Advance Auto Parts Inc 10-Q for FY2026 Q3
Advance Auto Parts Inc (AAP)
About this 10-Q
Advance Auto Parts Inc filed this 10-Q on November 5, 2026, covering the quarter ended October 10, 2026 (FY2026 Q3).
Headline figures
Quarter ended October 10, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.01B
- down 1.2% from $2.04B a year earlier
- Net income
- $15M
- compared with a net loss of $1M a year earlier
- Diluted EPS
- $0.25
- compared with -$0.02 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from ________ to ________.
Commission file number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class |
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Trading symbol |
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Name of each exchange on which registered |
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Not Applicable
(Former name, former address and former fiscal year, if changed since last report).
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Registration S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 2, 2026, the number of shares of the registrant’s common stock outstanding was
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS
Certain statements herein are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are usually identifiable by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast," “guidance,” “intend,” “likely,” “may,” “plan,” “position,” “possible,” “potential,” “probable,” “project,” “should,” “strategy,” “target,” “will,” or similar language. All statements other than statements of historical fact are forward-looking statements, including, but not limited to, statements about the Company’s strategic initiatives, future business and financial performance, revenue, earnings, cash flow, liquidity, restructuring and asset optimization plans, financial objectives, debt capital structure, operational plans and objectives, capital expenditures, organizational changes, cost reductions, expectations for macroeconomic conditions, marketing strategies, inflation, impairments, consumer behavior and preferences, labor costs and availability, supply chain and merchandising strategies and effects, technology investments, effective tax rates, regulatory changes and impacts, anticipated impacts of tariffs and other trade barriers, tariff refunds, compliance with debt covenants, statements about the status of, and capacity and utilization under, the Company’s supply chain financing arrangements and statements about the Company’s future credit ratings and outlook as well as statements regarding underlying assumptions related thereto. Forward-looking statements reflect the Company’s views based on historical results, current information and assumptions related to future developments. Except as may be required by law, the Company undertakes no obligation to update any forward-looking statements made herein. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements. They include, among others, the Company’s ability to hire, train and retain qualified employees, the timing and implementation of strategic initiatives, risks associated with the Company’s restructuring and asset optimization plans, risks relating to incurrence of indebtedness and increased leverage, risks relating to the Company's credit ratings or perceived creditworthiness, the Company's ability to complete store openings, deterioration of general macroeconomic conditions, geopolitical factors, including tariffs, petroleum supply and prices, and trade restrictions, the highly competitive nature of the industry, demand for the Company’s products and services, risks relating to the impairment of assets, including intangible assets such as goodwill, access to financing on favorable terms, complexities in the Company’s inventory and supply chain, implementation and operation of information and technology systems and innovative technologies, and challenges with transforming and growing its business. Please refer to "Item 1A. Risk Factors" of the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC"), as updated by the Company's subsequent filings with the SEC, for a description of these and other risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements.
1
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in millions, except par value amounts) (Unaudited)
Assets |
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October 10, 2026 |
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January 3, 2026 |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Receivables, net |
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Inventories, net |
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Other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Goodwill |
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Other intangible assets, net |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders' Equity: |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Current portion of long-term debt |
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Other current liabilities |
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Total current liabilities |
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Long-term debt |
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Operating lease liabilities |
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Deferred income taxes |
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Other long-term liabilities |
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Total liabilities |
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Stockholders' equity: |
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Preferred stock, nonvoting, $ |
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Common stock, voting, and additional paid-in capital, $ |
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Treasury stock, at cost |
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( |
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Accumulated other comprehensive loss |
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Retained earnings |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.
2
Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in millions, except per share data) (Unaudited)
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Twelve Weeks Ended |
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Forty Weeks Ended |
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October 10, 2026 |
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October 4, 2025 |
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October 10, 2026 |
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October 4, 2025 |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Selling, general and administrative expenses, exclusive of restructuring expenses |
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Restructuring and related expenses |
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Selling, general and administrative expenses |
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Operating income (loss) |
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Other, net: |
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Interest expense |
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( |
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( |
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Other income, net |
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Total other, net |
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( |
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( |
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( |
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( |
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Income (loss) before income tax expense |
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Income tax expense (benefit) |
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( |
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( |
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Net income (loss) |
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$ |
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$ |
( |
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$ |
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$ |
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Basic earnings (loss) per common share |
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$ |
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$ |
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$ |
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$ |
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Basic weighted-average common shares outstanding |
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Diluted earnings (loss) per common share |
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$ |
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$ |
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$ |
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$ |
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Diluted weighted-average common shares outstanding |
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The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.
3
Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(in millions) (Unaudited)
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Twelve Weeks Ended |
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Forty Weeks Ended |
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October 10, 2026 |
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October 4, 2025 |
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October 10, 2026 |
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October 4, 2025 |
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Net income (loss) |
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$ |
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$ |
( |
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$ |
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$ |
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Other comprehensive (loss) income: |
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Currency translation adjustments |
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( |
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( |
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Total other comprehensive (loss) income |
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( |
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( |
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( |
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Comprehensive income (loss) |
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$ |
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$ |
( |
) |
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$ |
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$ |
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The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.
4
Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(in millions, except per share data) (Unaudited)
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Twelve Weeks Ended October 10, 2026 |
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Common Stock and |
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Treasury |
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Accumulated |
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Total |
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Additional Paid-in Capital |
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Stock, at |
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Comprehensive |
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Retained |
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Stockholders' |
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Shares |
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Amount |
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cost |
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Loss |
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Earnings |
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Equity |
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Balance at July 18, 2026 |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Total other comprehensive loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Common stock issued under employee benefit plans |
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— |
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— |
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— |
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— |
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Repurchase of common stock |
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— |
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— |
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( |
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— |
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— |
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( |
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Dividends declared ($ |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance at October 10, 2026 |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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$ |
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Twelve Weeks Ended October 4, 2025 |
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Common Stock and |
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Treasury |
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Accumulated |
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Total |
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Additional Paid-in Capital |
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Stock, at |
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Comprehensive |
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Retained |
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Stockholders' |
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Shares |
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Amount |
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cost |
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Loss |
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Earnings |
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Equity |
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Balance at July 12, 2025 |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Total other comprehensive loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Share-based compensation |
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— |
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— |
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— |
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— |
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Common stock issued under employee benefit plans |
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— |
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— |
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— |
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— |
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Repurchase of common stock |
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— |
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— |
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( |
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— |
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— |
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( |
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Dividends declared ($ |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance at October 4, 2025 |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
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The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.
5
Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(in millions, except per share data) (Unaudited)
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Forty Weeks Ended October 10, 2026 |
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Common Stock and |
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Treasury |
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Accumulated |
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Total |
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Additional Paid-in Capital |
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Stock, at |
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Comprehensive |
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Retained |
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Stockholders' |
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Shares |
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Amount |
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cost |
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Loss |
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Earnings |
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Equity |
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Balance at January 3, 2026 |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Total other comprehensive loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Common stock issued under employee benefit plans |
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— |
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— |
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— |
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— |
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Repurchase of common stock |
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— |
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— |
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( |
) |
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— |
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— |
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( |
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Dividends declared ($ |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance at October 10, 2026 |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
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Forty Weeks Ended October 4, 2025 |
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Common Stock and |
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Treasury |
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Accumulated |
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Total |
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Additional Paid-in Capital |
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Stock, at |
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Comprehensive |
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Retained |
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Stockholders' |
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Shares |
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Amount |
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cost |
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Loss |
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Earnings |
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Equity |
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Balance at December 28, 2024 |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Total other comprehensive income |
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— |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Common stock issued under employee benefit plans |
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— |
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— |
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— |
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— |
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Repurchase of common stock |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
Dividends declared ($ |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance at October 4, 2025 |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
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The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.
6
Advance Auto Parts, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in millions) (Unaudited)
|
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Forty Weeks Ended |
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October 10, 2026 |
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October 4, 2025 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Share-based compensation |
|
|
|
|
|
|
||
Loss on sale and impairment of long-lived assets |
|
|
|
|
|
|
||
Expected future credit losses, net |
|
|
|
|
|
|
||
Provision for deferred income taxes |
|
|
|
|
|
( |
) |
|
Other, net |
|
|
|
|
|
|
||
Net change in: |
|
|
|
|
|
|
||
Receivables, net |
|
|
( |
) |
|
|
|
|
Inventories, net |
|
|
( |
) |
|
|
( |
) |
Operating lease right-of-use assets |
|
|
|
|
|
|
||
Other assets |
|
|
( |
) |
|
|
( |
) |
Accounts payable |
|
|
|
|
|
( |
) |
|
Accrued expenses |
|
|
|
|
|
( |
) |
|
Operating lease liabilities |
|
|
( |
) |
|
|
( |
) |
Other liabilities |
|
|
|
|
|
|
||
Net cash provided by (used in) operating activities |
|
|
|
|
|
( |
) |
|
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Proceeds from sales of property and equipment |
|
|
|
|
|
|
||
Other, net |
|
|
( |
) |
|
|
|
|
Net cash used in investing activities of continuing operations |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities of discontinued operations |
|
|
( |
) |
|
|
|
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Dividends paid |
|
|
( |
) |
|
|
( |
) |
Repayment of long-term debt |
|
|
( |
) |
|
|
( |
) |
Proceeds from issuance of long-term debt |
|
|
|
|
|
|
||
Debt issuance costs |
|
|
|
|
|
( |
) |
|
Other, net |
|
|
( |
) |
|
|
( |
) |
Net cash (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
||
Effect of exchange rate changes on cash |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
||
Net (decrease) increase in cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents, end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Non-cash transactions: |
|
|
|
|
|
|
||
Accrued purchases of property and equipment |
|
$ |
|
|
$ |
|
||
Accrued dividends |
|
|
|
|
|
|
||
Accrued debt issuance costs |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Supplemental cash flow information: |
|
|
|
|
|
|
||
Interest paid |
|
$ |
|
|
$ |
|
||
The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.
7
Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Amounts presented in millions, except per share data, unless otherwise stated)
(Unaudited)
Description of Business
Advance Auto Parts, Inc. and subsidiaries is a leading automotive aftermarket parts provider in North America, serving both professional installers (“professional”) and “do-it-yourself” (“DIY”) customers. The accompanying unaudited condensed consolidated financial statements include the accounts of Advance Auto Parts, Inc., its wholly owned subsidiaries, Advance Stores Company, Incorporated (“Advance Stores”) and Neuse River Insurance Company, Inc., and their subsidiaries (collectively referred to as “the Company”).
As of October 10, 2026, the Company operated a total of
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements and unaudited notes to the condensed consolidated financial statements are presented in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), have been condensed or omitted based upon the SEC interim reporting principles.
The accompanying condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments that are necessary to present fairly the results for the interim periods presented. The accounting policies followed in the presentation of these condensed consolidated financial statements are consistent with those followed on an annual basis.
These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for fiscal year 2025 (“2025 Form 10-K”) as filed with the SEC on February 13, 2026. 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 prior years, the Company’s first quarter of the year contained sixteen weeks. The Company’s remaining quarters each consist of twelve weeks.
The forty weeks ended October 10, 2026 included a payment to settle the customary final working capital amounts related to the Company's sale of Worldpac, which was reflected as a cash outflow for discontinued operations on the condensed consolidated statements of cash flows. The charge was recorded in the fourth quarter of fiscal 2025 and reflects a working capital adjustment recognized as an adjustment to the original estimated purchase price and a reduction in the gain on divestiture recorded as a component of discontinued operations in fiscal 2025 and 2024.
8
Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Amounts presented in millions, except per share data, unless otherwise stated)
(Unaudited)
Recently Issued Accounting Pronouncements - Adopted
Targeted Improvements to the Accounting for Internal-Use Software
In September 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-06, Intangibles - Goodwill and Other - Internal-Use Software: Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”), which makes targeted improvements to the accounting for internal-use software by removing references to “development stages”. The update also clarifies the criteria for capitalization, which begins when both of the following occur: (1) management has authorized and committed to funding the software project and (2) it is probable that the project will be completed and the software will be used to perform the function intended. ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027, and for interim periods within those annual reporting periods, with early adoption permitted. The amendments in ASU 2025-06 can be applied prospectively, retrospectively, or via a modified prospective transition method. The Company adopted ASU 2025-06 on a prospective basis as of the beginning of fiscal 2026 for all projects, including in-process projects. The adoption did not have a material impact on the condensed consolidated financial statements and related disclosures.
Measurement of Credit Losses for Accounts Receivable and Contract Assets
In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”), which provides a practical expedient permitting an entity to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current accounts receivable and current contract assets. ASU 2025-05 is effective for annual reporting periods beginning after December 15, 2025, and for interim periods within those annual reporting periods, with early adoption permitted. The amendments in ASU 2025-05 should be applied prospectively. The Company adopted ASU 2025-05 on a prospective basis as of the beginning of fiscal 2026. The adoption did not have a material impact on the condensed consolidated financial statements and related disclosures.
Recently Issued Accounting Pronouncements - Not Yet Adopted
Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation (“ASU 2024-03”), which requires public entities to disclose more detailed information about certain costs and expenses presented in the income statement, including (among other items) the amount of inventory purchases, employee compensation, selling expenses and depreciation and amortization of intangible assets. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2024-03 on the consolidated financial statements and related disclosures.
The following table summarizes disaggregated revenue from contracts with customers by product group:
|
|
Twelve Weeks Ended |
|
|
Forty Weeks Ended |
|
||||||||||
|
|
October 10, 2026 |
|
|
October 4, 2025 |
|
|
October 10, 2026 |
|
|
October 4, 2025 |
|
||||
Percentage of Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Parts and Batteries |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Accessories and Chemicals |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Engine Maintenance |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Other |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Total |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
9
Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Amounts presented in millions, except per share data, unless otherwise stated)
(Unaudited)
There were
The Company used the last in, first out (“LIFO”) method of accounting for approximately
The non-cash expense recorded to cost of sales related to the change in the LIFO credit reserve for the periods presented was as follows:
|
|
Twelve Weeks Ended |
|
Forty Weeks Ended |
|
||||||||||
|
|
October 10, 2026 |
|
|
October 4, 2025 |
|
October 10, 2026 |
|
|
October 4, 2025 |
|
||||
LIFO credit reserve expense |
|
$ |
|
|
$ |
|
$ |
|
|
$ |
|
||||
Purchasing and warehousing costs included in inventories as of October 10, 2026 and January 3, 2026 were $
Receivables, net, consisted of the following:
|
|
October 10, 2026 |
|
|
January 3, 2026 |
|
||
Trade |
|
$ |
|
|
$ |
|
||
Vendor |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total receivables |
|
|
|
|
|
|
||
Less: allowance for credit losses |
|
|
( |
) |
|
|
( |
) |
Receivables, net |
|
$ |
|
|
$ |
|
||
Changes in the allowance for expected credit losses were as follows:
Allowance for credit losses |
|
October 10, 2026 |
|
|
Balance at beginning of period |
|
$ |
|
|
Additions |
|
|
|
|
Write offs |
|
|
( |
) |
Balance at end of period |
|
$ |
|
|
The Company regularly reviews accounts receivable, vendor and other balances and maintains allowances for credit losses estimated whenever events or circumstances indicate the carrying value may not be recoverable and updates its estimate of credit losses each reporting period based on new information that becomes available. The Company considers the following factors when determining if collection is reasonably assured: customer creditworthiness, past transaction history with the customer, current economic and industry trends and changes in customer payment terms. The Company controls credit risk through credit approvals, credit limits and accounts receivable and credit monitoring procedures.
10
Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Amounts presented in millions, except per share data, unless otherwise stated)
(Unaudited)
In the third quarter of fiscal 2025, one of the Company’s vendors, a leading auto parts supplier for the automotive aftermarket industry, filed voluntary petitions for Chapter 11 bankruptcy protection with the U.S. Bankruptcy Court for the Southern District of Texas. On September 1, 2026, the bankruptcy cases were converted to Chapter 7 liquidation. As a result of these events, the Company recorded a non-cash charge of $
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 $
Long-term Debt
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
Fair Value of Financial Assets and Liabilities
As of October 10, 2026 and January 3, 2026, the fair value of the Company’s long-term debt, which includes the current portion of long-term debt, was approximately $
Credit Facilities
As of October 10, 2026 and January 3, 2026, the Company had
11
Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Amounts presented in millions, except per share data, unless otherwise stated)
(Unaudited)
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 the ABL Facility). As of October 10, 2026 and January 3, 2026, $
Debt Guarantees
The Company is a guarantor of loans made by banks to various independently-owned Carquest-branded stores that are or, prior to the Company’s restructuring and asset optimization plan approved in November 2024 ("2024 Restructuring Plan"), were customers of the Company, totaling $
Substantially all of the Company’s leases are for facilities, vehicles, and equipment. The initial term for facilities is typically to
Total lease cost is included in cost of sales and total selling, general and administrative expenses in the accompanying condensed consolidated statements of operations and is recorded net of immaterial sublease income.
Total lease costs are comprised of the following:
|
|
Twelve Weeks Ended |
|
|
Forty Weeks Ended |
|
||||||||||
|
|
October 10, 2026 |
|
|
October 4, 2025 |
|
|
October 10, 2026 |
|
|
October 4, 2025 |
|
||||
Operating lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Variable lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
12
Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Amounts presented in millions, except per share data, unless otherwise stated)
(Unaudited)
Other information relating to the Company’s lease liabilities was as follows:
|
|
|
|
|
|
Forty Weeks Ended |
|
|||||
|
|
|
|
|
|
October 10, 2026 |
|
|
October 4, 2025 |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
|
|
||
Operating cash flows from operating leases |
|
|
|
|
|
$ |
|
|
$ |
|
||
Right-of-use assets obtained in exchange for lease obligations: |
|
|
|
|
|
|
|
|
|
|
||
Operating leases |
|
|
|
|
|
$ |
|
|
$ |
|
||
The computations of basic and diluted earnings per share were as follows:
|
Twelve Weeks Ended |
|
|
Forty Weeks Ended |
|
||||||||||
|
October 10, 2026 |
|
|
October 4, 2025 |
|
|
October 10, 2026 |
|
|
October 4, 2025 |
|
||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator |
|
|
|
|
|
|
|
|
|
|
|
||||
Basic weighted average common shares |
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive impact of share-based awards |
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted weighted average common shares(1) |
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic earnings (loss) per share |
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted earnings (loss) per share |
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||
13
Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Amounts presented in millions, except per share data, unless otherwise stated)
(Unaudited)
Certain of the Company’s suppliers enter into agreements with third-party financial institutions to obtain enhanced receivables options. These arrangements are commonly referred to and known in the industry as supply chain financing programs. Through these agreements, the Company’s suppliers, at their sole discretion, may elect to sell their receivables due from the Company to the third-party financial institutions at terms negotiated between the supplier and the third-party financial institutions. The Company’s obligations to suppliers, including amounts due and scheduled payment terms, are not impacted, and no assets are pledged under the agreements. All outstanding amounts due to third-party financial institutions related to suppliers participating in such financing arrangements are recorded within accounts payable and represent obligations outstanding under these supplier finance programs for invoices that were confirmed as valid and owed to the third-party financial institutions in the Company’s condensed consolidated balance sheets. As of October 10, 2026, and January 3, 2026, the confirmed obligations outstanding under these supplier finance programs to third-party financial institutions were $
Currently and from time to time, the Company is subject to litigation, claims and other disputes, including legal and regulatory proceedings, arising in the normal course of business. The Company records a loss contingency liability when a loss is considered probable and the amount can be reasonably estimated. Although the final outcome of pending legal matters cannot be determined, based on the facts presently known, it is management’s opinion that the final outcome of any pending matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.
The Company conducts its operations principally in the geographical areas of the U.S. and Canada through its Advance Auto Parts and Carquest trade brands. The products sold by the Company, across all geographic areas, have similar economic characteristics, are sourced from the Company’s suppliers in a similar manner, and are available for sale to all of the Company’s customers through the Company’s stores and self-service e-commerce sites. All of the Company’s stores have similar characteristics, including the nature of the products and services, the type and class of customers, and the methods used to distribute products and provide service to its customers. Due to these reasons, the Company has
14
Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Amounts presented in millions, except per share data, unless otherwise stated)
(Unaudited)
The Company’s CODM is the Chief Executive Officer, who regularly reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance for the Company’s single reportable segment. Discrete information is not regularly provided to and/or reviewed by the Company’s CODM at a lower level than the consolidated level, inclusive of segment asset level detail. The CODM primarily focuses on net income to evaluate its reportable segment. The CODM also uses net income for evaluating pricing strategy and to assess the performance for determining the compensation of certain employees.
|
|
Twelve Weeks Ended |
|
|
Forty Weeks Ended |
|
||||||||||
|
|
October 10, 2026 |
|
|
October 4, 2025 |
|
|
October 10, 2026 |
|
|
October 4, 2025 |
|
||||
Net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative expenses(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restructuring and related expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization expense(2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other segment items(3) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Income tax expense (benefit) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||
2024 Restructuring Plan
On November 13, 2024, the Company’s Board of Directors approved the 2024 Restructuring Plan, a restructuring and asset optimization plan designed to improve the Company’s profitability and growth potential and streamline its operations. This plan contemplated the closure of approximately
Expenses associated with the 2024 Restructuring Plan included: (1) write down of inventory to net realizable value due to liquidation sales as a result of store closures and streamlining assortment associated with the 2024 Restructuring Plan, (2) non-cash asset impairment and accelerated amortization and depreciation of operating lease right-of-use (“ROU”) assets and property and equipment, (3) personnel expenses related to severance and transition expenses, which were offered to certain employees who would provide services through key dates to ensure completion of closure activities and (4) other location closure-related activity, including nonrecurring services rendered by third-party vendors assisting with the turnaround initiatives and other related expenses, including incremental revisions to receivable collectability due to termination of contracts with independents associated with the 2024 Restructuring Plan.
15
Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Amounts presented in millions, except per share data, unless otherwise stated)
(Unaudited)
Other Restructuring Initiatives
In November 2023, the Company announced a strategic and operational plan with anticipated savings of $
The Company has recorded all restructuring and related expenses as a component of selling, general and administrative expenses in the condensed consolidated statement of operations, with the exception of inventory related expenses that are recorded as a component of cost of sales in the condensed consolidated statement of operations.
Restructuring and related expenses for the periods presented was as follows:
|
|
Twelve Weeks Ended |
|
|
Forty Weeks Ended |
|
||||||||||
2024 Restructuring Plan Expenses: |
|
October 10, 2026 |
|
|
October 4, 2025 |
|
|
October 10, 2026 |
|
|
October 4, 2025 |
|
||||
Cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Inventory (recovery) write-down |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Selling, general and administrative expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Impairment and write-down of long-lived assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Severance and other personnel expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other location closure related expenses(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
2024 Restructuring Plan Expenses |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other Restructuring Plan Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of sales expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Distribution network optimization |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Selling, general and administrative expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Distribution network optimization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Impairment and write-down of long-lived assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Worldpac post transaction-related expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other restructuring expenses(2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other Restructuring Plan Expenses |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
16
Advance Auto Parts, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Amounts presented in millions, except per share data, unless otherwise stated)
(Unaudited)
Impairments and write-down of long-lived assets primarily relate to impairments recorded on ROU assets for Stores and Distribution Center locations impacted through the Company’s restructuring plans. Management continually assesses market conditions and assumptions for indicators of impairment related to the fair value of closed stores and distribution centers that are currently available for sublease. During the third quarter of fiscal 2026, management concluded that changes in market conditions and key assumptions related to certain closed locations had occurred, as they had not yet been subleased consistent with the Company’s expected use of the locations. These factors represented a triggering event requiring the Company to reassess the recoverability and measurement of certain asset groups, primarily consisting of ROU assets, that were previously impacted by the announced restructuring and distribution network optimization plans. As a result of the reassessment performed, the Company updated its estimates of future sublease income and other key assumptions using currently available market data (including market rents, broker indications, expected vacancy periods, and discounts to market rent based on remaining lease term) and recorded a non-cash impairment charge of $
Restructuring liabilities were immaterial as of October 10, 2026 and January 3, 2026.
As of October 10, 2026, the cumulative amount incurred to date under active restructuring plans totaled $
The Company’s effective tax rate for the forty weeks ended October 10, 2026 was higher than the estimated annual effective tax rate, primarily due to a discrete charge for stock-based compensation and return-to-provision adjustments related to the filing of prior-year tax returns. The Company's effective tax rate for the forty weeks ended October 4, 2025 was lower than the estimated annual effective tax rate, primarily due to a net discrete tax benefit of $
17
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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.
Third Quarter Fiscal 2026 Management Overview
The Company’s financial results for the third quarter of 2026 include:
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 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.
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.
18
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.
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 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 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.
19
Results of Operations
|
Twelve Weeks Ended |
|
|
|
|
|
|
|||||||||||||
($ in millions) |
October 10, 2026 |
|
|
October 4, 2025 |
|
|
Change(1) |
|
Basis |
|
||||||||||
Net sales |
$ |
2,012 |
|
|
100.0 |
% |
|
$ |
2,036 |
|
|
100.0 |
% |
|
$ |
(24 |
) |
|
— |
|
Cost of sales |
|
1,115 |
|
|
55.4 |
|
|
|
1,155 |
|
|
56.7 |
|
|
|
40 |
|
|
(131 |
) |
Gross profit |
|
897 |
|
|
44.6 |
|
|
|
881 |
|
|
43.3 |
|
|
|
16 |
|
|
131 |
|
Selling, general and administrative expenses, exclusive of restructuring and related expenses |
|
808 |
|
|
40.2 |
|
|
|
826 |
|
|
40.6 |
|
|
|
18 |
|
|
(41 |
) |
Restructuring and related expenses |
|
42 |
|
|
2.1 |
|
|
|
33 |
|
|
1.6 |
|
|
|
(9 |
) |
|
47 |
|
Selling, general and administrative expenses |
|
850 |
|
|
42.2 |
|
|
|
859 |
|
|
42.2 |
|
|
|
9 |
|
|
6 |
|
Operating income |
|
47 |
|
|
2.3 |
|
|
|
22 |
|
|
1.1 |
|
|
|
25 |
|
|
126 |
|
Interest expense |
|
(46 |
) |
|
(2.3 |
) |
|
|
(40 |
) |
|
(2.0 |
) |
|
|
(6 |
) |
|
(32 |
) |
Other income, net |
|
23 |
|
|
1.1 |
|
|
|
16 |
|
|
0.8 |
|
|
|
7 |
|
|
36 |
|
Income tax expense (benefit) |
|
9 |
|
|
0.4 |
|
|
|
(1 |
) |
|
— |
|
|
|
(10 |
) |
|
50 |
|
Net income (loss) |
$ |
15 |
|
|
0.7 |
% |
|
$ |
(1 |
) |
|
— |
% |
|
$ |
16 |
|
|
79 |
|
|
Forty Weeks Ended |
|
|
|
|
|
|
|||||||||||||
($ in millions) |
October 10, 2026 |
|
|
October 4, 2025 |
|
|
Change(1) |
|
Basis |
|
||||||||||
Net sales |
$ |
6,626 |
|
|
100.0 |
% |
|
$ |
6,628 |
|
|
100.0 |
% |
|
$ |
(2 |
) |
|
— |
|
Cost of sales |
|
3,625 |
|
|
54.7 |
|
|
|
3,764 |
|
|
56.8 |
|
|
|
139 |
|
|
(208 |
) |
Gross profit |
|
3,001 |
|
|
45.3 |
|
|
|
2,864 |
|
|
43.2 |
|
|
|
137 |
|
|
208 |
|
Selling, general and administrative expenses, exclusive of restructuring and related expenses |
|
2,699 |
|
|
40.7 |
|
|
|
2,771 |
|
|
41.8 |
|
|
|
72 |
|
|
(107 |
) |
Restructuring and related expenses |
|
84 |
|
|
1.3 |
|
|
|
180 |
|
|
2.7 |
|
|
|
96 |
|
|
(145 |
) |
Selling, general and administrative expenses |
|
2,783 |
|
|
42.0 |
|
|
|
2,951 |
|
|
44.5 |
|
|
|
168 |
|
|
(252 |
) |
Operating income (loss) |
|
218 |
|
|
3.3 |
|
|
|
(87 |
) |
|
(1.3 |
) |
|
|
305 |
|
|
460 |
|
Interest expense |
|
(160 |
) |
|
(2.4 |
) |
|
|
(86 |
) |
|
(1.3 |
) |
|
|
(74 |
) |
|
(112 |
) |
Other income, net |
|
76 |
|
|
1.1 |
|
|
|
61 |
|
|
0.9 |
|
|
|
15 |
|
|
23 |
|
Income tax expense (benefit) |
|
40 |
|
|
0.6 |
|
|
|
(150 |
) |
|
(2.3 |
) |
|
|
(190 |
) |
|
287 |
|
Net income |
$ |
94 |
|
|
1.4 |
% |
|
$ |
38 |
|
|
0.6 |
% |
|
$ |
56 |
|
|
85 |
|
Note: Sums may not equal totals due to rounding.
Net Sales
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.
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”).
20
Gross Profit
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.
Selling, General and Administrative Expenses, Exclusive of Restructuring and Related Expenses
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.
Restructuring and Related Expenses
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.
Interest Expense
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.
Other Income, Net
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.
21
Income Tax Expense (Benefit)
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.
Liquidity and Capital Resources
Overview
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):
|
October 10, 2026 |
|
|
January 3, 2026 |
|
|
Change |
|
|||
Cash and cash equivalents |
$ |
3,085 |
|
|
$ |
3,123 |
|
|
$ |
(38 |
) |
ABL Facility borrowing availability |
|
894 |
|
|
|
896 |
|
|
|
(2 |
) |
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.
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):
|
Forty Weeks Ended |
|
|||||
(in millions) |
October 10, 2026 |
|
|
October 4, 2025 |
|
||
Net cash provided by (used in) operating activities |
$ |
311 |
|
|
$ |
(118 |
) |
Net cash used in investing activities of continuing operations |
|
(209 |
) |
|
|
(137 |
) |
Net cash used in investing activities of discontinued operations |
|
(55 |
) |
|
|
— |
|
Net cash (used in) provided by financing activities |
|
(82 |
) |
|
|
1,559 |
|
Effect of exchange rate changes on cash |
|
(3 |
) |
|
|
1 |
|
Net (decrease) increase in cash and cash equivalents |
$ |
(38 |
) |
|
$ |
1,305 |
|
22
Operating Activities
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.
Investing Activities
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.
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.
Financing Activities
For the forty weeks ended October 10, 2026, cash flows used in financing activities increased by $1.6 billion compared with the forty weeks ended October 4, 2025. In the third quarter of fiscal 2025, the Company received net proceeds of approximately $1.6 billion related to the issuance of the 2025 Senior Unsecured Notes and the redemption of the 5.90% 2026 Notes.
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 its ability to increase the amount of cash dividends above its current levels.
Long-Term Debt
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.
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 the ABL Facility. As of October 10, 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 October 10, 2026 and January 3, 2026, the Company had no outstanding borrowings under its ABL Facility. As of October 10, 2026 and January 3, 2026, the Company had $894 million and $896 million of borrowing availability, respectively, and $106 million and $104 million letters of credit outstanding, respectively, under the ABL Facility.
As of October 10, 2026 and January 3, 2026, the Company had no bilateral letters of credit issued separately from the ABL Facility agreement.
23
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.
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 October 10, 2026, other than for the changes disclosed in the “Notes to the Condensed Consolidated Financial 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.
24
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no significant changes in the Company’s exposure to market risk since January 3, 2026. See “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in the Company’s 2025 Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act are management’s controls and other procedures that are designed to ensure that information required to be disclosed by management in the Company’s reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Internal controls over financial reporting, no matter how well designed, have inherent limitations, including the possibility of human error and the override of controls. Therefore, even those systems determined to be effective can provide only “reasonable assurance” with respect to the reliability of financial reporting and financial statement preparation and presentation. Further, because of changes in conditions, the effectiveness may vary over time.
Management evaluated, with the participation of the Company’s principal executive officer and principal financial officer, the effectiveness of the Company’s disclosure controls and procedures as of October 10, 2026. Based on this evaluation, the principal executive officer and the principal financial officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There has been no change in the Company’s internal control over financial reporting during the third quarter ended October 10, 2026, that has materially affected or is reasonably likely to materially affect its internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.
25
PART II. OTHER INFORMATION
None.
ITEM 1. LEGAL PROCEEDINGS
Information regarding certain legal proceedings is provided in this Quarterly Report. See Note 9. Commitments and Contingencies, of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1.
ITEM 1A. RISK FACTORS
The Company’s future business, operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended January 3, 2026, which could adversely affect the Company’s business, financial condition, results of operations, cash flows and future prospects, which could in turn materially affect the price of the Company’s common stock. Other than for matters disclosed in the "Business and Risks Update" in this Quarterly Report, there have been no material changes to the Company’s risk factors since the 2025 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table sets forth the information with respect to repurchases of the Company’s common stock for the quarter ended October 10, 2026:
Period |
Total Number of Shares Purchased (1) |
|
Average Price Paid per Share (1) |
|
Total Number of |
|
Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) |
|
||||
July 19, 2026 to August 15, 2026 |
|
514 |
|
$ |
56.55 |
|
|
— |
|
$ |
947 |
|
August 16, 2026 to September 12, 2026 |
|
4,452 |
|
$ |
47.02 |
|
|
— |
|
$ |
947 |
|
September 13, 2026 to October 10, 2026 |
|
11,437 |
|
$ |
42.55 |
|
|
— |
|
$ |
947 |
|
Total |
|
16,403 |
|
|
|
|
— |
|
|
|
||
ITEM 5. OTHER INFORMATION
During the third quarter of 2026, no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were
26
EXHIBIT INDEX
|
|
Incorporated by Reference |
Filed |
||
Exhibit No. |
Exhibit Description |
Form |
Exhibit |
Filing Date |
Herewith |
10-Q |
3.2 |
8/22/2024 |
|
||
Amended and Restated Bylaws of Advance Auto Parts, Inc., effective August 8, 2023. |
8-K |
3.1 |
8/14/2023 |
|
|
10-Q |
22.1 |
8/20/2026 |
|
||
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
X |
|
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
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Cover Page Interactive Data file (Embedded within the Inline XBRL Documents and Included in Exhibit). |
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27
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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ADVANCE AUTO PARTS, INC. |
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Date: November 5, 2026 |
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/s/ Ryan P. Grimsland |
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Ryan P. Grimsland Executive Vice President, Chief Financial Officer |
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Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Shane M. O'Kelly, certify that:
Date: November 5, 2026
/s/ Shane M. O'Kelly |
Shane M. O'Kelly |
President and Chief Executive Officer and Director |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Ryan P. Grimsland, certify that:
Date: November 5, 2026
/s/ Ryan P. Grimsland |
Ryan P. Grimsland |
Executive Vice President, Chief Financial Officer |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Shane M. O'Kelly, certify, pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and 18 U.S.C. Section 1350, that, to my knowledge, the Quarterly Report on Form 10-Q of Advance Auto Parts, Inc. for the quarter ended October 10, 2026 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act and that the information contained in such Report fairly presents in all material respects the financial condition and results of operations of the Company. The foregoing certification is being furnished to the Securities and Exchange Commission as part of the accompanying report.
Date: |
November 5, 2026 |
By: |
/s/ Shane M. O'Kelly |
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Name: Shane M. O'Kelly Title: President and Chief Executive Officer and Director |
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I, Ryan P. Grimsland, certify, pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and 18 U.S.C. Section 1350, that, to my knowledge, the Quarterly Report on Form 10-Q of Advance Auto Parts, Inc. for the quarter ended October 10, 2026 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act and that the information contained in such Report fairly presents in all material respects the financial condition and results of operations of the Company. The foregoing certification is being furnished to the Securities and Exchange Commission as part of the accompanying report.
Date: |
November 5, 2026 |
By: |
/s/ Ryan P. Grimsland |
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Name: Ryan P. Grimsland Title: Executive Vice President, Chief Financial Officer |
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