Advance Auto Parts reported lower third-quarter sales but a recovery in demand as the quarter progressed, with comparable sales turning positive in the final four weeks. The company also tightened its full-year outlook, lowering its sales forecast slightly while raising expected free cash flow to about $150 million.
Key details
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Sales fell, but late-quarter trends improved. Third-quarter net sales were $2.012 billion, down from $2.036 billion a year earlier. Comparable sales declined 1.2%. The company said sales were down at a low-single-digit rate during the first eight weeks, then turned positive in the final four weeks as transaction volumes improved.
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Professional customers led performance. Sales to professional installers grew at a low-single-digit rate, with stronger growth among Main Street Pro customers. DIY sales declined at a low-single-digit rate for the quarter, but improved from mid-single-digit declines early in the period.
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Adjusted operating margin edged higher. Adjusted operating income was $91 million, or 4.5% of sales, compared with $90 million, or 4.4%, a year earlier. Reported operating income rose to $47 million from $22 million. Adjusted figures exclude certain items and are company-defined measures.
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Gross-profit and expense trends were mixed. Reported gross profit increased to $897 million from $881 million, and its share of sales rose to 44.6% from 43.3%. On an adjusted basis, gross profit was $899 million, down from $913 million, with the margin slipping to 44.7% from 44.8%. The company attributed the adjusted margin pressure mainly to product and sales-channel mix and higher supply-chain costs relative to sales. Adjusted selling, general and administrative expenses fell to $808 million from $823 million, helped by expense management.
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Adjusted earnings per share declined. Diluted earnings were $0.25 per share, compared with a loss of $0.02 a year earlier. Adjusted diluted earnings per share were $0.79, down from $0.92.
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Full-year sales and earnings ranges narrowed. Advance now expects 2026 net sales of about $8.5 billion and comparable sales growth of about 1%. Its previous ranges were $8.485 billion to $8.575 billion for sales and 1% to 2% for comparable sales. The new adjusted diluted EPS range is $2.75 to $3.10, versus $2.60 to $3.30 previously.
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Operating-margin guidance is also narrower. The company now expects an adjusted operating margin of 4.0% to 4.3%, compared with a prior range of 3.8% to 4.5%. The midpoint is unchanged at 4.15%.
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Free-cash-flow guidance increased. The company raised its 2026 free cash flow outlook to about $150 million from about $100 million. It said it had generated more than $100 million of free cash flow through the first three quarters and expects full-year free cash flow to be more than $400 million above the prior year.
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Other outlook items were unchanged. Advance still expects about $300 million in capital expenditures, 30 to 35 new store openings and 15 to 20 market hub openings in 2026.
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A quarterly dividend was declared. The company set a regular cash dividend of $0.25 per share, payable January 22, 2027, to shareholders of record on January 8.
What changes for investors
The updated outlook puts more emphasis on cash generation: the company raised its free-cash-flow forecast even as it brought its sales outlook to about $8.5 billion and narrowed its earnings range. The full-year adjusted operating-margin range also tightened, with its midpoint unchanged.