 2026, cash used in operating activities changed favorably by $137 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.
20
Investing Activities
For the sixteen weeks ended April 25, 2026, cash flows used in investing activities of continuing operations increased by $30 million compared with the sixteen weeks ended April 19, 2025, with higher spend on property and equipment in the current period, partially offset by lower proceeds from the sale of property and equipment.
Net cash used in investing activities of discontinued operations for the sixteen weeks ended April 25, 2026, increased by $55 million compared with the sixteen weeks ended April 19, 2025, due to the timing of the final working capital payment made related to the Company's sale of Worldpac.
Financing Activities
For the sixteen weeks ended April 25, 2026, cash flows used in financing activities was $37 million, an increase of $20 million as compared with sixteen weeks ended April 19, 2025. The increase in cash used in financing activities was due to two dividend payments being made during the sixteen weeks ended April 25, 2026 as compared to one dividend payment made during the sixteen weeks ended April 19, 2025.
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. The Company’s ABL Facility has certain restrictions that may limit the Company’s ability to increase the amount of the Company’s cash dividends above its current levels.
Long-Term Debt
As of April 25, 2026 and January 3, 2026, the Company had outstanding principal of long-term debt totaling $3.5 billion.
For further details, see Note 5. Long-term Debt and Fair Value of Financial Instruments, of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1.
Credit Facilities
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 that provides for additional credit extensions up to $500 million.
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. As of April 25, 2026 and January 3, 2026, approximately $2.3 billion of cash and cash equivalents was designated as qualified cash and are subject to customary “springing” control agreements, as described in the ABL Facility Agreement.
As of April 25, 2026 and January 3, 2026, the Company had no outstanding borrowings, $896 million borrowing availability, and $104 million letters of credit outstanding under the ABL Facility. The Company was in compliance with its covenants related to the ABL Facility in all periods presented.
As of April 25, 2026 and January 3, 2026, the Company had no bilateral letters of credit issued separately from the ABL Agreement.
For further details, see Note 5. Long-term Debt and Fair Value of Financial Instruments of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1., respectively.
Additional Capital Requirements
Expected working and other capital requirements, including Contractual and Off-Balance Sheet Obligations are described in the Company’s 2025 Form 10-K in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As of April 25, 2026, other than for the changes disclosed in the “Notes to the Condensed Consolidated Financial
21
Statements”, and “Liquidity and Capital Resources” in this Quarterly Report, there have been no other material changes to the Company’s expected working and other capital requirements described in the Company’s 2025 Form 10-K.
22
Next expected filings
- ~2026-08-08 10-Q expected by 2026-08-09 (in 54 days)
- ~2026-10-24 10-Q expected by 2026-10-25 (in 131 days)
- ~2027-02-12 10-K expected by 2027-02-21 (in 242 days)
- ~2027-05-15 10-Q expected by 2027-05-16 (in 334 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-05-21 8-K Earnings Release; Financial Statements and Exhibits
- 2026-05-21 10-Q Quarterly Report
- 2026-03-10 8-K Officer/Director Change; Regulation FD Disclosure; Financial Statements and Exhibits
- 2026-02-13 10-K Annual Report
- 2026-02-13 8-K Earnings Release; Financial Statements and Exhibits
- 2026-01-13 8-K Officer/Director Change; Regulation FD Disclosure; Financial Statements and Exhibits
- 2025-10-30 10-Q Quarterly Report
- 2025-10-30 8-K Officer/Director Change; Financial Statements and Exhibits
- 2025-10-30 8-K Earnings Release; Financial Statements and Exhibits
- 2025-08-14 10-Q Quarterly Report
- 2025-08-14 8-K Material Agreement Entered; Earnings Release
- 2025-08-05 8-K Material Agreement Entered; Financial Statements and Exhibits
- 2025-07-24 8-K Earnings Release; Financial Statements and Exhibits
- 2025-07-24 8-K Material Agreement Entered; Regulation FD Disclosure; Other Events; Financial Statements and Exhibits
- 2025-05-22 10-Q Quarterly Report