0001193125-26-234388
SEC filingAAP's Q1 2026 gross margin expanded 221 bps to 45.1% driven by product margin improvement and lapping prior-year liquidation sales, though net income remained flat at $24M due to a normalized tax rate.
Advance Auto Parts reported net sales of $2.6 billion for the sixteen weeks ended April 25, 2026, an increase of 1.2% compared to the same period in fiscal 2025. Comparable store sales increased 3.5%, driven by higher average sales prices, though this was partially offset by lower transaction volume and the impact of store closures executed under the 2024 Restructuring Plan during the prior year.
Gross profit margin improved significantly, reaching 45.1% of net sales, a 221 basis point increase from 42.9% in the prior year. This expansion was primarily attributed to product margin improvements and the absence of lower-margin liquidation sales that negatively impacted the first quarter of 2025 due to the 2024 Restructuring Plan.
Selling, general and administrative (SG&A) expenses, exclusive of restructuring and related expenses, were $1.1 billion, or 41.3% of net sales, a 216 basis point decrease from 43.4% in the prior year. The decrease was driven by the elimination of operating costs for stores closed during the prior year. Including restructuring expenses of $32 million (down from $118 million in Q1 2025), total SG&A was 42.5% of net sales.
Operating income swung to a profit of $69 million (2.6% margin) from a loss of $131 million (-5.1% margin) in the prior year, a favorable change of $200 million. However, net income remained flat at $24 million, as a $166 million unfavorable swing in income tax expense (from a $155 million benefit to an $11 million expense) offset the operating gains. The prior-year tax benefit included a $126 million discrete item related to an internal legal entity restructuring. Diluted earnings per share was $0.39, compared to $0.40 in the prior year.
The MD&A does not provide a breakdown of performance by operating segment. The narrative focuses on consolidated results and the impact of the 2024 Restructuring Plan, which involved the closure of underperforming stores. The company operates 4,308 stores as of April 25, 2026, a net increase of three stores from the end of fiscal 2025.
Management remains confident in the long-term growth prospects for the automotive parts industry, despite near-term macroeconomic headwinds including trade policy changes, inflationary pressures, and geopolitical uncertainty. The company continues to execute its business plan focused on improving the customer experience, margin expansion, and driving consistent execution for both professional and DIY customers.
Regarding the 2024 Restructuring Plan, substantially all costs have been incurred, with an estimated $20 million to $30 million in additional expenses expected through the remainder of fiscal 2026. The company is also monitoring the potential recovery of IEEPA tariffs paid in fiscal 2025 following a U.S. Supreme Court ruling, though no recoveries have been recognized due to significant uncertainty. Management believes its cash and cash equivalents and sources of liquidity will satisfy working and other capital requirements for at least the next 12 months.
As of April 25, 2026, Advance Auto Parts held $2.956 billion in cash and cash equivalents, down from $3.123 billion at fiscal year-end 2025. Of this amount, $2.3 billion was designated as Qualified Cash under the terms of the Company's asset-based loan revolving credit facility (ABL Facility). These funds remain unrestricted but are subject to springing control agreements that would restrict access in the event of default or covenant breach. The Company must maintain minimum availability under the ABL Facility of the greater of 12.5% of the Line Cap or $125 million, plus excess availability of at least $400 million. The Company was in compliance with all covenants.
Total long-term debt stood at $3.414 billion, essentially flat compared to $3.412 billion at January 3, 2026. The fair value of this debt was approximately $3.4 billion, determined using Level 2 inputs. No borrowings were outstanding under the ABL Facility, leaving $896 million in borrowing availability against $104 million in letters of credit outstanding. The Company also guarantees loans to independently-owned Carquest-branded stores totaling $66 million, collateralized by approximately $120 million in inventory.
Inventory increased to $3.815 billion from $3.646 billion at year-end, with 92% valued under the LIFO method. The LIFO credit reserve balance rose to $121 million from $104 million, resulting in a $17 million non-cash charge to cost of sales during the quarter.
The Notes disclose $2.5 billion in confirmed obligations outstanding under supplier finance programs as of April 25, 2026, unchanged from January 3, 2026. These arrangements allow suppliers, at their sole discretion, to sell receivables due from the Company to third-party financial institutions. The Company's obligations and payment terms to suppliers are not impacted, and no assets are pledged. All amounts are recorded within accounts payable.
No material purchase commitments or contractual obligations beyond the supplier finance programs and lease obligations are disclosed in the Notes. Operating lease liabilities totaled $1.813 billion, with right-of-use assets of $2.131 billion. The Company recorded $6 million in accelerated amortization on leases expected to be exited before contractual term end.
Capital expenditures for property and equipment were $56 million during the sixteen weeks ended April 25, 2026, up from $42 million in the prior year period. The Company paid $30 million in dividends ($0.25 per share quarterly) and repurchased $8 million in common stock. Share-based compensation added $12 million to equity. The Company's effective tax rate was elevated due to a discrete charge for stock-based compensation.
The Company operates as a single reportable segment under the Advance Auto Parts/Carquest brand. The CODM, the Chief Executive Officer, reviews financial information solely on a consolidated basis. Net sales were $2.614 billion, with product mix consisting of Parts and Batteries (64%), Accessories and Chemicals (21%), Engine Maintenance (14%), and Other (1%). No major customer accounted for 10% or more of consolidated net revenues. The Company operated 4,308 stores and served 797 independently owned Carquest locations as of April 25, 2026.
The provided document excerpt for Advance Auto Parts, Inc. (AAP) for the period ended April 25, 2026, does not contain the Consolidated Statements of Cash Flows. The text includes the Notes to the Condensed Consolidated Financial Statements, covering topics such as revenue disaggregation, inventory accounting (LIFO), and receivables, but the actual cash flow statement is missing. As a result, no quantitative analysis of operating, investing, or financing cash flows, capital expenditures (capex), free cash flow, share repurchases, or dividends can be performed.
The only cash flow-related disclosure is a qualitative note stating that the sixteen weeks ended April 25, 2026, included a payment to settle final working capital amounts related to the sale of Worldpac, which was reflected as a cash outflow for discontinued operations. Without the statement itself, it is impossible to assess cash flow quality, trends in cash generation, capex intensity, or the coverage of capital returns. No anomalies such as working capital swings or one-time tax payments can be identified from the provided text.