What Management Said
Read the full Q1 2026 transcript ↗All statements other than statements of historical fact are forward-looking statements, including but not limited to statements regarding initiatives, plans, projections, goals, guidance, and expectations for the future. Additional information can be found under forward-looking statements in our earnings release and risk factors in our most recent Form 10-K and subsequent filings made with the SEC. Later, Ryan will discuss results for the Q1 and guidance for the year. Comparable sales grew by 3.5% in theQ1, marking our strongest quarter of growth in five years.
The Pro channel was the primary driver of sales, with consistent monthly growth in the mid-single-digit range. Performance in the Pro channel was driven by our strategic focus on the Main Street Pro, where the sales growth remains stronger. The DIY channel also delivered positive low double-digit growth, reversing the softness experienced last quarter. This progress was partly fueled by effective merchandising execution and product margin expansion.
We expect merchandising to remain the primary catalyst for margin improvement throughout the year, and I'm encouraged by the progress our team has made. We are pleased with the strong start to the year, and we continue to make progress on our strategic initiatives, which gives us confidence to reaffirm our full year guidance. Our strategy remains unchanged and is built on three pillars, supported by targeted initiatives to drive sustainable, profitable growth over the long term. We remain committed to executing actions under our 2026 strategic priorities as we make progress on our journey towards a medium-term seven percent adjusted operating margin target.
What went well
- Comparable sales grew 3.5% in fiscal Q1 2026, the company's strongest quarter of growth in five years, with results roughly in line with the broader aftermarket for the first time since the turnaround began.
- The Pro channel was the primary sales driver with consistent mid-single-digit monthly growth, and the Main Street Pro focus outperformed the overall Pro comp by more than 200 basis points.
- DIY delivered positive low-double-digit comparable growth, reversing the softness experienced in the prior quarter, helped by strong brakes performance and the ARGOS owned-brand launch.
- Adjusted operating margin expanded roughly 410 basis points year over year to 3.8%, with adjusted operating income of $99 million, driven by merchandising execution, product margin expansion, and expense leverage.
- Adjusted gross margin expanded over 210 basis points to 45.1% of net sales, led by product margin expansion from merchandising initiatives.
- Adjusted diluted EPS was $0.77, a sharp swing from a $0.22 adjusted loss in the prior-year quarter; reported diluted EPS was $0.39.
- Free cash outflow improved to $75 million from a $198 million outflow a year ago on stronger operating performance, better working capital, and lower restructuring cash costs.
- Transaction volumes improved in both channels and units per transaction grew, accelerating on both a one- and two-year basis and reflecting better parts availability and customer service.
What went wrong
- Reported net sales grew only about 1% to $2.6 billion because the 3.5% comp was offset by roughly two points of headwind from cycling $51 million of prior-year liquidation sales tied to store optimization.
- The deliberate optimization/wind-down of large national-account Pro business created a natural headwind in the Pro channel, with Q1 the largest pressure and continued (moderating) pressure expected through the year.
- A $17 million LIFO expense was a year-over-year gross-margin headwind that more than offset an approximately 90 basis point benefit from cycling atypical store-optimization margin headwinds.
- DIY performance remains tempered by a broader inflationary backdrop and stretched household budgets, even as the channel returned to growth.
- Management flagged near-term demand variability heading into the shoulder period between tax-refund season and peak driving, intensified by elevated gas prices and pressured consumer budgets.
- Early-quarter results were disrupted by winter storms causing temporary store closures and delayed maintenance-category spending, though weather was not a material driver of the full quarter.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| FY2026 net sales | FY2026 | approximately $8.5B |
| FY2026 comparable sales growth | FY2026 | 1%-2% (positive each quarter, first half stronger) |
| FY2026 same-SKU inflation | FY2026 | 2%-3% (H1 higher end, H2 lower end) |
| FY2026 adjusted operating income margin | FY2026 | 3.8%-4.5% (130-200 bps expansion) |
| FY2026 gross margin expansion | FY2026 | 110-150 bps, to approximately 45% |
| FY2026 SG&A leverage | FY2026 | 20-50 bps leverage (down YoY, cycling ~$90M non-recurring 2025 expense) |
| FY2026 adjusted diluted EPS | FY2026 | $2.40-$3.10 |
| FY2026 capital expenditures | FY2026 | approximately $300M |
| FY2026 new stores / market hubs | FY2026 | 40-45 new stores; 10-15 market hubs |
| FY2026 free cash flow | FY2026 | approximately $100M |
| FY2026 pre-tax interest | FY2026 | ~$210M expense partially offset by ~$80M income |
| Medium-term adjusted operating margin target | medium-term | 7% (~500 bps of self-help; ~half from merchandising, half from supply chain) |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Net sales | +1% to $2.6B | 3.5% comp offset by ~2 pts of headwind from cycling $51M of prior-year store-optimization liquidation sales. |
| Comparable sales | +3.5% | Main Street Pro focus, improved parts availability and service, plus favorable industry dynamics and tax-refund tailwinds; strongest comp in five years. |
| Pro channel comp | mid-single-digit | Consistent monthly growth led by Main Street Pro (>200 bps above overall Pro comp), partly offset by planned national-account optimization. |
| DIY channel comp | low-double-digit | Reversal of prior-quarter softness on brakes strength, ARGOS launch, assortment resets, and the new Advance Rewards loyalty program. |
| Adjusted gross margin | +210 bps to 45.1% | Product margin expansion from merchandising initiatives and cycling ~90 bps of atypical store-optimization headwinds, partly offset by $17M LIFO expense. |
| Adjusted SG&A | +200 bps leverage to 41.3% | SG&A down 3% cycling ~$37M of store-optimization expense; adjusting for that, roughly flat on strong productivity. |
| Adjusted operating margin | +410 bps to 3.8% | Merchandising execution, product margin expansion, and expense leverage; adjusted operating income of $99M. |
| Reported operating margin | 2.6% | GAAP operating margin per headline metrics, below the 3.8% adjusted figure. |
| Adjusted diluted EPS | $0.77 vs $(0.22) | Operating margin expansion and interest-income favorability; reported diluted EPS was $0.39. |
| Free cash flow | -$75M outflow vs -$198M | Stronger operating performance, improved working capital, and lower restructuring cash costs; Q1 is a seasonal FCF trough. |
| Same-SKU inflation | ~3% | In line with expectations; ticket was positive for the quarter. |
| Inventory | +5% vs year-end 2025 | Deliberate expansion of product depth and breadth across the network, allocated market by market. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Turnaround / three-pillar strategy | Stabilize market share while laying the operational foundation | Delivering roughly market-level growth for the first time; three pillars (merchandising, supply chain, store operations) unchanged and progressing toward a 7% adjusted operating margin target | — |
| Merchandising as margin driver | New assortment framework rolled out in 2025 (back-room hard parts) | Primary catalyst for 2026 margin expansion; roughly half of the ~500 bps self-help target, already in place and building over time | — |
| Main Street Pro vs national accounts | Over-indexed on lower-margin national accounts | Deliberately optimizing/exiting national accounts and pivoting to higher-margin, larger-addressable Main Street Pro, which is outperforming overall Pro by 200+ bps | — |
| Supply chain productivity | DC consolidation (from ~50 DCs down to ~15-16) nearing completion | Focus shifts to standardizing DC workflows under new leader Ron; productivity savings expected to drive gross-margin expansion in 2027 and beyond | — |
| Market hub network | New node built for same-day hard-parts availability; 33 at year-end 2025 | 35 hubs today (2 opened), 10-15 more planned in 2026 toward 60 by 2027; markets with hubs run ~100 bps better than those without | — |
| Owned brands and loyalty | ARGOS motor oil introduced; Speed Perks loyalty program | ARGOS expanded to hydraulics, antifreeze, performance chemicals and washer fluid; Speed Perks replaced by modernized Advance Rewards; new 'Good Parts' DIY brand campaign | — |
| Store operations | New store operating model fully implemented in Q4 2025 | Driving task execution, labor utilization, and productivity; NPS improving, Pro delivery consistently under 40 minutes, 1,000+ stores getting asset upgrades | — |
| Consumer and macro backdrop | Tax-refund tailwinds shaping recent trends | Watching the shoulder period into peak driving season with elevated gas prices and pressured budgets; reassured by needs-based demand (<10% discretionary), aging car park, and more miles driven | — |
Q&A Summary
(Citi) You reaffirmed the full-year comp guide despite a strong Q1 print - how should we think about the cadence, and what about Q2?
Q2 comps are expected to moderate from Q1, consistent with the original plan, staying within the guidance range with no major tax-refund tailwind and inflation lapping beginning in the second half of Q2. Q3 and Q4 are unchanged, in line with the low end of the full-year guide. The shoulder period between tax refunds and peak driving after Memorial Day will be the key indicator; back-half inflation moderates toward the lower end of the 2-3% range.
(Citi) How do the moving pieces on the DIFM side - Main Street versus winding down national accounts - play out through the year?
Q1 is the largest national-account headwind; it moderates over the year but persists in the back half given actions taken then. Main Street and overall Pro will converge, especially into next year. Management is excited about Main Street - a larger addressable market with a higher margin profile - where the outside sales team is delivering the right service and assortment.
(Morgan Stanley) You're growing above inflation for the first time in a while - is that specific to certain categories or geographies, or broad-based?
Inflation impact is universal across the board; transaction improvement is broad-based with some geographic nuance (better in the Northeast and Mid-Atlantic, some weather effects). Assortment, availability and service gains are hitting all geographies. Shane added that brakes and the ARGOS launch are standouts on DIY, and Main Street Pro plus technology-enabled selling is driving the Pro side, all showing up in improved NPS.
(Morgan Stanley) As you lap strong SG&A efficiency and easy gross-margin compares into 2027, does the cost structure rise, and are 3-4% comps enough for continued margin expansion?
This year's margin expansion comes mainly from merchandising initiatives already underway; supply chain and store productivity are a build this year with the lift expected more in future years. SG&A will see similar inflationary growth, but indirect-spend work and repositioned spend give good productivity runway, so management is confident in the trajectory into next year.
(Guggenheim) Can you update the percentage of sales covered by the assortment framework and the associated comp lift, including ARGOS?
Most assortment work is in back-room hard parts, rolled out in 2025, and the benefit builds over time as Pro customers recognize the availability and move Advance up their call list. Service-level and time-to-serve improvements add incremental lift. Shane cited overwhelmingly positive vendor-conference feedback on the parts, processes and talent, giving confidence in the merchandising strategy.
(Guggenheim) With a third quarter of mid-40s gross margin, are the supply-chain process improvements early breadcrumbs of a change to the 7% target, or a funding mechanism for reinvestment?
No change to the plan: roughly 500 bps of self-help within the company's control, about half from merchandising (in place, delivering, gross margin ~45%) and half from supply chain (not yet realized). This is a build year for supply chain and stores - new leader Ron is standardizing DC receiving and workflows to drive productivity that benefits gross margin in out-years - plus market hubs adding availability and efficiency.
(UBS) There's an argument AAP has high 'beta' to aftermarket trends - when will it have more control over its own destiny?
Management believes it has substantial control: assortment (what to buy and where to place it), service (40-minute Pro time-to-serve, greeting DIY customers to lift attach and ticket), and NPS measurement are all self-driven. Shane cited a New York store where optimized labor, more back-room hard parts, refreshed front room, new servers and Zebra devices came together, plus a $3 billion cash balance and the right leaders - all normalizing the beta.
(UBS) The shoulder-period commentary is being read as quarter-to-date starting slow - is that fair, and did it drive the guide reiteration?
Not a signal of a slow start; trends are in line with plan at the low end of the guide. The period between tax refunds and Memorial Day peak driving is always a different-volume window, and management wants to see how the pressured consumer behaves at peak driving before changing the view. With less than 10% of the business discretionary and needs-based demand, the industry tends to fare well; Main Street Pro continues to outperform.
(TD Cowen) What is the shape of gross margin through the year and the key puts and takes?
Q1 performance gives confidence in the range. Q2 and Q3 are seasonally higher-margin periods with operating margin toward the high end of the full-year guide and gross margin around 45%. Q4 ticks down a bit on business mix. Full-year gross margin is expected around 45%.
(TD Cowen) How has the DIFM account mix evolved, and what gross-margin benefit is it providing?
The mix is shifting higher toward Main Street, which significantly outperforms national accounts after the rationalization; Main Street carries a better margin profile and larger addressable market. Net-net it's slightly favorable from a margin-mix standpoint, partly offset by Pro (lower margin than DIY) growing faster than DIY.
(Wells Fargo) How do regions with a market hub perform versus those without, and how does the lift mature?
Markets with a hub run about 100 basis points better than those without, and parts availability builds over time. Only four of the 35 hubs are true greenfields (the rest converted from old DCs); greenfield results are early but encouraging. Management and Pro customers/independents are enthusiastic; new sites can support a radius of 50-plus stores, with 10-15 hubs this year toward 60 in 2027.
(Wells Fargo) Your ~3% inflation is below peers running 5-6% - how does your like-for-like pricing compare, and could there be another round of back-half inflation?
Pricing strategy is unchanged - competitively priced every day, not lowest price, in a rational industry - which drives the like-for-like inflation read. Some Q1 SG&A/transportation cost increases are assumed in guidance, but product-cost impact from tariffs/freight is still early; full-year inflation guidance assumes no significant product-cost increase, and Advance will partner with vendors to mitigate, helped by the industry's inelastic nature.
(Oppenheimer) How much of the Q4-to-Q1 comp step-up is Advance's repositioning versus improved industry tailwinds?
A lot is company-driven: parts availability and service investments now let Advance participate in the positive macro (aided by higher tax refunds) where it previously could not. Management views Q1 as roughly market-level growth. Ryan added that decisive product moves made in lower-volume Q4 caused some disruption then but set up the right assortment to capitalize in Q1.
(Oppenheimer) Any update on potential tariff refunds - your efforts and timing?
Advance has done work on it and is following the process, but there is nothing to report yet; the company will share more as information becomes available.
More on Advance Auto Parts Inc
Reported 2026-05-21 · figures from the Advance Auto Parts Inc Q1 2026 earnings call.
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