Advance Auto Parts reported adjusted diluted earnings per share of $1.03 for the second quarter of 2026, beating analysts' consensus estimate of $0.81 by 27.16%. The result marked a 49.3% increase from $0.69 in the same period a year earlier. Despite the earnings beat, total net sales of $2 billion fell short of Wall Street's expectation of $2.04 billion by 1.96%. Shares fell 21.05%, or $11.82, to $44.36 in premarket trading after the release.
Gross profit reached $924 million, equating to a gross margin of 46.2%, up 240 basis points year-over-year. The expansion reflected merchandising gains, disciplined pricing, cost controls and $26 million in tariff refunds. Adjusted operating income totaled $112 million, or 5.6% of sales, a 260-basis-point improvement from a year prior. Excluding tariff refunds, adjusted operating margin expanded by nearly 130 basis points to 4.3%. Selling, general and administrative expenses declined 1% year-over-year to $812 million, or 40.6% of sales.
Free cash flow turned positive at $120 million year-to-date, compared with an outflow of $201 million in the prior-year period. The company held $3.1 billion in cash and maintained net debt leverage at 2.1 times, within its target range of 2.0 to 2.5 times. It repurchased approximately $30 million of outstanding debt during the quarter.
Comparable sales declined modestly, with the Pro channel growing in the low single digits while the DIY segment fell in the low-double-digit range. The Main Street Pro business outpaced overall Pro growth by more than 200 basis points. Milder summer weather weighed on weather-sensitive categories such as cooling products and chemicals, contributing to a 100- to 150-basis-point headwind in comparable sales. Average ticket growth remained positive, with same-SKU inflation at roughly 4%, up from about 3% in the prior quarter.
Advance Auto expanded its assortment by approximately 80,000 new SKUs in the first half of the year, following 100,000 additions in 2025. The additions contributed about 100 basis points to product margin expansion year-to-date. The company completed consolidation of its distribution network from nearly 40 facilities to 15, implemented a unified warehouse management system and rebid carrier contracts to consolidate volume with 70% fewer carriers. It also opened five new market hubs, bringing the total to 38, and accelerated plans to open 15 to 20 additional hubs this year, targeting 60 locations by mid-2027.
Store-level metrics improved, with net promoter scores approaching 80 points, up from the high 60s last year, and in-store attachment rates nearing 30%, compared with the mid-high 20% range previously. Pro delivery times consistently tracked below 40 minutes weekly during the quarter. The company also completed an independent review of store task execution to update labor standards, which had not been revised in over a decade.
For the full year 2026, Advance Auto guided to net sales of approximately $8.5 billion, comparable sales growth of 1% to 2% and adjusted operating margin of 3.8% to 4.5%. It targets gross margin expansion of 110 to 150 basis points to about 45% and adjusted diluted EPS of $2.60 to $3.30. Free cash flow is expected to reach roughly $100 million, with capital spending of about $300 million. The company plans 30 to 35 new store openings and 15 to 20 new market hub openings. Early third-quarter trends showed transaction growth improving relative to the final weeks of the second quarter.
